ELECTRIC SYSTEM REVENUE REFUNDING CERTIFICATES ...

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NEW ISSUE- BOOK ENTRY ONLY RATINGS (Short-term/Long-term): Moody's: "VMIGl/Aaa" Standard & Poor's: '!4-1 +/AAA" Fitch: "Fl+/AAA" (See "RATINGS") In the opinion of jones Hall, A Profossirmal Law Corpomtifm, San Francisco, Califomia, Special Coumd, mbjert, to (l'rlain qualifimtiom desm'bed lm"l'itl, undn I'Xisli11g law, the porti()n of instalbnnll paJmen/5 designated as and comprising interest and I"I'Ceived bJ tlu ou'lzers of the 2008 Certificall'_l is excluded from gross income for federal income tax pu1poses and is not an item of tax preference for purposes of the fodual altenmtive minimum tax imposed on individuals and corporations, although for the p11rpose of comjmling the alternative mininwm tax imposed on certain mrporafions, such interest is takPJI into tUtOimf in dettrmini11g certain inmme and In the fiather opinion of Sprcial Counsel, such i11temt is eitmpt from Califomia personal ill come t.axts. See '"1/tX JWA'!TERS.'" ELECTRIC SYSTEM REVENUE REFUNDING CERTIFICATES OF PARTICIPATION $90,000,000 SERIES 2008A $64,500,000 SERIES 2008B Evidencing and Representing Proportionate Interests of the Owners Thereof Dated: Delivery Date 2008A Certificates CUSIPt: 777807 CR7 2008B Certificates CUSIPt: 777807 CS5 in 2008 Payments to be made by the CITY OF ROSEVILLE Price: 100% 2008A Certificates Due: February I, 2035 2008B Certificates Due: February I, 2035 Authority for Execution and Delivery. Tlu rtrti[lmle.\ ofjmrticipation captioned above "2008 CertijicaJes'") are being (xeruled ami delivered lry The Bank of New York 1Tus/ CmnpanJ, N. A., as lnJ.I(U (file "Tmstee") unbr a TnLI/ Agrument daied as afAiaJ 1, 2008, between the Roseville" Finance Arahurity (the Aut/writ)"') and the Tmslee, tmd unbr a Mn.1ter Installment Purchase Contract (the "Master Contract"'), dated ILl of November 1, 1997, as .wpplemented to date, including a 2008 Supplnnentallnstallment Purchase Contract dated as of May 1, 2008, all entered into be/1i!een the Cit)' of Ro1eville (lite "Cit)•") and lhr :!utharit)' (the "2008 Supplementnl Canlmr'l" ami, rol/utive(\' with thf MfLIIer Contract, 11.1 previous[_\· J!tpplemented, the "lnstallmenl Purchase Contract"). See "TilE 2008 CERTIFICATES for Ewculion and Delivery•." Interest with respect/a the 2008A (.ertijicales ami 20088 Certifimte.\ will initilllly be calculated at a Hb:'kly Rate fta)'able on the first Business Day ofeach calendar month, cmmnenci1Jg Junl' 2, 200fl. The 200HA Cerlifimlr.l mul 2008B Certijirnte.1 will he delivered ir1 denominations af$100,000 and rmJ integmlmultiplr.l of $1,000 in excess thereof See "TilE 2008 CERTIFICATES." Punutml to the TrJI.If Agreement, the 2008A Certijicale.\ and 20088 Certifu·ates be converted /11 one ofseveral rlif!rrerllfntere.\l IU1!1' Mode.1: Cmmnercial Paper Raie, Dai(\' Rate, U't'tkl)' Rate, Long-Tenn Rfl(e or an Auction Rille. AU of the 2008A CtrtifiraiRS mll.lt be in the same lnttml Rate A/ode at the .mme time and all of the 2008B CertificaJes Ill liSt be in the same lntere.1f &te Mode alfhe same time. Offir.ial Statement is not intended Ia provide injimnation with wpect /11 the 2008A Ceriificates rmd 20088 Certi_ftcale.1 (i11Cl11ding !he lemn afsllrh 2008A Certificate.\ rmrl20088 Certificates) ajier ConveHianftmn a Hi>ekly R11te Period Daily &le Ptriod. Owner.\ and pm.1pective Jmrrhasers of the 2008.-1 Certificates ami 2008B Certificates should not rei)' rm this Official Statement far infomwtion wncerning the 2008A Crrtifimles tmd 2008B Cntiftcaies in ronnel lion with Om version 2008A Ctrlifo'aie.l omi 2008B C.ertiftcates, but.1hauld loolt. solely lo the offering /11 bt !/Sed in connection with an)' surh Convnsion. Security for the 2008 Certi[lCates. The 2008 Ceriifimte.\ evidence dirrct, undivided fmrtional interests of the owners theruif in the "2008 Pa)·ment.<" received h)· the Trustee under the 1hut Agreement. "2008 are defintd as thl' imtallmrnt pa)'l/lent.l ofintemt, principal and prepn_wnent p-remium.<;, if an)', pn_wtble h)· the City umkr the 2008 Supplemmtul Contract. 111e 2008 CertijicaJes au aLw .1ecurerllt)· amounb held ill crrlain _fimd.1 and acco11nL1 estahlished under the 'fhlsl Agrmnenl. Su "SECUR/11' FOR THE 2008 CERT!f1(".ATES." The 2008 PaJinmts are pa)•able frrml and ucured by a pledge of"Nrt Revenuei" of the Electric System, which are dejinedgenerall)' as Revenues afthe Electric System less the Alaintenanre and OperatUm Co.1h of!he Electric .\).1/ffll durin}; any 12-I!Umlh period. 11u pledge 1j"Net Revmue.1 fOr pa)'lll1'11f afthr 2008 Payments is on a parity with the pledge afNet Revenue.\ .1auring pnyment of othn innmed fJ;i !l1e Cily uwkr tlu lnstallmenl Purr hast Conlrwt, iwh1ding insmllmm! paymmls which are the of four .11'rie.1 of ctrlifirales of jmrticipa1i-On executed and delivered in 1999, 2002, 2004 and 2005 (colleclivelJ, the "Prior Certificates") to fiwmce and refinanrr improvtment.llo the Eleclric SJslem. The 2008 Ceriificaits are also serured h)· a Parity Reserve Fund on a with lite Prior Crrti[u:ate.1. See "SECURIIT FOR THE 2008 CERT1FW.ATES- Outstamiing Senior and Pnrity Jndebledness" and"- Parity Reuroe Fund." "Maintenance and Operalion Co.1ts" indudt, among oll1er cos/.5, tlu Cit_\"s shau of debturvice on debt inmrTI'd h)· certain joint powers af(encies in which the Eltclric System participatl'.l. A.111 result, the City's paJ11JenLI of debt service an thi1 joint pawen agency debt are fm)'nble on 11 .1eniar loll1e City'1 pa_;·ments 1m the 2008 Certijira/e.1 and the otl1er Parity Obligation.s. Su "SECURITI' FOR TilE 2008 CERT!f1CATES- Outslllnding Senior and Indebtedness," Letter of Credit. PaJmml of the p-rinripalof and inUres/ with re.1pect to, and purchase prier of the 2008 Certificates will initiallJ lwve the benefit of an irrroomble diT"f'ci-PaJ letttr afcT"I'dit (the "Letter of Credit") to be i.Htll'd b)· Dtxia Crirlit Local, New lO-rk Branch (the "Bani!") as the initial Credit fO.cility under the Tnut Agreement. The i11itial expiration date oftlu l.etter of Credit i1 Mil)' I J, 2011, a.1 e:>.tended or mrlier tmninated p-rior thereto described herein. See "THE BANK" and "THE LETTER OF CREDIT AND REIMBURS£.\IENT AGREEMEN1:" Use of Proceeds. '1111' 2008 Certificaies are being exurllrrl and tlelivned to (i) refinance urtain ouL•tanding aftlu Cit)' reUIIing to crrtijicaJes afparticipmion executed and delivered in 2005 for tht Electric SJ.•Iem, (ii) pa)" costs as5ociaterl with the tenninaJion oftlu 2005 Swap Agreement (definerllu>rein), (iii) contribute funds to tlu> Pari!)· Rturve Fund .1ea1rinx tl1e 2008 Ceriiflmle.\ and the Certijirale.l and (iv) pay certain costs innlrTI'd in wnnection with the eXi'CIItion and delive1)' of the 200fl Certifimtes . 'lee "THE PLAN OF FINANCING." Certificate Terms; Book-Entry Only. "f11e 2008 Certificates will be issued i11 fullJ regi.sleredfon/1 in the nt11ne afCede & Co., as nominee of The Deposito')' 1h1St Campan.\' ("DTC") under the .IJ.Ifem mailrt(lined b)· DTC. So long as Cede & Ca. is ll1e registered owner of the 2008 Certificates, priTUipal m1d tender p-ric-e of p-remium. if nn)", and interest with to the 2008 C:ertifuates will be pnJable by the Ti-uslee to DTC, which will in ll1rn mail such pn)'menLI to its partiripanh fm· subuq111ml di.<bursnnenl to benejicial owners tif the 200!1 Certificates, (LI more fitll)• de.1·rrihed herein. of the 2008 Certijicate.1 will not receivr artificatr.< upmenting their inte1·e.<ls in tht 2008 Certifimtrs. See "TilE 2008 CERTIFICATES'" and L1PPE.NDIX f"- DTC AND THE BOO&EN"f"Rl" ONL\' .Sl'.STEAf." Prepayment and Tender. Prior to their maturi!J, the 2008 Certificate.\ are .111bjut to aptional and mandatory prepa)'ment awi optionalttnder and mandatory tmder a.1 de.1cribed in this Oj)icial Statement. See "TilE 2008 "-Optional"li:nder" and ''--Manda/01)' Tendrr" htrein. THE OBUGAT!ON OF THE CJITTO ,'IJA.K£ THE 2008 PAYMENTS IS A SPECIAL OB!Jr.A.T!ON OF THE Cin' SECURED BY A PLEDGE OF AND PAYABLE SOLEIJ' FROM THE Nt.T REVENUES AND DOES NOT CONSTITUTE A DEBT OF THE Cln' OR OF THE STATE OF CAIJFORNIA OR OF ANY POIJT!CAI. SUBDIVISION THEREOF IN CONTRAVENTION OF ANY CONSTITUTIONAL OR STATUTORY DEBT IJAHTATION OR RESTRICTJON. This cover:pagr certaill infarmatitmfor quick rrf'trence on{_";. It i.1 nat a .1111/llllll')" of this issut ;if"Crrtifua/es. lnvestan must reM the entire Oj}icial Statement to obtain injOnnatian nunlial to tlu making of an infomud i11vestmenl deci1ion will! respect lo the purdU1.1e of the 2008 Certificates. 11u 2008 Certifirate.l are offered IVhRn, IL\ and if exmlll'd ami drlivrred and arrepted b)· the Undenvriter; to the appnnml of the validity aftlu 2008 Supplemmtal Contrart by Jmm Hall, A l'rojfssimm! La-w CorpoTIIfimt, San fl"anrisw, CulijiYrnil!, Special Onmsel. Ct'rlnin Ugal mnltt'l".\ will n[\o be pa.\)td upon for the City by .Jones Hall 1/..1 disdo.n1re nmruel, jiJY the Bank h)· Kulak Rock [.J.P, At/mila, Ceo1J:ia, far thR City fry thR Allornry, and far the Underwriter h)· Orrick, llerringlon & Sutcliffi U.P. II i.1 that the 2008 Cerli[uaJe_\ will be delivmd in book-entryfonn thm11gh lhr jiuilities ofDTC on or about May 1), 2008. MORGAN STANLEY The date ofthi.J Of{lrinl Statement iJ .\fay 12. 2008. 2008, American !Jankers A.l.l'l!riatiau. CUSIP dn!a hnPin are fm!vuled f:t)· Sta11dnrd & lt11n's GUS/I' Senlice Bure011, a divisim1 of" I he AicCrnw--Hill CmnpanU:s, lw, , a11d are provided for of T1'fmonu only. Ntilhtr tM CilJ. the Aut/writ) tulr the Undtro•nler IWili"I'J an) mpa>IJihiiil_l'for the acmracy oft he CUSJI' dnta. - -- ....

Transcript of ELECTRIC SYSTEM REVENUE REFUNDING CERTIFICATES ...

NEW ISSUE- BOOK ENTRY ONLY RATINGS (Short-term/Long-term): Moody's: "VMIGl/Aaa"

Standard & Poor's: '!4-1 +/AAA" Fitch: "Fl+/AAA" (See "RATINGS")

In the opinion of jones Hall, A Profossirmal Law Corpomtifm, San Francisco, Califomia, Special Coumd, mbjert, hou.'l't~er to (l'rlain qualifimtiom desm'bed lm"l'itl, undn I'Xisli11g law, the porti()n of instalbnnll paJmen/5 designated as and comprising interest and I"I'Ceived bJ tlu ou'lzers of the 2008 Certificall'_l is excluded from gross income for federal income tax pu1poses and is not an item of tax preference for purposes of the fodual altenmtive minimum tax imposed on individuals and corporations, although for the p11rpose of comjmling the alternative mininwm tax imposed on certain mrporafions, such interest is takPJI into tUtOimf in dettrmini11g certain inmme and earning~. In the fiather opinion of Sprcial Counsel, such i11temt is eitmpt from Califomia personal ill come t.axts. See '"1/tX JWA'!TERS.'"

ELECTRIC SYSTEM REVENUE REFUNDING CERTIFICATES OF PARTICIPATION $90,000,000

SERIES 2008A $64,500,000

SERIES 2008B Evidencing and Representing Proportionate

Interests of the Owners Thereof

Dated: Delivery Date 2008A Certificates CUSIPt: 777807 CR7 2008B Certificates CUSIPt: 777807 CS5

in 2008 Payments to be made by the

CITY OF ROSEVILLE Price: 100%

2008A Certificates Due: February I, 2035 2008B Certificates Due: February I, 2035

Authority for Execution and Delivery. Tlu rtrti[lmle.\ ofjmrticipation captioned above (mllectivel_~. lh~ "2008 CertijicaJes'") are being (xeruled ami delivered lry The Bank of New York 1Tus/ CmnpanJ, N. A., as lnJ.I(U (file "Tmstee") unbr a TnLI/ Agrument daied as afAiaJ 1, 2008, between the Roseville" Finance Arahurity (the Aut/writ)"') and the Tmslee, tmd unbr a Mn.1ter Installment Purchase Contract (the "Master Contract"'), dated ILl of November 1, 1997, as .wpplemented to date, including a 2008 Supplnnentallnstallment Purchase Contract dated as of May 1, 2008, all entered into be/1i!een the Cit)' of Ro1eville (lite "Cit)•") and lhr :!utharit)' (the "2008 Supplementnl Canlmr'l" ami, rol/utive(\' with thf MfLIIer Contract, 11.1 previous[_\· J!tpplemented, the "lnstallmenl Purchase Contract"). See "TilE 2008 CERTIFICATES -Autharil,~ for Ewculion and Delivery•."

Interest with respect/a the 2008A (.ertijicales ami 20088 Certifimte.\ will initilllly be calculated at a Hb:'kly Rate fta)'able on the first Business Day ofeach calendar month, cmmnenci1Jg Junl' 2, 200fl. The 200HA Cerlifimlr.l mul 2008B Certijirnte.1 will he delivered ir1 denominations af$100,000 and rmJ integmlmultiplr.l of $1,000 in excess thereof See "TilE 2008 CERTIFICATES." Punutml to the TrJI.If Agreement, the 2008A Certijicale.\ and 20088 Certifu·ates ma_~ be converted /11 one ofseveral rlif!rrerllfntere.\l IU1!1' Mode.1: Cmmnercial Paper Raie, Dai(\' Rate, U't'tkl)' Rate, Long-Tenn Rfl(e or an Auction Rille. AU of the 2008A CtrtifiraiRS mll.lt be in the same lnttml Rate A/ode at the .mme time and all of the 2008B CertificaJes Ill liSt be in the same lntere.1f &te Mode alfhe same time. Thi.~ Offir.ial Statement is not intended Ia provide injimnation with wpect /11 the 2008A Ceriificates rmd 20088 Certi_ftcale.1 (i11Cl11ding !he lemn afsllrh 2008A Certificate.\ rmrl20088 Certificates) ajier ConveHianftmn a Hi>ekly R11te Period m· Daily &le Ptriod. Owner.\ and pm.1pective Jmrrhasers of the 2008.-1 Certificates ami 2008B Certificates should not rei)' rm this Official Statement far infomwtion wncerning the 2008A Crrtifimles tmd 2008B Cntiftcaies in ronnel lion with an_~ Om version rj"th~ 2008A Ctrlifo'aie.l omi 2008B C.ertiftcates, but.1hauld loolt. solely lo the offering docmnn~t /11 bt !/Sed in connection with an)' surh Convnsion.

Security for the 2008 Certi[lCates. The 2008 Ceriifimte.\ evidence dirrct, undivided fmrtional interests of the owners theruif in the "2008 Pa)·ment.<" received h)· the Trustee under the 1hut Agreement. "2008 Ptt_~m~nL~" are defintd as thl' imtallmrnt pa)'l/lent.l ofintemt, principal and prepn_wnent p-remium.<;, if an)', pn_wtble h)· the City umkr the 2008 Supplemmtul Contract. 111e 2008 CertijicaJes au aLw .1ecurerllt)· amounb held ill crrlain _fimd.1 and acco11nL1 estahlished under the 'fhlsl Agrmnenl. Su "SECUR/11' FOR THE 2008 CERT!f1(".ATES."

The 2008 PaJinmts are pa)•able frrml and ucured by a pledge of"Nrt Revenuei" of the Electric System, which are dejinedgenerall)' as Revenues afthe Electric System less the Alaintenanre and OperatUm Co.1h of!he Electric .\).1/ffll durin}; any 12-I!Umlh period. 11u pledge 1j"Net Revmue.1 fOr pa)'lll1'11f afthr 2008 Payments is on a parity with the pledge afNet Revenue.\ .1auring pnyment of othn oblignli11n.~ innmed fJ;i !l1e Cily uwkr tlu lnstallmenl Purr hast Conlrwt, iwh1ding insmllmm! paymmls which are the su~jnl of four .11'rie.1 of ctrlifirales of jmrticipa1i-On executed and delivered in 1999, 2002, 2004 and 2005 (colleclivelJ, the "Prior Certificates") to fiwmce and refinanrr improvtment.llo the Eleclric SJslem. The 2008 Ceriificaits are also serured h)· a Parity Reserve Fund on a pari!_~ with lite Prior Crrti[u:ate.1. See "SECURIIT FOR THE 2008 CERT1FW.ATES- Outstamiing Senior and Pnrity Jndebledness" and"- Parity Reuroe Fund."

"Maintenance and Operalion Co.1ts" indudt, among oll1er cos/.5, tlu Cit_\"s shau of debturvice on debt inmrTI'd h)· certain joint powers af(encies in which the Eltclric System participatl'.l. A.111 result, the City's paJ11JenLI of debt service an thi1 joint pawen agency debt are fm)'nble on 11 bmi.~ .1eniar loll1e City'1 pa_;·ments 1m the 2008 Certijira/e.1 and the otl1er Parity Obligation.s. Su "SECURITI' FOR TilE 2008 CERT!f1CATES- Outslllnding Senior and Parit_~ Indebtedness,"

Letter of Credit. PaJmml of the p-rinripalof and inUres/ with re.1pect to, and purchase prier of the 2008 Certificates will initiallJ lwve the benefit of an irrroomble diT"f'ci-PaJ letttr afcT"I'dit (the "Letter of Credit") to be i.Htll'd b)· Dtxia Crirlit Local, New lO-rk Branch (the "Bani!") as the initial Credit fO.cility under the Tnut Agreement. The i11itial expiration date oftlu l.etter of Credit i1 Mil)' I J, 2011, a.1 e:>.tended or mrlier tmninated p-rior thereto rL~ described herein. See "THE BANK" and "THE LETTER OF CREDIT AND REIMBURS£.\IENT AGREEMEN1:"

Use of Proceeds. '1111' 2008 Certificaies are being exurllrrl and tlelivned to (i) refinance urtain ouL•tanding oblixmion~ aftlu Cit)' reUIIing to crrtijicaJes afparticipmion executed and delivered in 2005 for tht Electric SJ.•Iem, (ii) pa)" costs as5ociaterl with the tenninaJion oftlu 2005 Swap Agreement (definerllu>rein), (iii) contribute funds to tlu> Pari!)· Rturve Fund .1ea1rinx tl1e 2008 Ceriiflmle.\ and the Pnrit_~ Certijirale.l and (iv) pay certain costs innlrTI'd in wnnection with the eXi'CIItion and delive1)' of the 200fl Certifimtes . • 'lee "THE PLAN OF FINANCING."

Certificate Terms; Book-Entry Only. "f11e 2008 Certificates will be issued i11 fullJ regi.sleredfon/1 in the nt11ne afCede & Co., as nominee of The Deposito')' 1h1St Campan.\' ("DTC") under the hoolt.-mtrJ-onl_~ .IJ.Ifem mailrt(lined b)· DTC. So long as Cede & Ca. is ll1e registered owner of the 2008 Certificates, priTUipal m1d tender p-ric-e of p-remium. if nn)", and interest with reo~pect to the 2008 C:ertifuates will be pnJable by the Ti-uslee to DTC, which will in ll1rn mail such pn)'menLI to its partiripanh fm· subuq111ml di.<bursnnenl to benejicial owners tif the 200!1 Certificates, (LI more fitll)• de.1·rrihed herein. Purclut~er.\· of the 2008 Certijicate.1 will not receivr artificatr.< upmenting their inte1·e.<ls in tht 2008 Certifimtrs. See "TilE 2008 CERTIFICATES'" and L1PPE.NDIX f"- DTC AND THE BOO&EN"f"Rl" ONL\' .Sl'.STEAf."

Prepayment and Tender. Prior to their maturi!J, the 2008 Certificate.\ are .111bjut to aptional and mandatory prepa)'ment awi optionalttnder and mandatory tmder a.1 de.1cribed in this Oj)icial Statement. See "TilE 2008 CERTJF[(;..(T£S-Prrpa~~menl" "-Optional"li:nder" and ''--Manda/01)' Tendrr" htrein.

THE OBUGAT!ON OF THE CJITTO ,'IJA.K£ THE 2008 PAYMENTS IS A SPECIAL OB!Jr.A.T!ON OF THE Cin' SECURED BY A PLEDGE OF AND PAYABLE SOLEIJ' FROM THE Nt.T REVENUES AND DOES NOT CONSTITUTE A DEBT OF THE Cln' OR OF THE STATE OF CAIJFORNIA OR OF ANY POIJT!CAI. SUBDIVISION THEREOF IN CONTRAVENTION OF ANY CONSTITUTIONAL OR STATUTORY DEBT IJAHTATION OR RESTRICTJON.

This cover:pagr contain.~ certaill infarmatitmfor quick rrf'trence on{_";. It i.1 nat a .1111/llllll')" of this issut ;if"Crrtifua/es. lnvestan must reM the entire Oj}icial Statement to obtain injOnnatian nunlial to tlu making of an infomud i11vestmenl deci1ion will! respect lo the purdU1.1e of the 2008 Certificates.

11u 2008 Certifirate.l are offered IVhRn, IL\ and if exmlll'd ami drlivrred and arrepted b)· the Undenvriter; m~jrl'l to the appnnml of the validity aftlu 2008 Supplemmtal Contrart by Jmm Hall, A l'rojfssimm! La-w CorpoTIIfimt, San fl"anrisw, CulijiYrnil!, Special Onmsel. Ct'rlnin Ugal mnltt'l".\ will n[\o be pa.\)td upon for the City by .Jones Hall 1/..1 disdo.n1re nmruel, jiJY

the Bank h)· Kulak Rock [.J.P, At/mila, Ceo1J:ia, far thR City fry thR Cit~; Allornry, and far the Underwriter h)· Orrick, llerringlon & Sutcliffi U.P. II i.1 tmliripm~d that the 2008 Cerli[uaJe_\ will be delivmd in book-entryfonn thm11gh lhr jiuilities ofDTC on or about May 1), 2008.

MORGAN STANLEY The date ofthi.J Of{lrinl Statement iJ .\fay 12. 2008.

Cop_~righl 2008, American !Jankers A.l.l'l!riatiau. CUSIP dn!a hnPin are fm!vuled f:t)· Sta11dnrd & lt11n's GUS/I' Senlice Bure011, a divisim1 of" I he AicCrnw--Hill CmnpanU:s, lw, , a11d are provided for convenim~t of T1'fmonu only. Ntilhtr tM CilJ. the Aut/writ) tulr the Undtro•nler IWili"I'J an) mpa>IJihiiil_l'for the acmracy oft he CUSJI' dnta. - -­....

Authority for Execution ard Deliv~ry . .

., - .!

INTRODUCTION

... ,' .,.· .' : ·;.

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The 2008 Certificates are being executed and delivered under the Trust Agreement and a Master Installment Purchase Contract (the "M1!?!er Cpntract") dated as of November 1, 1997, as supplemented by the following contracts, all entered into by and between the City and the Authority: a 1999 Supplemental:lnstallmeht F.'u·rchase Contract executed and entered into as of August 1, 1999 '(the. "1 ~99· SupplerT)ental Contra~!"),' ar2002·Supplemental Installment Purchase Contract executed and. entered into as of December 1, 2002. (the ''2002 Supplemental Contract"), a 2004.Sup.plemeritallnstallment Purchase Contract E;!Xequted and entered into as of July 1, 2004 (the "2004 Sup-plemental Contract"),. a 2005 Supplemental Installment Purchase Contract executed and enterea into' as of June. 1, 2005 (the "2005' Supple'mental Contract"), and a 2008 Supplemental Installment Purchase· Contract to be executed and entered into as of May 1, 2008, with respect to the 2008 Certificates (the "2008 Supplemental Contract"). The Master Contract, the 1999 Supplemental Contract, the 2002 Supplemental Contract, the 2004 Supplemental Contract, the 2005 Supplemental Contract and the 2008 Supplemental Contract are collectively referred to as the "Installment Purchase Contract". See "SECURITY FOR THE 2008 CERTIFICATES- Outstanding Senior and Parity Indebtedness."

. The .City is executing and delivering the 2008 Supplemental Contract under a resolution adopted by the ·City Council of the City on May 1, 2008. The Authority is executing and delivering the 2008 Supplemental Contract and the Trust Agreement.under a resolution adopted by the Authority's governing body on May 1, 2008.

Payments Represented by the 2008 Certificates .,

The 2008 Certificates evidence and represent the direct, undivided fractional interests of the owners thereof in the respective "2008A·Payments" and "2008B Payments" (collectively, the "2008 Payments") received by the Trustee under the Trust Agreement.. "2008 Payments" are defined as the installment payments of interest, principal and prepayment premiums, if any, payable by the City under the 2008 Supplemental Contract. See "SECURITY FOR THE 2008 CERTIFICATES."

The 2008 Payments are payable from and secured by a parity pledge of."Net Revenues" · of the City's electric utility (the ."Electric System"), which are defined generally as Revenues of the El§ctric System less the. Maintenance and Operation Costs of the Electric System during any 12-month period. "Maintenance and Operation Costs" ·include,, among .other costs, the City's share. of debt service on debt incurred by certain joint powers· agencies ·in which the Electric System participates. As a result, the City's payments· of debt service on this joint powers agency debt are, payable· on .a basis senior .to the' Parity Obligations, as defined below (which include the,2008 Payments).

The 2008 Certificates are also secured by amounts held in certain funds and accounts established under the Trust Agreement, including a Parity Reserve Fund, as described herein. See "SECURITY FOR THE 2008 CERTIFICATES."

The issuance of the 2008 Certificates will not directly, indirectly or contingently obligate the City to· levy or pledge any form of taxation or to make any appropriation for their payment. The 2008 Certificates are not secured by a legal or equitable pledge of, or lien or charge upon, any property of the City or any of its income or receipts except the funds pledged therefor pursuant to the Trust Agreement. Neither the faith and credit nor

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the taxing power of the City, the State of California or any other public agency is pledged to the payment of the principal or premium, if any, or interest with respect to the 2008 Certificates. The 2008 Certificates do not constitute a debt, liability or obligation of the State of California or any public agency (other than the special obligation of the City as provided in the Trust Agreement). · ·· ' ·

Financing Purpose !, ~·I.

The 2008 Certificates are being executed and delivered to (i) refinance the 20058 Certificates and the 2005C Certificates (described below), (ii) pay costs -associated with the termination of the 2005 Swap Agreements (described below), (iii) contribute funds to the Parity Reserve Fund ·securing the 2008 Certificates ·and the Parity Certificates (described below), and (iv) pay certain 'costs incurred in connection with the execution and delivery of the 2008 Certificates. See "THE PROJECT" and "ESTIMATED SOURCES AND USES OF FUNDS."

Outstanding Senior and Parity Obligations

Senior Obligations. The City has entered into financing agreements ·with certain regional joint powers agencies (including the Northern C~lifornia Power Agency and the Transmission Agency of Northern California), under. which the City is responsible for a share of debt service on debt issued by those joint powers agencies. Obligations of the City under these financing agreements constitute operating expenses of the Electric System payable prior to the Payments under the Installment Purchase Contract, including the 2008 Payments a·nd the other- Parity Obligations.

Parity· Obligations. lri addition, the 2008 Payments are secured on a parity with the Payments previously incurred by ·the City under the Installment Purchase Contract, which include (a) the payments securing the four series of prior certificates and (b) payments due under certain swap agreements (all as described below).-

See: "$ECURITY FOR THE 2008 CERTIFICATES - Outstanding Senior and Parity Obligations.".

Parity Reserve Fund '··

The City maintains a Parity Reserve Fund securing all Payments made under the Installment Purchase Contract securing the outstanding Prior Certificates and the· .2008 Certificates. The 2008 Reserve Account of the Parity Reserve Fund is being funded with amounts transferred from the reserve accounts securing the 20058 Certificates and the 2005C Certificates and proceeds of the 2008 .:Certificates ... See "SECURITY FOR .:THE· 2008 CERTIFICATES- Parity Reserve Fund." . • ·

Future Parity Debt

The Master Contract permits the City to execute additional· Parity Obligations and Parity Payment Agreements, the payments of which are payable from Net Revenues on a parity with the 2008 Payments and the payments due under certain swap agreements (described below), if the conditions set forth in the .Master Contract are met. · See "SECURITY. FOR THE 2008 CERTIFICATES- Additional Debt."

3

Rate Covenants

' Under the Master Contract, the City covenants that it will at all times fix, prescribe and

collect rates and charges for the services, facilities and electricity of the Electric System during each Fiscal Year which are reasonably fair and nondiscriminatory and which :will be. at least sufficient to yield "Adjusted Annual Net Revenues" for such Fiscal Year equal to at least 110% of the Adjusted Annual Debt Service for such Fiscal Year. See "SECURITY FOR THE 2008 CERTIFICATES- Rate Covenant."

The Letter of Credit

Payment of the principal, interest and purchase price of the 2008 Certificates will initially have the benefit of an irrevocable direct-pay letter of credit (the "Letter of Credit") as the initial Credit Facility under the Trust Agreement to be issued by Dexia Credit Local, New York Branch (the "Bank") for the benefit of the Trustee. The initial expiration date of the Letter of Credit is May 13, 2Q11, as extended or earlier terminated prior thereto as described herein: The Letter of Credit and any Alternate Credit Facility are defined under the Trust Agreement as the "Credit Facility." The Letter of Credit is being issued under the terms of a Letter of Credit Reimbursement Agreement, dated the delivery date of the 2008 Certificates (the "Reimbursement Agreement"), between the Bank and the City. See "THE BANK" and "THE LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT."

Prepayment and Tender

The 2008 Certificates are subject to mandatory and optional tender and to mandatory and optional prepayment prior to maturity as more fully described herein. See "THE 2008 CERTIFICATES- Prepayment,""- Optional Terider" and "-·Mandatory Tender."

DTC and the Book-Entry Only System··

The 2008 Certificates are being executed and delivered as fully registered securities in the name·of Cede & Co., as nominee of The Depository Trust Company ("DTC"),and beneficial interests in the book-entry certificates will be made available in authorized denominations to ultimate purchasers under the book-entry-only system maintained by DTC. See "APPENDIX F­DTC AND THE BOOK-ENTRY ONLY SYSTEM:"

Weekly Rate .. ·

Interest with respect to the 2008A and the 2008B Certificates will initially be calculated · at a Weekly Rate. During any Weekly Rate Period, interest with respect to the 2008A and 2008B Certificates will be payable on the first Business Day of each calendar month. See "THE 2008 CERTIFICATES -Interest Rate Modes" herein and "APPENDIX C- DEFINITIONS AND . SUMMARY OF CERTAIN DOCUMENTS." ·'

Change in Interest Rate Mode

· The Interest Rate Mode with respect to the 2008A Certificates and 20088 Certificates is subject to subsequent Conversion to a Daily Rate, Commercial Paper 'Rate, Auction Rate or Long-Term Rate (or thereafter back to a Weekly Rate), as described herein (each; an "Interest Rate Mode"). This Official Statement describes the terms of the 2008A Certificates and the 20088 Certificates only while the Interest Rate Mode is a Weekly Rate or Daily Rate, as described herein. This Official Statement is not intended to provide information with respect to

4

the 2008 Certificates in any interest rate period other than the Weekly Rate Period or Daily Rate Period. See "THE 2008 CERTIFICATES - Interest Rate Modes" herein and "APPENDIX C -DEFINITIONS AND SUMMARY OF CERTAIN DOCUMENTS.:'

PLAN OF FINANCING

The Refunding Plan

On June 30, 2005, the Authority executed and delivered three series of certificates of participation relating to the electric system: $52,900,000 Series 2005A-Eiectric System Revenue Certificates of Participation (the "2005A Certificates"), $90,000,000 Series 2005B Electric System Revenue Certificates of Participation (Auction Rate Securities) (the "2005B Certificates") and $60,000,000 Series 2005C Electric System Revenue Certificates of Participation (Auction Rate Securities) (the "2005C Certificates"). As described below, the 2005B Certificates and 2005C Certificates will be prepaid with the net proceeds of the 2008 Certificates. The 2005A Certificates will remain outstanding.

A portion of the net proceeds from the sale of the 2008A Certificates will be used to prepay a portion of the City's obligations under the 2005 Supplemental Agreement resulting in a prepayment of the remaining outstanding 2005B Certificates. On the date of delivery of the 2008 Certificates, the Authority will cause the Trustee, in its capacity .-as trustee for the 2005B Certificates, to prepay and defease the 2005B Certificates in accordance with the provisions of the Trust Agreement for the 2005B Certificates. Under the TrusL Agreement, the 2005B Certificates will be· prepaid on May 13, 2008, at a prepayment price equal to the' principal amount of 2005B Certificates to be prepaid; with.out premium .

• ! • .

A portion of the net proceeds from the sale of the 2008B Certificates will be used to prepay a portion of the City's obligations under the 2Q05 Supplemental Agreement resulting in a prepayment of the remaining outstanding 2005C Certificates. On the date of delivery of the 2008 Certificates, the Authority will cause the Trustee, in its capacity as trustee for the 2005C C~rtificates, to pre·pay arid defease the 2005C Certificates in accordance with the provisions of the Trust Agreement for the 2005C · Certificates. Under the Trust Agreement, the 2005C Certificates will be prepaid on May 15, 2008, at a prepayment price equal to the principal amount of 2005C Certificates to be prepaid, without premium.

Sufficiency of amounts available to prepay the 2005B Certificates and 2005C Certificates will be verified by Chris D. Berens, CAP, P.C. See "VERIFICATION."

2005 Swap Agreements

In connection with the issuance of the 2005B Certificates, the City entered into (i) an interest rate swap agreement with Morgan Stanley Capital Services, Inc., New York, an affiliate of Morgan Stanley & Co. Incorporated, and (ii) an interest rate swap agreement (together with the Morgan Stanley Capital Services, Inc. swap agreement, the "2005 Swap Agreements") with Bear Stearns Financial Products Inc. (together with Morgan Stanley Capital Services, Inc., the "2005 Swap Counterparties"). In connection with the refinancing of the 2005B Certificates as described above, the 2005 Swap Agreements will be terminated and a portion of the proceeds of the 2008 Certificates will be used to pay termination payments with respect to the 2005 Swap Agreements.

5

r· • 1',

ln·connection with the issuance of the 2008A Certificates, the City expects to enter into swap agreements similar in their terms to the 2005 Swap Agreements. See "SECURITY FOR THE 2008 CERTIFICATES- Parity Obligations" below.

ESTIMATED SOURCES AND.USES OF FUNDS . ·~ ~.,.

· ··c'~ The table below sets forth the estimated sources and uses of funds with respect to the 2008 Certificates.

Sources of Funds Par Amount of2008A Certificates Par Amount of.20088 Certificates Funds from 20058 and 2005C Certificates

Total Sources

Uses of Funds Prepayment of 20058 Certificates PrepaymeJJt of 2005C Certificates . Deposit to 2008 Parity Reserve Account <'> · Delivery Costs <'> _2005 Swap ,A,greements Termination Payments

. ... . Total L/ses : . . · .,

$ 90,000,000.00 64,500,000.00

9,191,931.55 $163,691,931.55

$90,210,010.00 59,588,726.67

9,090, 711.86 . 940,483.02

. 3.862.000.00 $163,691,931.55

(1) Represents. an increase in the common reserve fund securing the 2008 Certificates and the Prior ·Certificates which, when added to the amount previously on deposit in the Parity Reserve Fund (excluding the portion attributable to the 20058 and 200SC Certificates), equals the Reserve Fund Requirement for the 2008 Certificates and· the Prior Certificates. See "SECURITY FOR THE 2008 CERTIFICATES~ Parity Reserve Fund."' . .

(2) Includes costs of preparation and reproduction of documents, costs of rating agencies and costs to provide information required by rating agencies, filing and recording fees, initial fees and charges of the Trustee, initial fees and charges of the Bank, legal fees and charges, fees and disbursements of consultants.and professionals, fees and charges for preparation, execution and safekeeping of.the.2008 Certificates, fees of the Authority, Underwriter's discount, fees of the verification agent and any other cost, charge or fee in connection with the original execution and delivery of the 2.008 Certificates.

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.THE 2008 CERTIFICATES

·The followingds a summary of certain provisions·of the 2008 Certificates. Reference is made to the-2008 Certificates for the complete text thereof and to the Trust Agreement for a more detailei:l description of such provisions. The discussion herein is qualified by such reference. See APPENDIX C ~"DEFINITIONS AND SUMMARY OF CERTAIN DOCUMENTS".

This Official Statement. provides information as of its date with respect to the 2008A Certificates and 20088 Certificates (including the terms of such 2008A Certificates and 20088 Certificates) prior to a Conversion from a Weekly Rate or Daily Rate. There are significant changes in the terms of the 2008A Certificates and 20088 Certificates not described in this Official Statement when. the respective 2008A Certificates or 20088 _Certificates are not in a Weekly Rate or Daily Rate. Purchasers of the 2008A Certificates and 20088 Certificates should not rely on this Official Statement for information concerning the 2008A Certificates and 20088 Certificates .in connection with any Conversion of the respective 2008A Certificates or 20088 Certificates,. but should look solely to the offering document to be used in connection with any such Conversion. ·

Authority for Execution and Delivery

_ The 2008 Certificates are being executed and delivered under and in accordance with (i) the Trust Agreement, (ii) the Installment Purchase Contract, (iii) Resolution No. 08-223 adopted by the City Council of the City on May 1, 2008, and (iv) Resolution No. 1-08 adopted by the Authority's governing body on May 1, 2008.

General Certificate Terms

Dated Date and Maturities. The 2008 Certificates will be dated their date of initial delivery. Subject to the prepayment provisions outlined below, the 2008 Certificates will mature on the dates and .in the amounts set forth on the cover page of this Official Statement. ·

Variable Rate Certificates. Under the Trust Agreement, the 2008 Certificates are multi­modal certificates that are authorized to represent interest at a Weekly Rate, . Daily. Rate, Commercial. Paper Rate, Auction Rate or Long"Term Rate (as those terms are defined in the Trust Agreement, each· ah "Interest Rate Mode") .. The initial Interest Rate Mode for the 2008A and 20088 Certificates will be a Weekly Rate.

Conversion of the Interest Rate Mode. At the option of the City,. the Interest Rate Mode for the outstanding 2008A Certificates or 20088 Certificates may be converted to a Weekly Rate,-'Oaily Rate, Commercial Paper Rate, Auction Rate or Long-Term Rate (the effective date of such conversion is a "Conversion Date"). The 2008 Certificates are subject to mandatory tender and purchase on each Conversion Date, except upon conversion between a Weekly Rate and a Daily Rate, as set forth in the Trust Agreement. See· "Optional and Mandatory Tender- Mandatory. Tender for Purchase" below.

. . ·, .

All 2008A Certificates must be in the same Interest Rate. Mode,, .and all 20088 Certificates must be in the same Interest Rate Mode; however, the 2008A Certificates are not required to be in the same Interest Rate Mode as the 20088 Certificates, and the 20088 Certificates are not required to be in the same Interest Rate Mode as the 2008A Certificates .

. I'

7

Interest and Principal. The initial Interest Rate· Mode for the 2008A Certificates and 2008B Certificates will be a Weekly Rate. Each Weekly Rate will be computed on the basis of a 365 or 366-day year,. as appropriate, for_ the actual number of.days elapsed. ·._The principal evidenced and represented by the 2008 Certificates will be payable in lawful money of ·the United States of America upon the surrender thereof on the respective Principal Payment Date or on prepayment prior thereto at the Corporate.J"rust Office of the Trustee. ·. . --

Denominations. Authorized denominations. as to 2008A. Certificates · and 2008B Certificates representing interest at a Daily Rate or Weekly Rate shall be. $100,000 and any integral multiple of $1,000 in excess of $100,000.

DTC and Book-Entry Only System. DTC will act as-securities depository for the 2008 Certificates. The 2008 Certificates will be executed and delivered. as fully-registered securities registered initially in the-name of Cede & Co. (DTC's partnership nominee). So long as Cede & Co. is the registered owner of the 2008 Certificates, as nominee of DTC, references in this Official Statement to the "Owners" will mean Cede & Co., and will not mean the Beneficial Owners of the 2008 Certificates. See "APPENDIX F - DTC AND THE BOOK-ENTRY ONLY SYSTEM:'

Method of Payment. So long as the 2008 Certificates are registered in the name of Cede & Co., principal, premium, if any, and interest with respect to the 2008 Certificates are payable directly to DTC by the Trustee in lawful;money of the United States of America. Upon receipt of payments ofprincipal, premium or interest, DTC is to remit such principal, premium or interest to the "DTC Participants" (as defined in APPENDIX F) for subsequent disbursement to the Beneficial Owners of the 2008 Certificates. See "APPENDIX F - DTC AND THE BOOK­ENTRY ONLY SYSTEM:'

Interest Rate Modes

Interest with respect to the 2008· Certificates will be calculated, during any Weekly Rate Period at the Weekly Rate, and during any Daily ·Rate Period at the Daily Rate. The determination of the interest rate with respect to each Series of 2008 Certificates as provided in the Trust Agreement and as described herein will be conclusive and binding on the owner of such 2008 Certificates, the Trustee and the Authority. At no time will the interest rate with respect to any 2008 Certificates be higher than the Maximum Rate (12% for 2008 Certificates other than Bank Certificates or 2008 Certificates.bearing interest at an Auction Rate).

Weekly Rate.

Determination of Weekly Rate. During each Weekly Rate Period for a Series of 2008 Certificates; interest with respect to such Series of 2008 Certificates will be payable at Weekly Rates, which will be determined by the Remarketing Agent by no later than 5:00p.m., New York City time, on Wednesday of each week during such Weekly Rate Period, or if such day will not be a Business Day, then on the next succeeding Business Day. The first Weekly Rate· determined for each Weekly Rate Period will be determined on or prior to the first day of such Weekly Rate Period ·and will apply to the period commencing on the first day of such Weekly Rate Period: and ending on the next succeeding Wednesday (whether or not a Business Day). Thereafter, each Weekly Rate will apply to the period commencing on Thursday (whether or not a Business Day) and ending· on the next succeeding Wednesday (whether or not a:Business Day), unless such Weekly Rate Period will end on a day other than Wednesday, in which event the last Weekly Rate for such Weekly Rate Period will apply to the period commencing on

8

Thursday .(whether or not a Business·Day) preceding the last day of such Weekly Rate- Period and ending on the last day of such Weekly Rate Period. . ··

. ' :-!r ' .·;· . • I · I • •, ' '-)

· The Weekly Rate will be the rate 'of. interest--per annum determined 'by. the Remarketihg Agent to be the minimum interest rate which, if the applicable Series of 2008 Certificates, would enable the Remarketing Agent (based on then-prevailing market conditions) to sell such Series of 2008 Certificates on the effective. date of -such rate at a price (without regard to accrued interest) equal to the principal·am'ount thereof. In the event that the Remarketing Agent fails to establish a·weekly Rate for any week, .then the Weekly Rate for such week will be the same as the Weekly Rate for the immediately preceding week if'the Weekly Rate for such preceding week was determined by the Remarketing Agent. · ·

. ' . ,·

In the event that· the Weekly Rate for the immediately preceaing week·, was not determined by the Remarketing Agent, or in the event that the Weekly Rate determined by the Re·marketing ·Agent is held to be invalid or unenforceable by a court cif law, them the interest rate for such Week will be equal to the Variable Index on the day such Weekly Rate would otherwise be determined as described herein: "Variable Index" is defined in the Trust Agreement to mean, on any date, a rate determined on the basis of the Securities Industry and Financial Markets Association Municipal Swap lndexTM as of the most recent date for which such index was published· or .such other weekly,· high-grade index comprising seven-day, tax-exempt variable rate demand notes produced by MunicipaLMarket·Data, Inc.; or- its successor, or otherwise designated by The Securities Industry and' Financial Markets; provided that, if such index is no longer provided by Municipal Market Data, Inc. or its successor, the "Variable Index" will mean such other reasonably comparable index selected by the Remarketing Agent.

Conversion to Weekly Rate Period. If a Series of 2008 Certificates is converted· to another .Interest Rate Mode, the Authority or the City may, subject to the provisions of the Trust Agreement, at any time, with the written consent of the Bank (which consent may not be unreasonably withheld), by written direction to the Trustee and the Remarketing Agent, may elect that the Interest Rate Mode for a Series. of 2008 Certificates be Converted back to a Weekly Rate, provided that a Credit Facility or Alternate Credit Facility is in place for such Series of 2008 Certificates.· Such direction of the Authority or the City will specify the proposed Conversion Date for such conversion to a Weekly Rate Period, which will be a Business Day not earlier than the 20th day following receipt by the Trustee of such direction. . .

During each Weekly Rate Period commencing on a date so specified and ending on the day immediately preceding the effective date of the next succeeding Rate Period, the interest rate borne by the converted Series of 2008·Certificates will be a Weekly Rate.

· Notice of Conversion to Weekly Rate Period. The Trustee will give notice by first-class mail.of. a Conversion to a Weekly Rate Period to the Bank and the Owners of the applicable Series of' 2008 Certificates not less than 15 days prior to the proposed effective date of such Weekly Rate Period. Such notice will state the proposed Conversion Date for such Weekly Rate Period. . ·

Daily Rate.

Determination of Daily Rates. During each Daily Rate Period for a Series of 2008 Certificates, such Series of 2008 Certificates will represent interest at the Daily Rate, which will be determined by the Remarketing Agent by no later than 9:30 a.m. (New York City time) on each Business Day. The Daily Rate will be the rate of interest per annum determined by the Remarketing Agent to be the minimum interest rate which, if borne by such 2008 Certificates

9

under Prevailing Market .Conditions; would enable the Remarketing Agent to sell such 2008 Certificates o·n the effective date of such,rate at .a price (without .regarding accrued interest) equal to the principal amount thereof. In the event that the Remarketing Agent fails to establish a Daily Rate forany~Business Day, then the.Daily:Rate for such.Business.Day will be equal to the Variable Index on such Business Day.

''. ' ' ' . ~

Conversion to Daily Rate Period. Subject:to:the provisions of. the Trust Agreement, at any time, the Authority or the City, with the written·approval by the .Bank-if the Remarketing Agent is an entity· other than Morgan Stanley & Co.Jncorporated, by. written direction to .the Trustee and the Remarketing Agent, may elect that the Interest Rate Mode-for a Series of 2008 Certificates be Converted to a Daily Rate. Such direCtion of the City will.specify the proposed Conversion Date for such Conversion to a Daily Rate Period, which will be a Business Day not earlier than the twentieth (20th) day following. receipt by the Trustee of such. direction.

During each Daily Rate Period commencing on a. date so specified and .ending on the day immediately preceding the effective date ofthe next succeeding Rate Period, the interest rate borne by the converted Series of 2008 Certificates will be a Daily Rate.

Notice of Conversion to Daily Rate Period. The Trustee will give notice by first-class mail of a Conversion to a Daily Rate Period to the Bank. and·.the_ Owners of the 2008 Certificates not less than 15 days prior to the proposed effective •date·of .such Daily Rate Period. Such notice will state the proposed Conversion Date for.such Daily Rate Period.

' Conversion to Other Interest Rate Modes. At the option of the Authority or the City,

the Interest Rate Mode for the 2008A Certificates or 2008B Certificates may be converted from a Weekly Rate or Daily Rate to a Commercial Paper Rate, Auction Rate or Long-Term Rate (the effective date of such conversion is a "Conversion Date"). The 2008A Certificates and 2008B Certificates are subject to mandatory tender and purchase on ·each Conversion Date, with the exception of conversion between a Weekly Rate· and a Daily Rate, as· set forth in the Trust Agreement. See "Optional and Mandatory Tender- Mandatory Tender for Purchase" below.

· The Trustee will give notice by 'first-class mail of a Conversion to an Auction Rate, Commercial Paper Rate or Long-Term Rate to ·the Owners of the applicable Series of 2008 Certificates not less than 15 days prior to the proposed Conversion Date. See "APPENDIX C­DEFINITIONS AND SUMMARY OF CERTAIN ·DOCUMENTS" for additional information regarding the requirements for Conversion.

There are significant changes in the terms ·of the 2008A ·Certificates and 20088 Certificates not described in this Official Statement when the respective 2008A Certificates or 20088 Certificates are not in a Weekly Rate or Daily Rate. Purchasers of the 2008A Certificates and 20088· Certificates should not rely on this OffiCial Statement for information concerning the 2008A Certificates and. 20088 Certificates in connection with any Conversion of the respective 2008A Certificates or 20088 Certificates other·than between a Daily. Rate and a Weekly Rate, but should look solely to the offering document to be used in connection with any such Conversion.

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Prepayment

Optional Prepayment. Whenever the Interest Rate Mode is the Daily Rate or Weekly Rate, such Series of 2008 Certificates will be subject to prepayment prior to their stated maturity at the option of- the City, in whole or in part on any Business Day in such amounts as may be specified by the' City), by lot, at the principal amount thereof, plus accrued interest thereon to the date fixed for prepayment, without premium.

Sinking Fund Installments. The 2008 Certificates are subject to mandatory sinking fund prepayments as set forth below.

The following· are the sinking fund installments for the 2008A Certificates. Such installments are due on February 1 of each of the years set forth in the following table in the respective amounts set forth opposite such years in said table:

·2008A Certificates Sinking Fund Installments

Mandatory Prepayment Date

(February 1) 2023 2024 2025 2026 2027 2028 2029

Amount To Be Prepaid

$4,875,000 . 5,700,000

5,925,000 6,150,000 6,400,000 6,625,000 6,900,000

Mandatory Prepayment Date

(February 1) 2030 2031 2032: 2033 2034 2035

AmouhtTo Be Prepaid

$7,175,000 7,450,000 7,725,000 8,050,000 .8,350,000 . 8,675,000

The following are the sinking fund installments for the 2008B Certificates. Such installments are due on February 1 of each of the years set forth in. the following table in the respective amounts' set forth opposite such yea'rs'in said table: i: . . ·- . ' •

20088 Certificates Si~king Fund Installments . . . . - .. ' M-andatori . 'Mandatory

Prepayment Date·· _, · Amount To Be Prepayment Date Amount To Be (February 1) Prepaid (February 1) Prepaid

·:.. 2009 ' $1 ;315,000 2023 ' $2,385,000 ' ' 2010 .-· 1,540,000 2024 '- . 1,885,000 .. -·•-; '·' 2011 . 1,755,000. 2025 710,000.

' . . .. ,--. 2012 .• . 1,615,000 -...... ' 2026- ..• , 2,675,000 2013 1,675,00!-J 2027, '" ., ' '' ;.,.,2,7_65,000 ·.,_ • 2014 480,000 2028 - ' 2,890,000 -2015 555,000 . 2029 , 1 , ;2,~90,000

.. 2016 • 565,ooo -': · ·. · ' '2o3o · ' --- • 3 100 ooo ·- · - '' · 201'7 · ·_·, ·' · 585 ooo :~····· • · , .. · 203'1· '· - ,_, .• ,3.225'ooo

:-2018 : • 555' ooo' · ,:;,·. :. ' · · z'd:l2 • · "'3' 36o'ooo 2019 · · '57o'ooo ·-·.-: - ' ':-: 2033 · ,_, -3:465:ooo •2020 - 2,145:ooo· .:--' ( c:; .• ·-2034- r;_c 6,320,000

~ ;r .·• ' '2021 2;230,000 •, I,. 2035 I· . -10,820,000 • ·, v' 2022-. ',1 2,325,000 ·, .- ' '<• 1.:,_,. ' ' -: ., '-'

. ·•. . ···,· '

• Notwithstanding the provision described above, Bank Certificates are subject to special mandatory prepayment in accordance with the terms of the applicable Credit Facility and/or the Reimbursement Agreement

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Selection of 2008 Certificates for Prepayment. Whenever provision is made in the Trust Agreement for the prepayment of less than all of a Series of the 2008 Certificates, the · Trustee will select the 2008 Certificates of such applicable Series to be prepaid, from all 2008 Certificates subject to prepayment or such given portion thereof not previously called for prepayment, by lot in any manner which the Trustee in its sole discretion will deem appropriate and fair. Any Bank Certificates will be prepaid in accordance with the applicable provisions of the Credit Facility and will be prepaid before any other 2008 Certificates.

Notice of Prepayment. Notice of prepayment will be mailed by the Trustee by first class mail, not less than 30 days nor more than 60 days prior. to the. prepayment date, to the · respective Owners of any 2008 Certificates designated for prepayment at their addresses appearing on the· bond registration books of the .Trustee. Any 2008 Certificate which is remarketed subsequent to a notice of prepayment being delivered, but prior to the date of such prepayment, will be delivered to the purchaser thereof accompanied by such notice. The Trustee will also give notice of prepayment by overnight mail or by such other method acceptable to the Bank and such institutions to such securities depositories and/or securities information services as will be designated in a Certificate of the Authority. Each notice of prepayment will state the dat~ of such notice, the date of issue of the 2008 Certificates, the prepayment date, the Prepayment Price, the place or places of prepayment (including the name and appropriate address or addresses of the Trustee), the CUSIP numbers, if any, and, in the case of 2008 Certificates to be prepaid in part only, the respective portions of the principal amount thereof to be prepaid. Each such notice will also state that on said date there will become due and payable on .each of said 2008 Certificates the Prepayment Price thereof or of · said specified portion of the principal amount thereof in the case of a 2008 Certificate to be prepaid in part .only, together with interest accrued thereon to the prepayment date, and that from and after such prepayment date interest thereon will cease to accrue, and will require that such 2008 Certificates be then surrendered. ;1. '' . .. . ' ' . • - ~. . . . ·~ . Failur~ by .the Trustee to give notice urider the Trust Agreement, or the insufficiency of any 'such notice, wili not affect the sufficiency of the proceedings for prepayment. . . . .

. . . . .

Conditional notice of optional prepayment may be given at the direction of the Authority or the City, provided however that prior to or contemporaneously with any withdrawal or rescission of any notice of prepayment, the Trustee and the Tender Agent receive written confirmation from the Bank of the .. full reinstatement, if any, of the Credit Faciliiy.

Any notice or prepayment given pursuant 'to' the'· Trust Agreement may be rescinded by written notice given to the Trustee by the Authority no later than five Business·oays prior to the date specified for prepayment. The Trustee shall· ·give notice of such rescission as soon thereafter as practicable in the same manner, and to the same persons; as notice of such prepayment was given pursuant to the Trust Agreem-ent. · '

i. ., ~ . . ~.· . . .J • ' ' ~ -

Effect of Prepayment. Nolie~ of prepaym~nt liaving been duly give~;'·and moneys for payment of the' !"repayment Price of, Jogether with i~te,re~t accrued to the piepayment date on, the 2008 Certificates (or portions thereof) so called for prepayment being held by the Trustee, on the prepayment date designated iri such notice, the:2008 Certificates (or portions thereof) so called for prepayment will become due and payable at the Prepayment Price specified in such notice and interest accrued thereon· to the prepayment date, interest with respect to the 2008 Certificates so called for prepayment will cease to accrue, said 2008 Certificates (or portions thereof) will cease to be entitled to any benefit or security under the Trust Agreement, and the Owners of said·2008. Certificates will have no rights in respect thereof except to.-receive

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12

payment of said Prepayment Price and accrued interest to the date fixed for prepayment from funds held by the Trustee for such payment.

Optional Tender

During Weekly Rate Period. If the Interest Rate Mode is the Weekly Rate, any 2008 Certificate will be purchased on the demand of the owner thereof on any Business Day during a Weekly Rate Period at a purchase price equal to the principal amount thereof pl~:~s accrued interest, if any, to the Purchase Date, upon written notice to the Trustee, at its Trust Office at or before 5:00 p.m. (New York City time) on a Business Day not later than the seventh day prior to the Purchase Date, which notice (a) states the series,.number and principal amount (or portion thereof) of such 2008 Certificate to be purchased, (b) states the Purchase Date on which such 2008 Certificate will be purchased and (c) irrevocably requests such purchase and agrees to deliver such 2008 Certificate, duly endorsed in blank for transfer, with all signatures guaranteed, to the Trustee at or prior to 12:00 Noon (New York City time) on such Purchase Date. In the case of a tender for purchase of less than the full principal amount of a 2008 Certificate, both the portion of the 2008 Certificate tendered for purchase and the portion not so tendered will be in an Authorized Denomination.

During Daily Rate Period. If the Interest Rate Mode is the Daily Rate, any 2008 Certificate will be purchased on the demand of the owner thereof on any Business Day during a Daily Rate Period at a purchase price equal to the principal amount thereof plus accrued interest, if any, to the Purchase Date upon written notice or Electronic Notice given to the Trustee, at its Trust Office not later than 10:00 a.m. (New York City time) on the Purchase Date specified in such owner's demand for purchase, which notice (a) states the series, number and principal amount (or portion thereof) of such 2008 Certificate-to be purchased, (b) states the Purchase Date on which such 2008 Certificate will be purchased and (c).irrevocably requests such purchase and agrees to deliver such 2008 Certificate, duly endorsed in blank for transfer, with all signatures guaranteed, to the Trustee at or prior to 12:00 noon (New York City time) on such Purchase Date. In the case of a tender for purchase of less than the full principal amount of a. 2008 Certificate, both the portion of the 2008 Certificate tendered for purchase and the portion not so tendered will be in an Authorized Denomination.

Mandatory Tender

On Conversion Date. The 2008 Certificates will be subject to mandatory purchase on each Conversion Date other than a Conversion Date converting the Interest Rate Mode from a Daily Rate to a Weekly Rate or from a Weekly Rate to a Daily Rate:

· Upon Delivery of Alternate Credit .Facility.· The 2008 Certificates ·will be subject· to mandatory purchase from a draw on the then"existing Credit·Facility on the effective date of an Alternate Cre"dit Facility.

Upon Failure to Renew Credit Facility: Tlie 2008 Certificates will be purchased on the fifth "Business Day preceding the date of expiration of the Credit Facility if a notice of renewal of the Credit Facility is not delivered by the Bank to the Trustee at least 25 days prior to the scheduled expiration of the Credit Facility. ·' ·

Upon Termination of Credit Facility.· The 2008 Certificates will be purchased on the Business Day preceding the date of termination of the Credit Facility.

. . . .. ,•

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Upon Default Under Reimbursement Agreement. The 2008 Certificates secured by a Credit Facility will also be purchased on any Business Day within seven days (but not later than a Business Day prior to the date of expiration of the Credit Facility) after receipt by the Trustee of written notification from the Bank that an event of default under the Reimbursement Agreement or non-reinstatement of the Credit Facility has occurred and is continuing and instructing the Trustee to call for a mandatory tender of the 2008 Certificates.

Notice of Mandatory Tender. In connection with any mandatory tender described under "Upon Delivery of Alternate Credit Facility," "Upon Failure to Renew Credit Facility" or "Upon Termination of Credit Facility," the Trustee will give notice to the applicable Owners at least 20 days prior to the date of mandatory tender, or, in the event the Trustee does not have notice of the occurrence of the event which requires mandatory tender at least 25 days prior to the date of mandatory tender, notice will be given as soon as practicable upon receipt of notice by the Trustee. In connection with any mandatory tender described under "Upon Default under Reimbursement Agreement" above, the Trustee will give notice as soon as practicable upon receipt of notice of default from the Bank by the Trustee.

The form of such notice will be provided by the City and will state: (i) that the Purchase Price of any 2008 Certificate so subject to mandatory tender for purchase will be payable only upon surrender of such 2008 Certificate to 'the Trustee at its Trust Office, accompanied by an instrument of transfer thereof, in form satisfactory to the Trustee, executed in blank by the Owner thereof or by the Owner's duly-authorized attorney, with such signature guaranteed by a commercial bank; trust company or member firm of the New York Stock Exchange; (ii) that all 2008 Certificate so subject to mandatory tender for purchase will be purchased on the mandatory purchase date which will be explicitly stated; and (iii) that in the event that any Owner of a. 2008 Certificate so subject to mandatory tender for purchase will not surrender such 2008 Certificate to the Trustee for purchase on such mandatory purchase date, then such 2008 Certificate will be deemed to be an Undelivered 2008 Certificate, and that no interest will accrue with respect thereto on and after such mandatory purchase date and that the Owner thereof will have no rights under the Trust Agreement other than to receive payment of the Purchase Price thereof.

General Provisions Relating to Tenders

Any 2008· Certificates tendered to the Trustee for purchase will be held in trust for the benefit of the respective Owners· of such 2008 Certificates until moneys representing the Purchase Price of such 2008 .Certificates have been delivered to such Owners. The term "Purchase Price" of any Purchased 2008 Certificate means the principal amount thereof plus accrued interest to, but not including, the Purchase Date; provided, however, that if the Purchase Date for any Purchased 2008 Certificate is-an Interest Payment Date, the Purchase Price thereof will be the principal amount thereof, and interest with respect to such 2008 Certificate will be paid to the Owner of such 2008 Certificate pursuant to the Trust-Agreement.

The Purchase Price of Purchased 2008 Certificates will be paid by the Trustee or Tender Agent at or before 4:00 p.m. ·(New York City time) on the Purchase Date .from the proceeds of the sale of such 2008 Certificates received from the Remarketing Agent and, to the extent sufficient remarketing proceeds to pay the Purchase Price are not received, from draws on the Credit Facility.

,, '!• . ' The Trustee will draw: on :the Credit Facility pursuant tq the terms thereof or of the

respective Reimbursement Agreement (or, if at any time there is an Alternate Credit Facility, then pursuant to the requirements of such Alternate Credit Facility) on the Purchase Date in an

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amount equal to the difference between (a) the total Purchase Price of those Purchased 2008 Certificates to be purchased and. (b) the Purchase Price of those Purchased 2008 Certificates to

· be purchased with respect to which the Remarketing Agent expects to transfer, or to cause to be transferred, immediately available funds to the Trustee on the Purchase· Date for deposit in the Remarketing Proceeds Account established under the Trust Agreement In· the event the Trustee has not received any funds or commitment to deliver funds from the Remarketing Agent, the Trustee shall draw on the Credit Facility tile full amount of the Purchase Price.

Such moneys will be used only. to pay the Purchase Price as provided in the Trust Agreement, and if not so used will be promptly returned to the Bank.· If the 2008 Certificates are not Book-Entry Bonds, all amounts received from a draw under the Credit Facility will be transferred immediately by the Trustee to the Tender Agent· to purchase tendered 2008 Certificates on the Purchase Date. Until applied to pay the Purchase Price or returned to the Bank, all such amounts will be deposited in the Credit Facility Account established under the Trust Agreement and until so applied will be held uninvested in trust for the benefit of the Owners tendering such 2008 Certificates for purchase.

Any moneys held by the Trustee in the Certificate Payment Fund remaining unclaimed by the Owners of the Purchased 2008 Certificates which were to have been purchased for two (2) years after the respective Purchase Date for such Purchased 2008 Certificates will be paid, upon the written request of the Authority, against written receipt therefor. 'The Owners of Purchased 2008 Certificates who have not yet claimed money in respect of. such · 2008

· Certificates will thereafter be entitled to look only to the Trustee, to the extent it will hold moneys on deposit in the Certificate Payment Fund or the Authority to the extent moneys have been transferred in accordance with the Trust Agreement

Remarketing

Genera/;. Morgan Stanley & Co. Incorporated will serve as the initial Remarketin'g Agent for the 2008 Certificates. Under the Remarketing Agreement, the Remarketing Agent has agreed to: (i) determine the interest rates applicable to such 2008 Certificates and give notice to the Trustee of such rates and periods in accordance with the Trust Agreement; (ii) keep such books and records as will be consistent with prudent ·industry practice; and (iii) ·use its best efforts. to remarket 2008. Certificates in accordance with the Trust Agreement The Remarketing Agent will hold all amounts received by it in· accordance with any remarketing of 2008 Certificates pursuant to the Trust Agreement in trust only for the benefit of the Owners of tendered 2008 Certificates and will not commingle such amounts with any other moneys. · · ·

No Remarketing Under Certain· Conditions. Notwithstanding anything in the Trust Agreement to the contrary, there will be no remarketing of 2008 Certificates (1) upoh the occurrence of and the continuing of certain Events of Default under the Trust Agreement, (2) upon receipt by the Trustee of written· notification from the· Bank that an event of defaulf under the Reimbursement Agreement has occurred and is continuing and instructing the Trustee 'to call for a mandatory tender of the 2008 Certificates, or (3) for the period during which the Trustee has notice that the amount available to be drawn under the Credit Facility will·not or has not been reinstated, or (4) at any time when no Credit Facility' is in effect See·"APPENDIX C­DEFINITIONS AND SUMMARY OF CERTAIN DOCUMENTS." .

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Disclosure Concerning Sales of Variable Rate Demand Bonds by Remarketing Agent ... ·

The Remarketing Agent is Paid by the City. The Remarketing Agent's responsibilities include determining the interest rate from time to time and remarketing 2008 Certificates that are optionally or. mandatorily tendered by the·owners thereof (subject, in each case, to the terms of the Remarketing Agreement), all as .. further described in this Official Statement. The Remarketing Agent is appointed by the Authority and is paid by the City for its services. As a result, the interests of the Remarketing Agent may differ from those of existing holders and potential purchasers of 2008 Certificates.

The Remarketing Agent Routinely Purchases 2008 Certificates for its Own Account. The Remarketing Agent acts as remarketing agent for a variety of variable rate demand obligations and, in its sole discretion, routinely purchases such obligations for its own account. The Remarketing Agent is permitted, but not obligated, to purchase tendered 2008 Certificates for its own account and, in its sole discretion, routinely acquires such tendered 2008 Certificates in order to achieve a successful remarketing of the 2008 Certificates (i.e., because there otherwise are not enough buyers to purchase the 2008 Certificates) or for other· reasons. However, the Remarketing Agent is not obligated to purchase 2008 Certificates, and may cease doing so at any time without notice. The Remarketing Agent may also make a market in the 2008 Certificates by_ routinely purchasing and selling 2008 Certificates other than in connection with an optional or mandatory tender and remarketing. Such purchases and sales may be at or below par. However, the. Remarketing Agent is not required to make a market in the 2008 Certificates. The Remarketing·Agent may also sell.any 2008 Certificates it has purchased to one or more affiliated investment vehicles for collective ownership or enter into · derivative arrangements with affiliates or others in order to reduce its exposure to the 2008 Certificates. The purchase of 2008 Certificates by the Remarketing Agent may cause the interest rate to be lower than it would be if the Remarketing Agent did not purchase 2008 Certificates and may create the appearance that there is greater third. party demand for the 2008 Certificates in the mark_et than is actually the-case. The practices described above also may result in fewer 2008 Certificates being tendered in a remarketing.

2008 C,ertificates May be Offered at Differ.ent .Prices on Any Date-Including an interest rate determination date. Pursuant to the Remarketing Agreement, the Remarketing Agent is required to .determine the applicable rate of interest that, in its judgment, is the lowest rate that would_ permit the sale of the 2008 Certificates bearing interest at the applicable interest rate at par plus accrued interest, if any, on and as of the applicable· rate determination date. The interest rate will reflect, among other factors, the level of market demand for the 2008 Certificates (including whether the.Remarketing Agent is willing to. purchase 2008 Certificates for its own ·account). The purchase .of the 2008 Certificates by the Remarketing Agent may cause. the interest rate to be lower than it would be if the Remarketing Agent did not purchase 2008 Certificates .. There may or may not be 2008 Certificates tendered and remarketed on a rate determination date,. the Remarketing Agent may< or may not be able to remarket any 2008 Certificates tendered for purchase on such date at par and the Remarketing Agent may sell 2008 Certificates at varying prices to different investors on such date or any other date. The Remarketing Agent is not obligated to advise purchasers in a remarketing if. it does not have third party buyers for all of the 2008 Certificates: at. the remarketing price. The Remarketing Agent, in its sole discretion, may offer 2008 Certificates on any date, including the rate determination date, at a discount to par to some investors.

The Ability to Sell the 2008 Certificates other than through Tender Process May Be Limited. The Remarketing Agent may buy and sell' 2008 Certificates other than through the

16

tender process. However, it is not obligated to do so and may cease doing so ·at any: time without notice and may require holders that '{iish to tender their 2008 Certificates to do so through the Tender Agent with a·ppropriate notice. · Thus, investors who purchase the 2008 Certificates, whether in a remarketing or otherwise, should not assume that they will be able to sell their 2008 Certificates other than by tendering the 2008 Certificates in accordance with the tender process. · ·

Under Certain Circumstances, the Remarketing Agent May Be Removed, Resign or Cease Remarketing the 2008 Certificates, Without a Successor Being Named. Under cert?in circumstances the Remarketing Agent may be removed or have the ability to resign or cease its remarketing efforts, without a successor having ·been named, subject to the terms of the Remarketing Agreement. In the event there is no Remarketing Agent, the Trustee is required to apply to a court of competent jurisdiction for appointment of a successor Remarketing Agent.

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Payment Schedule : • 4 , • , r

The schedule below shows the annual 2008 Payments and Parity Obligations with respect to the outstanding· Prior Certificates (assuming no prepayment of the iooa Certificates or Prior Certificates other. than mandatory sinking fund prepayment) after prepayment of the 20058 Certificates and 2005C Certificates. · ·

Fiscal Year Ending

June 30 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035

TOTAL

2008A Installment Payments<11

$ 150,219.00 ' 3,004,380.00

3,004,380.00 3,004,380.00 3,004,380.00 3,004,380.00 3,004,380.00 3,004,380.00 3,004,380.00 3,004,380.00 3,004,380.00 3,004,380.00 3,004,380.00 3,004,380.00 3,004,380.00 7,825,134.24 8,478,216.92 8,510,435.88 8,535,143.92 8,577,062.80 8,585,914.32 8,636,698.60 8,678,302.76 8,710,726.84 8,733,970.92 8,797,478.60 8,825,415.28 8,868,059.20

$153,974,099.28

20088 Installment Payments<'!

$ 88,731.56 3,009,658.58 3,200,985.51 3,373,302.36 3,190,846.76 3,201 ,862.18 1 ,975, 718.09 2,037,344.66 2,035,223.05. 2,034,730.25 1 ,992,162.15 1 ,992,323.98 3,540,982.72 3,563,428.35 3,600,991.32 3,598,856.10 3,042,066.52 1,823,237.47 3,754,359.52 3,772,687.91 3,824,943. 75 3,844,252. 71 3,875,676.79 3,917,437. 70 3,966,800.45 3,979,842.85 6,719,148.09

11,012,462.60 $95,970,063.98

2008 Installment Payments

Total $ 238,950.56

6,014,038.58 6,205,365.51 6,377,682.36 6, 195,226.76 6,206,242.18 4,980,098.09 5,041,724.66 5,039,603.05 5,039,110.25 4,996,542.15 4,996,703.98 6,545,362. 72 6,567,808.35 6,605,371.32

11,423,990.34 11,520,283.44 10,333,673.35 12,289,503.44 12,349,750.71 12,410,858.07 12,480,951.31 12,553,979.55 12,628,164.54 12,700,771.37 12,777,321.45 15,544,563.37 19,880,521.80

$249,944,163.26

Outstanding Parity

Payments<'! $ 61,636.33

7,546,338.14 7,970,498.82. 9, 768,295.46 9,773,150.46 9,773,976.64 9,775,148.68 9, 775,155.04 9,777,127.62 9,782,253.58 9,784,526.72 9, 789,254.64 9,795,037.68 9,791,957.04 9, 793,062.36 4,989,067.82 4,541 '7 45.64 4,230,225.00 4,234,250.00 4,232,750.00 4,234,500.00 4,234,000.00 4,231,000.00 4,230,250.00 4,231,250.00 4,233,500.00 4,231,500.00

$184,811,457.67

Total Payments<'!

$ 300,586.89 13,560,376.72 14,175,864.33

"16,145,977.82 15,968,377.22 15,980,218.82 14,755,246.77 14,816,879.70 14,816,730.67 14,821,363.83 14,781,068.87 14,785,958.62 16,340,400.40 16,359,765.39 16,398,433.68 16,413,058.16 16,062,029.08 14,563,898.35 16,523,753.44 16,582,500.71 16,645,358.07 16,714,951.31 16,784,979.55 16,858,414.54 16,932,021.37 17,010,821 AS 19,776,063.37 19,880,521.80

$434,755,620.93

(1) Interest with respect to the 2008A Certificates is based on swap rates of 3.321% per annum on $54,000,000 and 3.364% per annum of $36,000,000 and interest with respect to the 20088 Certificates is based on an assumed rate of 2.65% (long term average of the weekly SIPMA index).

(2) Represents the 1999 Payments, the 2004 Payments, the 2005A Payments and estimated payments under the 2002 Payment Agreement as of May 1, 2008. Although the 2002 Payments are calculated based on a variable interest rate, the 2002 payments shown in this table are calculated based on the fixed interest rate set in accordance with the 2002 Payment Agreement entered into with respect to the 2002 Certificates. See "ELECTRIC SYSTEM FINANCIAL INFORMATION- Outstanding Indebtedness."

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SECURITY FOR THE 2008 CERTIFICATES . ' This section ,provides summaries of certain provisions of the Trust Agreement and the

Installment Purchase Contract. See APPEND/X-C for a summary of additional provisions of the Trust Agreement and the Installment~ Purchase Contract. Capitalized terms used but not defined)!) this section have the meanings given-in APPENDIX C.

-.. '

Letter. of Credit

While a Series of 2008 Certificates represent interest at Weekly Rates or Daily Rates, the principal of and interest with respect to such 2008 Certificates and the purchase price of such 2008 Certificates tendered or deemed tendered for purchase and not remarketed are to be paid with proceeds of drawings to be made by the Trustee under the Letter of Credit to be issued by the Bank. The Letter of Credit is stated to expire on May 13, 2011, unless extended or terminated earlier, and may be replaced by an Alternate Credit Facility. The Letter of Credit and any Alternate Credit Facility are defined under the Trust Agreement as the "Credit Facility." See "LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT" below.

2008 Payments

General. The 2008 Certificates evidence and represent the proportionate interests of the Owners in the 2008 Payments to be made by the City to the Authority under the Installment Purchase Contract. The 2008 Payments represent the purchase price of the facilities financed from the proceeds of the 2005 Certificates, which the Authority is selling to the City. See· "THE PROJECT."

2008 Payments Held in Trust. Under the Trust Agreement, the Trustee will hold the 2008 Payments in trust for the benefit of the Owners from time to time of the 2008 Certificates, and will disburse, allocate and apply the 2008 Payments solely for the uses and purposes provided in the Trust Agreement.

Unconditional Obligation. The Installment Purchase Contract provides that the City's obligations to make the 2008 Payments is (subject to the provisions of the Installment Purchase Contract relating to defeasance) absolute and unconditional, and until such·time as the 2008 Payments are paid in full (or provision for the payment thereof is made under the Installment Purchase Contract), the City will not discontinue or suspend any 2008 Payments required to be paid by it under the Installment Purchase Contract when due, whether or not the Electric System or any part thereof (including the facilities to be financed from the proceeds of the 2008 Certificates) is operating or operable, or its use is suspended, interfered with, reduced, curtailed or terminated in whole or in part. The 2008 Payments are not subject to reduction whether by offset, abatement or otherwise and are not conditional upon the performance or nonperformance by any party to any agreement for any cause whatsoever.

Notwithstanding anything contained in the Installment Purchase Contract, however, the City is not required to advance any moneys derived from any source of income other than the Net Revenues for the payment of the 2008 Payments or for the performance of any agreements or covenants required to be performed by it contained in the Installment Purchase Contract.

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Pledge of Net Revenues : •·. < • ~. .

Pledge.'·· Under the Installment· Purchase Contract, all" Net Revenues' of the· Electric System are irrevocably pledged to the payment of all Payments to be made by the City to the Authority, including the 2008 Payments and all other payments under the Parity Obligations in accordance with the terms of the Installment Purchase Contract. The· Net Revenues of the Electric System may not be used for any other purpose while any of the Payments remain unpaid; provided, however, that out of Net Revenues there may be apportioned such sums for such purposes as are expressly permitted by the Installment Purchase Contract. The Installment Purchase Contract provides that this pledge constitutes a parity first" pledge of and charge and lien upon .the Net Revenues of the Electric System

· Electric System. The Installment Purchase Contract defines "Electric System" to mean the electric public utility system of the City, comprising all electric generation, transmission and distribution facilities and all general plant facilities related thereto owned by the City at the time the Master Contract was executed and all other properties, structures or works for the generation, transmission or distribution of electricity thereafter acquired by the City, including all contractual rights for electricity or the transmission thereof, together with all additions, betterments, extensions or improvements to such facilities, properties, structures or works or any part thereof thereafter acquired.

Net Revenues. The Installment Purchase Contract defines "Net Revenues" to mean, for any Fiscal Year or any designated twelve-month period in question, the Revenues during such Fiscal Year or twelve-month period, less the Maintenance and Operation Costs during such Fiscal Year or twelve-month period.

Revenues. The Installment Purchase Contract defines "Revenues" to mean all gross income and revenue received or receivable by the City from the ownership or operation of the Electric System, determined in accordance with Generally Accepted Accounting Principles, including all rates and charges received by the City for the Electric Service and the other services and facilities of the Electric System and all proceeds of insurance covering business interruption loss relating to the Electric System and all other income and revenue howsoever derived by the City from the ownership or operation of the Electric System or arising from the Electric System, and including all Payment Agreement Receipts, and including all income from the deposit or investment of any money in the Electric Revenue Fund.

The definition of "Revenues" excludes proceeds of taxes, refundable deposits made to establish credit and advances, or contributions in aid of construction and line extension fees, and charges collected by any person to amortize, or otherwise relating to the payment of, the uneconomic portion of costs associated with assets and obligations ("stranded costs") of the Electric System or of any joint powers agency in which the City participates which the City has dedicated to the payment of obligations other than Contracts, the payments of which obligations will be applied or pledged to, or otherwise set aside for, the reduction or retirement of outstanding obligations of the City or any joint powers agency in which the· City participates relating to such "stranded costs" of the City or of any such joint powers agency to the extent such "stranded costs" are attributable to, or the responsibility of, the City.

Maintenance and Operation Costs. The Installment Purchase Contract defines "Maintenance and Operation Costs" to mean the costs paid or incurred by the City for maintaining and operating the Electric System, determined in accordance with Generally Accepted Accounting Principles, including, but not limited to, all costs of electric energy and power generated or purchased by the City for resale, costs of transmission, fuel supply and

20

water supply in ''connection with' the foregoing, all reasonable expenses of management 'and repair and other expenses necessary to maintain and preserve the Electric System in good repair and working order, all administrative costs of the City. that are charged directly or apportioned to the operation of the Electric System,· such as salaries and wages of employees, overhead, taxes (if any) and insurance premiums, arid all other reasonable and necessary costs of th~ City or charges· required to be paid by it to comply with the terms of the Contracts or any resolution authorizing the execution of any Parity Obligations or of such Contracts or Parity Obligations, such as compensation, reimbursement and indemnification of the 'Trustee, remarketing agent or surety costs for any such Parity Obligations, letter of credit fees for any such Parity Obligations, fees and expenses of Independent Certified Public· Accountal')ts and Independent ~ngineers .. · · _ · . · · · · · · - .. · · · · ·

. '. The definition of "Maintenance and Operation Costs" excludes depreciation, replacement

and obsolescence charges or reserves therefore and amortization of intangibles.

It should be noted that "Maintenance and Operation Costs" specifically include all amounts required to be paid by the City under contracts with a joint powers agency for the purchase of capacity, energy, transmission capability or any other commodity or service in· connection with the foregoing, which contract requires payments by the City to be made thereunder to be treated as Maintenance and Operation Costs. ·

Contracts. The Installment Purchase Contract defines "Contracts" to mean the Master Contract and all installment purchase contracts of the City supplemental to the Master Contract and authorized and executed by the City under and pursuant to the Master Contract and applicable law, the installment payments under and pursuant to which are payable on a parity basis from Net Revenues. · · ·

Assignment to Trustee

Under -the Trust Agreement, the Authority transfers, assigns and sets over to the Trustee, subject to the provisions of the Trust Agreement, all of the 2008 Payments and any and all rights and privileges it has under the Installment Purchase Contract, including the right to collect and receive directly all of the 2008 Payments and the right to enforce the provisions of

·the Installment Purchase Contract.

Any 2008 Payments 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 immediately be paid by the Authority to the Trustee

The Trust Agreement provides that the Trustee will, subject to the provisions of the Trust Agreement, take all steps, actions and proceedings required to be taken as provided in any Opinion of Counsel delivered to it, reasonably necessary to maintain in force for the benefit of the Owners of the 2008. Certificates the Trustee's rights as assignee of the 2008 Payments under the Installment Purchase Contract and as beneficiary of any other rights to securiiy for the 2008 Certificates which the Trustee may receive in the future. ·

Rate Covenant

Rate Covenant. Under the Installment Purchase Contract, the City covenants that it will at all times fix, prescribe and collect rates and charges for the services, facilities and electricity of the Eiectric System during each Fiscal Year which are reasonably fair and nondiscriminatory and which will be at least sufficient to yield "Adjustea Arinual Net Revenues" for such Fiscal

21

:Year equal to at least 110% c;>f the Adjusted Annual Debt Service for such Fiscal Year (the ':Rate Covenant"). · · .. · · . . . . . . . · · ~. . . .

, . r . ' • ' . . - • • . ' .

': · The City :·may make adjustments fro~ .tim~ t'o time in such fee~ and ch~rges ~~dmay make ,such classification thereof as it deems necessary, but may not reduce the rates and charges then in effect unless the Adjusted Annual Net Revenues from such reducedrates and charges will at all times be sufficient to meet the requirements described in the preceding sentence. · · ·

Adjustep ~nnual Net Revenues .. The ln~tallment Purchase Contract defines "Adjusted Annual Net ·Revenues" to mean, for any Fiscal Year or 12-month period in question, the "Adjusted Annual Revenues" during such Fiscal Year or 12-month period less the "Maintenance and Operation Costs" during such Fiscal Year or 12-month period.

Adjusted Annual Revenues. The Installment Purchase Contract defines "Adjusted Annual Revenues" to mean, for any Fiscal Year or 12-month period in question:

•.the Revenues during such fiscal Year or 12-month period,

• plus, for purposes of the Rate Covenant only, the amounts on deposit (n the Rate Stabilization Fund (or any other unrestricted funds ·of the Electric System designated by the City Council by resolution and available for the purpose of paying Maintenance and Operation Costs and/or Annual Debt Service for such Fiscal Year or 12-IT!onth period), as of the first day of such Fiscal Year or 12-month period,

• minus, for the purposes of the Rate Covenant only, earnings from the investments in the Parity Reserve Fund that are deposited in the Electric Revenue Fund in such Fiscal Year or 12-month period.

Adjusted Annual Debt Service. The Installment Purchase Contract defines "Adjusted Annual Debt Service" to mean, for any Fiscal Year or 12-month period in question, the "Annual Debt Service" for such Fiscal Year or 12-month period minus. the sum of

(i) for purposes of the Rate Covenant only, the earnings from the investments in the Parity Reserve Fund that have been deposited in the Electric Revenue Fund in such Fiscal Year or 12-month period, and

(ii) the amount of the Annual Debt Service paid from the proceeds of Parity Obligations or interest earned thereon (other than from the Parity Reserve Fund}, all as set forth in a certificate of the City.

Annual Debt Service. The Installment Purchase Contract defines "Annual Debt Service" to mean, for any Fiscal Year or 12-month period in question, the required payments scheduled to be made with respect to all Outstanding Parity Obligations in such Fiscal Year or 12-month period; provided, that for purposes of determining compliance with the Rate Covenant, the Reserve Fund Requirement and conditions for the execution of Parity Obligations, certain additional provisions are applicable as described in "APPENDIX C -DEFINITIONS AND SUMMARY OF CERTAIN DOCUMENTS."

Rate Stabilization Fund. Under .the Installment Purchase Contract, ttie ·City is also required to establish and maintain the Rate ·stabilization Fund so long as any Parity Obligations remain. unpaid. Under the Installment Purchase Contract, amounts in the Rate Stabilization

22

Fund may be included in Adjusted Annual Revenues for purposes of determining compliance with the Rate Covenant.

The City may at any time deposit in the Rate Stabilization Fund any Net Revenues after providing for the payment of Parity Obligations and any other money available for such deposit. The City may at any time withdraw any or all of the money from the Rate Stabilization Fund for any legal purpose. All interest or other earnings upon deposits in the Rate Stabilization Fund will be accounted for as Revenues.

Notwithstanding the foregoing, no Revenues will be deposited in the Rate Stabilization Fund to the extent that such amount was included by the City in Adjusted Annual Revenues for purposes of determining compliance with the conditions for the execution of Parity Obligations contained in the Contracts or for the Rate Covenant and deduction of the amounts to be deposited in the Rate Stabilization Fund would have caused noncompliance with such conditions.

The City's ability to set rates, fees and charges for electricity at levels which would permit the City to make deposits into the Rate Stabilization Fund may be limited by deregulation and other changes to the electric industry in California.

Parity Reserve Fund

· Establishment. Under the trust agreement entered into by the Authority and the Trustee with respect to the 1997 Certificates, the Trustee established and is obligated to maintain the Parity Reserve Fund, which secures all Payments made under the Installment Purchase Contract securing the outstanding Prior Certificates and the 2008 Certificates.

Funding of 2008 Reserve Account. A portion of the proceeds of the 2008 Certificates, together with moneys available from the 2005 Certificates, will be deposited in an account of the Parity Reserve Fund (the "2008 Parity Reserve Account") established under the Trust Agreement in an amount necessary to increase the amount in the Parity Reserve Fund to the Reserve Fund Requirement upon the delivery of the 2008 Certificates. The Parity Reserve Fund will be maintained so long as any Certificates remain outstanding. (The Trustee is also required to maintain an account in the Parity Reserve Fund for each outstanding series of Prior Certificates.)

After increasing the amount in the Parity Reserve Fund by the amount attributable. to the 2008 Certificates, the combined amount on deposit in the Parity Reserve Fund will be approximately $17,300,373.84. See "ESTIMATED SOURCES AND USES OF FUNDS" for the amount to be deposited in the Parity Reserve Fund upon the execution and delivery of the 2008 Certificates.

Reserve Fund Requirement. The ·Installment Purchase Contract .defines "Reserve Fund Requirement" to mean, as of any date of determination and excluding any Parity Obligations that are not Supplemental Contracts and the debt service thereon, the least of .

(a) 10% of the initial offering price to the public of the Parity Obligations as determined under the Internal Revenue Code of 1986 (the "Code"), or

(b) the Maximum Annual Debt Service, or ·

(c) ·125% of the Average Annual Debt Service.

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Substitution of Surety. The Reserve Fund Requirement (or any portion thereof)· may be provided by one or more policies of municipal bond insurance or surety bonds issued by a municipal bond insurer or by a letter of credit issued by a bank or other institution if the obligations insured by such insurer or issued by such bank or other institution, as the case may be, have ratings at the time of issuance of such policy or surety bond or letter of credit equal to "Aa" or higher assigned by Moody's (if Moody's is then rating any of the Parity Obligations) and "AA" or higher assigned by S&P (if S&P is then rating any of the Parity Obligations) and that maintain at all times ratings at least equal to the lowest ratings (without giving effect to municipal bond insurance or other credit enhancement) on any of the Parity Obligations provided by Moody's (if Moody's is then rating any of the Parity Obligations) and by S&P (if S&P is then rating any of the Parity Obligations).

If at any time obligations insured by any such municipal bond insurer issuing a policy of municipal bond insurance or surety bond or a bank or other institution issuing a letter of credit as permitted by this definition ·no longer maintains ratings as required in accordance with the requirements of the Installment Purchase Contract, the Installment Purchase Contract requires the City to provide or cause to be provided cash or a substitute municipal bond insurance policy or surety bond or a letter of credit meeting such requirements.

Disbursement. Amounts in the Parity Reserve Fund will be transferred to the 2008 Debt Service Fund to pay principal and interest .evidenced by the 2008 Certificates on any Interest Payment Date in the event amounts on ·deposit therein are insufficient for such purposes. The Trustee will also transfer amounts in the Parity Reserve Fund to any applicable debt service fund established under a trust agreement under which any obligations are issued in connection with a Supplemental Contract, without preference or priority between transfers made as described in the preceding sentence, and in the event of any insufficiency of such moneys ratably without discrimination or preference. See " - Outstanding and Senior Parity Obligations" above.

Outstanding Senior and Parity Obligations

Senior Obligations. The City participates in the projects of, and has entered into financing agreements with certain regional joint powers agencies (including the Northern California Power Agency and the Transmission Agency of Northern California), under which the City is responsible for a share of debt service on debt issued by those joint powers agencies. Obligations of the City under these financing agreements constitute operating expenses of the. Electric System payable prior to the payments under the Installment Purchase Contract, including the 2008 Payments (and the other Parity Obligations described below).

Parity Obligations. The 2008 Payments are secured by and payable from Net Revenues on a parity with other obligations previously incurred by the City under the Installment Purchase Contract and designated as parity obligations (collectively, including the 2008 Payments, the "Parity Obligations"), including installment payments securing four outstanding series of certificates of participation (the "Prior· ·certificates" and, together with· the 2008 Certificates, the "Certificates") and payments under certain swap agreements (described below). The currently' outstanding Parity· Obligations were entered into byahe City in connection with the following: ·. · · ·

1999 Certificates. The Authority's $21,630,000 original principal amount "Electric System Revenue Certificates of Participation, Series 1999," evidencing and representing proportionate interests of the owners thereof in the payments made under the 1999

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Supplemental Contract (the "1999 Payments"); principal amount outstanding as of May 1, 2008: $570,000.

2002 Certificates. The Authority's $40,385,000 original principal amount of "Variable Rate Demand Electric System Revenue Certificates of Participation, Series 2002," evidencing and representing proportionate interests of the owners thereof in the payments made under the 2002 Supplemental Contract (the "2002 Payments"); principal amount outstanding as of May 1, 2008: $24,820,000. The 2002 Certificates were used in part to advance refund certain of the 1999 Certificates. The 1999 Certificates refunded were those that mature on February 1, 2010, February 1, 2011, February 1, 2012, February 1, 2013, February 1, 2017 and February 1, 2024. The 1999 Certificates advance refunded are scheduled to be called on August 1, 2009.

2004 Certificates. The Authority's $39,940,000 original principal amount of "Electric System Revenue Certificates of Participation, Series 2004," evidencing and representing proportionate interests of the owners thereof in the payments made under the 2004 Supplemental Contract (the "2004 Payments"); principal amount outstanding as of May 1, 2008: $39,275,000.

2005A Certificates. The Authority's $52,900,000 original principal amount of "Electric System Revenue Certificates of Participation, Series 2005A (Fixed Rate)," evidencing and representing proportionate interests of the owners thereof in certain payments made under the 2005 Supplemental Contract (the "2005 Payments"); principal amount outstanding as of May 1, 2008: $52,450,000.

2002 Payment Agreement. In connection with the 2002 Certificates, the City has entered ·into an interest rate swap agreement dated December 16, 2002, with a notional amount of $40,385,000 (the "2002 Payment Agreement") with Morgan Stanley Capital Services, under which the City makes payments that are calculated by reference to a fixed rate and receives payments that are calculated by reference to a variable rate. The 2002 Payment Agreement constitutes a "Parity Payment Agreement" under the Master Contract, payments on which are made on a parity with all Payments under the Master Contract.

Interest Rate Swap Agreements. In connection with the issuance of the 2008A Certificates, the City is entering into (i) an interest rate swap agreement with Morgan Stanley Capital Services, Inc., New York, an affiliate of Morgan Stanley & Co. Incorporated, and (ii) an interest rate swap agreement (together with the. Morgan Stanley Capital Services; Inc. swap agreement, the "Swap Agreements") with Bank of America, N.A. (together with Morgan Stanley Capital Services, Inc., the "Swap Counterparties").

:>.The payment obligations of the Swap Counterparties under the Swap Agreements will be.general; unsecured obligations of the respective Swap Counterparties. The Swap Agreements have a term extending to the scheduled final maturity date of the 2008A Certificates (the "Scheduled Expiration Date") and require the City to pay a fixed rate of interest with respect. to. an initial notional amount .equal to the principal amount of the related respective 2008A Certificates, which payments are payable on a parity with ·the 2008 Payments. In return, the Swap Counterparties will pay a variable rate of interest equal to.a percentage of the London Interbank Offering Rate ("LIBOR") one month index

: .. on a like, notional amount·The amounts payable by·a party under the Swap Agreements are netted against the •payments to be received by such party thereunder .

' ' ..

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. The. Swap Agreements may be terminated sooner than the Scheduled Expiration Date upon the occurrence of certain events. Termination of a Swap Agreement requires payment of termination fees either to the City or the Swap Counterparty based upon a formula that includes an assessment of the then current market value of the Swap Agreement. The payments by the City under the Swap Agreements are secured by a pledge of the Net Revenues of the Electric System on a·parity with the Parity. Obligations (and the Swap Agreements provide that the City may insure its payment obligations under the Swap Agreements), except that any termination payment due under the Swap Agreement is secured and payable on a subordinate basis to the Parity Obligations.

Conditions for Issuing Additional Obligations .-;.

The City may at any time execute a Supplemental Contract or other Parity Obligation payable from the Net Revenues on a parity with the 1999 Payments, the 2002 Payments, the 2004 Payments, the 2005 Payments and the 2008 Payments, but only subject to the· specific conditions set forth in the Master Contract, which are conditions precedent to the execution of any such Parity Obligations, including the condition that there be on file with the Trustee either:

(1) A Certificate of the City demonstrating that during any 12 consecutive calendar ·months out of the· immediately preceding 18-calendar month period, the Adjusted Annual Net Revenues were at least equal to 110% of the Maximum Annual Debt Service for all existing Parity Obligations plus the Parity Obligations proposed to be executed; or

(2) An Engineer's Report showing that projected Adjusted Annual Net Revenues during the succeeding 5 complete Fiscal Years beginning with the first Fiscal

· Year following issuance of such Parity Obligations in which interest is not. capitalized in whole or in part from the proceeds of Parity Obligations, is at least equal to 110% of the Maximum· Annual Debt. Service for all existing Parity Obligations plus the Parity Obligations proposed to. be executed.

· Notwithstanding the foregoing, the Master Contract specifies that there are no limitations on the ability of the City to execute any Parity Obligation at any time to refund any outstanding Parity Obligations. See "APPENDIX C - DEFINITIONS AND SUMMARY OF CERTAIN DOCUMENTS."

Flow of Funds

Deposit of Funds into Electric Revenue Fund. Under the Installment Purchase Contract, the City agrees and covenants that all Revenues it .receives will be deposited when and as received in the· Electric Revenue Fund,. which the City is required· to. establish and maintain separate and apart from other moneys of the City so long as any Parity Obligations remain unpaid. -~ , '

. ·\· All money· on deposit .in tt]e. Electric Revenue F.und will· be applied :.and used· only as

provided in the Installment Purchase Contract. · · , ... ~- '.

· ·~ .Payment of Maintenance.·and.Operation Costs.' The City is to pay all Maintenance and ·Operation Costs (including amounts .reasonably required· to be set aside in· contingency reserves for Maintenance.and Operation Costs the· payment of which is not then.·immediately required) from the Electric Revenue Fund as they become due and payable.

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Disbursement of Remaining Funds. The Installment Purchase Contract,requires the City to deposit and set aside all remaining money in the Electric Revenue Fund at thei following times in the following .order of priority: •.

. (1) Parity Oblig~tion Payment Fund Deposits. On ·or before the. third . Business Day before each date on which interest or. principal becomes due and payable

under any Parity Obligation 9r any ne\ payment becomes due. and payable unger any Parity Payment Agreement, the City will, from the money in the Electric Revenue Fund,

. deposit in the Parity·()bligation Payment .Fund (which the City agrees and covenants to . establish and maintain separate and apari from· oiher ·moneys of the City so long as any Parity Obligations remain unpaid)'a sum equal· io the amount of)riterest,and,principal becoming due and payable under all Parity Obfigations on such due date,' plus the. net payments due on all Parity Payment Agreements on such due date. ·

;!.·

However, no such deposit need be made if· there is· m'oney in the Parity Obligation Payment Fund available therefore at least equal to the amount of interest and principal becoming due and payable under all Parity Obligations on such date on which interest or principal becomes due and payable under any_ Parity Obligations plus the net payments due on all Parity Payment Agreements on the next succeeding due date .

. . . Moneys on deposit in the Parity Obligation Payment Fund will be transferred by the City to the Trustee to make and satisfy the payments due on the next applicable date on which interest or principal bet;omes due and payable under any Parity Obligation at least one Business Day prior to such next applicable due date.

(2) Parity Reserve Fund Deposits. On or before the third Business Day before each Payment Date, the City will, from the remaining money on deposit in the Electric Revenue Fund after deposits and transfers under paragraph (1) above, transfer to the Trustee for deposit in the Parity Reserve Fund that sum, if any, necessary to restore the Parity Reserve Fund to an amount equal to the Reserve Fund Requirement.

The City will also, from such remaining moneys in the Electric Revenue Fund, transfer or cause to be transferred to the reserve fund or account for any Parity Obligations which are not Supplemental Contracts, without preference or priority between transfers made in accordance with this sentence and the preceding sentence, an·d in the event of any insufficiency of such moneys ratably without any discrimination or preference, that sum or sums, if any, equal to the amount required to be deposited therein pursuant to such Parity Obligations.

After making the foregoing deposits and transfers in each Fiscal Year, the City may apply any remaining money in the Electric Revenue Fund for any lawful purpose of the City, including for the payment of any Subordinate Obligations in accordance with the instruments authorizing such Subordinate Obligations; provided, however, that no moneys in the Electric Revenue Fund may be applied to the payment of any Subordinate Obligations in any Fiscal Year unless amounts on deposit in the Electric Revenue Fund are sufficient to make the transfers required to be made in such Fiscal Year as described above.

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uinited,Obligati(ins -; . :. .. ~ .-,. ' :...

... ' ' ..

;, .. ', ; ~- .. • • I • • .. .

Special, Limited Obligation of the City. Except for the' payment o( 2008 Payments when due and the performance of the other covenants and agreements of the City contained in the Installment Purchase Contract', the CitY has iio obligation or liability to the Owners of the 2008'Certificates with respect· to the'Trust Agreement or the execuiion, delivery or.transfer of the 2008 Certificates, ·or the disburs'emerir of Payments to the Owners by the Trustee. I.~,_,_~ • •"-;~·',;"<,•~'',•' ,·.~ ·•1-•,'1' J, •• • •• ·, •

' . The otiligation· ofth'e City to make the '2008 ·Payments is a special obligation ·of the City ~ . , ~ _ , . - . . _ • , i - -. ,-.. • , ,- r - "I• • • • ., · -· •

secured· by a'pledge of Net Revenues 1and·payable solely from the Net Revenues and does not constitute a·•i!e~t of the' City or' of the Stat~'bf Califqrnia or of any'political s'ubdivision th~reof in contravention ·of any' constitutional or statutory debt limitation or'restHctiori .. : . . .. . ·.

' .. Notwithstanding anything contained in the Installment Purchase Contract, the City is not

required to advance ariy moneys·'derived ·from any source of income oilier than the Net Revenues and the other funds provided in the Installment Purchase Contract for the payment of amounts' due under. the Installment Purchase·· Contract or for. the performance of any ag'reements or covenants required to be performed by' it contained in the Installment Purchase Contract. · · ·

' Limited Obligations of the Authority. The Authority has no obligation or liability to .the Owners of the 2008 Certificates with respect to the payment of the .2008 Payments when due, or with respect to the performance by ·the City of any. other covenant made by it in the Installment Purchase Contract or the Trust Agreeni'ent. ·

Alternate Credit Facility

The Authority has the option, which din 'be exercised at any time, to provide for the delivery of an Alternate Credit Facility. An Alternate (;redit Facility must be (i) an irrevocable letter ·of credit or other irrevocable credit facility, (ii) issued by a commercial bank, savings institution or other financial institution, and (iii) the terms of which must, to the extent dictated by the terms of the 2008 ·Certificates, be the same as or similar to the existing Credit Facility; provided, that the expiration date of such Alternate Credit Facility must be a date not earlier than one·year from its date of issuance (subject to earlier termination upon payment of all 2008 Certificates in full or provision for such payment in accordance with the Trust Agreement).

The procedures and requirements for providing an Alternate Credit Facility are•

. (1) at least 25 days prior to the expiration of the existing Credit Facility, the . ·Authority or the City will cause to be'provided to the Trustee: · ·

(a) · a draft of a Favorable Opinion of Special Counsel (as defined in the Trust' Agreement; a signed· opinion will be delivered on and dated the effective date of the Alternate Credit FacilitY). and · ·

(b) a draft of an opinion of counsel to the provider of the Alternate Credit Facility to the effect that such Alternate Credit Facility is enforceable in accordance with its terms, exceptio the extent that the enforceability thereof may be limited by bankruptcy, reorganization or similar laws limiting the enforceability of creditors' rights generally and except that no opinion need be expressed as to the availability of any discretionary equitable remedies, (a signed opinion will be delivered on and dated the effective date of the Alternate Credit Facility); and

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(2) actual delivery to the Trustee of an Alternate Credit Facility, together with executed copies of-the legal opinions in· subsection·s (1)(a) and (1)(b) above, will be

· made on a Business Day at least 5 days prior to the expiration date of an existing Credit Facility; and ·

(3) · · ·notice thereof is given to the Owners of the applicable Series of 2008 Certificates in accordance with the provisions of the Trust Agreement.

When a Credit Facility expires in accordancewfth its terms or is replaced by an Alternate Credit Facility, the Trustee will immediately surrender such Credit Facility to the Bank. The Trustee will draw moneys under the ·Credit Facility in accordance with the terms thereof in an amount necessary to make full and timely payments of (i) principal of and interest with respect tci and Prepayment Price of the 2008 Certificates (other than Bank Certificates) during a Weekly Rate Period or Daily Rate Period when due at maturity, redemption or acceleration arid (ii) Purchase Price required to be made pursuant hereto. If at any time there will have been delivered to the Trustee an Alternate Credit Facility meeting the requirements of the Trust Ag·reement, then the Trustee will accept such Alternate Credit Facility, draw on the existing Credit Facility to the extent required pursuant to the provisions thereof and of the Trust Agreement for payment of the Purchase Price, and after such draw has been honored, surrender the existing Credit Facility to the Bank, in accordance with the terms of such Credit Facility, for cancellation. The existing Credit Facility will be returned to the Bank only after the Bank has honored any draws required to pay the Purchase Price in accordance with the terms of the Trust Agreement.

LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT

The following are brief outlines of certain provisions contained in the Letter of Credit established by the Bank in favor of the Trustee and the Reimbursement Agreement and are not to be considered a full statement pertaining thereto. Reference is made to the Letter of Credit and the Reimbursement Agreement on file with the Trustee for the complete texts thereof. Capitalized terms used in this section and not otherwise defined will have the meanings given such terms in the Reimbursement Agreement. No representation is made by the City or the Underwriter as to the accuracy, completeness or adequacy of the following information.

The Letter of Credit

The purchase price of, and principal and interest evidenced by the 2008 Certificates (other than the Bank Certificates or 2008 Certificates owned by the City or the Authority) will be payable from amounts available to be drawn by the Trustee under an irrevocable, transferable direct-pay Letter of Credit issued by the Bank concurrently with the execution and delivery of the 2008 Certificates. The Trustee will be permitted to draw an aggregate amount not to exceed the principal amount of the 2008 Certificates plus interest calculated at an assumed rate of 12% for 52 days, based upon a 365/366-day year, subject to reductions and reinstatements'as provided in the Letter of Credit.

The Letter of Credit shall terminate (the "Stated Termination Date") on the close of banking business on May 13, 2011 (the "Maturity Date") unless terminated earlier in accordance with the provisions thereof or unless otherwise extended. ·

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The Reimbursement Agreement

Th'e R.eimbursement ·Agreemen( among .other things, sets. the terms and conditions whereby the City is required to repay .to the Bank any amounts .drawn by the Truste.e under the Letter of Credit. The Bank has certain rights and the City has certain obligations under the Reimbursement Agreement. These rights of the Bank do not extend to the owners of the 2008 Certificates .. ,ln addition, the City's ·complia.nce .with its obligations under the Reimbursement Agreement can be waived solely at the behest of the Bank. The Reimbursement Agreement provides for, among other things, repayment by the City of amounts drawn under the Letter of Credit. Although certain aspects of the-Reimbursement Agreem.ent are summarized herein .. this summary (jo~s not purport to be complete or definitive, and is qualified in its entirety .by reference to the full terms of the Reimbursement Agr~ement. · · ,

' · The following events .are Events of Default under the Reimbursement Agreement unless

waived by the Bank pursuant to. the terms therE!of: · .. .• •'

(i) Failure to pay when due any amount payable underthe Reimbursement Agreement (except as provided in subparagraph (ii) below) or under any Related

. Document to which the City is a party;

(ii) Failure to pay wi!hin thirty (30) days of the date when due any Draw Fees, Transfer Fees or Amendment Fees due under the Reimbursement Agreement;

(iii) Failure to observe or perform certain ierms, covenants or agreements contained in the Reimbursement Agreement;

(iv) Failure to observe or perform any of the covenants contained in the Reimbursement Agreement (other than those covenants referenced in subparagraph (iii) above) and such failure is not remedied within thirty (30) days after written notice thereof from the Bank to the City and the Trustee, or failure to observe any covenant contained in any Related Document after the expiration of any applicable grace period contained in the relevant Related Document in the case of any covenant incorporated by reference into the Reimbursement Agreement;

(v) Any representation, warranty, certification or statement made by the City (including through incorporation by reference) in the Reimbursement Agreement or any Related Document or in any certificate, financial statement or other document delivered pursuant to the Reimbursement Agreement or to any Related Document shall have been inaccurate or incomplete in any material respect when made or deemed to have been made;

(vi)· The City, or any Affiliate of the City, shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due, or shall take any corporate action to authorize any of the foregoing; · ·

(vii) (A) An involuntary case or other proceeding shall be commenced against the City, or any Affiliate of the City, seeking liquidation, reorganization or other relief with

30

respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed, undischarged and unbonded for a period of thirty (30) days; or an order for relief shall be entered against the City or any Affiliate of the City under the federal bankruptcy laws as now or hereafter in effect; or (B) there shall be commenced against the City, or any Affiliate of the City, any case, proceeding or other action seeking issuance of a warrant of attachment, execution, restraint or similar process against all or any substantial part of its assets, which results in the entry of an order for any such relief which shall not have been vacated, discharged, or stayed or bonded pending appeal within thirty (30) days from the entry thereof; or (C) the City, or any Affiliate of the City, shall ~ake any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (A) or (B) above; or (D) the City, or any Affiliate of the City, shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its Indebtedness as the same becomes due;

(viii) (A) A Governmental Authority with jurisdiction to rule on the validity of the Reimbursement Agreement, the Trust Agreement or any Related Document shall find, announce or rule that (x) any material provision of the Reimbursement Agreement or any Related Document or (y) any provision of the Contract or the Trust Agreement relating to the security for the 2008 Certificates or the Required Bank Payments and Reimbursement Charges, the City's ability to pay the Required Bank Payments and the Reimbursement Charges from the Pledged Net Revenues or perform its obligations under the Reimbursement Agreement or the rights and remedies of the Bank, is_ not a valid and binding agreement of the City or (B) the City shall contest the validity or enforceability of the Reimbursement Agreement, any Related Document or any provision of the Contract or the Trust Agreement relating to the security for the 2008 Certificates or the Required Bank Payments, the City's ability to pay the Required Bank Payments and

- the Reimbursement Charges from the Pledged Net Revenues or perform its obligations under the Reimbursement Agreement or the rights and remedies of the Bank, or shall seek an adjudication that the Reimbursement Agreement, any Related Document or any provision of the Contract or the Trust Agreement relating to the security for the 2008 Certificates or the Required Bank Payments and the Reimbursement Charges, the City's ability to pay the Required Bank Payments and the Reimbursement Charges from the Pledged Net Revenues or perform its obligations under the Reimbursement Agreement or the rights and remedies of the Bank, is _not valid and binding on the City;

. . (ix) A debt moratorium, debt adjustment, debt restructuring or comparable

restriction with respect to any of the Indebtedness of the City which affects payment of amounts in connection with the Electric System, shall be declared or imposed by the City or any Governmental Authority having jurisdiction over the City;

(x) Any Lien created by the Reimbur.sement Agreement, the Contract or the Trust Agreement in favor of the Trustee or the Bank, shall at any time or for any reason (except as expressly permitted to be released by the terms of such governing document) not constitute a valid and perfected Lien or, except as permitted under the Contract, the City shail so assert in writing; · · -

. . .~ ' \'' ' (xi) An event of default or termination event under the Trust Agreement, the

. Contract .or the .2008 Certificates or any other Related Document 'shall at any time have occurred and be continuing, irrespective of whether said event of default is declared, undeclared or has been waived under the terms of such respective instrument, or a

31

mandatory prepayment or acceleration sh.all have occurred with respect to the 2008 Certificates;

(xii) Any Parity Obligation, Senior Obligation or other Indebtedness of the City that ranks on a parity with or senior to the Parity Obligations shall not be paid when and as the same shall become due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise);

(xiii) The existence of one or more final, non-appealable judgments against the City for the payment of money payable out of Revenues and not covered by insurance, or the attachment or levy against the Electric System or other property of the City, the operation or result of which, individually cir in the aggregate, ·equals or exceed $1,000,000, and such judgment, attachment or levy shall remain unpaid or the Lien created thereby shall remain undischarged or unbonded (by property other than any of the Pledged Net Revenues) for a period of thirty (30) days;

(xiv) a Material Adverse Change shall occur;

(xv) a Determination of Taxability shall occur; or

(xvi) payment of the principal of any Parity Obligation or any Senior Obligation is accelerated in accordance with its terms.

If an Event of Default under the Reimbursement Agreement occurs and is continuing, the Bank may, in its sole discretion, (i) notify the Trustee of such occurrence and may in such notice further (A) notify the Trustee that the Letter of Credit shall terminate and direct the Trustee to draw upon the Letter of Credit in accordance with its terms and purchase all of the outstanding 2008 Certificates for the account of the Bank, or (B) direct the Trustee to declare the entire principal amount of the unpaid 2008 Payments and the accrued interest with respect thereto to be due and payable pursuant to the Trust Agreement, (ii) at any time subsequent to any notice under (i), and the Bank has not already 'directed such action in such notice under (i), the Bank may direct the Trustee to declare the entire principal amount of the unpaid 2008 Payments and the accrued interest with respect thereto to be due and payable pursuant to the Trust Agreement, (iii) by notice to the City, declare the entire unpaid principal and interest amount of any advances outstanding as a result of any Tender Drawing together with accrued interest thereon, and all other amounts owing under the Reimbursement Agreement, to be, whereupon the same shall become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the City; provided that in the case of any of the Events of Default specified in subparagraphs (vi), (vii), (viii) or (xvi) above, without ariy notice to the City or any ottier'act by the Bank, the principal amount of any such advances, together·with accrued interest thereon, shall be immediately due and payable and (iv) take any other action permitted to be taken by it urider the Reimbursement Agreement, under any of the Related Documents, or under applicable law or otherwise. Upon receipt by the Trustee of ariy notice frc)m th·er Bank pursuant to clause (i)(A) ofthis paragraph and to the extent it· has not ·already done so, the Trustee shall immediately draw under the Letter of Credit .pursuantto its terms in the amount. required thereby and to the extent'permitted ·by the Letter of Credit; whereupon' the Letter· of Credit shall terminate immediately upon distribution of the proceeds of such drawing to the Trustee. Upon receipt by the Trustee of a·noticei from the Bank pursuant to clause (i)(B) or (ii) of this paragraph directing the acceleration of all 2008 Payments, the Trustee shalf iriimeiaiately'declare thei"entjre 'principal amount· of the· unpaid 2008 Payments and the i_nterest accrued with r!!spect thereto immediately due and payable pursuant to the Trust Agreement · · '' · · ·· :• ·.' · · ·

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THE BANK . .

THE FOLLOWING REPRESENTS ONLY A SUMMARY OF THE INFORMATION REFERRED TO HEREIN. EXCEPT TO THE LIMITED EXTENT DESCRIBED HEREIN, THIS DOCUMENT DOES NOT ATTEMPT TO DESCRIBE THE BUSINESS OR ANALYZE THE CONDITION, FINANCIAL OR OTHERWISE, OF THE BANK OR OTHERWISE DESCRIBE ANY RISKS ASSOCIATED WITH THE BANK. EACH BONDHOLDER MUST RELY ON THAT HOLDER'S OWN KNOWLEDGE, INVESTIGATION AND EXAMINATION OF THE BANK AND THE BANK'S CREDITWORTHINESS. NO REPRESENTATION IS MADE BY THE CITY OR THE UNDERWRITER AS TO THE ACCURACY, COMPLETENESS OR ADEQUACY OF THE FOLLOWING INFORMATION.

Dexia Credit Local ("Dexia") is a subsidiary of the Dexia Group, which was created in 1996. The Dexia Group is a major European banking organization that is the product of several cross-border mergers. Dexia is an authentically European bank in terms of both its management organization and the scope of its different lines of business. The Dexia Group is listed on the Brussels, Paris and Luxembourg stock exchanges. With a stock market capitalization of over 20 billion euros as of December 31 , 2007, the De xi a Group ranks in the top third of the Euronext 100 companies.

Dexia specializes in the Dexia Group's first line of business - public and project finance and financial services for the public sector. Dexia has recognized expertise in local public sector financing and project finance. II is backed by a network of specialized banks, which employ over 3,500 professionals. Through this network of subsidiaries, affiliates and branches, Dexia is present in almost all of the countries of the European Union as well as Central Europe, the United States of America and Canada. Dexia also has operations in Latin America, the Asian-Pacific Region including Australia, and the countries around the Mediterranean.

Dexia is a bank with its principal office located in La Defense, France. In issuing the facility, Dexia will act through its New York Branch, which is licensed by the Banking Department of the State of New York as an unincorporated branch of Dexia. Dexia is the leading local authority lender in Europe, funding its lending activities in 2007 primarily through the issuance of euro and U.S. dollar-denominated bonds. In 2007, total funding raised by Dexia and Dexia Municipal Agency was 18.2 billion euros.

The Dexia Group is the owner of Financial Security Assurance Holdings Ltd. ("FSA Holdings"), the holding company for Financial Security Assurance Inc., a leading financial guaranty insurer.

As of December 31, 2007, Dexia had total consolidated assets of 345 billion euros, outstanding medium and long-term loans to customers of 285.1 billion euros and shareholders' equity of over 6.29 billion euros (Tier I plus Tier II), and for the year then ended· had consolidated net income of 991 million euros. These figures were determined in accordance with generally accepted accounting principles in France. Dexia maintains its records and prepares its financial statements in euros. At December 31, 2007, the exchange rate was 1.0000 euro equals 1.4721 United States dollar. Such _exchange rate fluctuates from time to time.

Dexia is rated Aa1 long-term and P-1 short-term by Moody's, AA long-term and A-1+ short-term by S&P, and AA+ long-term and F1 +short-term by Fitch.· .

33

Dexia will provide without charge a copy of its most recent publicly available annual report. Written requests should be directed to: Dexia Credit Local, New York Branch, 445 Park Avenue, 8th Floor, New York, New York 10022, Attention: General Manager. The delivery of this information shall not create any implication that the information contained or referred to herein is correct as of any time subsequent to its date. ·

THE ELECTRIC SYSTEM

History and Background

The City, through Roseville Electric, has been providing electrical power to its residents, businesses, and the City's street and traffic lighting systems since 1912. In 1956, the City entered into a contract with the Federal Bureau· of Reclamation for 69 megawatts ("MW"; a megawatt equals 1 million watts) of electric capacity from the Central Valley hydroelectric project, which consists of a system of dams, reservoirs and power plants within central and northern· California (the contract is currently administered through the Western Area Power Administration ("Western")). In the early 1970s, the City's demand for electricity exceeded the Western resource allocation. To help meet this additional need, in 1968 the City became a charter niember in the Northern California Power Agency (the "NCPA''); a consortium of municipal electrical utilities. The City participates in several resources developed by NCPA, including its geothermal, combustion turbine, steam~injected gas turbine, and hydroelectric projects. In addition, in 1984 the City became a member of the Transmission Agency of Northern California ("TANG") and participated in the California-Oregon Transmission Project ("COTP"). See "- Regional Transmission Facilities" below. Continuous high growth created more demand and uritil recently, the bulk of that demand was met through purchases on the open electricity market. See "-Sources of Power Supply" below. . '

The City recently completed construction of a 160 MW natural gas fired generation plant ("Roseville Energy Park") that commenced commercial operation in October of 2007. Roseville Energy Park has a base capacity of 120· MW and has the ability·to be peak-fired up to 160 MW nominal during warranted conditions through the use of duct burners in the heat recovery steam generators. ·Roseville · Energy Park includes two Siemens combustion turbine-generators ("CTGs"), two Vogt heat recovery steam generators ("HRSGs"), a single condensing steam turbine generator ("STG"), a de-aerating surface condenser; a four-cell mechanical draft cooling tower; and associated support equipment.

Organization and Management

Supervision by City Council and Roseville Public Utilities Commission. The City's Electric System is under the supervision of the· Rosevilie City Council. The seven-member Roseville Public Utilities Commission serves as an advisory board to the City Council on matters relating to all utilities owned·and operated by the City. The City Council appoints all seven members of the Public Utilities Commission. The Electric ·Utility Director manages the Electric System arid reports to the Public Utilities Commission and the City Manager.·

Senior Management. The Electric System's senior management consists of the following executives:

Tom Habashi, Electric Utility Director. Tom Habashi has served as Electric Utility Director since 1998. Mr. Habashi is a registered electrical engineer with a Bachelo"rof Science in Electrical Engineering and a Masters in Business Administration. He began his career as a

34

junior engineering aide with. the City of Burbank in 1981 and was promoted to assistant electrical engineer later that year. Mr. Habashi joined the Palo Alto Utilities Department as a Power Engineer in 1984 and was promoted to Senior Power Engineer in 1986, Senior Resource Planner in 1987, Manager of Resource Planning in 1992 and Assistant Director of Utilities, Resource Management in 1995.

David Brown, Assistant Electric Utility Director-Distribution. David Brown has served as Assistant Electric Utility Director-Distribution since 2001. He began working for Roseville Electric in 1987 after graduating from California State University, Sacramento with a Bachelor of Science degree in Electrical Engineering. He is responsible for the electric distribution system at Roseville Electric, including engineering, new services and system construction and maintenance. Mr. Brown is a registered electrical engineer in the State of California.

Tom Green, Assistant Electric Utility Director, Power Supply. Tom Green served as Power Supply Manager for Roseville Electric from 2001 until assuming his current position in 2005. Mr. Green is responsible for Roseville Electric's energy supply portfolio including power market assessment, risk management, power plant generation, power purchases and sales, regional transmission,· and administration. He is also responsible for the management of contractual relations with Western NCPA and the California Independent System Operator ("ISO"). ·Prior to joining the City, Mr. Green was employed for 13 years by NCPA where he led marketing and contractual activities related to bulk electric power services to NCPA members. Previously, he was employed for 11 years by the State of California, Department of Water Resources in the Department's Energy Division. Mr. Green graduated from California State University, Sacramento with a Bachelor of Arts Degree in Government.

Michelle Bertolino, Assistant Electric Utility Director, Administrative and Retail Services. Michelle Bertolino has worked at Roseville Electric since 2002. She is responsible for Roseville Electric's administrative and retail energy services which include financial, energy and load forecasting and analysis, ratemaking, power supply settlements and reporting, budget development, demand side management, development of public benefits activities, energy efficiency programs and customer service activities. Prior to joining the City, Ms. Bertolino was employed by the Sacramento Municipal Utility District and San Francisco Public Utilities Commission. She graduated from the University of California, Santa Barbara and attended the Graduate School of Management at the University of California, Davis. She received her Certified Public Accountant license from the State of California.

Employees

General. As of June 30, 2007, 139 City employees were assigned specifically to the Electric System. Certain functions supporting the Electric System operations, including meter reading, customer billing, collections and accounting, are performed by the Finance Department of the City.

'd '·. The. bulk of the non-management City personnel working at. Roseville Electric , are

represented by the International Brotherhood of Electrical Workers (IBEW). The current Memorandum of Understanding with IBEW will expire on December 31, 2010. There have been no strikes or other work stoppages at the City, including at the Electric System.

\ . . . . Retirement Benefits. Retirement benefits to City. employees, including those assigned

to the Electric System, are provided through the' City's participation ·in the Public. Employees Retirement System ("CALPERS") of California. As of June 30, 2007, the City had an unfunded pension liability of approximately $71.2 million (indicating the prior year's unfunded amount)

35

including approximately $48.5 million in the miscellaneous category, of which approximately 16.5% was allocable to the Electric System. The City estimates that the unfunded pension liability was approximately $73 million as of March 1, 2008.

Other Post Employment Benefits. The· City also provides post-retirement health care benefits ("OPEB Benefits") to its employees through CALPERS, including those assigned to the Electric System. Currently, 367 retirees receive OPEB benefits from the City ranging from $273 to $1,186 per month. The cost to the City in the year ended June 30, 2007 was $2,512,642 .. A portion of this cost was allocable to the Electric System.

The Governmental Accounting Standards Board has published Statement No. 45 which requires the City to account for OPEB Benefits in the fiscal year beginning after December 15, 2008. Statement No. 45 requires that the accrual basis measurement and recognition of the cost of postretirement healthcare benefits take place over a period that approximates the employee's years of service. Statement No. 45 also requires the periodic reporting of information about actuarial accrued liabilities associated with these benefits and whether and to what extent progress is being made in funding the plan. Funding the plan is not a requirement of Statement 45; however, the City established a fund in 2002 to set aside monies for the long­term liability for OPEB Benefits and has been transferring 3% of the total cost of salaries to the fund since that time. This amounted to $2.8 million in Fiscal Year 2008. At the end of Fiscal Year2008, the City expects to have $28.7 million in the Post Retirement Health/Insurance Fund (the "OPEB Fund") to pay for the post-retirement liabilities.

In anticipation of, and in accordance with, Statement No. 45, the City has engaged Bartle Associates to conduct an actuarial study to determine the City's liability with respect to OPEB Benefits. The actuarial study is expected to be complete for inclusion in the City's audited financial statements for Fiscal Year 2007-08. Based on pervious estimates, the unfunded actuarial accrued liability without a trust will be around $140 million, a portion of which will be allocable to the·Eiectric·System. Staff is currently working on strategies to address post­retirement· health costs· on a long-term basis, including funding the OPEB Fund described above. ,. . ,.

Service Area, Customer Base and Demand

Service Area. The Electric ·System· serves an area of approximately 36 square miles, coterminous with the City's borders. During Fiscal Year 2006-07, it served 49,742 customers, as further described in Table 1 below. See "APPENDIX A- GENERAL INFORMATION ABOUT THE CITY OF ROSEVILLE" for background and demographic information about the City.

··--.1

Customer Base. Between Fiscai •. Years '2002-03 and 2006-07 the Electric System's customer base increased by an average of 4.8% per year.. During the same time, population growth increased about 4% each year but slowed to 2% as of January 1, 2008. Residential growth is slowing, but the commercial sectors remain strong. The City has added over 7,000 new residential units over the past five years. Major health care facilities (Kaiser-Permanente and Sutter/Roseville) and;other businesses have expanded their facilities and operations in·the communitY."' - ' ·· ·· .. , . ' '. ,.,. ·: ·,

C ~~•: ~ • , • ' .• ·.,:: , • I , ' - .

Projected Growth in Customer Base. By the end of Fiscal Year 2007-08, electricity use in·the City'is ·expected to increase by approximately 2% compared to Fiscal Year 2006-07 levels. See :THE ELECTRIC SYSTEM - Sources of Power Supply - Future Power Supply Resources.'' ·. · .. · · · ·

36

Over the next five years growth is expected to continue. Retail, commercial, medical facilities and hotels are planned or are under construction, including The Fountains Lifestyle Center, the South Placer Justice Center, and an expansion of The Galleria at Roseville regional mall. Residential development also is expected, with approximately 4,800 new residences anticipated over the next five years. The City is currently reviewing proposed annexation projects, including Sierra Vista, Creekview and Placer Ranch. Sierra Vista is 2,100 acres with over 10,000 proposed residential units. Creekview is 570 acres with over 2,500 proposed residential units. Placer Ranch is 2,200 acres and includes a 300 acre university and about. 5,000 proposed residential units.

The City anticipates that the effect of the annexation and expected growth of the revenues of the Electric System will be offset by increases in operating expenses in order to meet the increased electricity demand.

·Historical Customers Sates and Peak Demand. The average number of customers, electricity sales measured in kilowatt-hours ("kWh") and in revenues, and peak demand during the past five fiscal years, are listed below.

Table.1 Customers, Sales and Peak Demand

Fiscal Years Ended June 30 111

2003 2004 %Chg 2005 %Chg 2006 '%Chg 2007 %Chg #of Customers Residential 38,054 40,312 5.93 41,883 3.90 43,001 2.67 43,793 1.84 Commercial 4,720 ,2.1Q1 8.07 5 410 6.06 5,523 2.08 5 950 7.73 Total 42,774 45,412 6.17 47,294 4.14 48,524 2.60 49,742 2.51

kWh Deliveries Residential 335,789,626 381.799,100 13.70 392,815,270 2.89 424,904,616 8.17 435,922,068 2.59 Commercial 686 404 562 717 219,609 4.49 733 576 815 2.28 767 580 974 4.63 797 143 850 3.85 Total 1,022,194,188 1,099.018,709 7.52 1 '126,392,085 2.49 1,192,485,590 5.87 1,233,065,918 3.40

Revenues Residential $29,062,613 $34,565,885 18.94 $36,306,339 5.04 $40,896,486 12.64 $44,302,447 8.32 Commercial 49 331 010 53 053,597 7.55 55 577,366 4.76 60 291 463 4.48 65 565,709 8.73 Total $78,393,622 $87,619,483 11.77 $91,883,705 4.87 $101,187,949 10.13 $109,868,156 8.56

Peak Demand (kW) 274,650 294,600 7.26 282,090 (4.25) 319,260 13.18 342,970 7.43

(1) Numbers may not total due to rounding. Revenues listed are as billed. For booked revenues, see Table 8. Source: City of Roseville.

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Ten Largest Customers. The ten largest customers of the City's Electric System, as of June 30, 2007, are shown in Table 2 below.

Customer NEG Electronics Hewlett-Packard City of Roseville Kaiser Hospital Sutter Roseville Medical Center Cassie Hill Center Roseville Telephone Co. Hines Wal-mart Safeway, Inc.

TOTAL

Source: City of Roseville.

Table 2 Ten Largest Customers

As of June 30, 2007

Type of Business Manufacturing Office/Manufacturing Government and Utilities Medical Care Medical Care Data Processing Telecommunications Property Management Retail Grocery

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%of Total kWh

11.55 4.91 2.84 1.85 1.44 1.24 1.13 1.07 0.99 0.86

27.89

%of Revenues

8.71 3.94 2.60 1.58 1.22 1.00 0.97 1.09 0.86 0.84

22.81

Sources of Power Supply · . . '

General. Prior to the operation of the Roseville Energy Park, the City acquired power supply from 3 major sources: a long-term contract with Western; _entitlements to a percentage of the capacity and energy of certain NCPA generation projects; and ·the open market for electricity. Table 3 below provides a summary of the City's sources of power .. supply for the fiscal year ended June 30, 2007, which are further described in detail below. These sources of power supply will change significantly for Fiscal Year 2007-08 and beyond as a result of the Roseville Energy Park becoming operational. See "Future Power Supply Sources" below.

Table 3 Sources of Power Supply

Fiscal Year Ended June 30, 2007 ·

Capacity Available

Source (MW) Western " 1 64 NCPA <'l Geothermal Project 9 Hydroelectric Project 29 Combustion Turbine Project No. 1 16 Steam Injected Gas Turbine Generator Project 20 Seattle City Light <•J 20

Open Market Purchases <'l 201 TOTAL 359

(1) Entitlements, firm allocations and contract amounts.

Actual Power %of (GWh)* Total

161 13%

77 6 35 3

1 0 25 2 32 2

944 74 1,275 100%

(2) This is a seasonal exchange agreement where the City receives more capacity and Seattle receives more energy on an annual basis.

(3) Net firm and non-firm energy purchases on the open market. • One gigawatt-hour (GWh) equals one million kilowatt-hours ("kWh"). Source: City of Roseville.

In the fiscal year ended June 30, 2007, the City's average cost of power delivered to its Roseville electric system was 5.8 cents per kWh.

Western Area Power Administration.

The City has a long-term contract with Western that provides the City with up to 67 MW of the output of the Central Valley Project generation net of project use, first preference allocations and control area obligations. The contract provides varying amounts of capacity and energy depending on hydrology and water storage conditions. The term of the agreement extends through December 31, 2024.

NCPA Geothermal Project.

Description. NCPA developed a geothermal project (the "NCPA Geothermal Project") located on federal land in certain areas of Sonoma and Lake Counties, California. In addition to the geothermal leasehold, wells, gathering system and related facilities, the NCPA Geothermal Project consists of two electric generating stations (Geothermal Plant 1 and Geothermal Plant 2), each with two 55 MW (nameplate rating) turbine generating units utilizing low pressure, low temperature geothermal steam, associated electrical, mechanical and control facilities, a heat dissipation system, a steam gathering system, a transmission tapline and other related facilities.

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Geothermal steam for the NCPA Geothermal Project is derived from geothermal property; which includes well pads, access roads, steam wells and reinjection wells.

• '~ + t - ... Ownership and Management: NCPA formed two not-for"profit corporations controlled by

its members to ·own the generating plants·of·the -NCPA Geothermai·Project. NCPA manages the NCPA Geothermal Project for the· corporations·and is entitled to all the capacity and energy generated by the NCPA Geothermal Project. <' ; • -..

Financing. NCPA. financed the NCPA Geothe·rmal Project-with· NCPA Geothermal Project Number 3 Revenue Bonds, of which $76.91 million were outstanding as of June 30, 2007 (which represents total debt not including' approximately $25 million in debt that has been economically defeased). The annual debt:service on these._bonds ranges from $3.0 million to $56.4 million, with a final maturity of July 1, 2010. The,. City's share of debt service is approximately $2.4 million per year.

City's Entitlement. The City has purchased from NCPA, pursuant to power sales contracts, a 7.88% entitlement share in the NCPA Geothermal Project and is obligated to pay a like percentage of all of the debt service and operating costs of the NCPA Geothermal Project. These obligations constitute operating expenses of the Electric System payable on a basis senior to payments under the Installment Purchase Contract. See "ELECTRIC SYSTEM FINANCIAL INFORMATION- Outstanding Indebtedness- Senior Indebtedness."

. ' .

Operation. Due to a decline in the steam field production, the NCPA Geothermal Project is currently being operated at an e~verage of 126 MW rather than the base loe~d of 238 MW. NCPA has implemented a number of strategies- to reduce the rate of decline in steam field productions, such as lowering steam turbine operating pressures to improve mass flow, and augmenting mass flow by managing the injection of plant condensate and supplemental water. These changes have been effective in reducing the decline in steam production. · · · · - . ' .

.. ":. Due to current operating protocols and forecasted opera!ions; NCPA.. expects average

annual generation and peak capacity to decrease, reaching approximately 113 MW by the year 2010, and remaining in excess of 72 MW through 2030, the end of the study period.

NCPA is contemplating issuing debt to fund capital improvements to the NCPA Geothermal Project. The improvements may include a 1 MW photovoltaic system to augment power for the pumping station and an additional low pressure rotor. If approved,:Roseville will participate in the improvements, however, participation levels, costs and the scope of the improvements are not yet finalized.

NCPA Hydroelectric; Project Number One.

Description. NCPA's Hydroelectric Project Number One (the "NCPA Hydroelectric Project") consists of (a) three diversion dams, (b) the 252 MW Collierville Powerhouse, (c) the Spicer Meadow Dam with a 5.5-MW powerhouse, and (d) associated tunnels located essentially on the North Fork of the Stanislaus River and on the Stanislaus River in Alpine, Tuolumne and Calaveras·Counties,-California; together with·required transmission facilities. -

... . Ownership and Management: The NCPA Hydroelectric Project (with the exception of

certain transmission facilities discussed below) is owned by the Calaveras County Water District ("CCWD") and is licensed to CCWD by FERC under its license for Project No. 2409, which has a term of 50 years and expires in 2032.

. ..

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Under a power purchase contract, NCPA (i) is entitled to the electric output of the NCPA Hydroelectric Project until Fiscal Year 2031-32, (ii) managed the construction of the NCPA Hydroelectric Project and (iii) operates the generating and recreational facilities of the NCPA Hydroelectric Project.

Under a separate FERC-issued license for Project No. 11197, with an expiration date coterminous with its license for Project No. 2409, NCPA holds the license to and owns two transmission lines from the NCPA Hydroelectric Project (the 230 kilovolt ("kV"; 1 kilovolt equals 1,000 volts) Collierville-Bellota and 21 kV Spicer Meadow-Cabbage Patch transmission lines).

Financing. NCPA financed the NCPA Hydroelectric Project through the issuance of the NCPA Hydroelectric Project Number One Revenue Bonds, of which approximately $483 million were outstanding as of June 30, 2007.

The City's nominal share of debt service is 12%, but the actual percentage share paid by the City is 9.9% due to certain economic defeasance portfolios established in 1998, under which a portion of the City's share of debt service was prepaid .. These obligations constitute operating expenses of the Electric System payable on a basis senior to payments under the Installment Purchase Contract. The City's share of annual debt service (net of these economic defeasance portfolios) continues to the year 2032 and ranges from $2.4 million to $4.3 million. See "ELECTRIC SYSTEM FINANCIAL INFORMATION - Outstanding Indebtedness - Senior Indebtedness:"

. City's Entitlement. The City has a 12% entitlement share of the generating output of the NCPA Hydroelectric Project.

Operation. The operation of the NCPA Hydroelectric Project is determined by consideration of its storage capacity and available stream flows. The NCPA Hydroelectric Project's average production is estimated to be 550 GWh annually, based on the 108-year record (1895 to 2003) of stream flows on the two rivers supplying water to the project. Using the driest period on record (1976-1977), the NCPA Hydroelectric Project is estimated to produce 180 GWh annually.

NCPA Combustion Turbine Project Number One.

Description. NCPA has developed its Combustion Turbine Project Number One (the "NCPA Combustion Turbine Project") consisting of five combustion turbine units, each nominally rated 25 MW. Two of the units are located in the City, two are in the City of Alameda and one is in the City of Lodi.

Financing. NCPA financed the NCPA Combustion Turbine Project through the issuance of the NCPA Combustion Turbine Project Number One Revenue Bonds, of which $15.125 million was outstanding as of June 30, 2007. The debt service on these bonds is approximately $4.3 million annually with a final maturity of August 15, 2010. The City's share in the debt service on these bonds is 13.58%, and constitutes an operating expense of the Electric System payable on a basis senior to payments under the Installment Purchase Contract. The City's share of annual debt service is approximately $600,000 per year. See "ELECTRIC SYSTEM FINANCIAL INFORMATION- Outstanding Indebtedness- Senior Indebtedness."

City's Entitlement. Under a power sale contract, the City has purchased from NCPA a 13.58% entitlement share in the NCPA Combustion Turbine Project. As is typical of reserve

and peaking resources, the average cost per kWh of power delivered to participants in the NCPA Combustion Turbine Project is comparatively expensive.

Operation. The NCPA Combustion Turbine Project provides capacity (i) that is economically dispatched during the peak load period to the extent permitted by air quality restrictions and (ii) that is used to meet capacity reserve requirements (which is operated only during emergency periods when o~her resources are unexpectedly out of service). ' ,

NCPA Steam Injected. Gas Turbine Generator Project, Unit One.

Description. In 1992, NCPA undertook its multiple capital faCilities project consisting of one Steam Injected Gas Turbine (a "STIG"), Unit One, with a design rating of 49.9.MW located in Lodi, and owned and operated by NCPA.

For Fiscal Year 2006-07, the STIG Unit One's electricity generation was 11A GWh.

Financing. NCPA financed the NCPA Steam Injected Gas Turbine Generator Project through the issuance of $152.3 million of Multiple Capital Facilities Revenue Bonds, all of which have since been refunded or defeased with a subsequent issue of refunding bonds; approximately $65 million of which was outstanding as of June 30, 2007. The annual debt service on these refunding Bonds ranges from $485,000 to $5.9 million, with a final maturity in 2026. The City's share in the debt service on these bonds is 36.55%, and constitutes an operating expense of the Electric System payable on a basis senior to payments under the Installment Purchase Contract. The City's share of annual debt service is approximately $2.0 million per year. See "ELECTRIC SYSTEM FINANCIAL INFORMATION - Outstanding Indebtedness- Senior Indebtedness."

·. City's Entitlement. The· capacity and energy of STIG Unit One is purchased through a contractual arrangement among the City, Alameda, Lompoc and Lodi, under which the City has purchased from NCPA a 36.55% entitlement share in the NCPA Multiple Capital Facilities Project. NCPA has entered into arrangements on behalf of the NCPA Multiple Capital Facilities Project Participants to provide for a gas supply for Unit One.

Seattle City Light Power Capacity and Energy Exchange Agreement. NCPA, on behalf of Healdsburg, Palo Alto, Ukiah, Lodi and the City, has negotiated a seasonal exchange agreement with Seattle City Light for 60 MW of summer capacity and energy and a return of 46 MW of capacity and energy in the winter. Deliveries under the agreement began June 1, 1995 and will terminate no earlier than May 31, 2014 .. The City has a 33.33% share of the benefits and burdens of the seasonal exchange agreement. ;: ·:

Open Market Term Purchase and Sale Agreements. The City enters into·various fixed-price purchase or sale contracts on the open market at various times to· meet its power supply requirements and hedge its portfolio costs consistent with its risk management policies. Electricity is generally sold or acquired in 25 MW increments on a seasol")al or annual basis. The City currently has one multi-year power purchase· contract for .25 MW net of on-peak energy. with Morgan Stanley Capital Group, Inc. that expires on December 31, 2010.

The City has also entered into several short-term purctiases for varying terms from a number of power suppliers. The short-term purchase terms range from 1 to 3 months.

The City purchases physical natural gas at market index prices then financially fixes these prices using fixed-for-floating swap agreements. Approximately 16 million MMBTU of

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natural gas delivery ·between 2008 and 2011 has had its price fixed in this manner. These financial swaps are divided between BP Corporation, Constellation Energy Commodities, J Aron and Company, and JP Morgan Energy Ventures. No counterparty has more than a one third share in this total natural gas hedge.

. . Future Power Supply Resources. The City recently completed construction of the

Roseville Energy Park, which became operational in fall of 2007. The Roseville Energy Park consists of a nominal 120 megawatt (MW) natural gas-fired generation facility located on 12 acres of a larger City-owned parcel adjacent to and north of the Pleasant Grove Wastewater Treatment Plant. The plant includes the ability to peak-fire up to 160 MW nominal during warranted conditions through the use of duct burners in the heat recovery steam generators. The· project includes two Siemens combustion turbine-generators ("CTGs"), two Vogt heat recovery steam generators ("HRSGs;'), a single condensing steam turbine generator ("STG"), a de-aerating surface condenser; a four-cell mechanical draft cooling tower; and associated support equipment.

PG&E owns and maintains the natural gas supply pipeline that serves the Roseville Energy Park. The City will contract with natural gas suppliers to supply natural gas to the Roseville Energy Park via the interstate pipeline network and the PG&E intrastate pipeline network. In January 2007 the Roseville Natural Gas Financing Authority entered into a 20-year pre-paid natural gas supply contract with Merrill Lynch Commodities Inc ("MLCI"). The natural gas purchased from MLCI is in turn sold to the City for use in the Roseville Energy Park. The natural gas the City is obligated to purchase under the prepaid gas supply· agreement is expected to provide approximately 40% of the City's expected gas requirements for the Roseville Ener,gy Park.

The City of Roseville subsequently acquired 34 MW of the NCPA Combustion Turbine Project from the City of Lodi, and swapped ownership positions with the other joint owners such that Roseville acquired full entitlements to the NCPA Combustion Turbine Project units located in the City of Roseville. The City of Roseville pays operations and maintenance costs and debt service on the acquisition. NCPA continues to operate the units on Roseville's behalf.

In addition to the above supply resources, the City expects that it will obtain additional resources from market purchases or investment in generation facilities, either independently, through NCPA or other agencies. In accordance with recent legislation, the City expects that future energy purchases will increasingly be made from renewable energy sources. · See "­Energy Efficiency and Conservation" below.

,.

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Table 4 below sets forth the City's projected energy requirements and resources for the next 1 0 fiscal years. ·

Table 4 Projected Energy Requirements and Resources

Fiscal Years 2007-0ii through 2016-2017 · · (GWh)

2008 2009 2010 . 2011 2012 2013 2014

CitY·Owned GeneratiOn . Roseville Energy Park 462 703 720 738 767 nri 719

Joint PO~ers Facilities: . · .. \I. Geothermai'Project 75 73. 70 68 66. 64 62

Hydroelectric Project 60 65 67 '67~ . 67 65 66 Combustion Turbine Project No. 1 0 0 0 0 0 0 0 STIG Generator Project 43 38 37 39 40 43 38

,;,. .! ,· Subtotal: 641 879 ~· 894 911 941 950 885

Long7T~nn Purchases and . •'::

·: . ' . r ~.) ExCh8riges

~. : Western c 117 138 155 155" . 155 155 155 Net Long Term Purchase$ 651 219 123 6~ . .•,.;. .. Other Contrae:ts 13 . 19. 19 19 19 ·a .

Subtotal: 781 375 297 236 174 162 155 ...... "• . 1- . . '·

Net Short-Tenn Ma~et Purchases . (Sales) ., • (82) 164 293 399 492 .541 . 659

.•. ' .. Total Energy ResoL!rc.es_ 1,340. . . 1.418 ·1.484 1;546 . 1,~0? : _1,653 1.699 Total Energy Requirements 1,340 1.418 1.484 1.546 1,607 1,653 1.699

Source: City of Roseville. Note: Subtotals and totals may [lOt add·due to rounding. ,,

:.: ... Power Supply Risk Management . , : . '.•

2015

721

60 66 -0 35

883

155 ·' . - '._

155

704

.1,742

1,742

.;.-.(. .;: 1

2016 2017

734 714

59 57 66 66

.. 0 0 38 36

897 873

155 155

155 155

741 804

·' 1,793 1,833

1,793 1,833

<

. I

The Electric System has in place a rigorous risk management program to ensure that customers will, to the best extent possible, be insulated from the volatility of supply prices. The Electric System estllblished a Risk Oversight Committee (ROC), risk management policies and procedures. The ROC meets quarterly to review energy trading activities and to ensure their adherence to the risk management policies.

All energy purchases are made to supplement existing resources to meet forecasted load requirements. Generally, the City purchases or sells energy that is deficit or surplus to its retail customer needs independently within a 12-month horizon and by using the scheduling and load following services of ACES Power Marketing within a 30-day horizon. The City's risk management policies include short-term and long-term measures.

In general, short-term measures limit market price exposure for the fiscal budget year to 5 percent or less of the City's budgeted purchased power cost and limit portfolio open volume to no more than +I- 10 percent of forecast load.

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The City's long-term risk management strategy encourages a balanced "layered" energy portfolio. The Energy Hedge F>olicy provides a ceiling and floor for the required hedged energy (electricity and natural gas) to meet expected loads as follows:

Rolling Year 1 2 3 4 5

Minimum Hedged Supply

90% 80% 70% 55% 40%

Maximum Hedged Supply 110% 105% 95% 80% 65%

The policy requires that the City purchase forward electric contracts and/or forward gas contracts to fulfill its long-term hedged supply requirement. In the event of decreases in expected sales levels, the policy may require that the City sell forward electric gas and/or electric contracts. Allowed instruments in the hedging program include:

• Electric forward sales or purchases with authorized counterparties • Electric tolling arrangements with qualified counterparties • Bi-lateral Gas contracts with qualified counterparties • Gas futures, Floors and Caps through the NYMEX or other approved market • Prepaid Gas Supply

The City's natural gas procurement strategy primarily involves purchasing natural gas for Roseville Energy Park's operation at a monthly index price. The City will manage daily dispatch variation through the purchase or sale of natural gas at the daily index price. The City expects to hedge its monthly index purchases with financial contracts in accordance with its Energy Hedge Policy described above. In addition, the Roseville Natural Gas Financing Authority entered into a 20-year pre-paid natural gas supply contract in January 2007. See "Sources of Power Supply - Future Power Supply Resources" above.

Regional Transmission Facilities

ISO Controlled Grid. NCPA Project generation and most market purchases are delivered over the ISO Controlled Grid to the electric system of Western, to which the City is physically interconnected. Western energy purchases are delivered to Roseville solely over Western transmission facilities.

NCPA Geysers Transmission Project.

Ownership and Description. In order to meet certain obligations required of NCPA to secure transmission and other support services for the NCPA Geothermal Project, NCPA and its transmission project participants (including the City) undertook the "Geysers Transmission Pr.oject," which includes (a) an ownership interest in PG&E's 230 kV line from Castle Rock Junction in Sonoma County to the Lakeville Substation, (b) additional firm transmission rights in this line, and (c) a central dispatch facility (see"- Dispatch and Scheduling" below).

Financing. NCPA financed the Geysers Transmission Project through the issuance of Transmission Project Number One Revenue Bonds, which were outstanding in the principal amount of approximately $3.3 million as of June 30, 2007. The City's share of debt service is approximately $60,000 per year.

45

. City's Entitlement. The City is entitled to a 14.18% share of the Geysers:Transmission Project transfer capability, and is responsible for 14'.18% of debt service·on the Transmission Project Number One Revenue Bonds, which constitute operating expenses of the Electric System payable on a basis senior to payments under the Installment Purchase Contract. See "ELECTRIC SYSTEM FINANCIAL INFORMATION - Outstanding Indebtedness - Senior Indebtedness."

TANC California-Oregon Transmission Project.

Ownership and Description. Fourteen Northern California cities and districts and one rural electric cooperativ·e, including the City, are members or associate members of a California joint powers agency known as the Transmission ~gency of Northern California ("T ~NC.").

TANC, together with the City of Vernon, California ("Vernon"): Western,' three California districts and authorities and PG&E (collectiyely; .tlie "COJP Participants':) own the California­Oregon Transmission Project ("COTP"),'a 339-mile long, '1,600 MW, 500 kV transmission power project between Southernpregon and .Central California. The COTP was placed in service on March 24, 1993, at a cost of approximately $430 million, and' was financed through a combination of bonds and notes issued by TANG: -

City's Entitlement. Under Project · Agreement No. 3 for the COTP (the "TANC Agreement"), the City is entitled to 2.313% of TANG's share of COTP transfer capability (approximately 29.35 MW). In return, the City has severally agreed to pay, on an unconditional take or pay basis, 2.295% of the construction costs of the COTP, including debt service, and 2.313% of TANG's COTP operating and maintenance expenses. TANC is currently considering various financing plans to address negative impacts its debt portfolio has· been experiencing due to recent market volatility surrounding variable rate and auction rate obligations .. The City's share of annual debt service continues to the year 2024 and is approximately $700,000 per year. These obligations constitute operating expenses of the Electric System payable on a basis senior to payments under the Installment Purchase Contract. See "ELECTRIC SYSTEM FINANCIAL INFORMATION- Outstanding Indebtedness- Senior Indebtedness."

City Use of COTP. The City uses its rights in the COTP to make economic power purchases for the Electric System and to deliver its share of the Seattle· City Light contract energy. . · · . 1 . •. . . ·

res/a-Midway Transmission Service. The southern physical terminus ·of the CO'fP is near PG&E's Tesla Substation in the San Francisco Bay Area. The COTP is connected to Western's Tracy and Olinda Substations. TANC has arranged for PG&E to· provide TANC and its members with 300 MW of firm bi-directional transmission capacity in its transmission system betWeen its Tesla Substation: and the Midway' Substation (the "Tesla-Midway Service") under an agreement known as the South of Tesla Principles. · · .. · ·

The City's share of this:Tesla-Midway·Transmission Ser¥ice is 5 MW. The City utilizes its allocation of Tesla-Midway Transmission Service for firm and non-firm power transactions when available and economic to do so. ·:

46

City Distribution System · ' .

The City owns and operates the electrical distribution system serving retail customers within the City's boundaries.-- The distribution system is connected to the Western transmission system at the two-connection points, the 230-kV Berry Street Receiving Station and the 230-kV Fiddyment Station. The distribution system consists-of over 137 miles of overhead lines, over 597 miles of underground lines and 16 substations. The City performs continued maintenance on-its distribution system to-sustain service reliability.

·Dispatch and Scheduling

Beginning July 1, 2006, the City contracted with ACES Power Marketing (APM) to provide scheduling services and discontinued its participation iri the NCPA Power Pool. NCPA

. continues to dispatch the NCPA power plants to meet the schedules of energy delivery prepared and submitted by APM on the City's behalf. NCPA provides dispatch service from its dispatch control center located at its headquarters in the City.

Energy Efficiency and Conservation

AB 1890, the California electric utility deregulation law, required the establishment of public benefit programs -for investor owned and public power utilities through 2001. On September 30, 2000, the governor signed into law SB 1194 and AB 995, which extended the requirement to support public benefit electricity programs through January 1, 2012. The City funds these programs at 5% of gross revenues (approximately $6 million per year based on Fiscal Year 2006-07 gross retail revenues).

Roseville Electric has developed a full portfolio of public benefits programs since 2001, addressing the four areas of concentration required by state law: low income assistance programs, renewable energy production, advanced electric technology demonstration and research and development, as well as energy efficiency programs. Residential and commercial energy efficiency offerings focus on summer period consumption reduction and include programs for both existing facilities and new construction.

In 2007 Roseville Electric implemented its BEST (Blueprint for Energy Efficiency and Solar Technology) Homes Program. The goal for the BEST Homes program is to ensure that 10-20 percent of all new homes built in Roseville utilize design criteria that substantially reduce the home's electricity bill. A typical BEST Home should create 40% less demand on the electric grid than the average single family home during the summer peak period. The BEST Homes program offers generous financial incentives to builders who integrate energy efficiency and solar generation technology into new home construction.

Additionally, in 2007, Roseville Electric began implementing a new residential load management program to reduce Roseville Electric's peak system load during the summer months of June, July, August, and September. The Load Control Program is a voluntary program for City of Roseville residents. Load control devices are installed on the customer's air conditioner or a programmable communicating thermostat is installed inside the customer's home. These devices allow Roseville Electric to send a signal to the device that will cycle the air conditioner off for short periods of time during system peak emergencies.

Under California Assembly Bill 2021, Roseville Electric is required to develop ten year plans for energy efficiency goals (in 2007) and report on these goals to the CEC with updates every three years. The CEC has the obligation to develop energy efficiency goals for the entire state, after consultation with utilities and others. Roseville Electric is participating in the state

47·

effort and has developed an energy efficiency plan, approved by City Council, with the goal of reducing customers' energy consumption.

. -,California Senate Bill 1037, signed into law in September 2005, established several

important policies regarding energy efficiency. Among the. many provisions .of the law is a statewide commitment to cost-effective· and feasible energy efficiency, with the expectation that all utilities consider energy efficiency before investing in any other resources to· meet growing demand. Roseville Electric is required to report annually to its customers. and. to the State Energy Resources Conservation and Development Commission, its investment in energy efficiency and demand reduction programs. Roseville continues its commitment to energy efficiency and is in compliance with these requirements.

. . For a more detailed discussion of recent California legislation relating to the electric

energy market, see "DEVELOPMENTS IN THE ENERGY MARKETS- State Legislation" below.

Insurance

The Electric System's insurance needs are handled by the Risk Management Division of the City's Human Resources Department. The City, including the Electric System, is self­insured for up to $500,000 for all insurance needs including casualty and liability and up to · $250,000 for workers'. compensation. The City has also joined -with a group of other municipalities to participate in two joint powers authorities, the California Joint Powers Risk Management Authority, that provides excess coverage up to $40,000,000 for casualty and liability, and the Local Agency Workers' Compensation Excess Joint Powers Authority, for excess coverage up to $50,000,000 for workers' compensation.

Upon taking over operational control of the Roseville Energy. Park from the general contractor, the City has continuously had a distinct "All Risk" property insurance policy in effect. Policy coverage includes Boiler and Machinery, Certified and Non-Certified Terrorism, Earthquake and Flood. The policy limit is $200,000,000 per occurrence with a variety of sub limits; the deductible for this policy is $250,000 generally, with a 60-day deductible for business interruption.

48

CAPITAL PLAN

Projected Capital Improvement Plan

The ·city's currently anticipated capital improvement plan for the Electric System encompasses both improvements to the City's electricity distribution system and the final construction phases of the Roseville Energy Park. As shown in the Capital Plan below, the City is forecasting electric system capital spending of approximately $122 million over the next five years.

Table 5 Capital Improvement Plan Summary

Fiscal Year Ending June 30

2007-08 2008-09 2009-10. 2010-11 2011-12 Total

Capital Improvement Projects $39,796,051

16,812,000 20,099,000 25,957,000 19.393,000

$122,057,051

The City is funding a portion of the capital improvement program with proceeds of its 2004 Certificates and 2005 Certificates. As of June 30, 2007, there were approximately $15,300,000 of unexpended construction proceeds available for such purpose. The remaining capital expenditures are expected to be financed with revenues ·collected from rates and development fees.

RATE SETTING·

Electric Rates

Rate-Setting Procedure. Under the City Charter and· State law, the City has the exclusive jurisdiction to set electric rates within its service area by ordinance, which requires a majority vote of the City Council. These rates are not currently subject to review by the California Public Utilities Commission or any other state.or federal agency. See "RATE REGULATION" below.

. .,

The City Council reviews Electric System rates periodically and. makes adjustments as necessary. ·

The City Council is also authorized by the City Charter to set charges, pay for and supply all electric power to be furnished to customers according to such schedules, tariffs, rules and regulations as are adopted by the City Council. The City Charter provides that the City Council will have the power to charge equitable rates for the electric services furnished and for building Lip the electric properties so as to conserve their·value ahd increase their capacity as needed by the City.

In addition, the City Charter provides for the maintenance of the Electric Fund for the Electric System into which is deposited receipts from the operations of the Electric System and from which are payable the costs and expenses of the Electric System.

49

Service Charges and Demand Charge as of February 2008. The City's monthly residential electric rates currently include an $8.00 basic service charge; $4.00 climate change mitigation charge, plus $0.0841 per kWh consumed up to 500 kWh, $0.1197 per kWh consumed from 501-1000 kWh, and $0.1367 per kWh for consumption in excess of 1000 kWh.

For small and medium business customers, the monthly basic service.charge ranges from $6.50 to $36.00, the monthly climate change mitigation charge varies from $4.00 to $25.00, plus $0.0913 to $0.0983 per kWh consumed. Medium business customers are also subject to a demand charge of $3.41/KW-month.

' . For large business customers, the·monthly basic service charge is $150.00, the monthly

climate change mitigation charge is $25.00; and depending on the season, day and hour, time of use energy charges vary from $0.0584 to $0.1158 per kWh .. Large business customers are also subject to a seasonal demand charge of $2.50/KW-month in winter and $8.62/KW-month in summer.

.. . Additionally, some large non-residential customers are eligible-for a 2.0% rate discount

when energy is delivered at primary service. , :,

Recent History of Electric Rate Adjustments. Over the past five years, the City's retail electric rates have increased an average of approximately 5% annually. Following is the City~s recent rate .change history:

... . ,

. .

. '

Febru~ry 2008 -two -rate ).ncreases of six pe~cent for all customers, effective February 2008 and February 2009 combined .with a monthly climate change mitigation charge of $4.00 for residential and small commercial, and $25.0.0 ,for medium and large commercial users, effective February 2008.

July 2007 -rate increase of six percert,for all customers .

July 2006 -rate increase of five percent for all customers .

April 2005 -rate .increase of five percent!or all customers ..

. ., ,Ja~uary_ 2904. -, rev~nue neutral. r~ie:.,~hanges;. tier,ed, rates for. residential customers and customer rate class consolid;;~tion for.~_qmmercial customers .. _ ..

Additionally, on May 8, 1996, the City adopted Resolution No. 96-148, which provides for, among. other policies, the establishment of a rate stabilization. fund, in order to remain competitive under ·industry-wide restructuring of the electric industry. Such policies also provide for the recovery of capital costs of the City's electric generating assets.

-Rate Coniparjsoil __

' -' ·-~~ . • • - .! . '~, . '

:' . . The City's current retail e.l.ectric ,rates ,are among :the lowest in California and over 40%

lower than other retail eh:~ctric,rates being charged in the SacramE!nto region. Table_ 6 below sets forth a comparison between average electric rates paid by City customers and · PG&E customers.

. ,.

•: ~-. ' .. , " ~~ : l ''. ' ..,

·'•·

50

rabiEi s · · Electric Rate Comparison with PG&E

(cents/kWh)

' Roseville Electric PG&E Customer Ty(:le Rates 1'> Rates 1'l

· Residential 11.05 14.90 Small Commercial 10.03 16.12 Medium Commercial 9.96 13.84 Large Commercial/Industrial 7.58 10.84

System Average 9.67 13.72

•% Difference

35% 61 39 43

42%

(1) Based on Fiscal Year 2007-08 midyear budget and retail sales forecast dated November 2007, which includes the City's February 1, 2008 rate adjustment.

(2) Based on average PG&E's approved rates, published January 1, 2008 and per Table 3 of the Advice Letter 3115-E-A dated February 7, 2008.

Source: ,city of Roseville.

Electricity Rate Regulation

No Current Direct Regulation. The authority of the City to impose and ·collect rates and charges for electric power and energy sold. and delivered is not currently subject to the regulatory jurisdiction of the California Public Utilities Commission, and presently neither the California Put;>lic Utilities Commission nor any other regulatory authority of the State of California nor FERC limits or restricts such rates and charges. See also ·~RATE REGULATION." .

California Energy Commission. The California Energy Commission is authorized to evaluate rate policies for electric energy as related to goals of the Energy Resources Conservation and Development Act and make recommendations to the Governor, the Legislatur13 and publicly owned electric utilities.

, ..

51

ELECTRIC SYSTEM FINANCIAL INFORMATION -· Significant Accounting Policies

Governmental accounting systems are organized and operated on a fund basis. A fund is defined as an independent fiscal and accounting entity with a self-balancing set of accounts recording cash and other financial resources, together with all related liabilities. and residual equities or balances, and changes therein. Funds are segregated for the purpose of carrying on specific activities or attaining certain objectives in accordance with special regulations, restrictions or limitations.

The Electric System is accounted for as an enterprise fund_ Enterprise funds are used to account for operations (i) that are financed and operated in a manner similar to private-business enterprises (where the iritent of the governing body is that the costs (expenses, including depreciation) of providing goods or services to the general public on a continuing basis be financed or recovered primarily through user charges) or (ii) where the governing body has decided that periodic determination of revenues earned, expenses incurred and/or net income is appropriate for capital maintenance, public policy, management control, accountability or other purposes.

The Electric Fund uses the accrual method of accounting. Revenues are recognized when they are earned and expenses are recognized when they are incurred.·

Investments are stated at cost. In-ventories- are valued at weighted average method. Capital assets are recorded at historical cost. Donated fixed assets are valued at their estimated fair market value on the date donated.

Audited Financial Statements

The City's Annual Financial Report is audited by Maze & AssoCiates, Walnut Creek, California (the "Auditor"}, in accordance with generally accepted auditing standards, and contains opinions that the financial statements present fairly the financial position of the various funds maintained by the City. The reports include certain notes to the financial statements which may not be fully described below. Such notes constitute an integral part of the audited financial statements.

Copies of these reports for prior Fiscal Years are available on the City's website, www_roseville.ca_us. The website address is given for reference and convenience only and the current accuracy of information contained therein cannot be assured,- nothing on the website is a part of this Official Statement or incorporated into this Official Statement by reference_

., \The City's Annual Financial Report for Fiscal Year 2006-07 is attached as APPENDIX C

to this Official Statement.

The City has not requested nor did the City obtain permission from the Auditor to include the audited ·financial statements as an appendix to this Official Statement. Accordingly, the Auditor has not performed any post-audit review of the financial condition or operations of the Electric System. In addition, the Auditor has not reviewed this Official Statement.

52

Outstanding Indebtedness

Parity Indebtedness.

Certificates of Participation. The 2008 Payments are secured on a parity with the 1999 Payments, the 2002 Payments, the 2004 Payments and the 2005A payments, which are further described below: ·

1999 Payments 2002 Payments 2004 Payments 2005A Payments 20058 Payments''' 2005C Payments121

Original Date and

Execution and Delivery Aug. 18, 1999 Dec. 18, 2002

- July 13, 2004 June 30, 2005 June 30, 2005 June 30, 2005

Original Principal Amount

$21,630,000 40,385,000 _39,940,000 52,900,000 90,000,000 60,000,000

(1) As of May 1, 2008. . . (2) To be refunded entirely by the 2008 Certificate_s

Outstanding Principal Amount1' 1

$570,000 24,820,000 39,275,000 52,450,000 90,000,000 60,000,000

Debt Service Range $597,275

1,328,726-2,920,521 1,640,225-4,234,500

760,113-5,574,613 3,251,700-8,883,952

2,656,535-3,251 '116131

(3) Assumes unhedged variable rate debt trades at 2.65% (10-year average of the weekly SIFMA index) ~ . .

Final Maturity Feb. 1,2009 Feb. 1,2024 Feb. 1,2034 Feb. 1, 2023_ Feb. 1,2035 Feb. 1,2035

' ~ ... ; ...

See "THE 2008 CERTIFICATES - Payment Schedule" for the schedule of ·combined 1999 Payments, 2002 Payments, 2004 Payments, 2005A Payments and 2008 Payments. -

Payment Agreement. In connection with the 2002 Certificates (which represent interest calculated at a variable rate): the City entered into the 2002 Payment Agreement with: Morgan Stanley Capital Services, which is an interest rate swap ag~eement·under which the City makes payments that are calculated by reference to a fixed rate and. receives payments that- are calculated by reference to a variable rate, all in connection with making the 2002 Payments. The 2002 Payment Agreement constitutes a "Parity· Payment Agreeme"nt" urider the Installment Purchase Contract, payments on which are made on a parity with all Payments under the Installment Purchase contract . :

Senior Indebtedness. The City participates in certain joinf powers agencies, -iilcluding NCPA and TAI')IC, through w~ich the City owes a.share of debt s~rvice on debt issued by those joint powers agencies. See "THE ELECTRIC 'sYSTEM - Sources· of Power Supply". and "­Regional Transmission Facilities."

Obligations of the City, as well as its other agreements with TANG an~ NCPA, co'nstituie op_~rating ~>_ep_enses of. the Electric System payable on a seni()r _basis-.to. any of the.p!Jyments required to be ;rl)ade under the.lnstallment.P,wchase. Contract, incly_qing the 4008 P~yrnents securing :the 2008 Certificates and the_ Parity Obligat[ons. _ ,See "SECURIT;Y. FOR TH~ 2008 Certificates..,. Outstanding Senior and Parity Obligations." . _ , _ . . ... ' . -

'~-· • ·.- ' .J. ' • : • ' • • ':. • •• ' ; • J ..:. • . ~!:-

The:agreements.,with NCPA and. TANG_ are on a "take or pay'~ba~is; which_requires payments to. be made. whether ,or not projects .. l!r.e -9per!3ble,. pr whe~t.her output fro111 such projectsis suspended, interrupted or terminated, Certain <;>f;these agre_ements_contain ;•step up" provisions obligating the City to pay a share of the obligations of a defaulting participant and granting the City a corresponding increased entitlement to electricity (generally, the City's "step­up" oblig~tionis limited to25%, of!he City's .scheduled paymel')ts on Sl,lt;:~ :obligatiqns).

. '·' . - ' . , .

- ·.·· ... ~· ' •· . .. ,.' ,;

53

The City's participation and share of debt service obligation (without giving effect to any "step up" provisions) for each of the joint powers agency projects in which it participates are shown in the following table.

Table 7 City Share of

Outstanding Joint Powers Agencies Debt As of June 30, 2007

(Dollar Amounts in Millions)

Roseville Share of

Outstandin~ Roseville Outstanding Princi~al 11 Partici~ation Princi~al

NCPA Geothermal Project 12> $76.9 7.9% $6.06

Geysers Transmission Project 13> 3.3 14.2 0.47 Hydroelectric Project I•> 483.5 12.0 58.02 Combustion Turbine Project No. 1 1'l 15.1 13.6 2.05 STIG Unit One 16> 65.0 . 36.6 23.72 TANG 1'> 366.2 2.3 8.42

TOTAL $945.0 $98.74

Roseville Appx. Annual Debt Service

Range

$0.3 to 4.5 Constant at 0.06 2.7 to 4.7 Constant at 0.6 1.5 to 2.2 Constant at 0.8

(1) Includes fixed-rate debt and variable-rate debt, a portion of which is subject to swap agreements. (2) See "THE ELECTRIC SYSTEM- Sources of Power Supply- NCPA Geothermal Project." (3) See "THE ELECTRIC SYSTEM- Regional Transmission Facilities- NCPA Geysers Transmission Project." (4) Although the City's participation share in this ·debt is 12%, the actual share of debt service is 9.9% due to

certain economic defeasance portfolios previously established with.NCPA. See "THE ELECTRIC SYSTEM -Sources of Power Supply- NCPA Hydroelectric Project Number One."

(5) See "THE ELECTRIC SYSTEM- Sources of Power Supply- NCPA Combustion Turbine Project Number One." '

(6) See "THE ELECTRIC SYSTEM - Sources of Power Supply- NCPA Steam injected Gas Turbine Generator Project, Unit One."

(7) ·See "THE ELECTRIC SYSTEM.,- Regional Transmission Facilities- TANG California-Oregon Transmission Project. n TANC is consi9ering ·vari.ous financing plans to address negative impacts its debt portfolio has been experiencing due to recent market volatility surrounding variable rate and auction rate obligations.

Source' City of Roseville. · ... Rate Stabilization Fund

:. '•

The· City c·ouncil adopted a policy establishing, among· other policies, a Rate s·tabilization Fund to hedge for energy price volatility. Amounts in the Rate Stabilization Fund are anticipated to be used t6 pay down energy supply expenses tO keep the City's electric rates stable. Amounts in the Rate Stabilization Fund are· not pledged ·as security for the Bonds, but interest earnings on the Rate Stabilization Fund are considered Revenues under the Trust Agreement, arid ft.inds in the Rate Stabilization· Fund ·may be· included ih Adjusted Annual Revenues for .. purposes·of determining compliance with the Rate· Covenant. See "SECURITY FOR THE CER'l"IFICATES- Rate Coven·ant" for-a further description of the Rate Stabilization Fund.· · · ···· ·.·. . ,. · '

···. The Rate Stabilization Fund had a balance of approximately ·$67 .1 million as of June 30,

2007. A five-year history of balances in the Rate Stabilization Fund is included in Table 8. The City estimates that under current annual revenue. estimates, the Rate Stabilization Fund is

54

expected to be sufficient to pay for currently anticipated contingencies related to power supply costs.

Historic Revenues, Expenses and Debt Service Coverage

Table 8 presents a five~year summary of the revenues, expenses, and debt service coverage for the City's Electric Fund for Fiscal Years 2002-03 through 2006-07 and a projection for Fiscal Year 2007-08. This table is based on historic operating results of the Electric System, but is presented on a cash basis consistent with the definitions of Revenues and Maintenance and Operation .Costs as defined in the Installment Purchase Contract, and as such, does not match the audited financial statements of the Electric System.

Table 8 also includes a five-year history and current-year projection of balances in the Rate Stabilization Fund, and calculates debt service coverage both with and without taking into account the Rate Stabilization Fund balance.

55

Revenues Charges tor Services Sale of Wholesale Power nJ · Other

Total Revenues Operating Expenses

Purchased Power (ZJ

Distribution/Operations (JJ

Administr<ltion Indirect Costs 141

Other Adrninistrative Transfers \51

Total Operating Expenses

Net Revenue Debt Service

1997 Certificates 1999 Certificates 2002 Certificates 2004 Certificates 2005 Certificates 1'' 2008 Certificates

Total Debt Service Adjusted Net Revenue

Net Revenue Transfer tram Rate Stabilization Fund(7l Transfer from NCPA GOR '" Other Expense 191

Plus Interest Revenue \101

Plus subventions/grants Adjusted Net Revenue

Debt Service Coverage Ratio

Table 8 Electric Fund

Statement of Revenues and Expenses Fiscal Years 2002-03 through 2006-07 (Audited)

Fiscal Year 2007-08 (Projected) (Dollars in Thousands)

2002-03 2003-04 2004-05 2005-06

$77,602 $87,719 ,. $91,884 $101,342 1,957 6,320 6,757 1,065

346 349 308 365 79,905 94,388 98,949 102,772

51,962 49,816 67,179. 68,659 11,917. 11,244 14,946 14,258 2,137 2,504 2,910 2,164 2,832 3,946 4,153 4,640

771 783 891 2,861 69,619 68,293 90,079 92,582

10,286 26,095 8,870 10,190

448 334 328 313 1,074 560 560 536

910 5,906 5,977 6,391 1,822 1,838

2,432 6,800 8,687 9,078

10,286 26,095 8,870 10,190

2,826 507 4,000 9,000

2,502 2,039 1,856 ~.279 51

15,665 28,641 14,726 21,469

6.44 4.21 1.70 2.36 Rate Stabilitation Fund Cash Balance $47,544 $46,684 $71,404 $64,358 DSC Ratio including RSF <11

l 25.99 11.37 9.91 9.45

2006-07

$111,715 17,248

1,301 130,264

102,414 14,330

2,462 5,006 2,794

127,006

3,258

328 527

1,141 2,161

4,157

3,258

9,999 (2,723) 3,649

14,183

3.41 $67,118

19.56

(1) Represents sale of electricity on the open market. See "THE ELECTRIC SYSTEM- Sources of Power Supply".

2007-08

$123,852 20,728

1,006 145,586

110,128 15,640

2,496 5,394 3,112

136,770

8,816

4 589

1,536 2,268 7,715

239 12,351

8,816

6,833

2,880

18,529

1.50 $60,255

6.38

(2) Increase in the cost of purchased power in 2004-05 due to reduced Western allocations and increased costs to replace the Western resource, Additionally, market priced energy increased approximately 18%. Increase in the cost of purchased power in 2006-07 resulted primarily from multi-year forward sale ($17 million -see "sale of wholesale power" -replacement energy was purchased and was partially offset by wholesale revenue), lower than normal hydro conditions ($13 million) and move to Western/SMUD control area ($2 million). .

(3) Effective as of 2005-06, Traffic Signal expenses were no longer included in Electric System operating expenses, Traffic Signal expenses are now funded through administrative transfers, instead of included in Electric System operations.

(4) Represents payments to the City as reimbursement for the Electric System's share of certain overhead expenses such as pe~yroll, human resources, meter reading, information technology, etc.

(5) Represents payments to the City for corporation yard rent, the Electric System's share of GIS system costs, and remodeling expenses. Effective 2005-06, Traffic Signal expenses are funded by administrative transfers (moved from Electric System Operations).

(6) computed taking into account swap rate plus basis; excludes capitalized interest for Fiscal Year 2007-08. (7) For Fiscal Years 2002-03 and 2003-04, Roseville used rate stabilization fund to fund one-time rebates to ratepayers. For

Fiscal Years 2004-05, 2005-06 and 2007-08, transfers were used to offset energy costs, mitigating rate impact. (8) Ttle City periodically deposits funds in the General Operating Reserve rGOR") maintained by NCPA in accordance with

the contractual relationship between the City and NCPA. In Fiscal Year 2006-07, the City determined that amounts in the GOR exceeded its contractual requirement, and transferred $9.999 million from the GOR to the Electric System operating fund, leaving a balance of $1.5 million in the GOR.

(9) In Fiscal Year 1998-99, capitalization of infrastructure was inadvertently booked twice when infrastructure was updated for GASB 34 purposes. An ~udit adjustment was made in Fiscal Year 2006-07 to adjust fixed asset balances accordingly.

(1 D) Excluding unrealized gain/loss. (11) Funds on deposit in the Rate Stabilization Fund may be counted for purposes of determining compliance with the Rate

covenant. See~- Rate Stabilization Fund" above and "SECURITY FOR THE CERTIFICATES- Rate Stabilization Fund". source: City of Roseville

56

·' Investment ·Policy

The cash attributable to, the Electric System must be invested in accordance with the City's Investment Policy. Pursuant to the Investment Policy, the City strives to maintain a level of investment of all idle funds, less required reserves, as near 100% as possible, through daily and projected cash flow determinations. Idle cash management and investment transactions are the responsibility of the City T~easurer and permitted investments include the following:

(1) (2)

' (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13)

(14) .

. Government obligations Federal agency or United States government-sponsored enterprise· obligations, participations, or other instruments · · Forward Delivery Agreements Obligations of the State of California Repurchase Agreements

-Bankers' Acceptances Commercial paper Medium-term corporate notes FDIC insured or fully collateralized time certificates of deposit Negotiable certificates of deposit or deposit notes State of California's Local Agency Investment Fund Insured savings accounts . . . . , . .·

· Shares of beneficial interest issued by diversified management companies that are money market funds registered with the Securities 'and ·Exchange Commission '·· ·' Shares in a California common law trust

Criteria for selecting investments and the order of priority are: . - . '

. -\ . • • . •. ..

Safety~Preservation of principal.~nd interest; Liquidity-Ability to convert investment to cash at any moment in time; and Yield-Potential dollar earnings on an investment.

~• The CitY's cash management system is designed to accurately monitor and forecast expenditures and revenues, thus enabling the City to invest funds to the fullest extent possible. The City attempts to obtain the highest yield when selecting an investment, provided the criteria for safetY and liquidity are met.

'1.1 1' •. •

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The following tables show the investments in the pooled funds of the City as of February 29, 2008. . .. .

·City of Roseville Pooled Investment Fund

City Pooled Investment Fund Certificates of Deposit Commercial Paper Corporate Notes Federal Agency Coupon Securities Treasury Coupon Securities Money Market Funds C.A.M.P. L.A. I. F.

Total

·par

$2,045,804 14,110,000 16,590,000

217,815,000 49,060,000

7,146,982 5,202,263

35,000,000 $346,970,049

Cost

. $2,045,804" _13,951,536

' 16,781,236 219,778,312

50,540,157 . 7,146,982

5,202,263 35,000,000

$350,446,290.

Distribution of Investments·

, Banker's Acceptances .Commercial Paper Money Market Funds Medium-Term Corporate Notes Negotiable Certificates of Deposit

Investment Policy Limit

30.0000% 25.0000 10.0000 30.0000 30.0000

Market Value

$2,045,804 • 14,091,187 17,038,845

226,949,672 52,558,838

7,146,982 5,202,263

35,000,000 $360,033,591

% of. Portfolio Per Cost

U.S. Government & Agency Obligations U.S. Treasury Notes and Bills

100.0000 100.0000 100.0000 100.0000

0.000% 4.623 1.623 5.012 0.464

65.435 13.715

L.A. I. F. (Pooled Funds)- $40,000,000 Limit Other (C.A.M.P.)

· Total

7.946 1.181

100.000%

The pooled funds of the City include. an amount allocable to the Electric System, as follows:

Commercial Paper Corporate Notes Federal Agency Coupon Securities Treasury Coupon Securities City Pooled Fund

RSF Total

Maturity 3

726 561 882

1 590

Par $2,300,000

1,825,000 46,740,000

8,255,000 1,551,017

$60,671 ,017

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Cost $2,294,404

1,800,471 47,174,331

8,581,600 1,551,017

$61,401,823

Markl)t Value

$2,299,076 1,859,707

48,552,497 8,938,801 1,551,017

$63,201 ,098

•• t DEVELOPMENTS IN THE ENERGY MARKETS

Background; Electric Market Deregulation . . '

In 1996,' California partially· deregulated its electric ~nergy market. An independent system operator of the transmission system, the California Independent System Operator (the "ISO"), was established, as well as an independent power exchange, the California· Power Exchange (the "PX"). The. PX was originally established to permit power generators to sell power on a competitive spot-market basis; however, the PX has ceased all power exchange operations and filed for bankruptcy protection.

Additional Developments

Financial Difficulties tJf the IOUs and ·certain Other Market Participants: As· a consequence of partial deregulation, .the California investor-owned uti_lities (the "IOUs") ·sold a large portion of their generation resources. ·As a result, three major IOUs "in California, PG&E, San Diego Gas & Electric Co. ("SDG&~") and Edison, were net buyers of electricity. Following the partial deregulation of th~ California energy markets, the IOUs were purchasing electricity ~t fluctuating short-term and spot wholesale prices while the retail price~ that they could charge their residential and small business customers were capped ·at speCified levels. During portions of 2000 and 2001, the market price of electricity in California significantly exceeded such capped retail prices, resulting in the deterioration of the creditworthiness of PG&E and Edison, with PG&E filing for bankruptcy on April 6, 2001. Certain other marketers, power suppliers arid power plant developers experienced downgrades of their credit ratings. PG&E emerged from bankruptcy oh April 12, 2004. The credit ratings of PG&E and 'Edison have improv~d sirice the dislocations of the California energy markets in 2000 and 2001. ,,

State and Federal Investigations. State of California and federa'r authorities are conducting investigations and other proceedings concerning various aspects of the California energy markets. These im;lude, for example, investigations by the Federal Energy Regulatory Commission ("FERC") intci alleged overcharging for the sale of electricity (including sales by municipal utilities) and alleged manipulation of ihe electricity ·market. The City is unable to predict the outcome of existing investigations and proceedings regarding California's energy crisis or whether further investigations, proceedings, litigation or other actions will follow. ·

Shortages and Volatility. During 2000 and 2001, California experienced extreme fluctuations in the prices and supplies of natural gas and electricity in much of the State. Licenses for new power plants have been issued by the California Energy Commission (the "CEC"), construction on several power plants has been completed and construction of additional power plants is uriderWay. P.rogress on ri~w ,transmission line projects within California has been slow. There also has been a substantial rise in the cost of natural gas, which is the fuel source for many of California's electric generating units. State agencies have issued warnings that further power shortages are possible for Southern California. As a result of the ·foregoing and other factors; no assurance can be given that measures undertaken duririg the" last several years, together with measures to be taken in the future, will prevent the recurrence of shortages, price volatility or other energy problems that have adversely affected the Electric System and otherCalifornia electric utilities in the recent past. See "OTHER FACTORS AFFECTING THE ELECTRIC UTILITY IND.USTf'~Y-Recent ISO FERC Filings-R!lsource Adequacy Filing" herein.

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State Legislation

A number of bills affecting the electric utility industry have been enacted by the California Legislature. In general, these bills provide for reduced greenhouse gas emission standards and greate~ investment in energy-efficient and environmentally friendly generation alternatives through more stringent renewable resource portfolio standards. The following is a brief summary of certain of these bills.

· See also "THE ELECTRIC SYSTEM- Energy Efficiency and Conservation" above.

Greenhouse Gas Emissions. On June 1, 2005, the Governor signed Executive Order S-3-05, which placed an emphasis on such efforts to reduce greenhouse gas emissions by establishing Statewide greenhouse gas reduction targets. The targets are: (i) a reduction to 2000 emissions levels by 2010; (ii) a reduction to 1990 levels by 2020; and (iii) a reduction to 80%. below 19.90 levels by 2050. The Executive Order also called for the California Environmental Protection Agency to lead a multi-agency effort to examine the impacts of climate change qn California and develop strategies and mitigation plans to achieve the targets. On AprH 25, 2006, the Governor also s·lgned Executive Order S-06-06 which d"1rects the State to meet a 20% biomass utilization target within the renewable generation targets of 2010 and 2020 for the contribution to greenhouse gas emission reduction. ,, - ... .

On September 27, 2006 .the Governor signed into law Assembly Bill 32 ("AB 32"), the Global Warming Solutions Act of 2006. AB 32 requires all California utilities to inventory and report. greenhouse gas emissions beginning January 1, 2008 and requires the California Air Resovrces Board ("CARB") to adopt enforceable greenhouse gas emission limits and emission reduction measures by regulation in order to reduce greenhouse gas emissions to 1990 levels by 2020. The CARB regulations for greenhouse gas emissions limits and reduction measures will be enforceable beginning January 1, 2012.

On September 29, 2006, the Governor signed into law Senate Bill 1368 ("SB 1368"), the Greenhouse Gas Emissions Performance Standard. SB 1368 sets a greenhouse gas emission performance standard ("EPS") ·for baseload electric generating resources. Any new investment in baseload generation or contract for baseload generation with a term of over five years must have greenhouse gas emissions at or below that of a baseload, combined cycle power plant. The california Energy Commission was assigned the responsibility of establishing the EPS and associated compliance methodologies for the publicly-owned utilities, including the Participants. The CPUC has the similar responsibility for the IOUs. The revised proposed CEC regulations were <!pproved by the Office of Administrative Law on October 16, 2007.

The regulations promulgated by the CEC prohibit any investments in baseload generation which does not meet the EPS of 1, 100. pounds of C02 per MWh of electricity, with limited exceptions for routine maintenance, requirements of pre-existing contractual commitments, or threat of significant financial harm. The City does not anticipate that SB 1368 will have a material impact on current City or NCPA resources. The impact on future resources is unknown at this time. - · ·

The new legislation wi\\ impact a\\ California electric utilities as the State begins to reduce i!~ reliance on· imported, out-of-state, coal-fired generation. The City is committed to renewable energy, demand side management and energy efficiency, however, it is widely recognized that there will still be a large demand for traditional, baseload fossil power plants in order to meet projected load growth. Currently there is a ban in California, prohibiting the development of nuclear power plants until there is a permanent storage solution for spent fuel

60

rods. With the effective ban on· new coal" power imports under SB 1368, natural gas. fired, combined cycle· power plants would. appear to be the primary· viable option for fossil fuel based baseloadc powe~ plant development absent .the ·implementation of new. technologies· ·in connection with other resource options. The reliance on a single fuel source will continue to put pressure on the already volatile natural gas market in the United States. In January 2007 the Roseville Natural Gas Financing Authority entered into a 20-year pre-paid natural gas supply contract with Merrill Lynch Commodities Inc ("MLCI"). The natural gas purchased from MLCI is in turn sold to the City for use in the Roseville Energy Park. The natural gas the City .is obligated to purchase under the prepaid gas supply agreement is expected to provide approximately 40% of the City's expected gas requirements for Roseville Energy Park. See "THE ELECTRIC SYSTEM- Sources of Power Supply."

-There are a number of issues yet to be sorted out surrounding the State's. mandatory

reduction of greenhouse gas emissions. Under AB 32, .GARB has delegated responsibility to the CPUC and the CEC to come up with solutions for the electric sector -in order to meet the C02 reduction targets identified (1990 levels by 2020). GARB has concluded that California's 1990 emissions level was 427 million metric tons of C02, and thus this was adopted as the 2020 target in December 2007. Business-as-usual in 2020 was identified as being 600 million .metric tons of C02, requiring an overall. reduction of 173 million metric tons of C02. Regulations outlining the mandatory annual reporting of greenhouse gas emissions were also. adopted in December 2007, and all retail providers will be required to report the emissions from their owned assets beginning in 2009 for the 2008 year as well as emissions from· in-state and out-of-state purchases and sales·. All unspecified purchases must be report!!d.as having .an emissions rate of 1,100 pounds of C02 per MWh, in an effort to mimic SB 1368. '· .

· During 2008, GARB will be developing its formal seeping plan on "who" will be required to reduce "what" to reach the 1990 emissions goal of 427 million metric tons of C02. GARB will be utilizing recommendations from the CEC and CPUC in its joint proceeding. and it.is already being .discussed that some sectors will need to reduce more than their fair share in order to achieve this statewide, multi-sector effort. The seeping plan must be adopted by January 1, 2009, and each greenhouse gas reduction method within the plan will undergo its own individual rulemaking prior to being enforceable on January 1, 2012. The seeping plan will then be revised every 5 years as GARB proceeds with its next task of designing the mechanisms for returning the state to 80% below 1990 levels by 2050 as directed in Executive Order S-3-05.

Energy Procurement and Efficiency Reporting. Senate Bill. 1037, signed by the Governor on September 29, 2005, requires that each municipal electric utility, including the City, prior to procuring new energy generation resources, first acquire all available energy efficiency, demand reduction and renewable resources that are cost effective, reliable and feasible. Senate Bill 1037 also requires each municipal electric utility to report annually to its customers and to the CEC its investment in energy efficiency and demand reduction programs. Further, California Assembly Bill· 2021 ("AB 2021 "), signed by the G.overnor on September 29, 2006 requires that the publicly-owned utilities establish,· report, and explain the basis of the annual energy efficiency and demand reduction targets by June 1, 2007 and every three .years thereafter for a ten-year horizon. Future reporting requirements per AB 2021 will include: (i) the identification of sources of funding for the investment in energy efficiency and demand reduction programs, (ii) the methodologies and input assumptions used to determine cost-effectiveness, and (iii) the results of an independent evaluation to measure and verify energy efficiency savings and demand reduction program impacts. The information obtained from local publicly-owned utilities will be used by the CEC to present the progress made by the publicly-owned utilities on the State's goal of reducing electrical consumption by 10% in ten years and amelioration with the greenhouse gas targets presented in Executive Order S-3-05

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enacted by the Governor on June-1,-2005. In addition, a report will be developed by.the CEC with recommendations for improvemenUo assist each local -publicly-owned utility in achieving cost-effective, reliable, and feasible savings in conjunction with the established targets for reduction.

In March 2008, the City. submitted its annual report to the CEC per Senate Bill 1037 which provided cost-effectiveness analyses of the City's energy.· efficiency programs for fiscal year·2006-2007. In September 2007, the City issued the first ·ten-year forecast of potential energy efficiency programs in the triennial cycle to the CEC in. response to the requirement of AB 2021. . • ·

Renewable Portfolio Standards. In September 2002, the California Legislature enacted and the Governor signed into law Senate Bill 1078. Senate Bill 1078 required that the IOUs adopt a Renewable Portfolio Standard ("RPS") to meet a minimum of 1% of retail energy sales needs each year from renewable resources and to meet a· goal of 20% of their retail energy needs from renewable energy resources by the year 2017. ·Senate Bill 1078 also directed the State's municipal electric utilities to implement and enforce an RPS that recognizes the intent of the Legislature to encourage development of renewable resources, taking into consideration the impact on a utility's standard on rates, reliability, financial resources, and the goal of environmental improvement. On September 26, 2006, the Governor signed Senate Bill 107 ("SB 1 07") into law, which requires IOUs to have 20% of ·their electricity come from renewable sources by 2010 and still prescribes that the local publicly-owned utilities meet the intent of the Legislature. The City currently has an RPS goal of 20% by 2017, in conformance with the intent of the Legislature.

Since the implementation of Senate Bill 1078, the California Public Utilities Commission (the "CPUC") and the California Energy Commission have taken a number of actions that have had an impact on the renewable energy goals set by the legislation. In order to overcome the challenges associated with meeting accelerated RPS goals, the CPUC and the CEC supported the implementation of a renewable energy certificate trading system to meet the accelerated RPS goals. SB 107 allows this flexibility, with the condition that the energy is delivered to an in-state trading hub.

In response to the adoption of SB 1078 in 2002, the City formally adopted an RPS in 2002 requiring 20% of retail sales to be supplied from renewable energy resources by 2017. In response to the subsequent passage of SB 107, the City is reviewing the requirement to accelerate the RPS requirement. The City expects up to 40% of retail sales to be served from renewable energy resources in the year 2008. This amount includes 10% of retail sales to be served from "California Eligible" renewable resources and an additional 30% of retail sales to be served from renewable large hydroelectric resources.

In parallel, pursuant to Senate Bill 1078, the CEC collaboratively with the Western Governors' Association and the Western Electricity Coordinating Council has undertaken the development and establishment of ·the Western Renewable Energy Generation Information System ("WREGIS"), which will be used to ensure the integrity of renewable energy certificates and prevent the double counting of the certificates. The electronic tracking system became operational in June of 2007. With the commercial operation of WREGIS, the City may establish an account and receive renewable energy certificates as they become available from yet to be determined sources. ·

·.<

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Solar Power. California Senate Bill 1 ("SB 1") (originally known as the "Million Solar Roofs Initiative") was signed by the Governor on August 21, 2006. This legislation aims to have 3,000 MW of solar energy systems installed within ten years, and establishes requirements to have solar energy systems installed on 50% of new residential developments within 13 years. SB 1 requires that publicly. owned utilities, including the City's Electric System, establish a program that adequately supports the. efforts to install 3,000 MW of photovoltaic energy in California .. ~ In addition, the legislation established a January 1, 2008 .deadline, for the development of eligibility criteria for solar energy .systems by the CEC in consultation with the CPUC, local publicly-owned utilities, and interested members of the public. Publicly owned utilities are required to commence a solar initiative program in order to establish the funding of solar energy systems receiving ratepayer funded incentives, which offering shall commence no later than January 1, 2008. · A publicly-owned utility has the choice of selecting an incentive based on the installed capacity, starting at $2.80 per watt, or based on the energy produced by the solar energy system, measured in kilowatt-hours. Incentives are required to decrease at a minimum average rate of 7% per year. By June 1, 2008, the City will be required to provide the following information to customers, the CEC and the legislature: (i) the number of photovoltaic solar .watts installed, (ii) the number of photovoltaic systems installed, (iii) the number of applicants for incentives, (iv) the amount of awarded incentives, and (v) the contribution towards the program's goals. The total statewide expenditures for local publicly-owned utilities .are expected to be $522 million. The City is expected to offer a proportionate amount of incentives over the 1 0-year period based on the respective utility's share of statewide load served by local publicly-owned utilities. The City is meeting the requirements of SB 1 through its BEST Homes program and other solar incentive programs for both residential and business customers. See "THE ELECTRIC SYSTEM- Energy Efficiency and Conservation."

Impact of Developments on the City

The effect of these developments (including the state legislation) in the California energy markets on the City cannot be fully ascertained at this time. Volatility in energy prices in California may return due to a variety of factors which affect both the supply and demand for electric energy in the western United States. These factors include, but are not limited to, the adequacy of generation resources to meet peak demands, the availability and cost of renewable energy, the impact of greenhouse gas emission legislation and regulations, fuel costs and availability, weather effects on customer demand, transmission congestion, the strength of the economy in California and surrounding states and levels of hydroelectric generation within the region (including the Pacific Northwest). This price volatility may contribute to greater volatility in the City's costs and revenues from the sale (and purchase) of electric energy and, therefore, could materially affect the financial condition of the City.

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. OTHER FACTORS AFFECTING THE ELECTRIC UTILITY INDUSTRY

Energy Policy Act of 1992

The Energy Policy Act of 1992 (the "Energy Policy Act") made fundamental changes in the federal regulation of the electric utility industry, particularly in the area of transmission access under Sections 211, 212 and 213 of the Federal Power Act·· The purpose of these changes, in part, was to bring about increased competition in the electric utility industry.

As amended by the Energy Policy Act, Sections 211, 212 and 213 of the Federal Power Act provide FERC authority, upon application by any electric utility, federal power marketing agency or other person or entity generating electric energy for sale or resale, to require a transmitting utility to provide transmission services (including any enlargement of transmission capacity necessary to provide such services) to the applicant at rates, charges, terms and conditions set by FERC based on standards and provisions in the Federal Power Act Under the Energy Policy Act, electric utilities owned by municipalities and other public agencies which own or operate electric power transmission facilities which are used for the sale of electric energy at wholesale are "transmitting utilities" subject to the requirements of Sections 211, 212 and 213.

Federal Energy Legislation

On August 8, 2005; President Bush signed the Energy Policy Act of 2005 ("EPACT 2005"). EPACT 2005 addresses a wide array of energy matters that could affect the entire electric utility industry, including the City's electric system. It expands FERC's jurisdiction to require open access transmission of municipal utilities that sell more than four million megawatt hours of energy and to order refunds under certain circumstances for municipal utilities that sell more than eighfmillion megawatt hours of energy. The City is not able to predict when, if ever, its sales of electricity would reach four million megawatt hours. EPACT 2005 requires that FERC conclude its investigation into the allegations of overcharges during the California energy crisis in 2000 and 2001 and submit a report to Congress. It also provides for mandatory reliability standards to increase system reliability and minimize blackouts, criminal penalties for manipulative energy trading practices and the repeal of the Public Utility Holding Company Act of 1935, which prohibited certain mergers and consolidations involving electric utilities. Under EPACT 2005, by February 2007 investor-owned utilities were required to offer each of its customer classes a time-based rate schedule to enable customers to manage energy use through advanced metering and communications technology. It authorizes FERC .to exercise eminent domain powers to construct and operate transmission lines if FERC determines a state has unreasonably withheld approvaL EPACT 2005 contains provisions designed to increase imports of liquefied natural gas and incentives to support renewable energy technologies, including a new two-year program for tax credit bonds for local governments, such as the Participants, to finance certain renewable energy facilities. EPACT 2005 also extends for 20 years the Price-Anderson Act, which concerns nuclear power liability protection, and provides incentives for the construction of new nuclear plants.

The City is unable to predict at this time the impact that EPACT 2005 will have on the operations and finances of the Electric System or the electric utility industry generally.

64

Recent ISO FERC Filings

MRTU Filing. On February 9, 2006, the ISO filed with FERC its Market Redesign and TectihologyUpgrade CMRTU") tariff amendment to implement a comprehensive overhaul of the electricity markets'administered by ihe ISO. A,ccording to t~e ISO; the proposed compr~hensive changes. include, but are not limited to, the following: perform effective !=Ongestion management in the ISO day-ahead market by enforcing all transmission constraints so as' 'to establish feasible forward transmission schedules; create a day-ahead market for en.ergy; automate real-time dispatch so .as to balance the system and manage congestion in an optimal manner with minimal need for manual intervention; and ensure consistency across market time frames in the allocation of transmission resources to grid users and the pricing of transmission service and energy. The MRTU also is intended to ensure that the ISO has.sufficient capacity available tci maintain reliability on the ISO grid. The MRTU requires that ali scheduling coordinators for all load-serving entities ("LSEs") meet standards· concerning forward capacity and energy procurements to m,eet their load requirements. The ISO has requested that its MRTU filing be approved by FERC, without modification, suspension or hearing, projected to go into effect on April1, 2008. On September 21, 2006, FERC issued an order conditionally accepting the I SO's MRTU filing. At this tirT)e, the City is unable to predict the impact of this filing on the City or the California el.ectrjc utility_ industry generally.

. . Resource Adequacy Filing. In September 2005, the Califo~nia Legislature enacted

and the Governor signed into law Assembly Bill 380, which requires the CPUC to establish resource adequacy requirements for all LSEs within the CPUC's jurisdiction. In addition, AB 380 requires publicly-owned utilities, including the City, to meet the most recent resource adequacy standard as adopted by the Western Electric Coordinating Council (WECC). In October 2005, the CPUC issued a decision stating that LSEs under its jurisdiction would be required, by June 2006, to demonstrate that they have acquired capacity sufficient to serve their forecast retail customer load plus a 15-17% reserve margin. The WECC has yet to formally adopt a resource adequacy requirement.

Fuel Risk

Increases in fuel supply, transmission and storage costs, or the failure of counterparties in its natural gas arrangements, pose a financial risk to the City. In addition, the City does not currently have firm gas supply and transmission arrangements in place to meet all of the Project's fuel supply needs and is therefore exposed to price volatility for such commodities and services. To mitigate such risks, the City has developed a fuel supply management strategy focused on reliability and price risk management. See "THE ELECTRIC SYSTEM - Power Supply Risk Management."

Other Factors

The electric utility industry in general has been, or in the future may be, affected by a number of other factors which could impact the financial condition and competitiveness of many electric utilities and the level of utilization of generating and transmission facilities. Such factors include, among others, the following:

(a) effects of compliance with rapidly changing environmental, safety, licensing, regulatory and legislative requirements other than those described above;

(b) changes resulting from conservation and demand-side management programs on the timing and use of electric energy;

65

(c) changes resulting from a national energy policy;

(d) effects of competition ·from other electric ·utilities (including increased competition resulting from mergers, acquisitions, and "strategic alliances" of competing electric and natural gas utilities and from competitors transmitting less expensive electricity from much greater distances over an interconnected system) and new methods of, and new .facilities for, producing low-cost electricity;

(e) the proposed repeal of certain federal statutes that would have the effect of increasing the competitiveness of many' investor owned utilities;

(f) increased competition from independent .ppwer producers and marketers, brokers and federal power marketing agencies;

-(g) "self-generation" or "distributed generation" (such as microturbines and fuel

cells) by industrial and commercial customers and others;

(h) issues relating to the ability to issue tax-exempt obligations, including severe restrictions on the ability to sell to nongovernmental entities electricity from generation projects and transmission service. from transmission line projects financed with outstanding tax-exempt obligations;

(i) effects of inflation on the operating and maintenance costs of an electric utility and its facilities; ·

0) changes from projected future load requirements;

(k) increases in costs and uncertain availability of capital;

(I) shifts in the availability and relative costs of different fuels (including the cost of natural gas);

(m) sudden and dramatic increases in the price of energy purchased on the open market that may occur in times of high peak demand in an area of the country experiencing such high peak demand, such as has previously occurred in California;

(n) inadequate risk management procedures and practices with respect to, among other things, the purchase and sale of energy and transmission capacity;

(o) other legislative changes, voter initiatives, referenda and statewide propositions;

(p) other political risks impacting the City's rates or other operational or financial matters;

(q) effects of changes in the economy;

(r) effects of possible manipulation of electric markets; and

(s) natural disasters or other physical calamities, including, but limited to, so earthquake and flood.

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' ' ., . ,- :'.Y ;· .-, •,1

Any of these· factors (as' well as other 'factors) co'uld have an· adverse 'effect on tile financial condition of any given electric uti!ity, including the Ele;ctric System.

The City cannot predict what effects such factors will have on the business operation~ and financial condition of the Electric System, but the effects could be .significant. ·The foregoing is a brief discussion of ce'rtain of these factors. The. City has taken certain steps to mitigate the imports ofthese'changes, inCluding establishing the Rate Stabilization 'Fund and implementation of the climate mitigation fee. This Official Statement includes a brief 'discussion of certain of these steps. This discussion does not purport to be comprehensive or definitive, and these matters are subject to change subsequent to· the· date hereof. Extensive information on the electric utility industry is, and will be, available from the legislative and regulatory bodies and other sources in ·the public domain.

RATE REGULATION

The City sets rates, fees and charges for electric service. The authority of the City to impose and collect rates and charges for electric· power and energy sold arid delivered i!; not subject to the general regulatory jurisdiction of the CPUC, and currently neiiher the CP'OC rior any other regulatory authority· of the State of California nor FERC approves such rates and charg·e·s.' It is p'ossible that future legislative and/or regulatory changes could subject the rates and/or service area of the City to the jurisdiction of the CPUC or to other limitations or requirements.

FERC potentially could assert jurisdiction over rates of licensees of hydroelectric projects (sucti as NCPA) and. customers of such licensees (such as the City) urider Part I of_the Federal Power Act, although it as a practical matter has not exercised or sought to exercise such jurisdiction to modify rates-that would fegitimately be charged. There is· a qu-estion as fo whether FERC has jurisdiction at all to modify rates for municipalities which are authorized to set their· owri rates. . NCPA •is ·a licensee of hydroeleCtric projects under Part 1,' put no jurisdictional 'authority to regulate their rates has been asserted by FERC. In· any·event, the City's participation in'the NCPA Hydroelectric Project represents 12% percent of the City's total power resources. FERC and its predecessor, the Federal Power Commission (the "FPC"), have indicated on a number of occasions that municipalities and other public ·agencies authorized to set their own rates are not subject to FERC's regulatory jurisdiction over rates. On the 'oth-er hana, the FPC in at least one decision suggested a contrary result. Even ·if FERC were to assert jurisdiction over the services and charges associated with such hydroelectric projects, it is unlikely that any reasonable rates and charges would be found to be contrary to applicable federal regulatory standards.

·Under EPACT 1992, FERC has the authority, under certain circumstances and pursuant to certain procedures, to order any utility (municipal or otherwise) to provide transmission access to others at'FERC-~ppro_ved rates. - '· ~·:. . . -

·· FERC also has jurisdiction to regulate those rates and has asserted that jurisdiction in Minnesota Municipal Power Agency v. Southern Minnesota Municipal Power Agency, 66 FERC 1!61,223 (1994) and 68 FERC 1!61,060 (1994). However, FERC's asserted jurisdiction over municipal rates does not extend to the rates for power sales and applies only to transmission service ordered by FERC pursuant to Section 211 of the Federal Power Act, as amended by EPACT 1992. Neither the City nor any joint powers agencies with which the City has contracted

67

which developed the transmission assets are providing any such transmission service to others. l'!o assura,nce can be given that such service will not be requested in the future.

Although its rates are not subjed to approval by any federal agency, the City is subject to certain provisions of the Public Utility Regulatory Policies Act of 1978 ("PURPA") with respect to the purchase of the output of "qualified facilities" ("QFs") at prices determined in accordance with PURPA. EPACT 2005 repeals the mandatory purchase obligation for utilities (including the City) when FERC determines that the QF has access to a competitive sales market and open access transmission. The City is operating in compliance with PURPA.

The State Energy Resources Conservation and Development Commission is authorized to evaluate rate policies for electric energy as related to the goals of the Energy Resources Conservation and Development Act and to make recommendations to the Governor, the Legislature and publicly owned electric utilities.

OTHER RISK FACTORS

The following information should be considered by prospective investors in evaluating the 2008 Certificates. However, the following does not purport to be. an exclusive listing of risks and other considerations that may be relevant to investing in the 2008 Certificates, and the order in which the following information is presented is not intended to reflect the relative importance ~f any such risks.and considerations.

Security for the 2008 Certificates

Except as noted herein under "THE LEITER OF CREDIT AND THE REIMBURSEMENT AGREEMENT," the 2008 Certificates are payable solely from payments made under the Installment Purchase Contract. No representation or.assurance can be made that revenues will be realized by the City in amounts sufficient to make payments required by the Installment Purchase Contract and thus to pay maturing principal, mandatory sinking fund requirements and interest with respect to the 2008 Certificates. Future economic and other conditions, including economic trends and events, technological developments. and demographic changes, increases in insurance claims, as well as increased costs and changes in government regulations, including Internal Revenue Service (the "IRS") policy regarding tax exemption, may adversely affect the future.financial condition of the City and, consequently, its ability to make payments of the principal of and premium, if any, and interest with respect to 2008 Certificates.

Expiration of the Letter of Credit

The initial scheduled expiration date of the Letter of Credit is May 13, 2011, subject to ex1ension or earlier termination in certain circumstances as described therein. If the Letter of Credit is. not ex1ended or an Alternate Credit Facility is. not obtained by the City, the 2008 Certificates will be subject to mandatory tender for purchase. There can be no assurance that the City will be able to obtain an ex1ension-ofthe Letter of Credit or an Alternate Credit Facility. The Bank is under no obligation to extend the Letter·cif Credit beyond the scheduled expiration thereof.

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Bank's Obligations Unsecured

The ability of the Bank to honor draws upon the Letter of Credit is based solely upon the Bank's general credit and is not collateralized or otherwise guaranteed by the United States of America or any agency or instrumentality thereof. No provision has been made for replacement of or substitution for the Letter of Credit in the event of any deterioration in the financial condition of the Bank. Neither the Authority, the .City or the Bank assumes any liability to any purchaser of the 2008 Certificates as a result of any deterioration of the financial condition· of the Bank. Upon any insolvency of the Bank, any claim by·the Trustee against the Bank would be subject to bank receivership proceedings.

General Factors Affecting the Bank .

The Bank is subject to regulation and supervision by various regulatory bodies. New regulations could impose restrictions upon the Bank which would restrict its ability to respond to competitive pressures. Various legislative or regulatory changes could dramatically impact the banking industry as a whole and the Bank specifically. The banking industry is highly competitive in many of the markets in which the Bank operates. Such competition directly impacts the financial performance of the Bank. Any significant increase in such competition could adversely impact the Bank.

Prospective purchasers of the 2008 Certificates should evaluate the financial strength of the Bank based upon \he information contained and referred to herein under the caption "THE BANK", and other information available upon request from the Bank and should not rely upon any governmental supervision by any regulatory entity. ·

Tax Exemption ·

·The City has covenanted in the Installment Purchase Contract that it will take all aCtions necessary to as.sure the exclusion of interest with respect to the 2008 Certificates from the gross income of the Owners of the 2008 Certificates to the same extent as such interest is permitted to be excluded from gross income under the Internal Revenue Code of 1986. If the City fails to comply with \his tax covenant, the interest compon·ent of the 2008 Paym'ents evidenced by the 2008 Certificates may be includable in the gross income of the Owners thereof for federal tax purposes. See "TAX MATTERS."

Limited Obligations

The 2008 Payments under the Installment Purchase Contract are limited obligations of the City and are not secured by a legal or equitable pledge or charge· or lien upon any property of the City or any of its income or receipts, except the Net Revenues. The obligation of the City to make the 2008 Payments does not constitute an obligation of the City to levy or pledge any form of taxation or for which the City has levied or pledged any form of taxation.

The City is obligated under the Installment Purchase Contract to pay the 2008 Payments solely from Net Revenues. There is no assurance that the City can succeed in operating the Electric System such that Net Revenues in the future amounts projected in this Official Statement will be realized.

69

Limitations on Remedies and Limited Recourse on Default

The ability of. the City to comply with its covenants under the Installment Purchase Contract and to generate Net Revenues sufficient lo pay principal of and· interest with respect to the 2008 Certificates may be adversely affected by actions and events outside of the control of the City and may be adversely affected by actions taken (or not taken) by voters, property owners, taxpayers or persons obligated to pay assessments; fees and charges. Failure by the City to pay the 2008 Payments required to be made under the Installment Purchase Contract constitutes an event of default under the Installment. Purchase ·Contract and the Trustee is permitted to pursue remedies at law or in equity to enforce the City's obligation to make such 2008 Payments. Although the Trustee has the right to accelerate the total unpaid principal amount of the 2008 Payments, there is no assurance that the City would have sufficient funds to pay the accelerated 2008 Payments.

Furthermore, the remedies available to the owners of the 2008 Certificates upon the occurrence of an event of default under the Installment Purchase Contract are in many respects dependent upon judicial actions which are often subject to discretion and delay and could prove both expensive and time consuming to obtain.

In addition to the limitations on remedies contained in the Installment Purchase Contract and the Trust Agreement, the rights and obligations under the Installment Purchase Contract and ·the. Trust Agreement may be subject to bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium and other laws relating to or affecting creditors' rights, to the application of equitable principles, to the exercise of judicial discretion in appropriate cases and to limitations on legal remedies against cities in the State of California. The opinion to be delivered by Special Counsel concurrently with the execution and delivery of the 2008 Certificates will be subject to such limitations and the various other legal opinions to be delivered concurrently with the execution and delivery of the 2008 Certificates will be similarly qualified. See "APPENDIX D- PROPOSED FORM OF SPECIAL COUNSEL OPINION."

If the City fails to comply with its covenants under the Installment Purchase Contract, fails to pay principal of and interest due with respect to. the 2005 Certificates or fails to pay the 2008 Payments, there can be no assurance of the availability of remedies adequate to protect the interest of the holders of the 2008 Certificates.

Seismic Considerations

The services area of the Electric System, like much of California, is subject to seismic activity that could result in interference with its operation of the Electric System. In addition, other active and potentially active seismic faults cross the regional transmission facilities through which the City obtains power.

No assurance can be given that a future seismic event will not materially adversely affect the operation of the Electric System .

. ' . - .

70

Possible Future Federal Deregulation and Tax Legislation_

Many" bills have been introduced in the United States House of Rep~esentatives ~nd the United States Sen-ate to deregulate the_ electric utility industry on the federal ~r state level. Many of the bills provide for open· competition in the furnishing of electriCity. to all retail customers (i.e., retail wheeling). In addition, various bills have been introduced which would impact the issuance of tax-exempt bonds for transmission and generation facilities.

No prediction can be made by the City as to whether any of these bills or any similar federal bills proposed in the future will become law or, if they become law, what their final form <;Jr effect would be.' Such effect could be material to the City. However, the Internal Revenue Service has recently issued new rules that will preserve the tax-exempt status of bonds issued to finance transmission facilities, where control is turned over to ari Independent System Operator ("ISO")or Regional Transmission Organization, subject to certain conditions.

Legal Proceedings

- . A number of legal proceedings are currently pending that relate ·to the deregulation. of the California electric utility industry and other matters affecting the City and the electric utility industry in general. Adverse rulings in certain of these cases may affect the NCPA's and the City's power costs or result in refunds payable by NCPA and the City to the State or other entities. The City is unable to predict the outcome of such litigation, investigations and proceedings.

CONSTITUTIONAL LIMITATIONS ON TAXES AND APPROPRIATIONS

California Constitution Articles XIIIA and XIIIB

Article XIIIA of the California Constitution limits the taxing powers of California public agencies. Article XII lA provides that the maximum ad valorem tax on real property cannot exceed one percent of the "full cash value" of the property, and effectively prohibits the levying of any other ad valorem property tax except for taxes above that level required to pay debt service on voter-approved general obligation bonds. "Full cash value" is defined as "the County Assessor's valuation of real property as shown on the 1975-76 tax bill under 'full cash value' or, thereafter, the appraisal value of real property when purchased, newly constructed, or a change in ownership has occurred after the 1975 assessment." The "full cash value" is subject to annual adjustment to reflect inflation at a rate not to exceed two percent or a reduction in the consumer price index or comparable local data, or declining property value caused by damage, destruction or other factors.

• The foregoing limitation does not apply to ad valorem taxe's or special' assessments to pay· the interest and redemption charges on any indebtedness approved by the voters before July 1, 1978 or any bonded indebtedness for the acquisition or improvement of real property approved by two-thirds of the votes cast by the voters voting on the proposition.

. . ~ . .

Under Article XIIIB of the California Constitution, state and local government entities have an annual "appropriations limit" which limits their ability to spend certain moneys called "appropriations subject to limitation", which consist of tax revenues, certain state subventions and certain other moneys, including user charges to the extent they exceed the costs reasonably borne by the entity in providing the service for which it is levying the charge. The City is of the opinion that the electric service and use charges imposed by the City do not

. ,-71

exceed the costs the City reasonably bears in providing the electric service. 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 an entity's revenues in any year exceed the amount permitted to be spent, the excess would have· to be returned by revising tax rates or fee schedules over the subsequent two years.

Constitutional Changes In California

Proposition 218, a State ballot initiative known as the "Right to Vote on Taxes Act," was approved by the voters of the State of California· on November 5, 1996. Proposition 218 added Articles XIIIC and XIIID to the State Constitution. Article XI liD creates additional requirements for the imposition by most local governments (including the City) of general ta.xes, special taxes, assessments and "property-related" fees and charges. Article XI liD explicitly exempts fees for the provision of electric service from the provisions of such article. Article XIIIC expressly extends the people's initiative power to reduce or repeal previously-authorized local taxes, assessments, and fees and charges. The terms "fees and charges" are not defined in Article XIIIC, although the California Supreme Court held in Bighorn-Desert View Water Agency v. Veriil, 39 Cctl. 4th 205 (2006), that the initiative power described in Article XIIIC may apply to a broader category of fees and charges than the property-related fee and charges governed by Article XIII D. Moreover, in the case of Bock v. Citv Council of Lompoc, 109 Cal. App. 3d 43 (1980), the Court of Appeal determined that an electric rate ordinance was not subject to the same constitutional restrictions that are applied to the use of the initiative process for tax measures so as to render it an improper subject of the initiative process. The City believes that even if the electric rates of the City are subject to the initiative power, under Article XIIIC or otherwise, the electorate of the City would be precluded from reducing electric rates and charges in a manner adversely affecting the payment of the 2008 Certificates by virtue of the "impairments clause" of the United States and California Constitutions.

Future Initiatives

Article XIIIA, Article XI liB, and Articles XIIIC and XI liD, were each adopted pursuant to measures qualified for the ballot pursuant to California's constitutional initiative process. From time to time other initiative measures could be adopted by California voters. The adoption of any such initiatives might place limitations on the ability of the City to increase revenues or to increase appropriations.

THE AUTHORITY

The Authority was established under Sections 6500 et seq. of the California Government Code and a Joint Exercise of Powers Agreement originally entered into as of July 1, 1989 and amended and restated as of July 1, 1997, by and between the City and the Redevelopment Agency of the City of Roseville.

The Authority was established for the purpose of financing the acquisition, construction, improvement and equipping of public capital improvements. The governing board of the Authority is the City Council of the City.

72

TAX MATTERS

In ·the opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, Special Counsel, subject, however to the qualifications set forth below, under existing law, the portion of installment payments designated as and comprising interest and received by the owners of the 2008A Certificates and 20088 Certificates is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, provided, however, that, for the purpose of computing the alternative minimum tax imposed on corporations (as defined for federal income tax purposes), such interest is taken ·into account in determining certain income and earnings.

The opinions set forth in the preceding paragraph are subject to the condition that the City comply with all requirements of the Internal Revenue Code of 1986 (the "Code") that must be satisfied subsequent to the delivery of the Installment Purchase Contract in order that such interest be, or continue to be, excluded from gross 'income for federal income tax purposes. The City has covenanted to comply with each such requirement. Failure to comply with certain of such requirements may cause the inclusion of such interest in gross income for federal income tax purposes to be retroactive to the date of execution and delivery of the 2008A Certificates and 20088 Certificates. · · -

In the further opinion of Special Counsel, interest payable with respect to the 2008A Certificates and 20088 Certificates·is exempt from C.alifo'rnia personal income taxes.

. . . ~· .

Owners ofthe 2008A Certificates and 20088 Certificates should also· be aware that the ownership or disposition 'of, or the accrual or·receipt of interest with respect to, the 2008.A: Certificates and 20088 Certificates may have federal or state tax consequences 'other than as described above. :Special Counsel expresses no opinion regarding ·any federal or state tax consequences arising with respect to the Installment Purchase Contract and the 2008A Certificates and 20088 Certificates other than as expressly described above.

OTHER INFORMATION .''· i'

Certai.n Legal Matters ;: r

The validitY of the lnstallm~nt Purchase Contract and certain· other legal matters are subject to the approving opinion of Jones Hall, A Professional Law Corporation, San Francisco; California, Special Counsel. Certain matters will also be passed upon for the City by Jones Hall as disclosure counsel. Certain legai matters Will be passed· upon for the Bank by Kulak Rock LLP, Atlanta, Georgia,' for the City by the City Attorney, and for the Underwriter· by Orrick, Herrington & Sutcliffe LLP. · · ·

~. -:. . .; . ' ' ,, . ' Professional Fees

' ., ,,. . .. • ..

... ' . Payment of the compens~tio~"of Sp~Cial c6unsel, Disclosure Counsel, the Unde,.;..,;riter arid the Trustee are cbntingenh1poh the execution and delivery of the 2008 Certificates.. .

73

Absence of Litigation

There is no action, suit or proceeding known to be pending or threatened, restraining or enjoining the execution, delivery or sale of the 2008 Certificates or the execution of the Trust Agreement or the Installment Purchase Contract, or in any way contesting or affecting the validity of the foregoing or any proceedings of the City or the Authority taken with respect to any of the foregoing. ·

RATINGS

Moody's Investors Service, Inc. ("Moody's"), Fitch Ratings ("Fitch") and Standard & Poor's Ratings Group ("S&P"), a division of the McGraw Hill Companies, Inc. have assigned the long-term ratings of "Aaa," "AAA" and "AAA", respectively, to the 2008 Certificates. The long­term ratings of the 2008 Certificates are based on the letter of credit support for the Bonds provided by the Bank, the underlying ratings of the City and the low credit correlation between the City and the Bank. Moody's, Fitch and S&P have assigned the short-term ratings of "VMIG1," "F1+" and "A-1+", respectively, to the 2008 Certificates based solely on the Letter of Credit provided by the Bank. Moody's, Fitch and S&P have assigned the underlying municipal bond ratings of "A 1 ," "A+" and "A+", respectively, to the 2008 Certificates without regard to the Letter of Credit.

These ratings reflect only the views of the respective rating agencies, and an explanation of the significance of this rating should be obtained from the respective rating agencies. There is no assurance that these ratings will continue for any given period of time, or that these ratings will not be revised downward or withdrawn entirely by the respective rating agencies if, in their judgment, circumstances so warrant. Any downward revision or withdrawal of the ratings may have an adverse effect on the market price of the 2008 yertific.ates.

UNDERWRITING

Morgan Stanley & Co. Incorporated, as representative of the underwriters of the 2008 Certificates (the "Representative") has agreed, subject to certain conditions, to purchase the 2008A Certificates at a price of $89,735,886.59 (which is equal to the initial principal amount of the 2008A Certificates less underwriter's discount of $264,113.41 ), and the 2008B ·certificates at a price of $64,310,718.71 (which is equal to the initial principal amount of the 2008B Certificates. less underwriter's discount of $189,281.29).

The purchase contracts under which the Representative is purchasing the 2008 Certificates provide's that the Underwriters will purchase all of the 2008 Certificates if any are purchased. The obligation of the Underwriters to make such purchase is subject to certain terms and conditions set forth in the contracts of purchase. ·

The public offering prices of the 2008 Certificates rriay be changed from time to time by the Underwriters. The .Underwriters may offer and sell.2008 Certificates to certain dealers and others at a price lower than the offering price stated on the inside cover page of this Official Statement. · · · · · · ·

74

J

VERIFICATION

Chris D. Berens, CAP, P.C. (the "Verification Agent"), independent public accountants, upon delivery of the 2008 Certificates, will deliver a report on the mathematical accuracy of certain computations contained in schedules provided to them relating to the sufficiency of (i) monies deposited with the Trustee to pay the principal and interest with respect to the 2005B Certificates on May 13, 2008 and (ii) monies deposited with the Trustee to pay the principal and interest with respect to the 2005C Certificates on May 15, 2008.

The report of the Verification Agent will include the statement that the scope of its engagement is limited to verifying the mathematical accuracy of the computations contained in such schedules provided to it, and that it has no obligation to update its report because of events occurring, or data or information coming to its attention, subsequent to the date of its report.

EXECUTION

The City has duly authorized the execution and delivery of this Official Statement.

CITY OF ROSEVILLE

By: /s/ Russell C. Branson Administrative Services Director/Treasurer

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APPENDIX A

THE CITY OF ROSEVILLE

The financial and economic data for the City are presented for information purposes only. The Certificates are not a debt or obligation of the City or the County, but are a limited obligation of the City secured solely by the funds held pursuant to the Trust Agreement.

The City of Roseville is located in Placer County, in California's Sacramento Valley near the foothills of the Sierra Nevada mountain range, about 16 miles northeast of Sacramento and 110 miles east of San Francisco. The City, with a population estimated to be approximately 106,266 at January 1, 2007, is the largest city in Placer County, as well as the residential and industrial center of the County.

The City has warm summers typical of central California, with an average July temperature of 77 degrees. Winter temperatures are moderate; the average January temperature is 46 degrees. The temperature drops below freezing an average of eight days per year. Rainfall averages 20 inches annually and falls mostly during the winter.

There is a wide variety of land uses within the City. Most of the City's residential neighborhoods are located west of Interstate Highway 80; industrial facilities, including Hewlett­Packard, NEC Electronics, Inc. and Surewest Communiciations are concentrated in the north Roseville area.

Additional information about the City is available on the City's website, www.roseville.ca.us. The website address is given for reference and convenience only and the current accuracy of information contained therein cannot be assured; nothing on the website is a part of this Official Statement or incorporated into this Official Statement by reference.

Municipal Government

The City was incorporated on April 10, 1909 and is a charter city. The City operates under the council-manager form of government, with a five-member City Council elected at large for staggered four-year terms. At each election, the council member receiving the most votes is appointed mayor pro-tempore for two years and becomes mayor for the final two years.

City services include, among others, police and fire protection, library services, street maintenance, and parks and recreation. The City also owns two golf courses and provides its own electricity, water, sewer and refuse services to its citizens.

A-1

Population

The following table shows population estimates for the City, the County and the State as of January 1 for the past five calendar years. Estimates for 2008 are not yet available.

,.

Year ., . 2003

·2004 2005

. 2006 2007

PLACER COUNTY Population Estimates

2003 through 2007·

City of Roseville 93,502 98,558

103,185 104,655 106,266

Placer County 283,942

- 297,033 308,431

. 317,498 324,495

Source: California State Department of Finance .

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A-2

State of California 35,691,472 .36,245,016 36,728,196

. 37,195,240 37,662,518

.··C.

,!o<

Effective Buying Income

Effective buying income ("EBI") is designated as personal income less personal tax and non-tax payments, Personal income is the aggregate of wages and salaries, other labor income (such as employer contributions to private pension funds), proprietor's income, rental income (which includes imputed rental income of Owner-occupants of non-farm dwellings), dividends paid by corporations, personal interest income from all sources, and transfer payments (such as pensions and welfare assistance). Deducted from this total are personal taxes (federal, state and local, non-tax payments (such as fines, fees, penalties), and personal contributions for social insurance. Effective buying income is a bulk measure of market potential. It indicates the general ability to buy and is essential in comparing, selecting and grouping markets on that basis. The following table demonstrates the growth in annual estimated EBI for the County, the State of California and the United States.

The following table summarizes the total effective buying income for the County, the State and the United States for the period 2003 through 2007.

Effective Buying Income As of January 1, 2003 through 2007

Total Effective Median Household Buying Income Effective Buying

Year Area (OOO's Omitted) Income

2003 Placer County $6,834,353 $50,504 California 674,721,020 42,924 United States 5,466,80,008 38,201

2004 Placer County $7,318,021 $51,455 California 705,108,410 43,915 United States 5,692,909,567 39,324

2005 Placer County $7,979,745 $52,702 California 720,798,106 44,681 United States 5,894,663, 750 40,529

2006 Placer County $8,516,663,000 $53,746 California 764,120,963 46,275 United States 6,107,092,244 41,255

2007 Placer County $9,314,663 $57,097 California 814,894,437 48,203 United States 6,300,794,040 41,792

Source: Sales & Marketing Management Swvey of Buying Power for 2003 and 2004; C/aritas Demographics for 2005 and after.

A-3

Employment and Industry

The unemployment rate in the Sacramento-Arden Arcade-Roseville MSA (which includes Sacramento, Placer, Yolo and El Dorado Counties) was 6.5% in March 2008. This compares with an unadjusted unemployment rate of 6.4% for California and 5.1% for the nation during the same period. The unemployment rate was 6.6% in El Dorado County, 6.0% in Placer County, 6.4% in Sacramento County, and 7.6% in Yolo County.

The table below provides information about employment by industry type for the Sacramento MSA for calendar years 2003 through 2007.

SACRAMENTO-ARDEN ARCADE-ROSEVILLE MSA El Dorado, Placer, Sacramento, Yolo Counties

Employment by Industry Annual Averages

2003 2004 2005 2006 2007 Civilian Labor Force 1'1 989,800 1,004,200 1,020,000 1,039,800 1,056,400

Employment 933,500 950,100 971,900 991,300 999,600

Unemployment 56,300 54,100 48,100 48,500 56,800 Unemployment Rate 5.7% 5.4% 4.7% 4.7% 5.4%

Wage and Salary Employ'!'ent 121

Agriculture 7,500 7,400 7,400 7,500 8,000 Natural Resources a~d Mining 700. 700 700 700 700 Construction 66,500 70,800 73,400. . 70,700 67,500

Manufacturing 41,500 42,600 43,100 42,800 40,700

Wholesale Trade 26,300 26,500 26,900 28,400 28,100 Retail Trade 94,900 96,700 98,700 100,700 99,900 Transportation, Warehousing and Utilitie~ 21,900 :22,900 23,400 ·24,500 25,400 Information 21,900 20,900 19,900 20,000 20,300 Finance and Insurance 44,800 45,400 47,000 47,700 46,500 Real Estate and Rental and Leasing 14,600 15,100 16,400 . 16,900 16,000 Professional and Business Services 100,600 .103,100 108,600 112,500 111,400 Educational and Health Services 81,000 84,600 88,200 92,100 96,900 Leisure and Hospitality 77,300 79,900 82,100 85,300 86,800 Other Services 28,000 28,500 28,500 28,300 28,800 Federal Government 12,900 12,600 12,800 12,600 12,400 State Government 106,700 102,300 102,500 105,400 110,000 Local Government 106,600 106,800 108,800 110,400 112,700

Total, All Industries 1' 1 853,500 866,400 888,300 906,600 912,000

(1) Labor force data is by place of residence; includes self-employed . individuals, unpaid family workers, household domestic workers, and workers on strike.

(2) ln<lustry employment is by place of work; excludes self-employed individuals, unpaid family workers, household domestic workers, and workers on strike.

(3) Totals may not add due to rounding. Source: State of California Employment Development Department.

A-4

Major Employers

The table below lists the top 10 major employers in the City as of January 1, 2007 _ Data for 2008 is not currently available_

Business Hewlett-Packard Kaiser Permanente Sutter Roseville Medical Center Union Pacific City of Roseville

CITY OF ROSEVILLE Major Employers

2007

No. of Employees 3,600 3,289 1,922 1,500 1,24B

Product/Service Technology Health Care Health Care

Railroad

Roseville Joint Union High School District Roseville Elementary School District NEC Electronics

975 B40 BOO BOO 796

Government Education Education

Technology PRIDE Industries Wai-Mart (2 Stores)

Source: City of Roseville_

Employment Service Retail

The table below lists the largest employers in the County as of January 1, 2008.

Employer Name Adventist Health Alpine Meadows AT&T Auburn Area Answering Svc Club Cruise Inc Coherent Inc Food Stamps Hewlett-Packard Kaiser Permanente Laser Vision_ Nee Electronics Usa Inc Placer County Human Svc Placer County Sheriff Placer County Superintendent Placer County We~are To Work Public Works Resort At Squaw Creek Roseville Telephone Co Sheriffs Training Sierra Community College Dist Stein Mart Sutter Auburn Faith Hospital Sutter Roseville Medical Ctr Tasq Technology Thunder Valley Casino United Natural Foods

PLACER COUNTY Major Employers January 1, 2008

Location Roseville Alpine Meadows Auburn Auburn Auburn Auburn Auburn Roseville Roseville Roseville Auburn Auburn Auburn Auburn Auburn Olympic Valley Roseville Auburn Rocklin Rocklin Auburn Roseville Rocklin Lincoln Rocklin

Industry Health Services Skiing Centers & Resorts Telecommunications Services Paging & Answering Service Travel Agencies & Bureaus Lasers-Medical-Manufacturers County Government-Social/Human Resources Computer Services Laser Vision Correction Semiconductors & Related Devices (Mfrs) County Government-Social/Human Resources Sheriff Schools County Government-Social/Human Resources Grading Contractors Golf Courses-Public Telecommunications Services Sheriff Schools-Universities & Colleges Academic Department Stores Hospitals Hospitals Nonclassifiable Establishments Casinos Health & Diet Foods-Retail

Source: State of California Employment Development Department.

A-5

Construction Activity

The housing downturn continuea to slow the County and City'economies·in 2007. Home building, home sales, and related retail sales all declined in the City and County. The problems with subprime mortgages and the related financial market volatility and credit tightening have worsened the housing sector downturn and raised the risk of further deterioration. The City of Roseville's Building Division issued 952 residential building permits for fiscal year 2006-07 with 942 of those for single-family dwellings. The number of building permits issued shows an increase from last year's total of 812, but still well below the peak of 2,500 permits issued in 2001. The slow housing market is· a major factor affecting the number of building permits issued. The median home price in the City continues a two year downward trend. The average median home price for fiscal year 2006c07 was $415,690, a drop of just under 10%, from the fiscal year 2005-06 median of $466,690. The total valuation of new residential construction permits issued in the City was approximately $217 million in fiscal year 2006-07, representing a decrease of $877. million (80%) from the 2000 total . .valuation. Although !tie yeaHo-year median home prices dropped dramatically as compared to last fiscal year, the median home price did stabilize by the second half of the fiscal year. In fiscal year 2006-07, developers completed 197,215 square. feet of office space. As of June 30, 2007, just over 1.2 million square feet was under construction and another 2 million square feet has been approved, but not yet constructed.

The following table shows a five-year summary of the valuation of building permits issued in the County. Data for 2007 is not currently available.

PLACER COUNTY Building Permit Valuation

(Valuation in· Thousands of Dollars)

2002 2003 2004 2005 2006 Permit Valuation New Single-family $1 '124,222. 7 $1·,037:441.2 $1,128,674.4 $1,160,684.7 $845,610.6 New Multi-family 141,165.7 51,983.3 14,777.9 47,179.2 55,306.1 Res. Alterations/Additions 45 294.0 46 182.9 72 624.7 75 000.4 77,853.3

Total Residential 1,310,682.4 1 '135,607.5 1,216,077.0 1,282,864.2 778,769.9

New Commercial 136,904.0 104,946.5 148,943.1 134,966.4 97,471.3 New Industrial 3,858.0 9,213.6 13,600.2 6,870.8 6,006,6 New Other 5.7.145.6 61,638.8 74,011.4 112,453.9 4?,677.9 Com. Alterations/Additions· • 571457 80,503.9 -· 94 818.0 115465.6 67 486.3

Tot~l NonreSidential $255,053.3 $256,302.9 .. $331,372.8 $369,756.7 $216,642 .. 1

New Dwelling Units

Single Family 5,441 4;670 4,743 4,858 2,557 Multiple Family . 1 747 ·584 __1§.1 436 ., 648

TOTAL 7,188 5,254 4,894 5,294 . 3,205

Source: Construction Industry Research Board,- Building Permit Summary.

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A-6

The following table shows residential and non-residential building permits issued, for calendar years 2002 through 2006. Data for 2007 is not currently available.

CITY OF ROSEVILLE Building Permit Valuation

(Valuation in Thousands of Dollars)

2002 2003 2004 2005 2006 Permit Valuation New Single-family $526,365,7 $384,045.3 $251,956.9 $174,522.4 $161,553.8 New Multi-family 78,999.5 42,747.2 7,863.7 17,304.5 3,755.1 Res. Alterations/Additions 2,849.5 2 374.4 3 781.0 3 043.1 4 331.2

Total Residential 608,014.8 429,166.9 263,601.6 194,870.0 169,640.1

New Commercial 105,953.3 91,323.3 88,982.1 69,756.3 97,471.3 New Industrial 2,922.5 3,883.9 13,600.2 5,975.0 6,006.6 New Other 22,969.7 23,697.7 25,404.3 23,301.6 45,677.9 Com. Alterations/Additions 34,272.8 37,062.9 43 987.8 52,473.8 67 486.3

Total Nonresidential $166,118.3 $155,967.7 $171,974.3 $151,506.7 $216,642.1

New Dwelling Units Single Family 2,300 1,467 1,015 826 752 Multiple Family 914 474 ~ 165 .§

TOTAL 3,214 1,941 1,108 991 800

Source: Construction Industry Research Board, Building Permit Summary.

Commercial Activity

During the first quarter of calendar year 2007, reported total taxable sales in the City were reported to be $915,705,000 a 2.6% decrease over total taxable transactions of $939,703,000 that were reported during the first quarter of calendar year 2006. A summary of taxable transactions in the City is shown below. Annual figures for 2007 are not yet available.

CITY OF ROSEVILLE Taxable Transactions

Calendar Years 2002 through 2006 (Dollars in Thousands)

2002 2003 2004 2005 2006 Apparel stores $118,936 $128,694 $158,633 $167,693 $165,338 General merchandise stores 418,267 467,494 561,058 599,179 610,855 Food stores 75,978 93,286 95,389 101,410 99,355 Eating and drinking places 195,011 214,558 235,917 258,486 272,895 Home furnishing and appliances. 96,700 108,737 136,822 135,036 141,624 Building material and farm implements 217,298 251.148 288,940 293,684 267,374 Auto dealers and auto supplies 1,026,213 1 '125,482 1,201,552 1,281,810 1,286,604 Service stations 89,200 114,336 130,953 152,008 179,957 Other retail stores 376,465 412,610 446,106 495 145 508,039

Retail Stores Totals 2,614,068 2,916,345 3,255,370 3,484,451 3,532,041 All Other Outlets 374 189 372 114 405 061 413 408 492 782

TOTAL ALL OUTLETS $2,988,257 $3,288,459 $3,660,431 $3,897,859 $4,024,823

TOTAL NUMBER OF PERMITS 3,348 3,909 4,307 4,442 4,538

Source: California State Board of Equalization, Taxable Safes in California (Safes & Use Tax).

A-7

Total taxable transactions reported in the County during the first quarter of calendar year 2007 were reported to be to $1-,743,381,000, a 2.2% increase over the total taxable transactions of $1,705,682,000 that were reported during the first quarter of calendar year 2006. A summary of historic taxable sales within the County during the past five years for which data is available is shown in the following table. Annual figures for 2007 are not yet available.

2002 2003 2004 2005 2006

PLACER COUNTY Taxable Transactions

~alendar Years 2002 through 2006 (Dollars inTho~sands)

Retail Stores Total All Outlets

Number Taxable Number Taxable of Permits Transactions of Permits Transactions.

3,861 $4,161,204 9,559 $5,549,881 4,389 4,539,346 10,543 5,973,818 4,841 5,024,153 11,184 6,595,566 5,055 5,539,337 11,488 7,232,568 5,218 5,710,898 11,623 7,531,225

Source: California State Board of Equalization, Taxable Safes in California (Safes & Use Tax).

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APPENDIX B

AUDITED FINANCIAL STATEMENTS

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~ ROSEVILLE CALIFORNIA

CITY OF ROSEVILLE, CALIFOR."'JIA COMPREHENSIVE AI'II"NUAL FINA."'iCIAL REPORT

FOR THE YEAR ENDED JUNE 30, 2007

Prepared by FINANCE DEPARTMENT

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Ol ' N

CITY OF ROSEVILLE, CALIFORNIA Comprehensive Annual Financial Report

For Tbe Year Ended June 30, 2007

INTRODUCTORY SECTION:

Table of Contents ..

Lener of Transmittal .

Organization Chart ..

Elected Officials ..

~ GFOA Certificate ..

I FINANCIAL SECTION:

Independent Auditor's Report on Basic Financial Statements ..

Management's Discussion and Analysis ..

Basic Financial Slotements:

Government-wide Financial Statements:

Statement of Net Assets ..

Statement of Activities ....

FWJd Financial Statements:

Governmental Funds:

Balance Sheet..

Reconciliation of Governmental Funds.!. FUnd Balance with

.............................................. i

. ... v

. ......................................... xii

. ... xiii

. .. xiv

. ............................................. !

... 3

. .... 22

. ........................................... 23

············ 26

Governmental Activities Net Assets ..... : ............... · ... ·: .. '· .......... : .. ··"'';/:: ........ ·: .. · ....... : ...................... 27

Statement of Revenues, Expenditures, and Changes in Fund Balances ........................................... 28

Reconciliation of the Net Change in Fund Balances Total Governmental Funds with the Changes in Net Assets of Governmental Activities ..

General Fund Statement of Revenues, Expenditures, and Changes in fund Balance

. ....... 29

~Budget and Actual: .................................... 30

Redevelopment Agency Fund Statement of Revenues, Expenditures, and Changes in Fund Balance- Budget and Actual: . . ..... 32

o::l ' "'

CITY OF ROSEVILLE, CALIFORNIA Comprebensh·e Annual Financial Report

For The Year Ended June 30, 2007

I FINANCIAL SECTION (Continued):

Major Proprietary Funds:

Statement of Net Assets .. . ....................................................... 34

Statement of Revenues, Expenses and Changes in Fund Net Assets . .................................... 36

Statement of Cash flows ... ....................... 38

Fiduciary Funds:

Statement of Fiduciary Net Assets ... . ..................................... 42

Statement of Changes in Net Assets .. .. .... 43

Notes to Financial Statements .. . ........ 45

I. Summary of Significant Accounting Policies.. .. ......... 45 2. Budgets and Budgetary Accounting.. .. ... 51 3. Cash and Investments.. .. ...................................................... 53 4. Interfund Transactions.... .. ......................................................... 59 5. Notes Receivable.. . ..... 61 6. Deferred Receivables . .. .............. 63 7. Development Agreements and Land Held for Redevelopment.... . ... 63 8. Capital Assets.. .. ................. 65 9. Long Term Debt... .. .... 69 I 0. Debt Without City Commitment.. .. ............................. 77 II. Net Assets and Fund Balances. . .. ............................. 78 12. Pension Plan.. .. ............... 79 13. Risk Management... .. ............................. 81 14·. Prepaid Purchased Electricity.. ... 82 15. Northern California Power Agency (NCPA) ... . ......................... 83 16. South Placer Wastewater Authority (SPWA)' ....................................................................... 87 17. Municipal Solid Waste Landfill Closure and Post closure Care Costs . . ..... 88 18. Commitments and Contingent Liabilities.. .. .. 88 19. Gas Supply Acquisition and Resale... .. ........................................................ 89

CITY OF ROSEVILLE, CALIFORNIA Comprehensive Annual Financial Report

For The Year Ended June 30, 2007

I suPPLEMENTAL INFORMATION SECTION: I Required Supplementary Information:

Modified Approach to Reporting Street Pavement, Costs and Parks and Landscaping Costs . . ......... 91

Supplemental information:

Non-major Governmental Funds:

Combining Balance Sheet ....

Combining Statement of Revenues, Expenditures, and Changes In Fund Balances ..

Combining Statement of Reventies, Expenditures, and Changes In Fund Balances-Budget and Actual ...

Internal Service Funds:

Combining Statement of Net Assets . ·

............. 96

. .............................. 102

............................... 108

... 118

Combining Statement of Revenues, Expenses and Changes in Net Assets ................................ 120

Combining Statement of Cash Flows .. . .............................. 122

Agency Funds:

Statement of Changes in Assets and Liabilities . .. .......... 128

;;,

I sTATISTICAL SECTION;

CITY OF ROSEVILLE, CALIFORNIA Comprehensive Annual Financial Report

For The Year Ended June 30, 2007

Net Assets by Components- Last Five Fiscal Years ..

Changes in Net Assets- Last Five Fiscal Years .

Fund Balances of Governmental Funds- Last Ten Fiscal Years ..

································· 141

·········· 142

. ....................... 144

Changes in Fund Balances of Governmental Funds- Last Ten Fiscal Years ................................... 146

Assessed Value and Estimated Value of Taxable Property- Last Five Fiscal Years .. . .. 148

Property Tax Rates- All Overlapping Governments Last Ten Fiscal Years.. . ............................... 149

Principal Property Tax Payers- Current Year and Nine Years Ago ................ 150

Property Tax Levies and Collections- Last Ten Fiscal Years ............................................. 151

Electric Customers, Rates and Revenues ..

Ratio of Outstanding Debt by Type- Last Ten Fiscal Years ..

Revenue Bond Covernge

. . 152

······························· 153

2000 WastCwater Revenue Bonds- Series A- Last Eight Fiscal Years.. . ............................... 154

2000 Variable Rate Demand Wastewater Revenue Bonds- Series B -Last Eight Fiscal Years ..

2003 Refunding Auction Rate~Synthetic Fixed Wastewater Revenue Bonds- Last Four Fiscal Years ..

2002 Redevelopment Tax Allocation Bonds- Last Five Fiscal Years .

2006A Redevelopment Tax Allocation Bonds ..

2006AT Redevelopment Tax Allocation Bonds ..

2006HT Redevelopment Tax Allocation Bonds ..

Computation of Direct and Overlapping Debt ...... .

Computation of legal Bonded Debt Margin Information ..

. ........ 155

·········· 156

.. 157

. 158

.. 159

········· 160

·············· 161

. ..... 162

Demographic and Economic Statistics- Last Ten Fiscal Years ......................................................... 163

Principal Employers- Current Year and Nine Years Ago ..

Full~ Time Equivalent City Employees by Function­Last Ten Fiscal Years ...

Opemting Indicators by Function/Program- Last Five Fiscal Years ..

Capital Asset Statistics by Function!Progr~- Last Four Fiscal Years .

········· 164

········ 165

........................................... 166

··························· .............. 167

Finance 311 Vernon Street Roseville, California 95678-2649

December 21, 2007

Honorable Mayor, Members of the City Council and City Manager:

This docume"nt, the Comprehensive Annual Financial Report (CAFR) of the City of Roseville, is for the fiscal year ended June 30, 2007. The report was prepared by the Finance Department in conjunction with the City's independent auditors. Responsibility for both the accuracy of the presented data and the completeness and fairness of the presentation, including all disclosures, rests with the City. The data, as presented, is accurate in all material aspects; and is presented in a manner designed to fairly set forth the financial position and results of operations of the City as measured by the financial activity of its various funds. All disclosures necessary to enable the reader to gain the maximum understanding of the City's financial affairs have been included. The organization of the financial report follows the guidelines set forth by the Government Finance Officers' Association (GFOA) of the United States and Canada.

The report is divided into three sections:

I.

II.

Introductory section, including this letter of transmittal, list of City elected officials, and City's orgaiJ.i7.ational chart.

Financial section, including the auditors' report by Maze & Associates, the City's independent certified public accountants, management's discussion and analysis, the basic financial statements, notes to the financial statements, required supplemental information and the combining financial statements for non~major funds .

III. Statistical section, including a number of tables and graphs of unaudited data depicting I 0 years of financial history about the City and information on its overlaPPing

' govemmen_tal debt.

A separate single audit report has been prepared in conformity with the provisions of the Fedeml Single Audit Act amendments of 1996 and U.S. Office of Management and Budget Circular A~133, "Audits of State and Local Gm:emments."

Finally, it is highly recommended that all readers of this report review the narrative introduction, overview, and' analysis found in management's discussion and analysis (MD&A) in this CAFR's financial section.

THE REPORTING ENTITY AND ITS SERVICES

This report reflects the entity concept prescribed by generally accepted accounting principles (GAAP). It combines the financial statements of the Redevelopment Agency of the City of Roseville (the "Agency"), the Roseville Finance Authority (the "Authority"), and the City of Roseville Housing Authority (the "Housing Authority") with those of the City to constitute a single reporting entity. In accordance with the criteria of the Government Accounting Standards Board (GASB)·Statement 14, the basic financial

916.774.5319 Fax 916.774.5514 TDD 916.774.5220 www .rosevllle.ca.us

statements include the financial activity of the City, the Agency, the Authority, and the Housing Authority. The Agency, the Authority, and the Housing Authority an~ separate legal entities from the City, are controlled by the City, and have the same governing board. The Agency issues it own component unit financial statements. Separate financial statements for the Authority and the Housing Authority are not _issued.

RoseVille is a charter law city of the State of California. The City was incorporated in 1909 and operates under a Council-Manager form of government. The City's political and legislative body is the City Council and is empowered by the City's charter to formulate citywide policy, including a fiscal program, City services, and appointment of the City Manager and City Attorney. There are five City Council members who are elected at-large for staggered four-year terms, and the Mayor is determined by which member received the highest nuffiber of votes in the previous election.

Roseville is a full-service City providing a full range of municipal utilities and services. These include: police; fire; community development; parks and recreation; public libraries; planning; building and public facility inspection; engineering; streets; electric, water, wastewater and solid waste utilities; redevelopment; housing and general administrative services.

Residents of the City desiring to assist the City Council in fanning government policy may do so by serving on a City commission, Committee, or Board. The commissions, committees, and boards act in an advisol)' capacity to the City Cmmcil. They are: Planning Commission; Parks and Recreation Commission, Cultural Arts Commission, Public Utilities Commission, Roseville Grams Advisol)' Commission, Senior Citizen Commission, Transportation Commission, Campaign Finance Reform Committee, Design Committee, Board of Appeals/Hearing Examiners, Library Board, Growth Management Visioning Committee, Central Roseville Revitalization Committee, and the Personnel

t;1j Board.

' Uo ECONOMIC CONDITION OUTLOOK AND ACTIViTY

The City of Roseville economic growth has been mixed this past year. While the housing slowdown continued to impact development-related departments in terms of permit and impact fee revenues, development in the commercial sector remained strong. Roseville's overall general fund revenues were at budgeted levels in total; however, there was a slowdoY.'Il in sales tax revenues that may impact the City in the coming years. This slowdown was driven primarily by weaknesses in new car and retail hardware sales (see discussion below). Property-tax growth remained strong in FY 2007, bolstering the City's overall budget.

Even with the difficulty in the housing market and sales tax revenue, the City continues to provide a high quality of service. Efforts to diversify revenues sOurces are starting to have an impact and should strengthen the City's economic position in coming years. While the City's general fund primarily relies on sales taxes, property-related taxes, and user charges for a majority of its revenue, the hotel sector has grown and should provide revenue growth in the next several years. Additionally, the City has instituted a Mello-Roos Community Facilities District (CFD) special tax: in new specific plans and for lands that have been rezoned from non-residential to residential land uses. These revenues are growing, and will be a major n;venue source as the newer areas of the City develop.

Job growth remains a vital part of the City's economy. The City's well-diversified employer base helps ke.ep the local economy strong. Employment growth increased by over I ,000 in 2007, to a total employment base of 78,900. The City remains strong in medical, manufacturing, regional office, and retail sectors.

The City-m.vned utilities continued to perform well throughout the year. The electric department neared completion of a gas-fired electric plant This will serve to diversify resources needs and strengthen the reliability for deli vel)' of electricity. In conjunction with this, the City pre-paid for 20 years of natural gas for the plant. This will provide index-priced gas at a fixed discount to the City and help control the plant's operating costs. The water utility is also nearing completion of an expansion of its w~ter treatment plant to 100 million gallons per day (MGPD). ' '

The long-term outlook for the City's economy is good. The housing market, while slow, continues to produce new housing, the non-residential sector remains strong, and the existing businesses continue to perform well overall.

The economic issues that are likely to affect City services include the length of time to recover sales ta~ growth and the impact of increased regional competition in the sales tax arena. Expansion of the region3.! mall and development of the Fountains shopping center sh.ould help to stabilize this sector.

Property taxes should continue to grow; however, at a lower pace 'than experienced in the last ten ye~. This is likely to require adjustments in the City's expenditures to match lowered growth in revenues. The City is responding to this challenge, and is unlikely to experience unplanned cutbacks in service.

Too Sales Tax Generators hv Economic Segment

The chart below provides an ovetview of the City's sales tax revenue by economic segment. There were sectors that experienced increases as well as sectors that experienced decreases in fisca1 year 2007. An important note is that while automobile sales represent a significant portion of the City's tax base, this segment is less dominant in total sales as the City continues to divei-sify its sales tax base. Additionally, used auto sales have becorrie a larger part of total auto sales. Combined, new and used auto sales comprise 29.1 percent of total sales tax revenues.

City Sales Tax Revenues AH" 1.,,. Top Economic S•gments

SD.Irce· MBIA Munist:vicesCanpany, FY 2006

Mt,;or Activity in the Cily

Many of the major activities initiated and completed in fiscal year 2007 are consistent with the City cOWtcil's direction to focus on projects and funding that provide economic stability within the coffim.unity and enhance the City's long-term financial condition while maintaining high levels of service tO the older parts of the community. Projects were initiated, or neared completion, in: .

Public works--completio'n of a major intercjurnge to ease traffic and an increase in overall r'oad system maintenance Wate~-upgrade of the water treatment plant reservoir and replacement of a major storage tank Wastewater---ongOing improvement of treatment plant operations Electric--construction of the electric generation power plant Downtov.rn Revitalization--construction of a multi-story parking garage

Private development has continued at a growing pace in commercial development-up over 25 percent­and industrial development-slightly increased, but at a much slower pace in business professional development. This is due in part to the large amount of growth in the business professional area in 2006; absorption of that additional space is required before a significant amount of new space is added. On the residential side, single-family development permits are up over. 2006. This reflects that commitment to the area by developers, and the continuing attractiveness of the area to home buyers. On the multi-family side, only 10 permits were pulled, reflecting a slowdown based on the current economy and reflective of the great number of multi-family units over the last several years. -The table below provides a summary of the City's major development activity in the 2007 fiscal year.

Development Type Number of Permits !'liew Square Feet Occupied Sin le-Famil Residential 942 Multi-Famil Develo ment 10 Industrial Development 340 523 Commercial Development 452 785 Business ProfessiOnal 197 215

Prop~sed major annexations to the City continue to be processed for specific plans on the boundaries of the West Roseville Specific Plan, the City's newest annexation area. In addition, the City has processed a number of requeSts to rezone industrial, comffiercial, and business professional uses to residential land use.

ACCOUNTING SYSTEM AND BUDGETARY CONTROL

In developing and evaluating the City's accounting system, consideration is given to the adequacy of internal accounting controls. Internal accounting controls are designed to provide reasonable, but not absolute, assurances regarding: (I) the safeguarding of assets against loss from unauthorized use or disposition; and (2) the reliability of financial records for preparing financial statements and maintaining accountability for assets. The concept of reasonable assurance recognizes that: (I) the cost of a control should not exceed the benefits likely to be derived; and (2) the evaluation of costs and benefits requires estimates and judgments by management

All internal control evaluations occur within the above framework. The Finance Depanment staff remains committed to improving the City's accounting system; to maintain the City's internal accounting controls to adequately safeguard assets; and to provide reasonable assurances of proper recording of financial transactions. Budgetary control is directed by the City Council by ordinance when the budget is adopted each year. ExPenditures may not legally exceed appropriations at the department level by major sununary category. The City utilizes the encumbrance system as a manageinent control technique to

viii

assist in controlling expenditures. Periodic reports of revenue, expense, and investment activity are prepared and distributed to the City Council and City departments to monitor spending in relation to the budget. At fiscal year-end, open encumbrances are reported as reservations of the fund balance. The City's accounting records are organized and operated on a "fund" basis, which is the basic fiscal and accounting entity in governmental accounting. Each fund is classified by category and fund type:

Governmental Funds:

Proprietary Funds:

Fiduciary Funds:

Category Fund Type

General Fund, Special Revenue Funds, Debt Service Fund, Capital Projects Funds, and Perm~ent Funds

Enterprise Funds and lntemai_Service Funds

Agency Funds and Endowment Private-PUrpose Trust Fund

Governmental Funds: The basic financial statements necessary to fairly present the financial position and operating results from major iovernmental funds are: the balance sheet, and' the statement of revenues, expenditures and changes in fund balance. These funds are maintained using the modified accrual basis of accounting, which is in ore thoroughly explained in the Notes t~ ~he Financial Statements.

Proprietarv Funds: Generally accepted accounting principles· applicable to private commercial business are applicable to proprietary funds of a government agency. The bisic financial statements required to present the financial position and operating results from major proprietary funds are the statement of net assets; statement of revenues, expenses, and changes in net assets; and the statement of cash flows. The full-accrual basis of accounting is utilized as explained in the Notes to the Financial Statements.

Fiduciarv Funds: Fiduciary funds are used to account for assets held by a government agency acting as a trustee or agent for individuals, assessment districts,. organizations, other governmental units, or other funds of the same entity. The modified accrual basis of accounting is used as explained in the Notes to the Financial Statements. · ·

CASH MANAGEMENT

The City has a fomial investment policy, which is subject to annual review and approval by the City Council. Permitted investments, restrictions on the maturity and percentage of the investments and categorization of credit risk are discussed in the Notes to the Biisic Financial Statements. The City's portfolio is invested mainly in Federal Agency Issues and U.S. TreasUi-y CouPoti.s. The aver.i.ge annual yield was 4.77% on the City's month-end average investment bala'nces. This compared with i return of 3.89% in the prior year. As of June 30, 2007, the yield to market of outstanding investments was 4.95%. This increase was the result of an overall rising interest rate environment. Investment income includes changes in the fair value of investments. Decreases in fair market Value during the current year do not necessarily represent trends that will continue. The City's policY is to hold investments to maturity, and to limit sales of securities to those that show gains in market value.

LO~G-TERM FINANCIAL PLANNING

The City of Roseville has consistently planned its budgets with an eye to the long-term needs of the City. This is accomplished through the establishment of several funds that serve to direct.City revenues to long­term financial needs. This ensures that fundin'g is available for needs as they arise .. These funds inclUde:

·'·

Operating Reserves: The City maintains an operating reserve in its General Fund of 10 percent of operating expenses. Additionally, the City anempts to maintain a similar operating reserve in all of the City-ovmed utilities. This guards against impacts from sudden changes in revenues.

Rate Stabilization Funds: The Electric Department maintains a rate stabilization fund targeted at a minimum of 60 percent of operating expenses. This allows the City time to react with major changes to the cost of electricity without having to impose an emergency rate increase. Rate stabilization funds are also used in the Environmental Utilities to help ease the impacts of rate increases over a period of years.

CIP Rehabilitation Fund: The City has set aside approximately Sll million in a CIP Rehabilitation Fund for the purpose of maintaining the City's investments in buildings and park facilities. These funds are used to provide necessary maintenance and improvements to City-owned facilities. The Council's goal is to increase this balance of this fund to at least $25 million, with the long-term purpose of creating an endowment that will not require annual budget contributions.

AutGmotive Replacement Fund: The City funds the CQSt of replacement \rehlcles O\rer the useful life d the vehicle. This ensures that monies are available to keep the City's vehicle fleet properly and safely operating.

Strategic lmpronment Fund: The City developed a fund several years ago that provides Council with funds that can be used for periodic, strategic invesnnents on behalf of the City. This fund has been used to acquire land and has been targeted to fund a portion of a conference center in the City.

Post-Retirement Insurance/Accrual Fund: This fund was set up in 2002 to begin setting aside monies to address the City's long-term liability for post-retirement health benefits. In addition to one time money

1:0 that was transferred into this fund, the City has transferred 3 percent of the total cost of salaries for the

1 last several years. _, INDEPENDENT AUDIT

Each year the City requires an independent annual audit of the City's financial records, the results of its operations, and cash flows. This report includes the opinion of the City's independent auditors, Maze & Associates, for the basic financial statements of the City. In addition, a separately issued document contains the auditors' reports on the internal control strucrure and compliance with applicable laws and regulations related specifically to the single audit.

The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reponing to the City of Roseville for its comprehensive annual financial report for the fiscal year ended June 30, 2006. In order to be awarded a Certificate of Achievement, a government unit must publish an easily readable and efficiently organized comprehensive annual financial report. This report must satisfy both generally accepted accounting principles and applicable legal requirements.

A Certificate of Achievement is valid for a period of one year only. We believe that our current comprehensive annual financial report continues to meet the Certiftcate of Achievement Program's requirements and we are submitting it to the GFOA to determine its eligibility for another,certificate.

ACKNOWLEDGMENTS

I extend my appreciation to the entire staff in the Finance Department and other departments who assisted in the process of compiling the information for this report. In addition, I extend a special "thank you" to the City's Accounting Division staff and our external auditors who contributed long hours to make this document possible. Their efforts and continued dedication are greatly appreciated. I sincerely thank the Mayor, members of the City Council and City Manager, for their support, interest, and integrity in directing the financial affairs of the City in a responsible, professional, and progressive manner.

Respectfully submitted,

Russ Branson Administrative Services Director/City Treasurer

Offic:e of Economl~ Development

leglslllllve

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B-8

Pubic lnlonnatlon

Media/Cable TV

'

CITY OF ROSEVILLE

ELECTED OFFICIALS

JUNE 30, 2007

Mayor Mayor Pro-tem

Council ~ember Council Member Council MemOer ...

xiii

Jim Gray Gina Garbolino

John Allard Cftrol Garcia

Richard R_occucci

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1A CCnifica"te of Ai:hieVeme'nt i~ Ekilence"ill~finaiiCiai',' -t. Rcpoiting is Presented by· the GOvernment FiciiiCi Offu:'tiS

,,ASsOciation of the Uniti:dState! and Canada tO, ~ ·.govciiu:ncnt ~unitS and PUblic aq,\0~· ~in•·,

. . sfit~.Wbo'se e<~lnprehensiVC arlnu8t fmanCia_l · • • · !ieports (CA'FRs} achieve the rughe'St· ·

~tandanfs ·in govennrient n_ccoimiing · "and fma~ialicp~~~- --"'

-President•

MA.zf,& . .... - ... .ASSOCIATES

Honorable Mayor and City Council City of Roseville, California

ACCOUNTANCY CORPORATION 3478 Buskirk Ave.- Suite 215 Pleasant Hill, California 94523

(925) 930-0902 ·FAX (925) 93Q-0135 maz&@mazesssocfates.com

www.miJZtNI880Ciall!s.com INDEPENDENT AUDfTOR'S REPORT ON BASIC FINANCIAL STATEMENTS

We have audited the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Roseville, California (City) as of and for the year ended June 30, 2007, which collectively comprise the City's basic financial statements as listed in the Table of Contents. These financial statements are the responsibility of the City's management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards in the United States of America and the standards for financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perfonn the audit to obtain reasonable assurance about whether the fmancial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting

b:' principles used and significant estimates made by management, as well as evaluating the overall financial statement • presentation. We believe that our audit provides a reasonable basis for our opinion. -0 In our opinion, the basic financial statements referred to above present fairly in all material respects, the respective

financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund infonnation of the City of Roseville, California as of June 30, 2007 and the respective changes in the financial position and cash flows, where applicable, thereof and the respective budgetary comparisons listed as part of the basic financial statements for the year then ended, in confonnity with generally accepted accounting principles in the United States of America.

In accordance with Government Auditing Standard~. we have also issued our report dated November 9, 2007 on our consideration of the City's internal control structure and on its compliance with laws and regulations.

Management's Discussion and Analysis is not a required part of the basic financial statements but is supplementary infonnation required by the Governmental Accounting Standards Board. We have applied certain limited procedures, which consisted principally of inquiries of ·_management regarding the methods of measurement and presentation of the required supplementary infonnation." HOweve:r, ~e did not audit the information and express no opinion on it.

Our audit was conducted for the purpose of fanning opinions on the financial statements that collectively comprise the basic financial statements. The Supplemental Information listed in the Table of Contents is presented for purposes of additional analysis and is not a required part of the basic financial statements. This infonnation has been subjected to the auditing procedures applied in the audit of the basic financial statements, and in our opinion, is fairly stated in all material respects in relation to the basic finattcial statements taken as a whole.

The Introductory Section and Statistical Section have not been subjected to the auditing procedure applied in the audit of the basic financial statements attd, accordingly, "we expfess no opinion on them.

·~_y;f¥~ November 9, 2007

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,,

MANAGEMENT'S DISCUSSION AND ANALYSIS

The following discussion provides readers of the City of Roseville's financial statements a narrative overview and analysis of the fmancial activities of the City of Roseville for the fiscal year ended June 30, 2007. Please read this document in conjunction with the accompanying T ransminal Letter and Basic Financial Statements.

Even with the slowdown of the housing market, the City has sustained grov.1h in tax revenues. Charges for services and commercial development continues to remain strong. The City's financial highlights are presented below:

FISCAL YEAR 2007 FINANCIAL HIGHLIGHTS

Financial highlights of fiscal year 2007 include the following:

Entitv-widc: . The City's total net assets were $2.3 billion as of June 30,2007. Of this total, $1.0 billion were

Governmental assets and Sl.3 billion were Business-type assets. Governmental revenues include program revenues of $134.0 million and general revenues and transfers of$133.4 million for a total of$267.4 million. Governmental expenses were $163.6 million. Business-type program revenues, interest revenue and miscellaneous revenues were $329.1 million while Business-type expenses and transfers were $234.2 million.

Fund Level: t:p Governmental Fund balances increased to $248.3 million in fiscal year 2007, up $30.1 million ,__. from the prior year.

Governmental Fund revenues increased to $251.0 million in 2007, up $11.3 million from the prior year. This was primarily due to increases of tax revenues of$10.7 million, $9.0 million in charges for services, $9.2 million in use of money and propeny, $2.4 million in subventions and grants, alld $1.4 million 'in miscellaneous revenues: while there was a decrease of $21.2 million in contributions of bond proceeds for Community Facility Districts and other developer contributions as there were fewer districts formed in 2007. Governmental Fund expenditures increased to $266.7 million in fiscal year 2007, up $37.1 million from the prior year. This increase was primarily due to increases of capital outlay of S 18.1 million, public safety of $7.2 million, $2.9 in debt service, $l.6 million in public works, S 1.1 million in community development and planning. $1.9 million in parks and recreation, and $4.8 million in general government. Other Financing Sources provided a net of $45.8 million in fiscal year 2007, up $22.4 million from 2006 due to Redevelopment bonds issued.

General Fund: General Fund revenues of $113.2 million were $12.4 million higher than the prior year, with the largest increases in taxes and use of money and property. General FlUld expendintres of $125.6 million represented an increase of $15.7 million over the prior year. The largest increases were in general government, public safety, and parks and recreation. Other Financing Sources showed $13.8 million, a decrease of$2.3 million from 2006, which had included sale ofpropeny of$3.4 million. The General Fund balance of $65.8 million as of June 30, 2007 is up from fiscal year 2006's fund balance of$64.3 million.

OVERVIEW OF THE COMPREHENSIVE ANNUAL FINANCIAL REPORT

This Comprehensive Annual Financial Report is divided into six parts:

1) Introductory section, which includes the Transmittal Letter and general information, 2) Management's Discussion and Analysis (this section), 3) The Basic Financial Statements, which include the Government-wide and the Fund financial

statements, along with the Notes to these financial statements, 4) Required Supplemental Information, 5) Combining statements for Non-major Governmental Funds and Fiduciary Funds, 6) Statistical information

The Basic Financial Statements

The Basic Financial Statements comprise the Entity-wide Financial Statements and the Fund Financial Statements; these two sets of fmancial statements provide two different views of the City's financial activities and financial position.

The Entity-wide Financial Statements provide an overview of the City's activities, and are comprised of the Statement of Net Assets and the Statement of Activities. The Statement of Net Assets provides information about the financial position of the City as a whole, including all of its capital assets and long­term liabilities on the full-accrual basis, similar to that used by corporations. The Statement of Activities provides information about all of the City's revenues and all of its expenses, also on the full-accrual basis, with the emphasis on measuring net revenues or expenses of each the City's major functions. The Statement of Activities explains in detail the change in Net Assets for the year.

All of the City's activities are grouped into either Government Activities or Business-type Activities, as explained below. The amounts in the Statement of Net Assets and the Statement of Activities are separated into Governmental Activities and Business-type Activities in order to provide a summary of these two activities for the City.

The Fund Financial Statements report the City's operations in more detail than the entity-wide statements and focus primarily on the shon-term activities of the City's General Fund and other Major Funds. The Fund Financial Statements measw-e only current revenues and expenditw-es and fund balances; they exclude capital assets, long-term debt and other long-term amoWlts.

Major Funds account for the major financial activities of the City and are presented individually, while the activities of Non-major Funds are presented in summary, with subordinate schedules presenting the detail for each of these other funds. Major Funds are explained below.

The Fiduciary Statements provide financial information about the activities of the Community Facilities Districts and cenain other entities, for which the City acts solely as agent. The Fiduciary Statements provide information abont the cash balances and activities of these Districts and other entities. These statements are separate, and their balances are excluded, from the City's basic financial statements.

The Entity-wide Financial Statements

Entity-wide financial statements, prepared on the accrual basis, measure the flow of all economic resources of the City.

The Statement of Net Assets and the Statement of Activities present information about the following:

Governmental Activities-All of the City's basic services are considered to be governmental activities. These services are supported by general City revenues such as taxes, and by specific program revenues such as user fees and charges.

The City's governmental activities also include the activities of three separate legal entities, the Redevelopment Agency of the City of Roseville, the Roseville Finance Authority, and the City of Roseville Housing Authority. The City is financially accountable for these entities.

Business-type Activities-The City's enterprise activities of electric, water, wastewater, solid waste, natural gas, golf course, local transportation, and school-age child care are reported in this area. Unlike governmental activities, these services are supported by charges paid by users based on the amount of the service they use.

Fund Financial Statements

The Fund ·Financial Statements provide detailed information about each of the City's most significant funds, called Major Funds. The concept of Major Funds, and the determination of which are Major Funds, was established by GASB Statement 34 and replaces the concept of combining like funds and presenting them in total. Instead, each Major Fund is presented individually, with all Non-major Funds summarized and presented only in 9. single colwnn. Subordinate schedules present the detail of these Non-major Funds. Major Funds present the major activities of the City for the year, and may change from year ~o year as a result of changes in the pattern of City's activities.

In the City's case, the Redevelopment Agency of the City of Roseville Fund and the Community I;Jj Facilities District Projects Fund are the only Major Governmental Funds in addition to the General Fund.

' -N All eight of the City's Enterprise Funds are reported as Major Funds.

Fund Financial Statements include governmental and proprietary funds as discussed below.

Governmental Fund Financial Statements are prepared on the modified accrual basis. This means they measure only cwrent fmancial resources and uses. Capital assets and other long-lived assets, along with long-term liabilities, are not presented in the Governmental Fund Financial Statements.

Enterprise and Internal Service Fund Financial Statements are prepared on the full-accrual basis, and include all of their assets and liabilities, current and long-term.

Since the City's Internal Service Funds provide goods and services only to the City's governmental and business-type activities, their activities are reponed only in total at the Fund level. Internal Service Funds may not be Major Funds because their revenues are derived from other City Funds. These revenues are eliminated in the Entity-wide Financial Statements and any related profits or losses are returned to the activities which created them, along with any residual net assets of the Internal Service Funds.

Comparisons of Budget and Actual financial information are presented only for the General Fund and the Redevelopment Agency of the City of Roseville Fund, as required by GASB 34.

Fiduciary Statements

The City's fiduciary activities are reported in the separate Statements of Fiduciary Net Assets and the Agency Funds' Statement of Changes in Assets and Liabilities. These activities are excluded from the City's other financial statements. because the City cannot use these assets to finance its own operations.

FINANCIAL ACTIVITIES OF THE CITY AS A WHOLE

This analysis focuses on the net assets and changes in net assets of the City as a whole. Tables I, 2, and 3 focus on the City's Governmental Statement of Net Assets and Statement of Activities, while Tables 4, 5, and 6 focus on the City's Business-type Statement of Net Assets and Statement of Activities.

Governmentol Activities

Table I Governmental Net Assets at June 30

(In MUilons)

1007 Cash and Investments $329.2 Other Assets 41.6

MlJlO $298.5

36.7 688.4 Capital Assets ---~7c7:;5c.I,_ ___ _,,.,"--

Total Assets

Long-Term Debt Outstanding Other Liabilities

Total Liabilities

Net Assets: Invested in Capital Assets, Net of Debt Restricted Unrestricted

Total Net Assets

I 145.9

55.3 63.5

118.8

742.8 177.2 107.1

$1 027.1

I 023.6

33.3 67.0

100.3

664.1 149.8

109.4

$923.3

·'·

The City's governmental net assets amounted to $1.0 billion as of June 30, 2007, an increase of$103.8 million over 2006. This increase is the Change in Net Assets reflected in the Governmental Activities column of the Statement of Activities shown in Table 2. The City's net assets as of June 30, 2007 comprised the following:

Cash and investments comprised $263.0 million in the city treasul)' and $66.3 million of resnicted cash and investments. Substantially all of these amounts were held in short term investments in government securities, as detailed in Note 3 to the financial statements.

Receivables comprised $16.1 million of which are current, along with deferred receivables of $2.5 million and notes receivable of $12.5 million that are due over longer periods of time, as explained in Notes 5 and 6 to the financial statements.

• Capital assets of $775.1 million, net of depreciation charges, includes all of the City's infrastructure as well as other capital assets used in governmental activities, as discussed in Note 8. .

Current liabilities-including accounts payable, claims, and other amounts due currently-totaled $48.1 million.

Accrued compensated absence liabilities payable to employees of $9.0 million, as explained in Note JG to the financial statements.

Long-tenn debt of$55.3 million, of which $53.7 million is due in future years and $1.6 million is due currently, as detailed in Note 9.

Net assets invested in capital assets net of related debt of$742.8 million, representing the City's investment in infrastructure and other capital assets used in Governmental Activities, net of amounts borrowed to finance that investment.

Restricted net assets totaling $177.2 million, only may be used to construct specified capital projects, for debt service, or for community development projects. The restrictions on these funds cannot be changed by the City.

tD

Umestricted net assets is that part of net assets that can be used to finance day-to-day operations without constraints established by debt covenants or other legal requirements or restrictioris. The City had $107.1 million of unrestricted net assets as of June 30,2007. "While these assets are technically unrestricted, most of these assets are designated for a specific use.

'

Misoellalltou< &rid

UstofMoney 111d .... ~, "

Tu .. md

H%

Tram fen ll%

Fiscal Year 2007 Government Activities

Sourctl of R.>vtoue

CbOfFS for Servic ..

'"

Grlllls and Coroributioa< 4!%

Functional E:l:prnsn

b!ereot on t.lng TetmDebt

3% lhngAsoistai!Ce P)!llt.

'" PaJb ond

'"

~S%

Geaeral

As .the Sources of Revenue Chart above shows, $91.0 mi\lion, or 34% of the City's fiscal year 2007 governmental activities revenue, came from taxes and unrestricted intergovernmental revenues (motor vehicle-in-lieu), while $109.0 million or 41% came from grants and contributions, $25.0 million, or 9%, came from charges for. services, and the remainder c~e from a v~riety of sources, as shown above.

The Functional Expenses Chart above includes only current year expenses; it does not include capital outlays, which are added to the City's capital assets. As the Chart shows, general government is $30.9 million, or 19% of total government expenses, corrununity development and planning is $13.2 million, or 8%, public works is $42.1 million, or 25%, police is $27.4 million, or 17%, fire is $20.6 million, or 13%, parks and recreation is $17.6 million, or 11%, and other governmental programs and functions are the remaining 7%.

The Statement of Activities presents program revenues and expenses and general revenues in detail. All of these are elements in the Changes in Governmental Net Assets summarized below.

Table2 Cbanges in Governmental Net Anets

June JO (in Millions)

Governmental Activities

= 2006

Expenses General Government $30.9 $25.4 Community Development and Planning 13.2 11.9 Public Works 42.1 33.5 Police 27.4 24.5 Fire 20.6 16.4 Library 3.6 3.2 Parks and Recreation 17.6 16.1 Housing Assistance Payments 3.3 3.0 Interest on Umg-Term Debt 4.9 1.9

Total Expeoses 163.6 135.9

Revenues Program Revenues:

Charges for Services 25.0 26.3 Operating Grants and Contributions 7.2 7.7 Capital Grants and Contributions 101.8 113.5

Total Program Revenues 134.0 147.5 General Revenues:

Taxes/Intergovernmental 91.0 82.2 Use of Money and Property 14.2 8.1 Miscellaneous 3.0 1.7 Gain on Sale of Property 0 2.7

Total General Revenues 108.2 94.7

Total Revenues 242.2 242.2 Cbanges In Net Assets before Transfers 18.6 106.3

Transfers 25.2 23.6

Change In Net Assets $103.8 $129.9

As the Sources of Revenue Chan and Table 2 above show, $134.0 million, or 55.3% of the City's fiscal year 2007 governmental revenue, came from program revenues and $108.2 million, or 44.7%, came from general revenues such as taxes and interest.

Program revenues were composed of charges for services of $25.0 million that include permit revenues, fees, and charges used to fund expenses incurred in providing services; $7.2 million of operating grants and contributions which include gas tax revenues, hol.lsing, and police grants; and capital grants and contributions of $101.8 million that consist mainly of street project grantS, developer impact fees restricted to capital outlay' and .contributions fr<;~m community facilities districts to be used to build infrastrucrure in those" districts. · · · · · · · . ; .. General Revenues-Taxes/lntergovemmentftl showed an increase of $8.8 million. The 'majority of this increase was due to property and sales taxes. General revenues are not allocable to programs and are used to pay the net cost of governmental programs.

Table 3 presents the net (expense) or revenue of each of the City's governmental lictivi~ies, including interest on long-term debt. Net expense is defined as total program cost less the rCvenues generated by those specific activities.

T~ble 3 .•, : Governmental Aetlvittes

June 30 ' (inMIUioi:Js)

General Government Community Development and Planning Public Works Police Fire Library Parks and Recreation Community Facilities Districts HOusing Assistance Payments Interest on L_ongTerm Debt

Totals ...

,,

,,

...

Net I"Exoonse)/Revenues from Services lQQ1 WQ2

($23.4) (Sl9.9) (7.9) (6.1)

(16.6) (14.7) (23.1) (21.3) (15.8) (13.6) (3.1) {2.9) (8.2) (4.6) 73.0 96.3

0.4 (4.9)·

$(29.6)

'.1

0.4 (1.9)

$11.7

Business-type Activities

The Statement of Net Assets and Statement of Activities present a summary of the City's Business-type Activities that are composed of the City's enterprise funds. ,.

Table 4 Bu~lness-Type Net Anets ~~June 30

(in Millions)

2QQl = Cash and Investments 5185.4 $308.5 Other AsSets 381.6 158.2 Capital Assets 1,333.4 1,156.4

Total Assets 1900.4 I 623.1

Long-Term Debt Outstanding 610.5 390.8 Other Liabilities 48.0 85.3

Total Uablllties 658.5 476.1

Net Assets: lnvC'Sted in Capital Assets,

Net of Debt 938.9 838.4 Restricted 34.6 28.2 Unrestricted 268.4 280.4

Total Net _Assets $1 241.9 $1 147,0

The net assets of business-type activities increased to $1.242 billion in fiscal year 2007, an increase of $94.9 million. Cash and investments decreased $123.1 million, due to increased expenditures for capital projects; and correspondingly, capital assets have increased $177.0 million. Other assets increased by $223.4 million due to most part from entering into a prepaid gas contract. Correspondingly, long-term liabilities increased by $219.7 million, as bonds were sold for the prepaid gas. Other liabilities decreased $37.3 million, which includes decreases of $35.0 million for deposits, $4.4 million in unearned revenue, and $5.5 million in aCcounts payable; while increases to accrued liabilities of $4.1 million, due to other government agencies o($2.0 million, and current portion of compensated absences of $1.4 million offset the decreases .

"

o:l ' v.

Table 5 Changes In Business-Type Net Auets

June 30 (In Millions)

Business-Type Activities 2007 2006

Expenses Electric Fund $131.2 $97.1 Water Fund 15.9 18.5 Wastewater Fund 28.9 27.2 Solid Waste Fund 15.2 14.2 Natural Gas 5.2 0 Golf Coune Fund 24 2.5 Local Transportation Fund 54 44 School-Age Child Care Fund 4.8 4.5

Total Expenses 209.0 168.4

Revenues Program Revenues Charges for Services 195.0 161.0 Operating Grants and Contributions 14.3 2.3 Capital Grants and Contributions 108.4 68.9

Total Program Revenues 317.7 232.2

• General Revenu"es Use of Property and Money 11.4 10.6

Total Revenues 329.1 242.8 Change In Net Assets before Special Items and Transfers 120.1 74.4 Provision for Disputed SCS Charges 0.0 0.0 Non-operating Expense(??) 0.0 1.8 Transfers (25.2} 23.6 Changes in Net Assets $94.9 $52.6

Business-type program revenues, interest revenue, and miscellaneous revenues were $329.1 million while Business-type expenses and transfers were $234.2 million 2007. Each program is discussed in the Proprietary Funds section below.

Table 6 summarizes the financial activity of the business-type programs, the detail of which is discussed under the Proprietary Funds section below.

"

Table 6 Changes in Business-Type Net Anets

(In Millions)

Net <ExoenseVRevenues From Services 2007 2006

Electric Fund Water Fund Wastewater Fund Solid Waste Fund Natural Gas Golf Course Fund Local Transportation Fund School-Age Child Care Fund

Totals

$13.8 43.4 43.5 4.7

(5.1) 08 74 0.3

$108.8

$22.1 27.0 13.6 3.3

0

OJ (3.1)

0.6

$03.8

Analyses of Major Governmental Funds

General Fund

Fiscal Year 2007 General Fund Activity

RfVCIIIIOI

Sut>•<o<•ooo aoJ!"' of mon<y •nd ~Of>;r<}

"

Expeo,es

a.pitalru!lay l'yml:l-7% de...,q,,..,.

Ilo/o

General Fund revenues increased $12.4 million this fiscal year due primarily to increases in taxes, use of money and property, and subventions and grants. Actual revenues were more than budgeted amounts by S3.3 million, with charges for services and use of money and property coming in over budget, but taxes came in less than targeted. Taxes increased in both property and sales taxes ($7 .9 million and $2.1 million, respectively). Property taxes· assessed valuations rose 6. 7%, driven by prior years' construction, which are now on the tax rolls. Sales tax revenues increased, in pan from continued addition of new retail stores surrounding the Galleria regional mall and the Highway 65 corridor.

General Fund expenditures were $125.6 million, an increase of $15.8 million from the prior year. Expenditures were $29.2 million less than budget however, as most departments expended less than budgeted. The original budget was increased by $7.5 million, $5 million from encumbrances carried over from fiscal year 2006 and $2.5 million from budget adjustments. The sources of these budget savings included finance, information technology, planning, public works, police, fire, and central services which had delays in professional services; police, public works, and parks and recreation which had savings in salaries with salaries being budgeted at the top step; vacancies; and capital projects anticipated for 2007 that have been carried over to fiscal year 2008.

Other financing sources and uses reported net inflows of $13.8 million in fiscal year 2007, which is slightly less than the prior year due to a $3.4 million sale of property in 2006.

As of June 30, 2007, the General Fund's fund balance totaled $65.8 million, including $13.4 million reserved almost entirely for encumbrances and advances to other funds, $14.7 million designated for economic reserve and cap_ital improvements and $37.7 million in unreserved, undesignated balances. Only the unreserved portion of fund balance represents available liquid resources, since the reserved portion is represented by non~cash assets or by open purchase orders. The designated portion of fund balance has been set aside by City Council, which may alter or reverse its decisions with respect to designated ~d balances at any time. ·

Redevelopment Agency of the City of Roseville

This Fund accounts for the Redevelopment (RDA) activity including capital projects in the downtown redevelopme?t area funded by tax allocation bonds. The RDA issued $22.945 million in tax allocation bonds in 2006. In addition the RDA owes other City funds $13.5 million, whiCh. will be repaid from future tax increment revenues. . ·

t:e. ' !,.. Community Facilities District Proleclli a-.

This Fund accounts for capital expenditures on community facilities districts in the City. The purpose of these districts is to finance 'the construction of capital improvements within the boundaries of each district, through the cOntribution ofMello-Roos bond proceeds. The improvements are connibuted to the City, which in turn acquires 3:f!d pays for these facilities from the developers who actually construct the improvements: In fiscal yeai-'2007, the Fund received $71.5 million in such contributions from property­owners and developers, and expended $68.6 million in capital outlay on facilities in community facilities districts. The largest projects underway in fiscal year 2007 were improvements to the West Roseville area.

Other Governmental Funds

These funds are not presented separately in the Basic Financial statements, bUt are individually presented as Supplemental Information.

Proprietary Funds

Electric Fund

Net assets of the Electric Fund increased $7.2 million in fiscal year 2007 to a total of $282.4 million. Operating income for fiscal year 2007 is $4.6 million, a decrease of $7.7 million from 2006, due for the most pait from higher purchased power costs. Electric retail sales increased by $10.4 million in 2007. However, purchased power expenses increased $33.8 million with a corresponding increase of $16.2 million of sale of wholesale power. Rates are anticipated to be incre~sed in fiscal years 2008 and 2009.

Of the fund's Net Assets of $282.4 million, $156.0 million waS invested in capital assets, $17.1 million was resnicted and $109.3 million was unrestricted.

Water Fund

Net assets of the Water Fund increased $42.1 million in fiscal year 2007. Operating income is $0.3 million, an increase of $4.0 million from the $3.7 million loss in 2006, as a 10.5% rate increase was implemented in April 2007. Operating revenues increased $1.5 million in fiscal year 2007, while expenses decreased $2.4 million to a total of$14.6 million. Rates are anticipated to be increased in fiscal year 2008. Capital connection fees were $8.8 million (a decrease of $0.6 million, as growth has stabilized), and contributions from developers were $33.6 million in fiscal year 2007, an increase of$13.0 million, while net transfers out were $3.7 million.

As of June 30,2007, the Fund's Net Assets were $413.3 million, of which $383.2 million was invested in capital assets, $2.6 million was restricted for debt service and $27.5 million was unrestricted as to use.

Wastewater Fund

Operating_ revenues increased_ i~ fiscal year 2007 $3.4 million to a total of $22.5 million. Operating expenses mcreased to $25.3 milhon, up $1.6 million. The net result was an operating Joss of$2.8 million, of which $9.9 million was deprectation. Rates are anticipated to be increased in fiscal year 2008. Other items that affected net assets were: connection fees of$10.4 million (up $4.7 million as non-residential growth increased); capital contributions of S2l.4 mi11ion and $7.4 million, respectively, from developers and South Placer Wastewater Authority; and net transfers out of $4.3 million. The total increase to net assets was $39.9 million for fiscal year 2007 to a total of $515.6 million. As of June 30, 2007, of the Fund's Net Assets, $377.1 million was invested in capital assets, and $138.5 million was unrestricted.

"

Solid Waste Fund

Revenues increased $1.0 million to $18.6 million and expenses increased $0.9 million to $15.1 million in fiscal year 2007. As a result, net operating income increased minimally to $3.5 million. In addition, a new capital impact fee was established in fiscal year 2007. The fees collected totaled $1.2 million. Rates are anticipated to be increased in fiscal year 2008. Net transfers out were $2.6 million. As of June 30, 2007, total net assets were $4.3, an increase of$2.2 million.

Roseville Natural Gas Financing Authority

This fund was created as the financing mechanism to purchase pre-paid natural gas for the recently constructed Roseville Energy Park (REP), an electric power plant, through the issuance of revenue bonds. $224.1 million in bonds were issued, which includes $14.7 million in deferred premium, for the purchase of pre-paid natural gas of $212.7 million. $4.9 million in debt service were expensed as of 2007. The REP is expected io -start receiving naturaJ gas in early 2008.

Golf Course Fund

Revenues and expenses remained relatively flat in fiscal year 2007 at $3.2 million and $2.1 mi!lion, respectively. As a result, the Fund's net assets were stable at $9.2 million. The Fund is financed in part by advances from other City funds; as a result, it has a deficit in its unrestricted net assets, partially offsetting the $10.2 million it has invested in capital assets, net of the related debt.

Loeal Transportation Fund

t::J:j Net assets of the Fund increased $7.6 million in fiscal year 2007 to a total of$21.1 million. Most of the , increase was due to the increase of subventions and grants of $12.1 million. There was a $4.7 million :::i opemting loss in fiscal year 2007, but most of the loss was offset by the above mentioned subventions and

grants. As of June 30, 2007, the Fund's Net Assets were $21.1 million, of which $6.9 million was invested in capital assets and $14.2 million was restricted for use in local transportation.

School-Age Child Care Fund

Net assets of the Fund remained relatively flat with a slight decrease of$0.04 million in fiscal year 2007 to a total of $0.84 million .. Revenues stayed relatively flat and expenses were up $0.4 million. As of June 30,2007, the Fund's Net Assets were $0.84 million. $0.95 million were invested in capital assets, which leaves a negative $0.11 million in unrestricted net assets.

"

CAPITAL ASSETS

In fiscal year 2002, the City started recording the cost of its infrastructure assets and computed the amount of accumulated depreciation for these assets based on their original acquisition dates. Infrastructure includes roads, bridges, signals and similar assets used by the entire population. The cost of infrastructure and other capital assets recorded on the City's financial statements was as shown in Table 7 below:

Table 7 Capital Assets at Year End

(in Millions)

Governmental Activities umd Streets (modified) Parks (modified) Landscaping (modified) Construction in Progress Buildings Improvements Equipment Bike Paths Bridges Culverts Curb, Gutter, Sidewalk, & Median Curbs Drain Inlets Flood Control improvements Sotmdwa!l Stormdrains Traffic Signals Less: Accumulated Depreciation

GoYernmeotal Acthity CapltaJ Assets, Net

.;·

l6

·-:

Balance at June 30, 2007

s 23.3 209.7 68.9 35.6

131.7 80.0

4.7 57.1 7.7

49.4 19.7

129.8 20.0 17.3 24.2 62.3 20.7

(187.0)

$775.1

·:·

.,.

Balance at June 30 2006

s 22.6 166.9 6(J.J 29.1

126.8 .79.9

4.7 52.6. 7.2

~ 46.6 18.9

120.7 18.9

.,.17.3 21.4 51.3. 18.9

(175.7)

$688.4.

. I

Balance at Balance at June 30, 2007 June 30, 2006

Business. Type Activities Land $ 16.1 $ 16.1 Landscaping (modified) 0.6 0.6 Construction in Progress 269.8 163.4 Buildings 17.6 12.0 Improvements 1!.2 11.0 Machinery and EquipmePt 17.1 \6.2 Bike Paths 1.1 1.1

Plant and Substations 286.2 283.3 Distribution 929.1 846.5

Less: Accumulated Depreciation (215.4) (193.8)

Busi.Dess. Type Activity Capital Assets, ~et SI 333.4 Sl,IS6.4

Detail on ca~ital assets, current year additions and construction in progress can be found in Note 8.

The City depreciates all its capital assets over their estimated useful lives, as required by GASB 34, except for streets, parks and landscaping, which are reported using the Modified Approach allowed under GASB 34. The purpose of depreciation is to spread the cost of a capital asset over the years of its useful life so that an allocable portion of the cost of the asset is borne by all users .. Additional information on depre~iable lives may be found in Note 8 to the fmancial statements. The Modified Approach requires

ti:l the City to employ an asset management system that maintains a current inventory of these assets, !,.. estimates annual costs to maintain them, and assesses the condition of the assets in a replicable way.

00 The City uses a computerized Pavement Management System to track the condition levels of each of the street sections. The City has adopted a policy of maintaining arterial and collec10r roadways at an avernge

•Pavement Quality Index: (PQI) of 7.5 and residential roadways at an average PQI of 6.5, which means that, on average, the City's streets must be maintained al no less than 7{)% of pavement 'in perfect condltion.

Al June 30,2007, the City's streets avemg~d 7.7 PQl for arterial and collector roadways and 8.{) PQI for residential roadways. The City expended $9.2 million on preservation of its streets in fiscal year 2007, compared.to the budgeted amount of$5.5, and plans to spend $5.9 million in fiscal year 2008.

The City uses a computerized Grounds Management System to track the condition levels of each of the parks and landscaping. The City has adopte:d a policy of maintaining parks and landscaping at an average Ground Management Index: (GMI) of LeV"el 2, which means that, on average, the City's parks and landscaping must be maintained at no less titan 83% of parks and landscaping maintained at a state-of·the­art !eye!.

At June 30,2007, the City's parks and landscaping averaged 2 GMI. The City expended $5.0 million on preservation of its parks and landscaping in fiscal year 2007, compared to the $5.1 budgeted, and plans to spend. $5.3 mill_ion in fisc~! year 2008.

"

DEBT ADMINISTRATION

The City made aJI scheduled repayments of existing debt. Each of the City's debt issues is discussed in detail in Note 9 to the financial statements. As of June 30, the City's debt comprised:

GiJ~·emmental ActiVity Debt: Certificates of Participation:

Table 8 Outstanding Debt

(in Millions)

2003 Public Facilities Bond, 2.0%-5.0%, due 8/1/25 Tax Allocation Bonds 2002 Roseville Redevelopment Project 3%-5.14% due 9/1133 2006 Roseville Redevelopment Project, Series A 4.5%-5.00% due 9/1140 2006 Roseville Redevelopment Project, Series A-T 5.31%-5.90% due 9/1/28

2006 Roseville Redevelopment Project, Series H-T 5.31%-6.07% due 911/40

InstaUment Purchase Obligations

Equipment Otber Long Term Obligations: Foothill Blvd. Extension, due 41!/07

Total Governmental Activity Debt:

"

Balance at June 30 2007

$16.49

13.46

13.15

3.29

6.51

2.39

0.0

S5S.29

Balance at

June 30 2006

S\7.11

13.74

0.0

"' 0.0

"'! 0.0

2.40

.. 0.0

$33.3

tl:l '·

Business-type Activity Debt: Certificates or Participation:

1997 Electric System Revenue, 3,6%-5.25%, due 2/1/17 1999 Electric System Revenue, 4.0"/o-5.5%, due 211124 2002 Electric System Revenue, Variable Rate, due 2/1/24

Less deferred amount on refunding 2004 Electric System Revenue, 3.0-5.25%, due 211/34 2005 Electric System Revenue,Series A, 3.0-5.0%, due 2/1123 2005 Electric System Revenue,Series B, Variable Rate, due 2/1/35 2005 Electric System Revenue,Series C, Variable Rate, due 2/1135 2003 Golf Course Project, 2.0-5.0%, due 8/1/23 1997 Water Utility Revenue, 3.9%-5.2%, due 12fl/18

Total Certificates of Participation

Revenue Bonds: 2000 Wastewater Revenue Bonds,

Series·A, 3.8%-5.5%, due 11/IJ27 2000 Variable Rate Demand Wastewater Revenue Bonds,

Series 8, variable rate, due 11/1/35 2003 Wastewater Refunding Revenue Bonds,

variable rate, due 11/1/27 Less deferred amount on refunding

Balance at Balance at June 30 2007 June 30, 2006

$ 0.0 $ 0.33 1.11 1.63

25.39 25.62 (2.92) (3.09) 39.61 39.94

52.90 52.90 90.00 90.00 60.00 60.00

7.31 7.63 23.35 24.74

296.75 299.70

6.19 7.59

37.92 37.92

50.66 51.01 (5.28) (5.54)

'-0.

2007 Gas Revenue Bonds "'ariable rate, due 2/15/28 209.35 0.0

Add deferred bond premium cost Total Revenue Bonds

Otber Long Term Obligations: Notes, 5%, due 10/1/17

Total Business-type "'!'-ctivlty Debt:

COMMUNITY FACILITIES! ASSESSMENT DISTRICTS DEBT

\4.72 • 313.56 90.98

0.16 0.17

$610.47 5390.85

Commu~ity fa~iiities districts ~d ~sessme~i districts in diff~rent p:lrts of the City have also issued debt to tir:lance infrastructure and facilities Construction in their reSpective districts .. As of June 30, 2007, a total of $404.4 million in community facilities district and"assessment district debt was outstanding, representing fourteen issues by community facilities districts and One issue by assessmeri.t districts. This debt is secured only by special tax liens and assessments on the real property in the district issuing the debt and is not the City'S respOnSibility; however, the City does act as the agent in the collection and remittanCe Of special taxes a'nd assesSments for these Districts. Further detail on this debt may be found in Note 10 to the financial stateme1:1ts.

CONTACTING THE CITY'S FINANCIAL MANAGEMENT

This Annual Financial Report is intended to provide citizens,.f:axpayers, investors, and creditors with a general overview of the City's finances. Questions about this Report should be directed to the City of Roseville at 31 I Vernon Street, Roseville, California, 95678.

"

This Page Left Intentionally Blank

•.

CITY OF ROSEVILLE

STATEMENT OF NET ASSETS AND STATEMENT OF ACTIVITIES

· The purpose of the Statement of Net AssetS·and the Statement of Activities is to swnmarize the entire City's financial activities and financial position." ·

The Statement Of Net Assets reports the difference between the City's total assets and the City's total liabilities, including all the City's capital assets and all its lOng~term debt. The Statement of Net Assets focuses the reader on the composition of the City's net aSseis, by subtracting total liabilities from total assets and summarizes the financial positiOn of all the City's Governmental Activities in 3. single column, and the financial position of all the City's Business-Type Activities in a single column; these columns are followed by a Total column that presents 'the financial position c_:>fthe entire City.

The City's Governmental Activities include the activities of its General Fund, along with all its Special Revenue, Capital Projects and Debt Service Funds. Since the City's Internal Service Funds service these Funds, their activities are consolidated with Governmental Activities, after eliminating inter~fund transactions and balances. The City's Business Type Activities include all its Enterprise Fund activities and any portion of the Internal Service Fund balances that service Enterprise Funds. Fiduciary activity is excluded.

The Stateme'nt of Activities reports increases and decreases in the City's net assets. It is also prepared on ttj the full accrual basis, which means it includes all the City's revenues and all its expenses, regardless of 1 when cash changes hands. This differs from the "modified accrual" basis used in the Fund financial ~ statements, which reflect only current assets, current liabilities, available revenues and measurable

expenditures.

Both these Statements include the financial activities of the City, the Redevelopment Agency of the City of Roseville, the Roseville Finance Authority, and the City of Roseville Housing Authority, which are legally separate but are component units of the City because they are controlled by the City, which is financially accountable for the activities of these entities.

CITY OF ROSEVILU STATEMENT OF NET ASSETS

JUNE 30, 2007

ASSETS

Cash ond lrtve•1melllll 111City T"'"'"'Y (Noto3)

Ratriotod ouhand ;,,_ -..;u, fJOcalall"""' (NOIC l)

RO<etnbleo·

'"" A<eoLU1"

Duo from oth<r 11ovcmment •iOlltie< lntomalbala!lceo{NOIC40)

Propaid! Defemd tt«ivables (t'oto 6}

Note• "'ce<v•b1o (NoteS) Notes ...,.,;vohle from NCPA (Note l5B) Laventories(Noto II)

Land b<ld for rc<bv<lopmau (Note 7D) i'repald pUKhu<deloctric1ty (Note 14)

Pr'l'aid purcha.<alp< (Note 19)

Unamoniu>d bond origllllltoo eoou LavmmcntU1 NCPArcservoo (Note IS)

La,·e=cntill SPWA = (Noto 16) Copit.o!IIS5Ctli(Noto8):

LaodolldtoiJOIJ\IC1i""inprogreoo CapLto.l "'"""' beina d'l'r<eiated, net

Total..,scts

UAB!LIT!ES

A.cooonl> payobk

Acaucd Liabilitie! Dcvelop<r agreement payab\o

Due to other J<>V<rnmetLb -· Uncamod =roues Dcfe:rredliabtltu .. L.o.ndfill dMtlfcand pool c\OIItlrclmbility (Nate 17)

Cornpcou.lcd ob:=ceo (Note !G) Due wL!hia one year

Due ill """"' than oao yeor Self·wurance c\.nmo payable Olld htigotion ..rtlcmo:at (Nolo B)

Dlse'"lhinoneyear Due in !>lore tblU1 one yoar

loog..Jerm ~obiUtie:l (Note 9); Due wulun <me yoar 0...;, ...... than .... yeor

Tou.lliabiliu ..

NETASSETS{t'<>~ell)

lnv .. tedill eopltal ~. oet of related debt R.sttictedfo~

C'LijlLto.lproject<! llipond.abl< NoncxJICI>Lb.blc

Debt.'Lef\'i<C Co=umcy dn"C\apmmt projO:cU Lot•ltnmport.otioo

Total rcotrict<d net.....-!:!

Total net., .. ~

S262,962,%5

66,257,080

1.906.989 1,996,162

2.919,787 9,327,978

4.0S8,676 86,355

2,518.298

12.518,139

1.520,803 4,749,958

469,163,009

305.921.360

1.145.'107.559

29.274,881

3.212.494

5I.l46 7,942.Jl.O

5,566,/IJ>' 2,098,760

4112,421

8,586,271

621,500 5,789,500

U90,9'11 53.694.716

I\U3l.JI9

742.822.1S8

134,436,899

16,833,979

1.477,535 24,44\.584

177.189.997

!07/164.085

$1,027.076.240

See OC<O!llp.,yU!g 1101cs to fLillliLCiaJ mtC.ttiL:Ill:l

BU<ineli-T)')lC Activin.s

Si34,186,SOI

51,180,494

34,608

24,108,682

I.7l8,8S9

D.091.R06 (4,058,676)

639.064

176,0'14 K,891.446

l,M0,909

2\l,661.363 J,ll6,330 3,786,593

11S.434,780

286,508,252 1.046.885.157

1.900.362.222

15.361.004 7,592,920

3.0l7.D3 3,()/(),9J9

8.613,466 156,377

3..'146.209

3.983,974

2,699.430

6,068.7H 604.409.103

658,461530

938,933,934

20.356.973

14.196.638

34.553.611

268.413.147

Si,24J.900.692

$391,149,466

117.437,574

1.941.597 26,!04,844

4,638,646

22.419,784

86.355 3,150,362

12.518,139 !76,0'14

lU,412,249

4,749.958 3,800,9(19

212,661.363

1.316,330 3,786,593

l!S,434.780

155,671.261

l.l5U06517

3.046.269.781

44.637,885 !0,805,41~

51,346

!0,959.463

8.J?7.1MR 10.712.226

156,377

3.'146,209

4,386.395

11.285,701

62UOO 5,789,500

7,659,74(;

658.104,019

777.292.849

1.68!,756,092

134.~36.899

16,8J3,979

21.834.5011 24,44U84 14.196,638

lll.i43,608

375.477.232

S2.26U76,9l2

CITY OF ROSEVILLI STATEMENT OF ACTIVITIE!

FOR THE YEAR ENDED IUNE 30, 2007

NCI(E•ponse) Revenue and

""'""'"'- C'lwll!:!iDNetA.wu Operatmg Capital

""""'" """'""' """'""' "'"~~ _......,.

Functiona/ProiEom• ~ ~ ~ ~ Aethineo ActiVIties T"" Ocrvercma~tal A<thitieo· """"'·- $)0,929,747 $3,980,445 $125,952 $3,461,172 ($23,360,178) (113.360.178) C~ty develcrpmem &Dd planning ll,17l,347 3,5-43,270 1,401,618 >48,SI1 (7,8i7,648) (7,877,648) PubUcworb 42,070,1\9 9,246,666 96,482 16.108,160 (IM1U11) (16,618,811) Polioc 27,44<1,631 2.)46,49) 689,444 1,266,689 (23,138,005) (23,138.005)

'"' 20,S72,207 1,50!,547 910,790 2..ll4.147 (15,841,723) (15,841,723) Library 3,552,614 235,231 191.090 16,043 (3,110,250) (3,110,250)

ParU """m:rmll<IIO 17,634,&87 4,167,719 40,0S9 S,230.'i12 (8,196,597) (8,196,597) Community focilitieo distri<to 73,020,933 73,020,933 73,020,9Jl H~~poymo<!!$ 3.32M56 3,790,886 462,230 462,230 lntcn!st"" !Odg-tcrm debe ~ (4.910,776) (4,920,776)

Tllla! aov.:.m.-1a1 Acnvrtieo ~ ~ ~ ~ ~29.'i80,825) (29.'i80.82S)

B~A<tmlieo:

Electric ll\,224,885 1)0,264,098 14,792..l87 $13,831,600 !!,831.600 w- IS,855.'i79 14,938,66! 1,868,419 42,457,157 4),408,662 43,408,662 Wu-.w 28,948,611 22,455.64! 50,013,669 43,'i30,703 43.'i30.703 This Page Left Intentionally Blank ll<>lidWO!Ie 15.182,395 18,!?5,194 102,421 1.153,426 4,648,646 4,648,646 • ...,Gu 5,152,447 (5,152,447) (5,152,447) Oo1fCounc: 2,351,603 3,162,637 811,034 811,0>4 Local T ronap>natioo 5,410,63{1 739,826 12,075,393 27.199 7,4ll,]g8 7,431.788 S..:bool·age Cluld CIIIC ~ ~ ~ 302078 302,QJ8

Tllla! Bllllioa.typo Ac:nvilieo ~ ~ ~ ~ 108.812.064 108.8121!64

'""' ~ ~ ~ ~ (29.'i80,8;>5) 108,812,064 79.231,239

til .....,~.

' N Tueo

-~-38,737,491 3V37,491

s..t .. tax .. 44,772,743 4-4,772,743 Fnmchileuxeo 1,429,155 1,429,155 MoiOr!'beiWI .. 1.999542 l.999.S4l Other w: .. 3.529,485 3.'i2'J,485

IDtnp>V<::rl>moODiai,lmiOOini:!Od: Motor vehicle in lieu 56!.719 565,719

u .. of IDDD<)' ODd property 14,208,032 11.359,783 25.567,815 Mi<ce1lu>eouo I'OVmiiCI 2,926,467 2,926,467

Trm~fet:!(N<>Ie4) 25,223191 (25.123.297)

Total gcoerol revenuco ond ttarufero 133,391,931 (lJ.8.1iJ.SL4! 119.528,417

C'lwll" iD Net A.Jo<to 103.811.106 94,948,'iSO 198,759,656

N<1 Aucto-Beginnif13 923,265,134 1,146.952,142 2,070.217,276

N<t-Eo4illi $1,027,076.240 $1,24!.900,692 $2 268.976,932

"

FUND FINANCIAL STATEME~TS

Major funds are defined generally as having significant activities or balances in the current year.

The funds described below were determined to be Major Funds by the City in fiscal 2007. Individual non-major funds may be found in the Supplemental section.

GENERAL FUND

The General Fund is ui>ed for all the general revenues of the City not specifically levied or collected for other City funds and the related expenditures. The General Fund accounts for all financial resources of a governmental unit whic:h are not accounted for in another fund.

REDEVELOPMENT AGENCY OF THE CITY OF ROSEVILLE FUND

The Redevelopment Agency of the City of Roseville Fund accounts for all activities of the Agency, including I) tax incren1ent allocations set aside for the purpose of increasing or improving housing for low-income residents; :l) the accumulation of property taxes for payment of interest and principal on the Redevelopment Agency tax allocation bonds issued in 2003; 3) capital projects connected with downtown redevelopment funded by property tax increment revenues.

COMMUNITI' FACILITIES DISTRICT PROJECTS FUND

This fund is used to a.ccount for specific public improvements such as streets, sewers, storm drains, r:p sidewalks or other ame]l]ties funded by special assessments against benefited properties. N N

This Page Left Intentionally Blank

CIIT OF ROSEVlLLE GOVERNMENTAL FUNDS

BALANCE SHEET JUNE 30, 2007

c--Focihtin Rodevc1oprneot Dutrict

""'-' A!!!:!!<l ~""" ASSETS

Cub ODd iovesQncnt> in Cny T=sury (No<e 3) SS6,150,561 $8,547,664 S9,848,40J ~strided ~ ood inVOitmontswilh fiscal &g<lltl (Note 3) 23,676,458 39,7JJ,778 ~Y3b101

Tuo 1,>58,162 348.827 M- 1.n1.379 AcOI'\Iedint•r .. t 2.296.653 1M,293 242,063 Due from ocher govommem .,..,.;.. 6,608,756

Due finmotbO'I' fundo (Note 48) 2.183,406 Advances to ocher fuDdJ (Noce 4C) 7,655,536 ,.,... 86.355 Def=ed rcceivlbleo (Note 6) 1.615 NotH =ivlb1o (Note 5) 126,123 1,252,9-49 illveotorieo(Notell) 570,390 Land held for mlevelopmeot (Note 70) 4,749,958

TotalAaeto $79,114,936 $39,736,149 $49,804,144

LlABn.rrtES

A"""""ts payable $4,507,003 $1.492.JH $16,155,426 Accrued liabi!iti01 2,068,349 10.433

c:l Due to ocher fimdi (Note 48) "'·""' ' Due to othO'I' government agendco 20,186 N De\o:loper agr=nem payable 51.346

"' AdvOD<:n from otber 1\u:>do (Note 4C) 12,534,737 -- 4,959,503 6,606

Deform!~ ... 1,761,312 2,252,949 Deferred 1iahihti .. 3.011.620

Total Li•lnliheo 13,316,453 20 350.044 16.255,426

FIDID BALA.._CES (Note II)

Reoenoed far: ...,._ 7,655,536_ illventorieo 570.390

"""""""'" 4,983,142 326,819 Capital proJects 33,548,818 Defetred r"e<:eivab1"' and not... receivable 126,123 - !lli,J5S Lew and moderate income hOLII~ 3,185,217 Debt_.,-; .. 23,769,447

Unn:served. DeoiJD&Ied for eoooomlc reserve 12,498,500 Reponed in Capital Pro] octo Funds:

Deoignaled fur o.nyov.,. of capital improvement projects 2,184,196 Unreaerved. undesiptated. ~ed u>:

""""'""" 37,694,141 Special Revmu Funds (8,095,438) Pemwu:nt funds

TOTAL FUND BALA.NCilS 65,798.483 19.386,\0S 33,548,&18

Total Lilbllitlel and Fund Ba10D<:eo $79,114,936 $39,736,149 $49,804,244

See accompanying ooteo to financial rtab:ments

""" T""' GO>·trmnontal Go\'erniiiOnu1 ,_ ,_

$127..589,411 $202..236,039 2,826,844 66,117,080

1.906,989 207,648 1.985,027

1,956,930 4,655,939 2,704,267 9.313.023

250,000 2,4JJ,406 4,250,000 11.905,536

86.355 2,516,683 2,518,298

10,139,067 12,518,139 570,390

4.749,958

S1S2,440,8SO $32!.096,!79

$6,663,691 $28,918.473 184,071 2,162,853

1.303.230 2.293,230 7,922,044 7,942.330

51,346 500,000 13.034,737 600,000 5,566,109

5,379,618 9.393.879 359.467 3,371,087

22.912,121 72.834,044

4,250,000 11,905,536 570.390

4,990,369 10,300,430 33,548,818

26.991 lS3,115 !16355

3,38S,217 1.477.B5 25,246,982

12.498,500

20,128.123 22,312,319

37,694,141 81.821.731 73,726,193 16,833,979 16.833,979

129.528,729 248.262,135

$152,440,850 Sl2l.096.J79

CITY OF ROSEVILLE

Reconciliation of GOVERNMENTAL FUNDS-- FUND BALANCE

with the Governmental Activities

NET ASSETS

JUNE 30, 2007

TOTAL FUND BALANCES-- TOTAL GOVERNMENTAL FUND

Amounts reported for Governmental Activities in the Statement of Net Assets are different from those reported in the Governmental Funds

above because of the following

CAPITAL ASSEn Capital asse1s used in Governmental Activities are not cwrmt assets or flllllllcial ~urCes

and therefore are not reported in the Governmental Funds.

ALLOCATION OF INTERNAL SERVICE FUND NET ASSET Internal service funds are not governmental funds. However, they are used

by management to charge the costs of certain activities, such as insurance and central services and maintenance, to individual governmental funds. The net current assets of the Internal Service Funds are therefore included in Governmental Activities in the following line items in the Statement of Net Assets.

Cash and investments Accounts receivable Accrued interest Due from other govarurn:nt agencie! Inventories Accounts payable Accrued liabilities Self-insurance claims payable Compensated absences Internal balances

ACCRUAL OF NON-CURRENT REVENUES AND ExPENSE: Revenues which are deferred on the Fund Balance Sheets, because

they are not available currently, are taken into revenue in the Sutement of Activities.

LONG-TERM ASSETS AND LIABILITIE The assets and liabilities below are not due and payable in the current period and

therefore are not reponed in the Funds: long-term debt Interest payable and other accrued liabilities, included in ~rued liabilities Non-current ponion of compensated absence!

NET ASSETS OF GOVERNMENTAL ACilVITIE:

See accompanying notes to financial statements

"

$248,262,135

775,084,369

60,766,926 11,135

1,634,935 14,955

950,413 ' (588,865)

(42,781) (6,411,000)

(339,565) S,O·H,701

7,295,1 )9

(55,285,707) (906,860)

(8,416670)

$1027076240

CITY OF ROSEVILLE GOVERNMENTAL FUNDS

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED JUNE 30, 2007

R~~velopnm~t CommWiiry Agency of !he Faclhtieo

•" C11y of Omnct

""""' Ro .. ville Projocts

REVENUES Taxes $80,837,720 $6,737,370 Lic:c:DSe$ and prnwts 2,762,883 Charges for servi~s 17,817,204 SubventiOII!I and grac.ts 2,983.17l 106,623 Uoe ofm011ey and property 3,549,717 1.353,209 $3,607,885 Fines. forfeirureo and penalties 918,024 Conlributwns from property ownm 71,488,795 ContributiODJ from developen 605,891 '" 3,984 Miscellaneous revenue• 3.748,628 62,083 1,398.154

Total Rcve:uucs 113,223.238 8,260.130 76.498,818

EXPENDITURES Current:

General governmelll 28,021,122 Community developmeDI and plamling 5,029,833 3,242,564 Pubhcworb 13,563,220 Public safety:

Oj Police 28,988,754

' '= 19,977.075 N Library 3,508,834

""' Pub and l<'Cfeltion 14,885,622 Housing aO<ista.Dce paymen!S

Capital outlay 9,035,596 11,614,000 68,606,144 Payments 1mde:r development agreements (Note 7A) 2,396,314 Debt oavice:

Principal retirement 154,893 275,000 Interest and fuca! cbafies 16,713 2.1S4,657

Total Expenditure• l25,5TI,976 17,287,021 68,606.144

EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES (12,354,738) (9,026,891) 7,892,674

OTHER flNANCThiG SOURCES (USES) Proceeds from is•uance ofbo!ldt (Note 9) 210,524 22.945,000 Transfers in (Note 4A) 23,944,594 5,597,668 400,000 Tramfcro (out) (Note 4A) (10,374,335} (230,933) (3,112,936)

Total Other FI!Wloing Source< (Use$) 13,840.783 28.311.735 (2,712,936)

NET CIW'GE IN FUND BALANCES 1,486,045 19,284,844 5,179,738

Fund balmces at begimting of period 6-1,312.438 101,261 28,369,080

FUND BALANCES AT END OF PEIUOD $65,798,483 Sl9.386,105 533,548,818

~ accompaDying notes to fin&acial st..temt~~ts

'"

""'" T=' -·· Goverom<t~tll

'""'' ,~.

$5,925,131 $93,500,227 2,762,883

22.4&4.621 40,301,825 9,655,126 12,744,920 8,432,385 16.943,196 1.440,718 2,358,742

71,488,795 980,339 1,591,059

4,077,258 9,286,123

52,995,584 250,977,770

1,699,757 29,720,879 3,689,082 11,961,479 3,384,664 16,947,884

28,9U,754 742.643 20,719,718

12,000 3,520,834 3,069,460 17,955,082 3,328,656 3,328,656

36,169.534 125,426,074 2,396,314

716,910 1.206,803 2,352,355 4,523,725

35,2~5.061 21>6.696,202

(2,229,477) (15.718.432)

23,215,524 24.284,%6 54,227.228

(17.932,052) (31,650,256)

6,352,914 45,792,496

4,123,437 30,074,064

125.405,292 218,188,071

S\29,528.729 $248.262,135

CITY OF ROSEVILLE Roconciliationoflbe

NET CHANGE IN FUND BALANCES - TOTAL GOVERNMENTAL FUNDS with !he

CHANGE rn' NET ASSETS OF GOVERNME."'TAL ACTIVITIES FOR THE YEAR ENDED JUNE 30,2007

1"M 5<hedu!e below r=cile•lhe Net Changes in Fund Ba\.once• reponed on We Govdnmental Funds Stacernent of Reven,...., Expendilllfe• ud Clw!geo in Fund Bal&ncc, wbicb meuwe• only cbanie• in cun= &SlOts and cwrent liabiliti.,."" the modified accnuo1 buis, wilh the Change in !'e1 Aose~o ofGovernmen!al Activitie• reponed in lbe Stat<111ent of Activitie1, wbieb i• prepared OD lbe full accrual buU

:O.TI CHANGE IN FUND BALANCES- TOTALGOVERNME."'TAL FUNDS

Amo<mt< reponed for gove:rnmental activities ;, the S~a~emc:~~t of Aotiviti .. are different bocauu of We following·

CAPITAL ASSETS TRANSACTIONS

Govemmcn!al Funds n:pon capital outlay• as expcndilllJeS. However, in the Sllllemcnt of A<:tivitia the o::om of !bole OSKtJ U capitalized and allocated over lbeir estimoted u.odill ~veo and reported .., dqm:ciatiom npense.

The capital outlay e>;p<:nditura are thenfono odd«! bal:k to fund balance

Depreciation expense i> deducted from lbo fund ~ (Depreciation expeaoe i• net of internal service fund depreciation of 3, 798,375 whieb bas already been allocotcd to .m-ie<:d funds.)

Loas on n:nrement of cop1tal useto (lntemal .m-ice fund retin:mc:fJt of$32,037 bas already been deducted from copital .. seu)

LONG-TERM DEBT PROCEEDS AND PAYMEI'm>

Bot~d proceed! provide CU!Tellt financial rewurce• to &ove:rnmental funds, bm io.surng ~bt increuc:s !ona-tennliabiliues in the Statement of Net A<sel:l Rq>~yment of bond pnacipal U an expenditure in lbe govemmentll funds, but in the Statement of Net Anel'l the repayme:ut reduce:• lon&·teml liabiliti ..

Proceed! from the iO<UIUice of debt and capital uaet'l are deducted from fund balance R.epayme:ut of debt principal is odd«! back to fund balance

ACCRUAl. OF NON-CURRENT ITEMS

The amounts bel""· included in !he Statement of Activuieo do 1101 provide or (require) the use of cwrem fmancial reoource• and therefore are not reponed u revenue or c~pendtlllfe• in goVEIOOlt:l\ll.l funds (111'1 clw!ge)·

Long-term ~ted absences !ntenot poyable and acaued lilbiliti.,, included i;n accrued ~obiliti.,. Deferred revenue&

ALLOCATION 01' INTERNAl. SERVICE FUND ACITVITY

lotemo1 Servko Fonds are used by management toebarj:< We costs of certain activities, oueb os equipment acquioition, maiMelwtcc, and m..urance to individual funds The ponion of the net n:venue (expeMO) of the•elnternal Service Funds arising out of their uansactiono with governmental funds ;. reponed with governmental activities, bec11111e they oervice those aclivities.

Clw!ge in Net AJsetJ- All !ntml.al Service Funds

CHANGE IN NET ASSETS OF GOVERNMENTAl. ACTIVITIE.!

"

530,074,064

99,&7S,I26

(11,590,000)

(2,906,319)

(23,215,524) 1,210,026

(l,261,2.4S) ()97,051)

1,684,900

11,337,119

S103,8ll,Hl6

CITY OF ROSEVILLE GENERAL FUND

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES rN FUND BALANCE

BUDGET AND AcruAL FOR THE YEAR ENDED JUNE 30, 2007

~lcdAmowns

Actual Amounr:.

Ori!tinal Final ~~Bui•

RevENUES Tue• $80,480,790 $82,504,670 $80,837,720 Licenoe5 and pmnir:. 4,917,810 2,917,810 2,762,883 Charges for """'ceo 14,664,817 16,250,317 17,817,204 SubventiOM and if'311tS U05,917 3,385,183 2,983,171 u~ of money and property 1,763,780 2,093,750 3,549,717 finco, foriritum and penalti.., 711,500 711,500 918,024 Conmbutiono from d..,e1opers 2,000 2,000 605,89\ M!sccllancow revenuCI 1.647,170 2,090,244 3,748,628

TOTAL REVENUES l05,993,7S4 109,955,474 113,223.238

EXPENDITURES

Cum:nt: General government

COUDcil S•larics and benefits 38,340 44,220 41,860 Operating s.ervice• .wd supplies 424,110 415,110 358,626

C1ty allorncy Salarie• and benefits 1,280,944 1,180,944 988,399

Opcn.nng """"" ... .wd suppliCI 196,?15 192,077 218,706

tl:l C1ty manager

' Salarin and benefits 1,700,186 1,700,186 1,594,734 N ~ing senriceo and supplies 415,640 400,795 287,510 Vo Finance

Salaries and benefits 5,633,381 5,627,381 5,387,013 Operating services aod supplies 2,068,160 2,!142,690 1,541,601

Hum.tn I'C$0Utca

Salarie• and benefits 1,715,249 1.692,799 ],643,234 Ope13nng services and supplies 772,190 771,915 657,137

lofonnalion te<:hnology

Salarie1 and benefits 4,288,146 4,288,146 4,030,581 Operating oerviceo and supplies 2,992,742 2,920,627 2,072,149

Cotyclerl< Salarin &lid benefits 692,929 692,929 649,530 Opet8ling service• and supphes 273,586 272,186 174,626

Economic development Salarie• &lid benefits 305,0(1[ 295,001 314,460

~ing services and supplies 177,524 184,999 187,143

Cmtralmvicts Salancs and benefits 3,518,679 3,509,339 3,297,$06 Operating oervices &lid oupplits 3.9~.508 6,482,519 4,576,307

Comrmmity development and planning

HowiDg Salari~s and benefits 197,858 197,858 253,376 Operanng JCI'V!CCI &lid supphes 152,430 150,080 108,247

Community development Salarie1 and benefits 1,337,722 1,337,722 1,162,739

Open.ting servicCI and supphes 372,473 365,403 .320,729 Planning

Salariea and benefits 2,586,616 2,586,616 2,304,013

Open.ting serv..ceo and aupplie1 1,1&4,182 1,437,737 880,729

.,

Variance with Final Bwlget

PoSitive

jNeetive)

($1,666,950) (1S4,927)

1.566,887 {402,012)

1,455,967 206,524 603,891

1,658,3S4

3.267.764

2060 56,484

192,545 (26,629)

105,452 I 13,285

240,368

501,089

49,565 1\4,778

257,565 848,478

43,399 97,560

(19,459)

{2,144)

21J,833 1,91M,2l2

(55,518)

41,833

I 74,983 44,674

282,603 557,008

(Continued)

CITY OF ROSEVILLE GENERAL FUND

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES TN FUND BALANCE

BUDGET AND ACTUAL

Public works Salaries and benefits

Opmlting services and tuppliu Public safety

Police Salaries and benefits op..ratiog services and supplies

fire Salaries and benefits Opentlllg JCI'V!CCS and supphtJ

Libl'll)'

Salarie• and benefits Operating services and IUJ!Pheo

Parlu and recrealion Salaries and beoefits Open.ting tervices and tuppliel

Capital outlay Payments under development agreements Debt service:

Principal lolerest and fiscal charges

TOTAL EXPENDITURES

OTHER FINANCING SOURCES {USES) Procee<b from capital leu.e T!3!!sforsrn Transfers {OIIt)

Total Other Finaucing Sources (Uses)

NET CHANGE IN FUND BALANCE

Fund bal.wce at beginning of year

Fund balmc:e at end of yea

FOR THE YEAR ENDED JUNE 30, 2007

Budgeted Amounts

Ori!linal

S11.215,198 5,219,785

23,904,172 5,426,895

16,951,844 2,915,718

3,122,703

1,040,245

10.760,445 5,119,220

21,446,518 2,31\,230

913,135 670,606

147,309,625

270,524 22,865,470 (5.295,819)

17,840,175

($23,475,666)

final

S I I ,202,448 5,193,732

24,381,859 5,990,667

17,522,449 2,972,622

3,122,703 '1,107,985

10,715.865 5,265,371

25,302,800 2,396,314

154,893 670,606

154,7&9.593

270,524 26,398,931

(ll.815,!60)

14,854,295

{129,979,824)

Sce ac<:ompanying no~l to fin.uocial mtements

' . '

"

"""'""""""' Budgetary Baois

~$9,404,100 4,159,120

23,854,743 5,134,011

17,762,980 2,2\4,095

2,715,536

793,298

9,835,805 5,049,817 9,035,596 2,396,314

t25,5n,976

270,524 23,944,594

(10,374,335)

13,840,783

1,486,045

64,3!2,438

$65,798,483

Vari&Dce witb Final Budget

POIII!Ve {Nesative)

$1,798,348 1,034,612

527,116 856,656

407,167 314,687

880,060 215,5S4

16.267,2G(

653,893

29.211.617

(2,454,337) 1,440,825

(1,013,512)

$31465,869

,t;.:

ClTY OF ROSEVILLE REDEVELOPMENT .AGENCY OF THE CITY OF ROSEVILLE

STATEMENT OF REVENUES, EXPENDITURES

SubveDrions and gr.mls Use of money and property Contriburio!lll fmm dcvelopc:l'l Mi.ocellaneous revmues

Total revcDUC:S

EXPENDITURES Commutaily developmenT ond pilliiiiDR

Community oervices Salaries ond benefits ()pa'atills service• md supplies

Pas•· through paymon!J Capital outlay Dobtscrvtce:

Pnnc:ipal lnt~l and fiscal charges

t:::tl Total oxpeodllum

' ~ OTHER RNANCING SOURCES (USES) ._.., Proceedsfromi<s~oofbo!lds

Ttansfmin TransfmDUT

NET CHANGE IN FUND BAlANCE

FUDd balmce at beginning of year

Fl!lld balance 01 erad of yea:

AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL

FOR THE ~AR ENDED JUNE 30, 2007

Budgeted AmoomtJ

Original ,.,. ,..,

s.6,1.lU90 s.t.,sll,nl'l S6,131,~1\'l

\,6{14,3\6 2,508,466 106,623 158,310 158,3\0 \,353.209

FlO "' 1.6\0 62,083

7,881.516 9.\91,9~ 8,260,\30

879,3!19 840,369 422,118 1,587,109 553,990 9n.242 1,806,940 1.620,540 1.848.204

14,1!6.584 11,614,800

275,000 521.000 l,l00,9!0 ' 2.154,657

4,794,448 18,232,393 ]7,287.021

22,'.M5,000 22,945,000 1.223,780 1.850,000 5,597,668

(2,467,07S) 1555,1591 (230,933)

(1.2~1.l9S) 2~.239,1:14\ u .. ltt.ns

$1.843,773 $15,199,404 \9,284.844

101.261

Sl9.386,l05

See atC<lmpa!lyulg nlltes to frnancial statement.

Vari0111ce Positive

(Negative)

Sl\4,65() 12.401.843)

1,194,899 {S)

60,473

(931,826)

4]8,251 (418.252) (227,664)

2,5{)1.784

(275,000) (1,053,747)

945,372

3,747,668 324,226

~.<l?l.t'M

14,085,440

MAJOR PROPRIETARY FUNDS

Proprietary funds account for City operations financed and operated in a manner similar to a private business enterprise. The intent of the City is that the cost of providing goods and services be financed primarily through user charges.

' The concept of major funds established by GASB Statement 34 extends to Proprieurry Funds. The City has identified the funds below as major proprietal)' funds in fiscal2007.

GASB 34 does not provide for the disclosure of budget vs. actual comparisons regarding proprietary funds that are major funds.

ELECTRIC FUND

This fund accounts for all financial transactions relating to the City's Electric service. Services are on a user charge basis to residents and business owners located in Roseville.

WATER FUND

This fund accounts for all fmancial transactions relating to the City's Water seiVice. Services are on a user charge basis to residents and business owners located in Roseville.

WASTEWATER FUND

This fund accounts for all financial transactions relating to the City's Wastewater Collection and Treatment Services are on a user charge basis to residents and business owners located in Rose.ville.

SOLID WASTE FUND

This fund acoounts for all financial transactions relating to the City's Solid Waste serviCe. Services are on a user charge basis to residents and business owners located in Roseville.

ROSEVILLE NATURAL GAS FINANCING AUTHORITY

This fund accounts for fmancing and purchasing pre-paid natural gas for the generation of power for the Roseville Energy Park.

GOLF COURSE FUND

This fund accounts for all financial transactions associated relating to the development, operation and maintenance of the City's public golf courses.

LOCAL TRANSPORTATION FUND

This fund accomltS for the activities associated with the operations and maintenance of the City's public transit activities and has particular emphasis on serving the elderly and the handicapped. .

SCHOOL-AGE CHILD CARE FUND

This fund accounts for the receipt of parent fees and State grants used to finance child development programs.

J d. ~ c•.H ~ ~ ; • " ' • :::~:!~

~ a w ! .. i :e

~ i ~i~~~~; ~ H~ ~~ ! i l ' ~~~ i ~ " ~

. II ~ i5i' I 'I . "I jl ~1 ,.

1u ~ ~ -· n '-

-~ ~- ~-~ ;~ ~

I il HI ~1 !I j- ~- "'8§~~ • -· e '

~1 ~1 !I ;I ~

~1 ~I ~ ~

~ri

·~ ~ ~- -· ~""! ~ ~:/ ~~ ; . ~~ ~ • ~

!~~~~;~~: ~ t;~&; ~ •• ~ ~ ~-~:!- ~ H ~ ~ ..;,; ~ '!

~a ~;. ~g.

I il a ~ I 'I ~I ~~ •• g~ ~

~~ "' I ~1 ·~

I ~I ~I g -;:; ;;:~ 5 •

~H~ I ~1- ~~ ' ~~ I ~I ~I

HH~ 1~1 IP I !I ~I ~~ ~~~ I ~1 ~~ ~ I ~1 ;I u~J~m ; H u -~ ij

"

~ ~-

i1 •• £ .

~~~~ :;~:!~ !1 i ~ ~~ • • I !~ " !!

CITY OF ROSEVILLE PROPRIETARY FUNDS

STATEMENT OF REVENUE, EXPENSES AND CHANGES IN FUND NET ASSETS FOR THE YEAR ENDED JUNE 30, 2007

Busi,.,...-~ Acriviti .... En~sc Funds Gov~rnm0111AI

Activities-

""' Roseville Natural Gu Go" """ Scllool-Ag~ Internal s~l'1/ioc Elecnic w.~ Wu1ewo1er WMte FinaDcinl Amhori~ Course Tl'l%l~tion Child Care '"'" , .....

OPERATING REVE.'WES Charges for services Slll,715,490 S!3,623,0SS S22,312,214 SI8,]44,0IR $3,14~.S66 $631,633 $4,S45,460 $174,420,436 S21,919,180

Sale ofwho!o .. Ie powo• 17,247.459 17,247,459

O<hcr 1,30l.l49 1,315,610 143,431 431,176 14.071 108,193 3,313,630 2,587,208

Total Opcmtiq R~• 130.264.098 14,938,665 22.455,1>45 18,575,19-4 3,162.637 739.826 4,&45.460 194,981.525 24,S06,.188

OPERATING E-XPENSES ?un:haoed power 102,413,597 102,413,597

OpentiOD.'I ]4,330,023 4,531,198 14,790,805 l4,3!7,01J 1,604,474 4,191.390 4,797,282 58,562,185 13,748,421

Adminbnation 2,461,590 4,045,133 626,647 606,492 49-4,953 8,234,815

[kp=iation md amortiz.ation 6,496,179 6,054,317 9,8711,725 193,112 447,9'90 724,287 14,523 23,801,133 3,789,.175

Cloim•e;q>en.., 1.516,411

T lllal Operatin$ hponse• 125,701,389 14,630,643 25.288,177 15.116,617 2,o52,4M 5,410,63!1 4,8]],805 193,011,730 ]9,054,207

OpenW.glncome (L<m) 4,562,709 308,017 (2,832,532) 3.458..S17 1.110,173 {4,670,804) 33,655 1,969,795 5.452.181

NONOPERATING REVENUES (EXPENSES) lnlereSl and rents revenuo 7,007,226 2,H4,244 720,653 ]69,933 $255,451 216,658 652,110 4,102 !1,359,783 2,985,944

Interest ADd fiscal <bar] .. (c~pon .. ) (2,800,756) (1,224,931} (3,660,434) (65,778) (4,1H,S05) (299,]39) (13,S61) (12,200,104)

C<>Slofismanc~ (1,752,852) (1.752,852)

o:l Amortization of \>end premium 735,910 735,910

' Suhvenlioru and gralllS 1,868,419 102,421 12,075,393 281,984 14,328,217

N Increase (d..,r=ue) ill NCPA r=liei'V .. 1,777,634 1,717,634 00 Increase (decrease) ill SPWA "'""rve• 8,866,468 8,866.468

O<ho (2,?22,740) (2,722,740) 252,679

Net Nonoperating Revenues (E:<penoes) 3,261,364 2,977,732 5,926,087 206,576 (4,896,990) (82,481) 12.727,.503 272.525 20.392.316 3,238,623

Inc=• {loss) lkf""' Conaibutions and Tl'lll<fm 7,824,!173 3,285,749 3,(193,555 3,665,153 {4,896,990) 1,027,692 8,056,699 306,1M 2.2,362,111 8,690.~04

' Capi!al conaibutioru - conneclionlimpaol fee< 8,820,363 10,408,763 1,153,426 20,382,552

Conaibulion in aid of eoruli'Uetion 7,409,833 7,4{)9,833

Capital contribution> fr= developers 5,604,920 33,6)6,794 23,398,144 27,199 62,667,057

Capital contributions from SPW A member agencies 7,350.294 7,350,294

Transfer• t.n(Note4A) 3!1,000 1,284,676 623,743 1,112,300 28,52~ 3,079,247 5,359,712

Tl'lll<fers{OUl) (Note 4A) (13,671,556) (4,9(,3,841) (4,341,4271 (),211,040} (169.041} (1,.570,547) m5.090) (28,302,544) (2.713,)87)

Qw,ge ill = usets 7,(97,270 42,063,741 39,909,329 2,231.282 (4,896,990) 858,649 7,625,651 (40,382) 94,94!!,.550 11.337,129

ToW netasscts-beginning 275,189,140 371,274,909 475,727,702 2,056,860 ~.319.113 13,S06,98l 877,435 1,146,952,142 65,887,309

Total net assets-endin! S282,l86.4IO S4B,338,6SO SSI5,637,03l $4,288,142 ($4,896,990) $9,177,762 $21.132.634 $837,053 $1,241.900,692 $77,224,438

Soc accompanying oolealo financiolsuttements

to ' N

'-0

CITY OF ROSEVILLE PROPRIETARY FUNDS

STATEMENT OF CASH FLOW! FOR THE YEAR ENDED JUNE 30, 2001

Bu>in"'!:t:ip< Acuvu ..... Entc"P"'• f'und•

Solid RoKVlli< Notu110l ,;.,

CASH FLOWS FROM OP!RA n!<.G AcnVlnES

Re<eip<>frumCidtomm

Poymm~> to "'''!'lien

f'll)"'ll<lll> to mrploy«> Cb....,.poid Othcr=eipa

CASH f'LOWS FROM NONCAPITAL

$91,410.867 (116.1;:><1,714]

(9,4-18,3)(1)

~

~

(lno;reanld«rea><inducfromoth<rfund> tU04) lri<T'OO'CI-..:l;oducooOtlltrr-cb. ~.000

llncre .. eld~onodvanceoooolltffurld< ]r>CIQ1C (<i<auo<) in od>on«> from othc:r fiU'I<!> 200,000

Transfcn'" )(1,000 11V15fm(GIIt) ~

CASH FLOW~ fROl.1 CAPITAL AND REI,ATHJ

Capotalcc•1trih«tt<m>

Acqui.,ti'"'and-ofc.opoW....a.n«

l'ramf"' of oonn«•""' f«> "'SPWA (']w,ge inre.triciOd .. >et,

l'rmclpol fl&ym<nl> orr capoW deb< lnt<r<otf10idoncaplloldobt

s..bvatttoll>ondgr.tl>

C~ Flov.• frumCopnal•nd Rel.w:d

fi""""'"gAcuvil><>

CASU FLOWS FROM !NVESTIJ<G ACTIVI1JES

l'r<>c«d•frorn,.,.,..,.,,wdot>l

lnteretOpaidonnon-a.potBidcbt

l•l<h:<londdhid<roh

]'.'CI uu:ra>< (dccreaS<) 1:1 cash and ca!h equivalent>

Ca>h ond mvntmrnl> at end of peri<><

NONCASH TRANS>\cnONS ContnburiooofSPWA c.opoW ...... ooCoty

l'nrtelP"If<l<mn<n1 ofSPWA Rcvrnue B«w;l'

lntcn:>l on SPWA R"·onuclkmd>

Cgn<rib111"'"of<.tpo1BI....,. ffornde'-cloper<

R<ttrem<nLofcapttala;r><t>

ll,Ol-1,1$3 (84.'199.1104)

11M>6J,9H9

(1,400..0001

Il.6lS,91lJ (69,6ll)

5lO,H5l

~

~

tSIJH.76li

RECONCJUA TION Of OPIORA nr;G !SCOl.IF. (LOSS) TO

NEl'CASI! PROVIDED BY OPERATING Al-"lWITILS

A<i)u>lfll<'111> Lo <e<On<01< operot>ni income

10 ..... <o>h PfO"i<<<d by _...,~ """"'""''

Prepoid..~base<lps

Ae<uunts•mloth<Tfi&Y•bl.,

O.femd~

l<<t ,.,h pro>1ded by opon.ttng "'""""

6.496,179

a~sJ.o....J

(1,71).766)

(.l9.bl4,l2~)

~ l~ll.HM.OlR)

w .. """', .. ~Finanrui!!AIIIhoriiY

$14,059.8M

(~39.33'i)

(6J9~)!7))

S2!,94-!,318 , Sl7,889,819

(10.127.9~2) (10,774.~)])

(4.967.483) (4,)18,103)

(7,890)

7.8~

20.1,500

1..211-1.616 613.743

14.96).&41) ~ ~

33,6)6.7'1-1

(71.NI'i.940)

" {IM5.~lll

11,22-1,9)0) 1.1163.8)9 ~.~.:0.)6)

(23,IIO.Jml

(JOJ9,38-I) (7,614.)21)

(4J7Ml41

l0,40H.Jb3

1.61),-«>8

(960,9811

(65,778> 210,814

l,!ll,426

9J5,m

SO.Jl2.1Xll ~~

Sl7.lii.Oll~~

tS1.448.l4HJ

SJOI!,Ol7

Ms.l.ll7

432,810 670,04H

574.475

SH.O.W,l6J

~llMUlJ

(1,7.16.~21

(3,0711.198)

23,398,1.1.1

(22,5081

1Sl.8ll,ll21

9.Sm.m

($30,6-ISI

193,112

(2Sol.l99) 29,747

(199.176)

($10H.527,54J)

l.ll>4

(10.645,177)

{]0,(>41..177)

2.24.80-1.116

tH88J57J

lll,~9

Z19.1JI .. ll6

(Sll1,1\61.l6l) 4,13).820

tSlO~.ll7S-lll

Governmental Activlt!Q•

Golf Loco! School-A~ lnt<mal S<r>i«

~ ~ ChildCore ~ Fund•

SJ.OS/1.826 !S3.81J,031) (1,7)1,4071 (),930,'148)

llHJ.lll>

1219]

(320.000) (2'1'1,1)9)

("i2M9l)

(28,806)

1500.000)

27,!99

(1.776,583)

l.Oll.71l

!-1,818,1'¥7

(759,9021

(4.!104.3451

219,213

241.31>6

Sl49,>66,8ll

(l52,912,61i1)

(29,860.629)

(38,200)

428,617

(2'14,500)

1212,500)

3.079,247

46,678,746 (159,995,615)

(7,()24.}211

108,012.672 (1,125,8111

(4.218 .. 7621 l.92X.O~S

20J~~..551

(l.72l.7401

224.~04.110

(5,1L&8.Jl1)

~~~~

(),.;t,.1,)16) (2'i,I00.7bi!J

~~~~

~~~~

$1,110,11)

• «7.'1'1(1

lllt>.~l!l '

$ll.M5

724,187 1~.523

l~.\45 3) .. 91!

~~

~~

SIS,o~.i2J

(1,746,9~21

().670,1~)

23.398,144

(1,640,166)

11,899,837)

(1.017,-lli)) (lll.MI.ll•.\1

(3•.!73.065)

~

~

S21,922,M2

(IIJ97,876)

(1.141,046) (l..'i7Mll) l.587,l08

J.Ml,757

]SILI,.'i99) 113,737

459,500

5.3.\~.711

12.713.3871

1.r..lol.%3

(6,100,Q291

151.679

7.1!2,856

ll.SI\4.070

$60.766 .. 926

$S,4l1,181

J,789.J7S

~20.524

(2,0J98,401i)

17 .. 693.757 --,

til ' "' 0

This Page Left Intentionally Blank

FIDUCIARY FUNDS

FIDUCiARY FUNDS

Fiduciary funds are presented separately from the Government-wide and Fund financial statements. The City had the following types of fiduciary funds in Fiscal2007:

Endo\\ment Private-Purpose Trust funds are used to account for trust arrangements under which principal and income benefit private organizations.

Agency funds are used to account for assets held by the City as an agent fo~ individuals, private organizations, and other governments. The financial activities of these funds are excluded from the City~ wide financial statements, but are presented in separate Fiduciary Fund fiflancial statements.

"

CIIT OF ROSEVILLE STATEMENT OF FIDUCIARY NET ASSETS

FIDUCIARY FUNDS JUNE 30, 2007

ASSETS

Cash and investments in Treasury (Note 3) Restricted cash and investments with fiscal agents (Note 3)

Accounts receivable Accrued interest receivable Due from other government agencies Deferred receivable

Total Assets

LIABrLITIES

Accounts payable Accrued liabilities Due to other government agencies Due to member agencies Due to bondholders Due to others

Total Liabilities

NET ASSETS

Held in trust for private purpose

Endowment Private-Purpose T~mt Fond

$2,251,422

27,021

2,278,443

$2,278,443

See accompanyillg note~ to financial statements

"

Agency

'""' $196,546,701

51,685,766 160,654

2,090,470 4,624,110

62,966

$255,170,667

$5,133,092 306,288

13,014 185,290,250 62,337,426

2,090,597

5255,170,667

CITY OF ROSEVILLE ENDOWMENT PRIVATE-PURPOSE TRUST FUND

sr A n:MENT of CHAN_GES IN NET ASSETS FOR THE YEAR ENDED ~E 30, 2007·

ADDITIONS Contributions from developers 'contributions from the City Investment income

Total additions

DEDUCfiONS Payments in accordance with trust agreements

Change in net assets

Net assets -beginning

Net assets -end

See accompanying ootes to finaoci~l statements

..

SI08,653 . 36,940

106 498

252 091

2.243

249,848

2,028 595

52 278 443

I ,, ' ·~ •"·

This Page Left Intentionally Blank

CITY OF ROSEVILLE Notes to Basic Financial Statements

I NOTE I ·SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The City of Roseville was incorpomted on April 10, 1909 under provisions of Act 279, P.A. 1909, as amended (Home Rule City). The City opemtes under the CoUncil Manager form of government and provides the following services: public safety (police and fire), highways and streets, sanitation, water, solid waste, electric, local transportation, school-age child care, golf course, parks recreation, public improvements, planning and ·zoning, library, genera1 administration services, redevelopment and housing.

The financial statements and accounting policies of the City conform with generally accepted accounting principles in the United States of America applicable to governments. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. Significant accounting policies are summarized below:

A. Reporting Entity

The accompanying basic financial statements present the financial activity of the City, which is the primary government presented, along with the fmancial activities of its component units, which are entities for which the City is financially accountable. Although they are separate legal entities, blended component units are in substance part of the City's operations and are reported as an integral part of the City's financial statements. This City's component units which are described below are all blended.

The Redevelopment Agency of the City of Rosevi.lle is a separate government entity whose purpose is to prepare and implement plans for improvement, rehabilitation, and development of certain areas within the City. The Agency is controlled by the City and has the same governing board as the City, which also performs all accounting and administrative functions for the Agency. The financial activities of the Agency have been included in these fmancial statements in the Redevelopment Agency of the City of Roseville Special Revenue Fund.

The Rosc~·iUe Finance Authority is a separate government entity whose purpose is to assist with the financing or refinancing of certain public capital facilities within the City. The Authority has the power to purchase bonds issued by any local agency at public or negotiated sale and may sell such bonds to public or private purchaseis at public or negotiated sale. The Authority is controlled by the City and has the same governing body as the City, which also performs all accounting and administrative functions for the Authority. The financial activities of the Authority are included in the Roseville Finance Authority Debt Service fwid and Capital Projects Fund.

The City of Roseville Housing Authority is a separate government entity whose purpose is to assist with the housing for the City's low and moderate income residents. The Authority is controlled by the City and has the same governing body as the City, which also performs all accounting and administrative functions for the Authority. The fmancial activities of the Authority are included in the Housing Authority Section 8 Special Revenue Fund.

Financial statements for the Redevelopment Agency may be obtained from the City of Roseville at 311 Vernon Street, Roseville, California, 95678. Separate fmancial statements for the Roseville Finance Au!h~rity and Roseville Housing Authority are not issued.

Ol ' w w

CITY OF ROSEVILLE Notes to Basic Financial Statements

I NOTE 1 -SUMMARY OF :SIGNIFICANT ACCOUNTING POLICIES (Continued) I

B.

The California Joiilt Powers Risk Management Authority, the Local Agency Workers' Compensation, Excess Joint Powers Authority, the Roseville-Placer County Civic Center Improvement Authotity, the Highway 65 Joint Powers Authority, the Disaster Recovery Joint Powers Authority, and the South Placer Wastewater Authority are not included in the accompanying basie: financial statements because they do not meet the above financial accountability criteria as these entities are administered by governing boards separate from and wholly independent ()[the City.

Basis of Pr~~mtatio)!

The City's Basic Financial Statements are prepared in conformity with accounting principles generally accepted in the United States of America. The Government Accounting Standards Board is the acknowledged standard setting body for establishing accounting and financial reporting standards followed by governmental entities in the U.S.A.

These Standards req1.1ire that the financial statements described below be presented.

Government-wid~ Statements: The Statement of Net Assets and the Statement of Activities display information about the primary government, the City and its component Wlits. These statements include the financial activities of the overall City government, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. These statements di~tinguish between the governmental and busine~s-type activitie~ of the City. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange ttansactions. Business-type activities are financed in whole or in part by fees charged to external panies.

The Statement of Activities presents a comparison between direct expenses and program revenues for each segment of the business-type activities of the City and for each function of the City's governmental activities. Direct expenses are those that are specifically associated with a program or function and, th~refore, are clearly identifiable to a particular function. Program revenues include (a) charges paid by the recipients of goods or services offered by the programs, (b) grants and contributions that are restricted to meeting the operational needs of a particular program and (c) fees, grants and Contributions that are restricted to financing the acquisition or construction of capital assets., Revenues that are not classified as program revenues, including all taxes, are presented as general revenues.

Fund Financial Stat~ments: The fund financial statements provide information about the City's funds, including fiduciary funds and blended component units. Separate statements for each fund category-governmental, proprietary, and jiducia~are presented. The emphasis of fund financial statements is on major individual governmental and ente~prise funds, each of which is displayed in a separate colunm. All remaining governmental funds are aggregated and reported as nonmajor funds.

Proprietary fund operating' revenues, such as charges for services, result from exchange transactions associated with the principal activity of the fund. Exchange transactions are those in which each party receives and gives up essentially equal values. Nonoperating revenues, such as subsidies and investlnent earnings, result from nonexchange transactions or ancillary activities.

· ..... ,·

CITY OF ROSEVILLE Notes to Basic Financial Statements

I NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

c. Major Funds

Major funds are defined as funds that have either assets, liabilities, revenues or expenditures/expenses equal to ten percent of their fund-type total and five percent of the grand total. The Genera! Fund is always a major fund. The City may also select other funds it believes should be presented as major funds.

The City reponed the following major governmental funds in the accompanying financial statements:

General Fund - This is used for all the general revenues of the City not specifically ·levied or collected for other City funds and the related expenditures. The general fWld accounts for all financial resources of a governmental unit which are not accounted for in another fund.

Redenlopment Agency - The Redevelopment Agency FWld accounts for all activities of the Agency, including I) tax increment allocations set aside for the purpose of increasing or improving housing for \ow-income residents; 2) the accumulation of property taxes for payment of interest and principal on the Redevelopment Agency tax allocation bonds issued in 2003; 3) capital projects connected with downtown redevelopment· funded by property tax increment revenues.

Community Facilities District Projects Fund - This fund is used to account for specific public improvements such as streets, sewers, storm drains, sidewalks or other amenities funded by special assessments against benefited properties.

The City reported all its enterprise funds as major funds in the accompanying financial statements:

Electric Fund - This fund accounts for all fmancial transactions relating to the City's Electric service. Services are on a user charge basis to residents and business owners located in Roseville.

Water Fund - This fund accounts for all financial transactions relating to the City's Water service. Services are on a user charge basis to residents and business owners located in Roseville.

\"

Wastewater F11nd - This fund accounts for all financial transactions relating to the City's Wastewater Collection and Treatment. Services are on a user charge basis to residents and business owners located in Roseville.

Solid Waste Ftmd -This fund accounts for all financial transactions relating to the City's Solid Waste service. Services are on a user charge basis to residents and business owners located in Roseville.

Roseville Natural Gas Financing Authority- This fund accounts for financing and purchasing pre-paid natural gas for the generation of power for the Roseville Energy Park.

Golf Course Fund- This fund accounts for all financial transactions associated'relating to the development, operation and maintenance of the City's public golf courses.

Local Transportation Fund - This fund accoWlts for the activities associated with the operations and maintenance of the City's public transit aCtivities and has particular effij)hisiiiOn· serving the elderly and the handicapped ..

CITY OF ROSEVILLE Notes to Basic Financial Statements

I NOTE 1 -SUMMARY OF SIGJ\'IFICANT ACCOUNTING POLICIES (Continued) [

School-age Child Care Fund -This fund accounts for the receipt of parent fees and State grants used to fin~ce child development programs.

The City also reports the following fund types:

Internal Service Funds. The funds account for automotive services, automotive replacement, worker's cCJmpensation, general liability, unemployment reserve, vision, dental, section 125, post retirement,' and central stores; .all of which are provided to other departments on a cost­reimbursenlent basis.

Fiduciarv Funds. The Endowment Private-Purpose Trust Fund and the Agency funds are used to account io( assets held by the City. as an agent for individuals, private organizations, and other governments. The financial activities of these funds are excluded from the government-wide financial swtement, but are presented in separate Fiduciary Fund financial statements.

D. Basis of Accounting

·The government-wide, proprietary, and private-purpose trust fund financial statements are reported u:;ing lhe economic, re.murces memurcmenl focus and the full nccrunl bnsis of accotmting, Revenues are recorded when earned and expenses are recorded at the time liabilities are in cuffed, regardless of when the related cash flows take place.

Govemmer.ttal funds are reported using the cuffelll financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when measurabM and available. The City considers all revenues reported in the governmental funds to be available if the revenues are collected within sixty days after year-end. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term -debt, claims and judgments, and compensated absences, which are recognized as expenditure-s to the extent they have matured. GeneraJ capital asset acquisitions are reponed as expenditllrf!S in governmental funds. Proceeds of general long-term debt and acquisitions under capital leases are reported as other financing sources.

Those revenues susceptible to accrual are property, sales and franchise taxes, certain other intergovernmental revenues, certain charges for services and interest revenue. Fines, licenses and permits, and charges for services are not susceptible to accrual because they are not measurable until received in cash.

Non-excharlge transactions, in which the City gives or receives value without directly receiving or giving equal value in exchange, include taxes, grants, entitlements, and donations. On the accrual basis, revenue from taxes is recognized in the fiscal year for which the taxes are levied or assessed. Revenue from grants, entitlements, and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied.

The City milY fund programs with a combination of cost-reimbursement grants, categorical block grants, and general revenues .. Thus, both restricted and unrestricted net assets may be available to fmance program expendirures. The City's policy is to first apply restricted grant resources to such programs, followed by general revenues if necessary.

CITY OF ROSEVILLE Notes to Basic Financial Statements

!NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) [

E.

F.

G.

The City follows Statements and interpretations of the Financial Accowlling Standards Board and its predecessors that were issued on or before November 30, 1989, in accounting for its business­type activities, unless they conflict with Government Accounting Standards Board pronouncements.

Revenue Recognition For Electric, Water, Wastewater, and Solid Waste Funds

Revenues are recognized based on cycle billings rendered to customers. All residential and commercial utility customers are billed once per month. There are twenty billing cycles per month which include all types of customers, based on their location within the City. Revenues for services provided but not billed at the end of a fiscal year are accrued.

Contributions of cash or assets to proprietary funds from state and federal agencies, developers and others are recorded as revenue.

Property Tax

Placer County assesses properties and it bills, collects, and distributes property laxes to the City. The County remits the entire amount levied and handles all delinquencies, retaining interest and penalties. Secured and unsecured property taxes arc levied on July I of the preceding fiscal year.

Secured property tax is due in two installments, on November I and February I, and becomes a lien on those dates. It becomes delinquent on December 10 and April 10, respectively. Unsecured property tax is due on July I, and becomes delinquent on August 31. Collection of delinquent accounts is the responsibility of the county, which retains all penalties.

The term "unsecured" refers to taxes on personaJ property other than real estate, land and buildings. These taxes are secured by liens on the property being taxed. Property tax revenues are recognized by the City in the fiscal year they are ·assessed provided they become available as defined above.

Compensated Absences

Compensated absences comprise unused vacation leave, vested sick pay and certain compensated time off, which are accrued as earned. The City's liability for compensated absences is recorded in various Governmental funds or Proprietary funds as appropriate. The liability for compensated absences is detennined annually. For all governmental fwtds, a liability of these amounts is reported only if they have matured, for example, as a result of employee resignations and retirements. The remaining portion is recorded as a liability in the Statement of Net Assets. Proprietary funds' liability for compensated absences is recorded in each proprietary fund.

"

CITY OF ROSEVILLE Notes to Basic Financial Statements

I NOTE l- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) I

H.

/,

J.

The changes of the compensated absences were as follows:

Cklvemmental Business-Type

Activities Activities Total

Beginning Balance $7,594,950 SS,ll3,984 S\2,708,934 Additions 1,626,199 1,632,525 3,258,724

Payments (232,457) (63,105) (295,562)

Endi,n~ Balance $8,988,692 $6,683,4[)4 $15,672,096

Currmt Po~l~n $402,421 $3,983,974 54,386,395

Compensated absences are liquidated by the fund that has recorded the liability. The long-term portion of governmental activities compensated absences is liquidated primarily by the General Fund and the Redevelopment Agency of the City of Roseville Special Revenue Fund.

Postemployment Heath Core Benefits

The City provides health care benefits for 347 retired employees and spouses based on negotiated employee bargaining unit contracts. Substantially, all of the City's employees hired before January I, 2004 may become eligible for those benefits if they reach the normal retirement age and have a minimum five years of service while working for the City. Employees hired after January I, 2004 may become eligible for those benefits if they reach the normal retirement age and have years of service credit that range from \0 to 20 years v.ith the City's contributions ranging from 50% to 100%, respectively. The cost of retiree health care benefits is recognized as an expenditure as health care premiums are paid. For the year ending June 30, 2007, those costs totaled $2,512,642.

Inventories

Inventories are valued at cost, usiri"g the weighted.average method. lnventoriC:s of -the General Fund consist- of expendable supplies held for cohsitmption. The cost is recorded as an expenditure in the General Fund at the time individual inventory items 'are consumed. Reported General Fund inventories are equally offset by a fund balance reserve which indicates that they do not constitute available Spendable resources even though they are a component of net current assets. Inventories of the Enterprise Funds consist primarily of merchandise held for internal consumption.

NeW funds . .. -. Th~'FEMA Special Revenue Fund, the Bike Trail/Open Space Maintenance Fund, the Roseville Natural Gas Authority Enterprise Fund, the Diamond Creek Community Facilities District #I Ag'ency Fund, and the Fountains·Community Facilities District #I Agency Fund were established in fiscal year 2007. \.',''

CITY OF ROSEVILLE Notes to Basic Financial Statements

j NOTE 2- BUDGETS AND BUDGETARY ACCOUNTING

A. Budgeting Procedures

The City follows these procedures in establishing the budgetary data reflected in the financial statements:

I. The City Manager submits to the City Council a proposed budget for the fiscal year commencing the following July I. The budget includes proposed expenditures and the means of financing them.

2. Public hearings are conducted to obtain taxpayer comments.

3. The budget is legally enacted through passage of a minute order and ordinance.

4.

5.

6.

7.

The City Manager or designee is authorized to apply prudent monitoring procedures to assure that actual expenditures/expenses of the City do not exceed the appropriations by department of the major summary categories (salaries and benefits, operating services and supplies, capital outlay, and capital improvement projects) in conformance with the adopted policies set by the City Council. Additional appropriations or interfund transfers not included in the original budget ordinance require approval by the City Council.

Expenditures may not legally exceed budgeted appropriations at' the dePartment level by major summary category within each fund.

Formal budgetary integration is emPloyed as a management control device during the year.

Budgets are adopted on a basis consistent with generally accepted accounting principles (GAAP) for all goverrimental funds. Budgets are adopted for all governmental funds.

The following funds are budgeted on a project basis. Such budgets are based on a project time frame, rather than a fiscal year "operating" time frame, whereby unused appropriations continue until project completion:

i. Special Revenue Funds I. Traffic Mitigation 2. State Gasoline Tax 3. Park Development 4. Pleasant Grove Drain Basin 5. Tree Propagation ·~

ii. Capital Project Funds I. Community Facilities District 2. Building

5I

Ill ' ...., "'

CITY OF ROSEVILLE Notes to Basic Financial Statemenh

I NOTE 2- BUDGETS AND BUDGETARY ACCOUr-!TING (Continued)

B.

c.

Encumbrances

Under encumbrance accounting, purchase orders, contracts and other comminnents for the expenditure of monies are recorded in order to reserve that portion of the applicable appropriation. Encuinbrance accounting is employed as an extension of formal budgetary integration in all budgeted funds. Encumbrances outstanding at year end are reported as reservations of fund balances since they do ilOt constim.te expendi~~s or liabilities and are reappropriated in the following year. Unexpended appropriations lapse at year end and must be n:arpropriated in the following year.

£;Cess of Expenditures or Expenses over Appr()priation.f

The Funds below incurred expenditures in excess of their budgets in the amounts below. Sufficient resources were available within each department to finance these overages.

Fund Department Amount

General Fund: Housing

Sal31"ies and benefits $55,518 Economic development

Salaries and benefits 19.459 Operating services & supplies 2,144

Fire Sal!IJ"ies and benefits 240,531

City attorney Operating services & supplies 26.629

Redevdopment Ail:ei.cy Special Revenue Fund;

Conmtunity development and planning Pau-through payments 217,?64

Debt ~ervice: Principal 175.000 Inte~est and fiscal charges 1,549,547

Community Block Grant/HOME Special Revenue Fund:

ComnJ.unity services Operating services & supplies 433,994

Housin.g Salaries and benefits 13.527

Housing Authority Section 8 Spceial Revenue Fund:

Housing Salaries and benefits 390,863 Operating services & supplies 44.241

Housillg assistance payments 3,328.656 Affordable Housing

Special Revenue Fund: llo<L~ill&

Operating services & supplies 53,386 Ro8eville Financing Authority

Special Revenue Fund· Debt service:

lnteJeSt and fiscal cha.Tges 1.537,911 Gcnerlll government 936.494

CITY OF ROSEVILLE Notes to Basic Financial Statements

!NOTE 3- CASH AND INVESTMENTS I The City pools cash from all sources and all funds, except cenaln specific invesnnents within funds and cash with fiscal agents, so that it can be invested at the maximum yield, consistent with safety and liquidity, while individual funds can make expenditures at any time.

The City and its fiscal agents invest in individual investments and in invesnnent pools. Individual investments are evidenced by specific identifiable pieces of paper called securities instruments, or by an electronic entry registering the owner in the records of the institution issuing the security, called the book entry system. Individual invesnnents are generally made by the City's fiscal agents as required w1der its debt issues. In order to maximize security, the City employs the Trust Department of a bank as the custodian of all City managed investments, regardless of their form.

The City's investments are carried at fair value instead of cost, as required by generally accepted accounting principles. The City adjusts the carrying value of its invesnnents to reflect their fair value at each fiscal year end, and it includes the effects of these adjustments in income for that fiscal year.

Classification

Cash and invesnnents are classified in the fmancial statements as shov.'l! below, based on whether or not their use is res~cted under the terms of City debt instruments or agency agreements.

Cash and investments in City Treasury Restricted Cash and investments with fiscal agents

Total City cash and investments with primary government

Cash and investments in Fiduciary Funds (Separate statement)

Total Cash and Investments

Cash and investments as of June 30, 2007 consist of_ the following:

Cash in bank and on hand Investments

Total Cash and Investments

5397,147,962 117.439,078 514,587,040

250,483 890

$765,070,930

$35,236,082 729,834,848

$765,070,930

Cash and investments with original maturities of three months or less are treated as cash and equivalents for purpose of preparing Proprietary Fund statements of cash flows. Also, each Proprietary Funds' portion of the City's ovemll cash and invesnnent pool is treated as cash and equivalents since these amounts are in substance demand deposits.

53

to ' <;J

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CITY OF ROSEVILLE Notes to Basic Financial Statements

NOTE 3 - CASH AND INVESTMENTS (Continued)

B. Investments Authorized by the California Government Code and the City's Investment Policy

The City's Investment Policy and the California Government Code allow the City to invest in the following, provided the credit ratings of the issuers are acceptable to the City; and approved percentages and maturities are not exceeded The table below also identifies certain provisions of the California Government Code or the City's Investment Policy where it is more restrictive:

Minimum Maximum Maximum Maximum Credit Percentage Investment

Authorized Investment T~e Maturi!r ~ali!r Allowed In One Issuer

U.S. Treasury Obligations S Years None None None U.S. Agency Securities SY= None None None Mortgage Pass-lbrough Securities S Years None 20% None Forward Delivery Agreements (A) N/A A None None Local Agency Bonds S Years None None None Repurchase Agreements 30 days None None No~

Bankers' Acceptances ISO days 'N'one 40% 30% Commercial Paper 270 days A· I 25% 10%{B) Medium-Term Notes 5 Years AA 30% None Collateralized Time Deposits SY= None None None Negotiable Certificates of Deposit S Years AA 30% None Local Agency Investment Fund (LAIF) N/A None None None Insured Saving Accounts NIA None None None Money Market Murual Funds N/A None 2()% 10% Shares in a California Common Law Tn N/A None None None Interest Rate Swaps (C) 'N'IA None None None

(A) In specified fund accounts where liquidity is not the primary investment objective, the maximum maturity can be up to ten years with granted express authority by the City Council. Such investments cannot be made less than three months following the approval of extended investment terms. All longer-term investments must be Federal Treasury or Agency securities. The specified fund accounts are:

Citizens Benefit Permanent Fund Roseville Aquatics Complex Maintenance Permanent Fund Endowment Private-purpose Trust Fund All future trust and/or endowment funds established by the City with no anticipated use of principal

(B) Eligible Commercial Paper may not represent more than 10% of the outstanding paper of an issuing corporation.

(C) Interest rate swaps may only be used in conjunction with enterprise fund debt or investments, not the General Fund. Currently, the City does not participate in any Forward Delivery Agreements. Pursuant to its function as custodian and investment manager of the South Placer Wastewater Authority, the City investCd certain Authority funds in Forward Delivery Agreements which are investments with fixed maturities and which bear interest at a variable rate. To hedge against changes in short-term interest rates, the Authority entered into a swap agreement to create a synthetic fixed interest rate on one of the Forward Delivery Agreements. Risks associated with the Forward Delivery Agreement and associated swap agreement are those of the Authority and not those of the City. Details of the swap agreement and associated risks may be found in the Basic Financial Statements of the Authority.

"

CITY OF ROSEVILLE Notes to Basic Financial Statements

I NOTE 3 - CASH AND INVESTMENTS (Continued)

c. Investments Authorized by Debt Agreements

The City must maintain required amounts of cash and investments with trustees or fiscal agents under the terms of certain debt issues. These funds are unexpended bond proceeds or are pledged reserves to be used if the City fails to meet its obligations under these debt issues. The California Government Code requires these funds to be invested in accordance with City resolutions, bond indentures or State statutes. The table below identifies the investment types that are authorized for investments held by fiscal agents. The table also identifies certain provisions of these debt agreements:

Authorized Investment Type

U.S. Treasury Obligations

U.S. Agency Securities

Certificates of Deposit

Time Deposits

Repurchase Agreements

Bankers' Acceptances

Money Market Funds

Taxable Governmental Money Market Portfolio

Commercial Paper (A)

Special Revenue Bonds

Pre-refunded Municipal Obligations

Municipal Obligations

Common Law Trust

California Asset Management Pool (CAMP)

Lawful Investment

Investment Agreements

Local Agency Investmenl Fund (LAIF)

Placer County Investment Pool

Maximum

Maturity

N/A

NIA

NIA- 30 days

NfA- 30 days

NIA

N/A- 270 days

N/A

NIA

180-270 days

N/A

N/A

N/A

N/A

N/A

N/A

N/A

NIA

N/A

Minimum

Credit

Quali!r

None

None

None to A-I

NOne to A· I

None roA

None to A-I

None to Aam-G

None

A-ltoAA

AA

AAA

AAA

None

None

None

A+toAA

None

None

(A) Maximum investment in one issuer of Commercial Paper is 10"/o of the outstanding bond proceeds.

CITY OF ROSEVILLE Notes to Basic FinaJJcial Statements

I NOTE 3- CASH AND INVESTMENTS (Continued)

D.

to ' v.o

00

Interest Rote Risk

Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Normally, the longer the rru1turity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. The City also manages its interest rate risk by holding most investments to maturity, thus reve:rsing unrealized market gains and losses.

Information about the sensitivity of the fair values of the City's investments (including investments held by bond trustees) to market interest rate fluctuations is provided by the following table that shows the distribution of the City's investments by maturity or earliest call date·

Remainin!:! Maturity (in Months) 12 Months 13 lO 24 25-W More Than

Or Less Months Months 60Moiltlis Total

U.S. Government Securities $10,426.299 S42.925.445 512.360,760 565.712,504

Federal Agency Set:urities 85,462,187 172,858.675 \13,060.629 $11.099.152 382.480,643

Co1p0nte Notes 9.309,945 19.671.169 4.923.0\0 33.910,124

Forward Delivery Agreement 56,013.059 8.908.460 64.921.519

Forward Purchase Agreement 10.644.515 10,644,515

Commercial Paper 15,843,305 15,843.305

Guaranteed Investmem Contracts 54.151.583 14.086.690 3,024,659 26,163,922 97.426,854

Repurchase Agre<.:ment 4,905,395 4.905,395

Money Market Mutual Funds (U.S. Securities) 23.707,335 23.707.335

Local Agency lnvesllllent Fund 16.355.741 16.355.741

California Asset Management Pool 11.852,902 1 1.852,902

Collateralized Time Deposits 2.074.011 2.074,01 I

Total Investments $229,183,308 $249j47,979 $189,382.117 $61.721.444 $729,834.848

The City is a participant in the Local AgenCY Investment Fund (LAIF) that is regulated by California Government Code Section 16429 mtder the oversight of the Treasurer of the State of California. The City reports its investment in l.,AIF at the fair value amount provided by LAIF, which is the same as the value of the pool shar(.. AI June 30, 2007 the fair value was $7,444 less than the City's cost. The balance is available: for withdrawal on demand, ·and is based on the accounting records maintained by LAIF, which are recorded on an amortized cost basis. Included in LAIF's investment portfolio are collateralized mongage obligations, mortgage-backed securities, other asset-backed securities, loans to certain state funds, and floating rate securities issued by federal agencies, government-sponsored enterprises, United States TreasUI)' Notes and Bills, and corporations.

CITI' OF ROSEVILLE Notes to Basic Financial Statements

I NOTE 3 -CASH AND INVESTMENTS (Continued)

E. Credit Risk

Credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented below is the actual rating as of June 30, 2007 for each investment type as provided by Standard and Poor's investment rating system:

AAA AA AA· M A-1+

l~•"<'•tm~nts:

Total

Feden.l Agency Securiues Corporate ~otes fMW,dDtl\vt:ryA~

F<>TWU<I Purdta~ Agre""""'t Commercial Paper

$~82,4~0,643 $382.480,643

G..Wteed lnvestment Coruracu Repurchase Agreement• Money Mad.e1 Mutual fur>ds

(\} S. S<X"tll"ities)

Tota!J

E.umpljrom C"dil R~t~ Di<do•u,~: U.S. Government Securities

,\{>tRatd:

local Agency lnves~m<;J;tt FUild Ca1ifomia A"'"' Management Pool Collaterallzed Time Deposits

Total Investments

2.758.062

68,3%,189

23.707.335

$477,~42,229

F. Concentrotion of Credit Risk

$13,537,427

56,013,\lS':i 10,644,515

11.540.578 4,905,395

$96,640,974

Sl7,614,635 33,910,124 1,169,4'14 Sl,H%,%1> 64,92\,S\'1

10.644,515 $15,843,305 15.843,305

l7,490.tm 97.426.~54 4,905.395

23.707.335

$!4.784.129 $19,229,05~ $15.843.305 033.839.690

65,712.504

16,355,741

11.~52.902

2.074,011

S729.834,M8

Investments in any one issuer, other than U. S. Treasury securities, money market mutual funds, California Local Agency Investment Fund, and California Asset Management Pool, that represent 5% or more of total Entity-wide investments are as follows at June 30, 2007:

Issuer

Federal Home Loan Bank

Federal National Mortgage Association

Federal Home Loan Mortgage Corporation

"

Investtnent

T

Federal Agency Securities

Federal Agency Securities

Federal Agency Securities

AmoWJt

. SJ37,220,680

121,713,275

96,990,702

CITY OF ROSEVILLE Notes to Basic Financial Statements

I NOTE 3- CASH AND INVESTMEN'fS (Continued)

t:J:J. ' w \0

Investments in any one issuer tltat represent 5% or more of total investments by iildividual funds were as follows at June 30, 2007:

M~)or Gfw~mm~nwl F~nd<:

~lopmtal A$ftH'Y of City ofRnstvillo

.1/.P, EmrrpriH FuNh:

Elocuio

R<l•rville !1/atural G ... ,fioan<U..Autbority

WatCT

Cl<>lfCoun:e

Fidudary FunJ:J:

. ·'

Issuer

We!!lflltJO

Am FSA Capital M"""'gtn>rnl

Fe<knl Home l<>on Morts•~ Corpontion

F<:denl Homo Lo011 llant Federal National Mon,.,. A!s~ri011

Wachovia Bank

T!'nity Pluo Finding

Federal Homo Loan Mongaae Corpcratioo

UBS Fina!loe Corpcration

Bank of America

Dexio

Am

MorpaSWIIoy

J.P.M_<'fPII,

Fedeml u~ La.nl M<Mlpl" Carpomwt~

Fedctal Home loan Bank

"

Investment T~ AmoWlt

lavesttneat Apeem<nl $23,023.496

lnve:!mlml Agroemeot 10,916,558

Invesunem Agreement 17.523,225

FedCTal Agot:~cySecumieo 10,786.643

Federal Agel>Cy Securities 20,285.559

fodCTal;\&m.y 5<-curit!U J4,[lj_~.D6.l

lnvomnmt Agreement 10.644.515

I~sanmt Apeemem 2.612..320

Federal AFl:lcy S.curiues 2.309.691

Cotmnm:ial Paper 2.421.078

Co"""'~rti.al Paper 2.Jl8,lll

Commordall'aper 2,686,538

lnvesunc:w Contn.ct 624,020

lDvestme!U CO!Xnlct 17,490,087

Forward Doli"ery Agreemetlt 56,013,059

FedcraJA~Sewnlici 14.1!14.67(1

Fodera! Aamcy Se<.-oritia 19,2$6.748

CITY OF ROSEVILLE Notes to Basic Financial Statements

!NOTE 4- INTERFUND TRANSACTIONS

A. Transfers Among Funds

With Council approval, resources may be transferred from one City fund to another. Transfers between funds during the fiscal year ended June 30, 2007 were as follows:

FundMakllli[Tran>fen

Redov<topmont A!01><y of the C1!y of R<Joev\lle

C"""""""YFocili"""Dislrictl'loj«t<

Non-MajOT Gu=l$1 Funds

Eloc:!ri<EIIla"pn><l'und WaterEote<priuFlllld

W-Eme<prucl'tmd • Sohd Wu1< Emaprioo F...:!

Qu!fCOiltS< Eoterprio.e Fund

l<dt T~ Eo""Priso FUDd S.:hool·Ag< ChJid C:~te Enteqm .. Fu<td

lnl ..... ! Servi<cl'uncb

Red...-ot..Pa<at Alfii<Y of II>• Qly of 11_.-lU• Ft!Dd a....n.t Fund

Non-M&JOf~ODtalF\uul>

lnl<mat Snvtn FIUitb

(A) Tol'llnd"""'"'1KIIIu.lfundo.:..:m...u.

(BJ r ..... r ... ro fund~ lllll Ond!=' cosu.

(C) To!'JIY for iodi«><1 ooou.

~-Redc>iolopmrnl A3ncy uf 1hc Coly of ROOC">"il!e

Commwnty focibb01 Du1rid c.pdal ""':j<e11 Fomd

Non·Mojor Oo""""'oruat Furub "

Et<ctri<Eotc<prisel'uood

Wate:rl'.merJ>ris<FWid

W~Eotorptis<F~md

SolidWoste~FUJ>d

local Tramportoti"" Ente:rpri .. l'uood ID!anat s.nu:. FuJ,di

Wa<'"""'"" Enlerp.U. Fund

SohdWa>:<ED1<0Jiri>eFIJnd

N-Mojor~lF\mda

Wo<erEotOI')In><f\uod

w.....,........Enterprio.eFUDd

• C<mliDWli!y F..:ih~ .. Du1rid c.pttal Project& FlDld

NOil·MajorGov<mrnODta! FlDltb

Non-MajOr Gov<mmmlall'unds

_,""' Non-Major Gov=!montat Furub

Eloctn< Emcrprise FUDd

WaterEI>te:rprioof'und w ........ , .. E<>t<rprioeFIJnd

SolidWUlo~fund

Golf c"""" En•orpn .. 1'\tnd

r.-t r~.., Eo~ Fund lntmtal Sctvoco Funds

(D) Totnn>f<Ti.o lieu ftmchi>e f001md fund iDdire<i coots.

(E) Recurring transfm

(f) To fund vaOOus l""'oct:ai.o !he upital fllndla-payddlt...,.,;.e.

"

~

y,....,r..-rm

Sl!l.llO ,,, 5ll.lll '" 4.546.190 (li),(C)

10.427)44 !D)

l,18l.SS8 "' t,946.67S "' 1.$6l.t08 (F.)

162.~17 '" 178.111 "' l1S.090 <G 921.270 '" 4.114J,66g '" 150»00 '" -·- "'

1.248.186 (A)

tt9.6ll ,,, 1,498,311 '" • '10.819.371 '" 2.71)6.593 ., 1.lll.S4S "' 1.063.996 !D)

6ll.J2J (D)

1,JH.550 '" 1.696.4S4 '" 30.000 .,

8t>O.Sl8 {Q

423,838 "' l.!l9S "' .ros,a7~ "' 308.074 '" 1.083.4\14 '" 28.!06 "'

28.!528 '" 2.278.431 "' l.lSt.S62 "' 537,719 '" 104.6!>4 ,. 161,8-44 "' 008.767 "' 6.126 "' !4.SS6 "' 9~ 66) "'

U2.666.tS7

CI1Y OF ROSEVILLE Notes to llasic Financial Statements

I NOTE 4 -II'iTERFUND TRANSACTIOJ'IOS (Continued)

B. Current lnterfund Balances

Current interfund balances arise in the nonnal course of business and are expected to be repaid shortly after the end of the fiscal year. At June 30, 2007 interfund balances comprised the

,;following:

Due From Other Funds General Fund

Speeial Revenne Fund: Affordable Housing

Traffic Mitigation

Enterprise Funds: Electric Fund Wastewater Fund Local Transportation Fund

Internal Service Fund: Automotive Replacement

Due To Other Funds Redevel!.opment Agency of the City of Roseville

SpedaJ Revenue Fund School-Age C1tild Care Enterprise Fund Traffic Safety Special Revenue Fund FEMA Special Revenue Fund Community Development Block Grant!HOME Special Revenue Fund Roseville Aquatics Comp1e~~, Maintenance Permanent Fund

Redevelopment Agency of the City of Roseville Special Revenue Fund

Electric ~nterprise Fund

Rosevil\6 Natural Gas Financing Authority Enterprise Fund Solid Waste Enterprise Fund FEMA Special Revenue Fund

Traffic Mitigation Special Revenue Fund Golf Course Enterprise Fund School-Aged Child Care Enterprise Fund Automotive Services Internal Service Fund

C Long· Term lnterfund Advances

-~· S940,000 (A)

181,482 (B) !92,641 (B) 588,781 (B) 214,044 (B)

6,458 (B)

50,000 (A) 200,000 (A)

1,504 (B) 205,500 (A) 28,806 (B)

212,500 (A) 127,000 (A) 60,000 (A) 534 599 (A)

$3,603,315

At June 30, 2007 the funds beloW had made advances which were not expected to be repaid wit_hin the next year. .

Fund Receiving Advance Fund Making Advance Amount of Advance

Special Revenue Funds: Redevelopment Agency of the City of Roseville General Fund $7,655,536

3,900,000 150,000 829,201 500,000

State Gasoline Tax Special Revenue Fund Affordable Housing Special Revenue Fund Automotive Replacement Internal Service Fund

State Gasoline Tax Local Transportation Enterprise Fund

Enterprise Funds: Electric Solid Waste Golf Course School-Age Child Care

Traffic Mitigation Fund 200,000 Wastewater Enterprise Fund 1,339,890 Automotive Replacement Internal Service Fund 3,639,000 Automotive Replacement Internal Service Fund ___ 1U8~0~.0~0!£0

$!8,393,627

CITY OF ROSEVILLE Notes to Basic Financial Statements

I NOTE 4- INTERFUND TRANSACTIONS (Continued)

D.

Rede,•elopment Agency advance consists of three advances: (I) Advances in the amount of $7,634,737 will be repaid in fiscal year 2029. This advance bears interest at the average interest rate of the City's pooled investments. (2) Advance in the amount of$1,000,000 bears interest at 3.15% and will be repaid in fiscal year 2023. (3) Advances in the amount of$3,900,000 bear no interest and will be repaid in fiscal year 2029.

State Gasoline Tax advance bears interest at the average interest rate of the City's pooled investments. It will be repaid in fiscal year 2008.

Electric advance bears interest at the average interest rate of the City's pooled investments. It will be repaid over a period of two years and will be repaid in fiscal year 2009.

Solid Waste advance bears interest at 3.94%. It will be repaid over a period of 10 years and will be repaid in 2016.

Golf Course advance bears interest from 3.5-4.0%. It will be repaid over a period of 27 years and w-ill be repaid in 2029.

Schooi~Age Child Care advance will be repaid over five years beginning in fiscal year 2007. This advance bears interest at the average interest rate of the City's pooled investments and ~terest is to be paid at the end of the loan.

Internal Balances

Internal balances are presented in the City-wide fmancial statements only. They represent the net interfund receivables and payables remaining after the elimination of all such balances within governmental and business-type activities.

(NOTE 5 - NOTES RECElV ABLE

The City and Agency engage in programs designed to encourage business enterprises, construction or improvement in low-to-moderate income housing, or other projects. Under these programs, grants or loans are provided with favorable terms to businesses, home-ov..ners or developers who agree to spend these funds in accordance with the City's tenns. Although these notes are expected to be repaid in full, their balance has been offset in the fund financial statements by deferred revenue or a reservation of fund balance as they are not expected to be repaid during fiscal year 2007. These notes receivable comprised the following at June 30, 2007:

Notes Employee Notes Housing Rehabilitation and Affordable

Housing Notes First Time Home-Buyer Notes Housing Elevation Notes

Total

"

$468,777 111,771

5,110,681 6,797,932

28 978

$12,518,139

CITY OF ROSEVILLE Notes to Basic Financial Statements

I NOTE 5- NOTES RECEIVABLE (Continued)

A.

B.

c.

D.

Notes Receivable

The City has provided loans to various homeowners and businesses for rehabilitation due to flood damage. The maximum loan amount is $5,000 carrying various interest rates and payment dates. Although these notes are expected to be repaid in full, their balance has been offset by a reseJVation of fund balance. The balance of these notes receivable at June 30, 2007 was $6,633.

In fiscal year 1989, the City made a loan to a property owner in the amount of$7,719, seemed by a first deed of ttust. The note did not bear interest and payment was deferred. The balance of this note has been offset by a reseJVation of fund balance.

The Agency engages in a commercial rehabilitation program designed to aid small business owners in renovating and rehabilitating commercial property in need of repair. These notes will be forgiven at the end of the Owner Participation Agreement term, which is five to fifteen years, if the property has not been sold. If the property is sold prior to the completion of the agreement term, a proportionate amount of the note will be forgiven. The notes are secured by a deed of trust on the property. At June 30, 2007, $454,425 in notes had been issued to thirteen property owners.

Employee Notes Receivable

All full-time and part·time City employees who have completed their probationary period are eligible to obtain an interest free loan of up to $2,500 to purchase a computer. All requests for loans are subject to review by the Information Technology Department and must be approved by the Human Resources Director. Repayment of these loans is handled through payroll deductions which are spread out equally over a two year period. Employees must pay off any outstanding balance on their loans upon ending employment with the City. As of June 30, 2007, 93 employees had $111,771 in notes due to the City.

Housing Rehabilitation and Affordable Housing Notes Receivable

The City engages in programs designed to encourage construction or improvement in low·tO· moderate income housing or other projects. Under these programs, grants or loans are provided under favorable terms to home-owners or developers who agree to spend these funds in accordance with the City's terms. Although these loans and notes are expected to be repaid in full, their balance has been offset with the liability, Due to Other Governments, as they are not expected to be repaid during fiscal year 2007 and any repayments will be used to reduce future grant draw--downs by the City. The balance of the notes receivable arising from these programs at June 30,2007 was $5, [ 10,681.

First Time Home-Buyer Notes Receivable

The City and the Agency engage in a first time home-buyer program designed to encotu-age home ownership among low-income persons. Under this program, grants or loans are provided at no interest and are due upon sale or transfer of the property. These loans have been offset by due to other governments and deferred revenue as they are not expected to be repaid during fiscal year 2007 and any repayments will be used to reduce future grant draw--downs by the City. The balance of the notes receivable arising from this program at June 30, 2007 was $6,797,932.

CITY OF ROSEVILLE Notes to Basic Financial Statements

I NOTE 5 -NOTES RECEIVABLE (Continued) I . E. Housing Elevation Notes Receivable

In fiscal 1997, the Federal Emergency Management Agency (FEMA) approved Hu.ard Mitigation Grant Program funds to be used for residential home elevation projects in the City at a maximum of $33,934 per household, with the total federal share not to exceed $1,493,096. The City provides matching funds to each eligible household at a maximum of $5,000 in the form of a zero percent, deferred loan payable upon sale, change of title or change of use (See Note 4A above). As of June 30, 2007, eleven loans funded through the FEMA Hazard Mitigation Grant Program were outstanding with a total balance of$28,978.

I NOTE 6- DEFERRED RECEIVABLES

The City has entered into a number of agreements with developers to defer permit fees for various projects within the ,City. The terms of these agreements call for various interest rates and payment dates. Although these fees are expected to be repaid in full, their balance has been offset by deferred revenue in governmental funds, as they are not expected to be repaid early enough to be treated as a current asset. The long·term portion of these receivables at June 30, 2007 was $3,157,362, which has been classified as deferred receivables, and the shorHerm portion of these: receivables, which totaled $526,749 at June 30, 2007, is included in accounts receivable.

j NOTE 7- DEVELOPMENT AGREEMENTS AND LAND HELD FOR REDEVELOPMENT

A.

The City may enter into development agreements in an effort to provide incentives to develop new businesses and new tax revenues. The substance of these agreements is that developers or other public agencies will be paid a portion of future sales tax or traffic mitigation fee revenues produced by their developments. These payments are conditioned on the generation of sales tax revenues or traffic mitigation fee revenues by these developments and the City is not required to use any other resources to pay these amounts.

Galleria at Roseville

In fisca12001, the City entered into a lease agreement with the Galleria at Roseville regional mall. The purpose of this agreement was to share revenue with the mall developers based on the generation of certain levels of sales tax. The Developer agreed to construct the mall, along with water and storm .sewer mains, a bike trail, pedestrian walks, landscaping, parking areas and infrastructure improvements to surrounding streets. The mall opened for business in August 2000 and the term of the revenue sharing agreement commenced on that date. The remaining portion of sales tax revenues to be returned approximated $15 million at June 30, 2007. The agreement terminates in 2017, regardless of whether this amount has been returned; after that date: all future sales tax revenues remain with the City. During fiscal year 2007 payments made to the developer under the agreement totaled $2,396,314.

"

Ol .b. N

CIIT OF ROSEVILLE Notes to Basic Financial Statements

NOTE 7- DEVELOPMENT AGREE:\IENTS AND LAND HELD FOR REDEVELOPMENT (Continued)

B. Civic Pklza Project

c

In fiscal 2004, the Agency agreed to sell four parcels of land to VernOn Street Associates, LLC for $\50,000, for the purpose of the construction of an office complex and public parking garage. Two of the parcels were owned by the Agency and two by the City. The City parcels were conveyed to the Agency in fiscal 2007 and subsequently all four parcels were sold to the Developer. The office complex is being built on the land sold to the Developer and is funded by the Developer. The developer has agreed to construct the parking garage for the Agency funded by $5,817,000 of bond proceeds from the Agency's 2002 Tax Allocation Bonds, a $360,000 contribution from the Developer, and a $900,000 contribution from the General Fund. In addition, the Developer has agreed to contribute $20,000 annually, plus an inflationary escalator beginning in 2010, towards the maintenance and operation costs of the parking garage. The Agency increased the project contract amowtt in fiscal 2007 by $2.2 million, funded by an additional $111,415 from the 2002 Tax Allocation Bonds and $2.1.million from the City's General Fund. Construction is expected to be completed in October 2007.

Loan for 112 Pocijic Street

In fiscal 2007, the Agency entered into an Owner Participation Agreement with MSR Properties, LLC. The Agency agreed to loan MSR Properties, LLC, $200,000 for the redeveloped residential property located at 112 Pacific Street in Historic Old Town. The loan bears 5.25% interest and payment is deferrable for 15 years, subject to cenain conditions The loan will be repaid inclusive ofthe principal amoW1t, plus the greater of the deferred accumulated interest or proportionate share of the appreciation if the property. The loan is secured by a deed of trust The Developer has agreed to maintain the second story residential W1its as efficiency W1its through the duration of the loan.

D. Land ht-ld for usalt'

In April 2007, the Agency purchased a parcel located at 8051 Washington Boulevard. On June 30,2007, the Agency also owned the parcel located at 238 Vernon Street. Both parcels are held by the Agency for resale in the future. They are accoW1ted for the lower of cost or net realizable value. On June 30,2007, total value of these parcels amowtted to $4,749,958.

I NOTE 8- CAPITAL ASSETS

A. Policies

CITY OF ROSEVILLE Noles to Basic Financial Statements

All capital assets are valued at historical cost or estimated historical cost if actual historical cost is not av~i!able. Contributed capital assets are valued at their estimated fair market value on the date contributed. The City has recorded all its public domain (infrastructure) capital assets, which include roads, bridges, curbs and gutters, streets and sidewalks, drainage systems and lighting systems.

Capital assets with limited useful lives are depreciated over their estimated useful lives. Alternatively, the "modified approach" is used for certain capital assets. Depreciation is not provided W1der this approach, but all expenditures on these assets are expensed, unless they are additions or improvements.

The purpose of depreciation is to spread the cost of capital assets equitably among all users over the life of these assets. The amoW"Jt charged to depreciation expense each year represents that year's pro rata share of the cost of capital assets.

Depreciation is provided using the straight-line method which means the cost of the asset is divided by its expected useful life in years and the result is charged to expense each year W"Jti!.the asset is fully depreciated. The City has assigned the useful lives and capitalization thresholds listed below to capital assets:

Capitalization Useful Lives Thresholds

Buildings 20-40 years $10,000 Improvements 40 years 10,000 Machinery and Equipment 3-12 years 5,000 Bike Paths 20 years 10,000 Bridges 90 years 10,000 Culverts 75 years 10,000 Curb, Gutter, Sidewalks &

Median Curbs 20 years 10,000 Drain Inlets 50 years 10,000 Flood Control Improvements 75 years 10,000 Sound wall 35 years 10,000 Stormdrnins 75 years 10,000 Traffic Signals 20 years 10,000 Plants and Substations:

Electric 10-120 years 10,000 Sewer 15-60 years 10,000 Water 15-75 years 10,000

Electric Improvements: Electric 7-100 years 10,000 Sewer 75 years 10,000 Water 75 years 10,000·

Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase is reflected in the capitalized value of the asset constructed, net of interest earned On the invested proceeds over the same period.

CITY OF ROSEVILLE Notes to Basic Financial Statements

(NOTE 8- CAPITAL ASSETS (Continued)

B. Capital Asset Additions and Retirements

Capital assets at June 30 comprise:

Cap1Ul asset.o no! being depreciated:

"""' St=ti (modified)

Parks {modified)

Landscaping {modified)

Constructio:o in progreso

Total capitala.sacta not being depr«iated

Capi!a] asset.o being depreciated:

Buildin&S

Improvements

Equipment

Bilr.e paths

Bridges

""""" Curb. gutter. sidewalk. & me<!iiW ClUbs

Drain inlet.<

Rood cootrul impfO'\'anc:t!U

Soundwall

Stonndrams

T111ffie ligoals

Total capi!al assels being depreciated

leoo accumulated dep=iation fot:

Buildings

lmprovemtnts

Equipment

Bilr.e paths

Bridges

CUlverts

Curb. guttcr.lid~-a!k. & mcdiao =bs

Dillin inlets

Flood contrul improvements

Soomd...U

Stormdrains

Traffie signals

Total accumulated dcprcciation

Net eapital .... et.< beiug depreciated

Govemmcotal acti,ity capiul asscu, net

Jnne 30,2006 Additions

$22.583,531 $744,228

166.849,987 7.065.421

6(1,252,352 5.112,589

29.138,661 2.557,694

126,!143,367 ---''e'e':"'"-'""'-405.667.898 ---''"'·~"o'c"'"'-

Retirements

($828,282)

{1.990.179)

{2,818,461)

TransfcrJ

Balance a!

June 30, 2001

$23,327,759

$36,6(11.723 209.688.849

3,512,496 68,877,437

3,905,727 35,602,082

(58,776.541) ---""e'~·'""!·'~"~

(14,756,595) --="~'·~"~'~·"""!!:..

79,895,972 117,322 80,013,294

4,747.378 4,747,378

52.578,388 9.232,838 (5.217,131) 543,978 57.138.073

7.233,994 467.910 7,701,904

46,590,903 109,802 2.697,565 49,398,270

18.927,555 49,740 681.815 19,659,110

120,717,966 4,()97,622 4.9SI.IR4 129.796.772

18,893,305 "490.190 586.547 19.970,1)42

17,292,946 17,292,946

21,363.476 1.406,039 1,384.543 24.154,058

51,310.JJo 9.434.370 1,578.564 62,n3,244

18,920,469 ------ ----- ---''-'·"~"'''"'"-' ----''~'~·"~'-'·'~"~ 458.472.662 --"'~'·""~'"·'~"'- (5.:m,l31l --'~'C.·'~"o·'~''-' _--:!:"~'·""~'~""~'~

(29.605.891) (1,966.234) (31.572.125)

(926.666) (129.449) 10.332 {1.045,783)

(33,507,113) (5,194.912) 5,086.904 13.192 (33.601,929)

(3,618.7!14) (371,130) (3.989.914)

(5.349,838) (533.273) (5.883.1 II)

{3,405.512) (257,245) (3,662,757)

(70,353,573) (5,030.236) (75.383.809)

(5,343,961) (388,632) (5.732.593)

(1.290.653) (230.573) (1.521.226)

(3,908.337) (650.251) (4,558,588)

(~.032,771) (757,556) (8.790.327)

(10.403,453) ---'~··~'-'·'~"~' ----- ----''~""''"'"-" ---""-''"~·~·~·'~"~' (175.746,552) _ _..!(~"~·'~"~J~>l~) --''~·"~'~-'~"~ ------ (187,028,689)

282.726,110 8,558.550 (119.895) --'"'"·'"""·'"''-' --"""'·~"e',:·'~"'~

$688.394.008 189.628,717 ($2,938,356) -===- $775,084.369

"

CITY OF ROSEVILLE Notes to Basic Financial Statements

I NOTE 8 ·CAPITAL ASSETS (Continued)

BIL>iM<S-i}p~ IJctivitit.>

Capital assw.. not being depreciated:

""'" Laods<:~ping

Construction in progre ..

Toul CKpital usets not being dCJ>reciated

Capiul assets, being depreciated

Buildings

lmprovC"ID<lll$

Machinery and equipment

Bil<ep~ths

Drain inlet<

Stonn dntins

Plant and subsutions

Di•mbution

Total capital uscu being depreciated

Less accumulated depreciation for:

Buildings

Improvement.

Machinery and equipment

Bilr.c path<

Dmin inlets

Stotm drains

Plant and ""b<utions

Distribution

Total aocumlllated depreciation

Net capital assets being depreciated

Businc•o·typc activity capital auets, net

Balance at

June 30. 2006

$16,125.746

550,000

163,411.509

180.087.255

12,003,030

11.035,099

16.224.909

1.064,167

18,500

30,863

283.324.200

846.463.181

1,170,163.949

Additions

118,345,983

118,345,983

4,056,997

72.646

987.41i7

1.648,060

78,641,809

83,406,979

(3.615.679) {321,047)

(2.973.205) (329,181)

(8,050,163) (1,908,744)

(133,020) (53.209)

{925) (370)

(1.030) (410)

Retirements

($63)

(1.665.076)

(l,li65,l39)

Transfers

Balance Kt

}\liiC 30.2007

$16,125,683

550,000

($10.259.847) --'"~'~··~"~·'~"~

(10.259.841) --'"~·~·"~'~"~"~

1.525.114

"l\2,053

"'

17.585,141

11.219.798

17,093.685

1,064,167

1g.5oo

30.863

(3.197,890) 4,385.920 286.160.290

{256,405) __ !'""'~·~·'~"'- --~"~'~·"~'~"="~

(3.572.983) ----''~'"='~'"·"~"'-

118,683

1.262,257,792

(3.936,726)

(3,302,386)

(9,840.224)

(186.229)

(49,441.960) (6,745,811) 475,142

(1.295)

(1.440)

(55,712.629)

(142,391.706) (129.614.463) --2"l'·!"'~·~·'~"!!.' --~"~'!·'~"'- ------(193,830,445) --"""'·""~'~·"~'!!" __ ...!C"o'!·'!"'C. _____ _ '(215.372.635)

976,333,504 63,162,108 (2,870.302) 10.259.S47 1.046,885.157

$1,156,420.759 $181,508.091 ($4.535.441) ~=~=~ $1,333,393.409

CITY OF ROSEVILLE Notes to Basic Financial Statements

I NOTE 8 -CAPITAL ASSE1'S (Continued)

c.

D.

Depreciation Allocatirm

Depreciation expense is charged to fimctions and programs based on their usage of the related assets. The amounts allocated to each function or program are as follows:

Governmental Activities

(Jenera! government

Community development and planning Public works

Police

Fire

Library

Parks and recreation

Capital assets held by the City's internal service

funds are charged to the various functions based on their usage of the assets

Business~ Type Activities

Electric Water

Wastewater

Solid Waste

Golf Course

Total GovernmentaJ Activities

Local Transportation School-age Child Care

Total Business-Type Activities

Streets, Parks and Landscaping Covered By the Modif~ed Approach

$1,526,739

153,234

9,355,674 660,399

377,757

138,746

377,449

3,789,375

$16,379,373

$5,393,407

6,011,995

9,342,901

324,996 . 432,762

724,287

14,523

$22,244,871

The City has elected tO use the modified approach diSCUssed above \\-ith respect to its roads, most of which are relatively new. The City's policy based on current funding is to maintain the arterial and collector roadways at an average Pavement Quality Index (PQI) of 7.5 and residential roadways at an average PQI of 6.5, instead of providing depreciation. During fisca\.2007 the City expended $9,206,007 to preserVe its roads. The City estimates that it will be required to expend approximately S 5,929,683 in fiscal2008 to maintain its roads at this condition level.

The City has also elected to use the modified approach.with respect to its parks and landscaping, most of which are relatively new. The City's policy based on current funding is to maintain the parks and landscape at an average Ground Management Index (GMI) of Level 2, instead of providing depreciation. During fiscal 2007 the City expended $5,028,402 to preserve its parks and landscaping. The: City estimates that it will be required to expend approximately $5,309,367 in fjscal 2008 to maintai~ its parks Jtt this condition level.

68'

CITY OF ROSEVILLE Notes fo Basic Financial Statements

!NOTE 9- LONG-TERM DEBT I The City generally incurs long-tenn debt to finance projects or purchase assets, which will have useful lives equal to or greater than the related debt.

A. Cu"ent Year Transactions and Balances

l:o><rnn .. o!IIMH•II) Utbl' Ctnllk....,oiP•rtl<lpa<low' 100JA ~ubl1c l"ao1lll""' Rcfundmg ~.,.d.

20%-5.0%.4u<~"lo:!:\ ~~----~ Sl'-490000 ~ TuAIIoullonBon<h lOOl R<><n>llo R<d<v<lopm<rtt ~"'!«'

:>%-~.14%.du<9111lJ 275,000

20XJ6 K"'<'"lil' ~cdovd.,~rn<IH l'rojM. 'icn<1 A 4~%-l.~olu<9o"L·.W

2006 R""' 1110 Rcdo;olopmerH Pro)o<<· Sen.,. A· T l.JI%-5.'1Q%.duc91il!

2/.o:l:l R"""rlk R<d<l<"lo~< Proj<..1. Sen<. H· T 5 J I ~~6.01:'.. du• ~ "1."4<1

lo.,olllat., l'«rd<ox Obll~olloo" lqm~""'"' 310.!111)

(kb<r i.o"&-T<•ao0bllp6o~" fooohHIIII•il.l:<ton"'"·duc4'1.U7 J.lll

B<nl ..... l)p<A<1k"il) !Hbo: C<r<lncat .. n!Por!ldpollon:

I '191 El«trn: Sl"«rn R<'<m><. J.b%-5.25%, ilu< 111111

I '>'>'I Eloc<ricSy.<ornR<><nu<. 40%-l.5l'o,du<:'.'lr24

)U{" Ekc<nc~y>L<"Ill RC"o·onuo. vatiabkn«.J..,l'\124 '-"''" d<fcmxlamourn on f<fundln~

)001 [~~< Sp•<rn R~u<. ) Q0%.5.15\~ ill>< VII).>

lOIJl Cl«:tricSyotcmR.:vouu<. ><:ncs,\

20051"1"t~<Sy>LomR .. cnoo, <;ori...,.ll

'""'"" rn1<,duc ~·Ill! lOO~ £1«1<1< S)'>t<m R"""""- XncsC

vario01orn..,.Oue2"1!Jl lOOJB Golf C.....,. Rofundm~ llootd,

l.cJ%-l o%. """~·1m 1'197W11<rUolu~~'"""'-

J.9'1 •• ~ZO,O,duc 1211111)

R., •• ,..Bo .. :

2000 W""'~~"" Ro.omr< Buod~ '><>1« A. J.•%-~.l''o, duo 11/11:'.7

:!<•Kl \'on>blo ko« Demand\\'""""""'" Rcvo:f1UC~Ol1d>.S<ri<>~.

=W>kmc.d""IIIHJ5 '!IOJ W•~<w"'"' RefonJ,•gR"~""" ~ond'

,..,.bk,..«.du< 1111117 I.e" d<:f<m:d •mounL oo rt:funOmg

2001 Ga• R"'""''"' BOdd• l"&t<abl<m<.du<2'lll28 .\rldJcferrcOOOndpn:mlumou>L

Tul41Rc\<1W<II<lnds Olb<t l.o"i""T<rooOb~ptloo"

""' .. ,5%.du< lfil117

SJll.OOU

l2o.ooo

J.lO.OOO

l.JOI.OOO

I;Jil4.!7J

J~l.IOl

(lOJ.90li

13.40<J,Il00, 2!111.!11'1

IJ.Ill.<!O()

].285.000 l40.(l(IO

•.so!.llXI ·~~ 1.]'>11707 JOO.WI

~l.lll,OOO Sl4l,OOO

ll.J95.000 !75.\000 (l.9ll.l17l

19.610 ... 111 Jll.fi()I"J

!2.900.000 410.000

90.000.000

e.o.ooo.ooo ~~,ll(IO

7.110.(100 l:$.000

ll.:J.>J.r•IO 1.4MI.CXXJ

6.191.62) 1,4ll.lSb

J7.919.ooo

lO.M:'..~'I\0 ]65.1>48 (5.218.241)

21J'J.J50.000

CITY OF ROSEVILLE Notes to Basic Financial Statements

I NOTE 9 ·LONG-TERM DEBT (Continued)

B. 2003A Public FDcililies Refunding Bonds

On July 17, 2003 the City issued $18,275,000 of Public Facilities Refunding COPs to advance refund the outstanding 1993 Public Facilities COP's. The COP's are repayable from the any source of available funds of the City which includes the General Fund. Principal payments are payable annually and interest payments are due semi-annually on February I and August I through 2025.

C 1002 Ro.~evilie Redevelopment Project Tax Allocation Bonds

D.

E.

On October 23, 2002 the Redevelopment Agency issued Tax Allocation Bonds in the original principal amount of $14,500,000 to fund certain redevelopment activities of benefit to property within the t;tgency's Roseville Redevelopment Project Area. The Bonds are special obligations of the Agency ai1d are secured by the Agency's tax increment revenue. Principal payments are payable annually on September I and interest payments are due semi-annually on March I and September I, through September I, 2033.

1006 Ro.~eville Redeveloprr~ent Project Tax Allocation Bonds

On October 26, 2006, the Redevelopment Agency issued Tax Allocation Bonds Series 2006 A, Taxable Tax Allocation Bonds Series 2006 A-T, and Taxable Tax Allocation Bonds, Series 2006 H-T in the amotmts of $13, I 55,000, $3,285,000, and $6,505,000, respectively, for a total principal amount of $22,945,000. 1be Series A bonds bear interest at 4.50%-5.00%, the Series A-T at 5.31%-5.90%, and the Series H-T at 5.31%-6.07%. The proceeds for the Series A and Series A-T bonds will be used to fund redevelopment activities of benefit to property within the Agency's Redevelopment Project Area. The proceeds for the Series H-T bonds will be used to pay the costs oflow- and moderate-incorile housing projects of the Agency's Redevelopment Project Area. The Series A and Series A-T botlds. are secured by tax revenue~ which are aliccated to the Agency from the Project Area. The Series H-T bonds are secured by the tax increment revenue deposited in the Agency's Low and Moderate Income Housing Fund. Interest on the bonds is payable semiannually on March I and September l. Principal for the Series A and Series H-T bonds is payable annually on September I through 2040. Principal for the Series A· T is payable annually on September I through 2028.

lnstallmeni Purchase Obligations

The City is purchasing various pieces of computer equipment on the installment basis. The City has also entered into long-term c,ontracts for the lease/purchase of various public safety equipment.

F. Foothill Boulevard Extensitm

.G.

The City acquired several parcels of land, in August of 1989, within the Foothill Boulevard Extension Assessment District to build the Corporation Yard. Upon acquisition, the City took over the assessment debt in the aJTI.Ount of $114,423, due on these parcels. This debt was repaid in fiscal 2006-07.

1997 EleCtric System Revenue Certificates of Participotion

The City issued Certificates of Participation in the original principal amount of $11,880,000 on November I, 1997 to finance a substation for the Electrical System and to refinance its 1985 COP's and is repayable from net revenue of the Electric Utility System. Principal payments are payable rumually on February 1 and interest payments are due semi-annually on February I and August 1, through February}, 2017.

CITY OF ROSEVILLE Notes to Basic Financial Statements

I NOTE 9 • LONG· TERI\-'1 DEBT (Continued)

H.

I.

J.

In December of2002 the City defeased a portion of the 1997 COP's by placing proceeds from the 2002 Electric System Revenue Certificates of Participation in an irrevocable trust to provide amounts sufficient to pay on February 1, 2008 the prepayment price of 101% of the principal amoWJt and accrued interest. Accordingly, the trust accotmt assets and the liability for the defeased COP's are not included in the financial statements. At June 30, 2007 the 1997 Electric System Revenue Certificates of Participation outstanding in the amount of $4,290,000 are considered defeased. ·

1999 Electric System Revenue Certificates of Participation

On August 3, 1999, the City issued $21,630,000 of Certificates of Participation to fmance a portion of the cost of capital improvements and is repayable from net revenue of the Electric Utility System. The Certificates bear interest at 4.0%- 5.5% and are due semi-annually on February I and August I. Principal payments are due annually on February I and interest payments are due semi-annually on February I and August l. through February I, 2024.

In December of 2002 the City defeased a portion of the 1999 COP's by placing proceeds from the 2002 Electric System Revenue Certificates of Participation in an irrevocable trust to provide amoWJts sufficient to pay on August I, 2009 the prepayment price of 101% of the principal amount and accrued interest. Accordingly, the trust account assets and the liability for the defeased COP's are not included in the financial statements. At June 30, 2007 the 1999 Electric System Revenue Certificates of Participation outstanding in the amount of$17,685,000 are considered defeased.

2002 Electric System Revenue Certiftcates of Participation

On December 17, 2002 the City issued $40,385,000 of Certificates of Participation to defease portions of the 1997 and 1999 Electric System Revenue Certificates of Participation above and financed a pOrtion of the cost of capital improvements. The COP's are repayable from net revenue of the Electric Utility System. Principal payments are due annually on February I and interest payments are due monthly, through February I, 2024.

The 2002 Electric System Revenue Certificates of Participation were issued as variable rate COP's, with interest calculated weekly. llae rate flucruates according to the market conditions, but is capped at 12%. However, the City entered into a 22-year interest rate swap agreement for the entire amount of its 2002 Electric System Revenue Certificates of Participation as discussed in R. below. The combination of the variable rate COPs and a floating rate swap creates synthetic fixed-rate debt for the City. The synthetic fixed rate for the COPs was 3.18% at June 30,2007.

2004 Electric System Revenue Certiftcates of Participation

On July I, 2004 the City issued $39,940,000 of Certificates of Panicipation to fmance capital improvements to the City's Electric System. The COP's are repayable from net revenue of the Electric Utility System. The COPs bear interest at 3.00%-5.25% and are due semi-annually on February I and August I of each year beginning February I, 2005. Principal payments are due annually on February 1 through February 2034, commencing February I, 2007.

"

CITY OF ROSEVILLE Notes to 8;1jsic Financial Statements

j NOTE 9- LONG-TERM DEBT (Continued)

K.

L

M.

2005. E~ectric System Revenue Certificates of Participlllion, Series A; 2005 Electric System Revenue Certificates of Participation, Series B; atul 2005 Electric System Varillble Rate Revenue Certificates of Participation, Series C:

ofl May 26, 2005 the City issued Certificates of Participation Series A, Seri~s B, and Series C in the ?riginal principal.!lfflounts of S$2,900,000, $90,000,000, and $60,000,000 respectively, to finance certain Electric System improveinents, primarily including construction of thi: Roseville Energy Park.

The Series A-COPs bear interest at 3.00%-5.00% and are due semi-annually on February I and August I of each year. Principal payments are due annually beginning February I, 2008 through 2023.

' The Series B COPs were issued as auction rate securities with interest calculated weekly. The rate fluctuates according to the market conditions, but is capped at 12%. However, the City entered into a 30-year interest rate swap agreement for the entire amount of the Series B COPs as discussed in R .• below. The combination of the variable rate Series B COPs and a floating rate swap creates synthetic fixed-rate debt for the City. The synthetic fixed rate for the Series B COPs was 3.38% at June 30, 2007. Principal· payments are due annually on February I beginning February I, 2023 through 2035.

The Series C'were issued as variable rate bonds, with interest calculated·weekly. The rate fluctuates according to the market conditions, but is capped at 12%. Interest payments are due weekly. Principal payments are due annually on February I beginning Februaty I, 2008 through 2035.<.

200?B G~lfcourse Refunding Certi/kates of Participaium

On July. 17, 2003 the City issued $8,240,0oo of Golf Course Refunding COPs, th~ proceeds of whic~ are to be used to advance refi.m.d the outstanding 1993 Golf Course COP's. The COP's are repayable from the any source of available funds of the City which includes the General Fund. Interest payments are due semi-annua.IIy on February 1 and August I. Principal payments are due annually on August I ~ough 2024.

/997 Willer Utility Revenue Certificales of Participation.

~e City issued ctrtifi~tes of Participation in the original principal amount of $33,000,000 on September I, 1997 to fmance the acqtUsition, construction, and installation of additions to the ~ater utility system, and, is repayable.frotn net revenue.from the Water Utility System. Principal payments are payable annually on December I and interest payments are due semi-annually on December 1 and June 1, through December I, 2018.

CITY OF ROSEVILLE Notes to Basic Financial Statements

I NOTE 9- LONG-TERM DEBT (Continued) I N.

0.

2000 South Placer Wastewater Authority Wastewater Revenue Bonds, Series A; and 2000 South Placer Wastewater Authority Variable Rate Demand Wastiwater Revenue Bonds, Series 8

In November 2000, the South Placer Wastewater Authority issued Revenue Bonds Series A and Series Bin the original principal amounts Of$109,775,000 and $70,000,000 respectively. The purpose of these bon~ is to partially finance the costs of acquisition and construction of the Pleasant Grove Wastewater Treatment Plant. Upon compfetion, this Plant will benefit the City of Roseville, the South Placer Municipal Utility District, and the County of Placer. These three entities in return share the obligation of the Revenue Bonds. The City's share of this obligation was determined to be 54.17%. As a result, this portion of the debt was recorded on the City's financial statements. '

The South Placer Wastewater Authority Wastewater Revenue Bonds, Series A were issued as fixed rate bonds. On September 17,2003,$84,525,000 of the Series A Bonds were defeased by the 2003 Wastewater Refunding Revenue Bonds as mentioned below. Remaining principal payments are payable annually on November I and interest payments are due semi-annually on May I and November I, through November I, 2027. At JlUle 30,2007 the outstanding balance of the defeased portion of the Series A Bonds was $84,525,000.

The South Placer Wastewater Authority Variable Rate Demand Wastewater Revenue Bonds Series B were issued as variable rate bonds, with interest calculated weekly. The rate fluctuate~ according to the market conditions, but is capped at 12%. The average monthly interest paid in fiscal year 2007 was $211,024. Beginning in fiscal year 2029, principal payments will be made in addition to the variable interest payments.

2003 South Placer Wastewater Authority Refunding Wastewater Revenue Bonds·

On September 17, 2003 the South Placer Wastewater Authority issued $97,000,000 of Refunding Wastewater Revenue Bonds to defease a portion of the SeriEis A Wastewater Revenue Bonds as discussed above. The City's share of this obligation was determined to be 54.17%. These proc~eds were placed in an irrevocable trust to provide for all future debt service payments on the Refunded Bonds. Principal and interest payments are due semi-annually on May I and November I, through November 1, 2027. · •

The 2003 Wastewater Refunding Revenue Bonds were issued as auction rate bonds with interest calculated weekly. The rate fluctuates according to the market conditions, but is capped at 12%. However, the Authority entered into a 24-year interest rate swap agreement for the entire amount of its 2003 Refunding Revenue bonds aS discussed in R. below. The combination of the variable rate Bonds and a floating rate swap creates synthetic fixed-rate debt for the Authority. The synthetic fixed rate for the Bonds was 3.51% at June 30, 2007.

P. 2007 Roseville Natural Gas FinanCing Authority Gas Reve~u_e Bonds

On January 24,2007, the Authority issued $209,350,000 of Gas R'evenue Bonds, Series 2007, to finance a lump sum prepayment to a Gas Supplier (See Note 19A) in order to acquire a supply of natural gas to be delivered over a period of twenty-years. The gas purchased by the Authority will be sold to the City pursuant to a Natural Gas Supply Agreement (See Note 19B) to produce revenues to be used for debt service on the Bonds.

Principal payments are due annually commencing on February 15, 2009 through 2028 and interest is payabfe semiannually on February 15 and August 15, commencing August 15,2007.

"

CITI' OF ROSEVILLE Notes to Basic Financial Statements

I NOTE 9- LONG-TERM DEBT (Continued)

Q.

R.

Notes Payable

The City borrowed $333,108 original principal amount, on November 9, 1977, from the U. S. Department of Commerce to aid in financing drought emergency projects. The debt is repayable from the surplus revenue acconnt of the Water Revenue Bonds. Principal and interest payments are payable annually on October I, through October I, 2017.

Interest Rate Swap Agreements

The City entered into interest swap agreements in cmmection with the 2002 Electric System Revenue Certificates of Participation and the 2005 Electric Revenue Certificates of Participation, Series B. The City has a 54.17% interest in the Authority which entered into an interest swap agreement in connection with the 2003 South Placer Wastewater Authority Refunding Wastewater Revenue Bonds.

These transactions allow the City to create synthetic fixed rates on the COPs and Bonds, protecting it against increases in short-term interest rates. The tenns, fair value and credit risk of the swap agreements are disclosed below.

Terms. The term!), including the counterpart)' credit ratings of the outstanding swaps, as of Jnne 30, 2007, are included below. The swap agreements contain scheduled reductions to the outstanding notio.nal amount that are expected to follow scheduled reductions in the associated bond issues.

Variable Notional Effective Credit Fixed Rote ••• Termination

Related Bond bsue -~· ~ COUDt~ ~~~ D~te

2002 Elccttic System Morgan Stanley Capial 62%of30-

Rcvtm~eCOP $25.620.000 12.11812002 Services Inc M 2.9800/o doyliBOR 2.1112024

2005 E1ectnc System Beor Steam• Frn.,cial 10.5%of30

Revenue COP. Series B 36,000,000 6130.'2005 Produeu Inc. AAA 3613% dayLIBOR 21112035

2005 Electric System Morgan Stanley Cop11al 70.5%ofl0

ltovenue COP, Series B 54,000,000 6.130.'2005 Services Inc M 3 613% doy LIBOR 21112035

2003 Wutewa!er

Refunding Re~onue B<JPd.J MorgOD Stm1cy Copita1 62%of30-

(Ciryportion) 51.014.604 (A) 911712003 Services Inc. M 3 433'Y. dayLIBOR 11/112027

$166.634.604

(A) The Authonty's owap agreement" based on the notional omount of$94,175,0(10 oquiv~lent to !bo ouwanding bo111lce on the 20008 Bondo

The Cit)!s sbsR of these underlying Bonds is ,54.17%. or SS1.014.604. Only the Citfs portion of the swap ag:recn>e~~t i• shown above.

Based on the swap agreements, the City owes interest calculated at a fixed rate to the connterparty of the swap. In return, the cmmterparty owes the City interest based on the variable rate that approximates the rate required by the associated COPs and Bonds. Debt principal is not exChanged; it is mliy the basis on which the swap receipts and payments are calculated.

CITY OF ROSEVILLE Notes to Basic Financial Statements

I NOTE 9- LONG-TERM DEBT (Continued) [

Fair value. Fair value of the swaps takes into consideration the prevailing interest rate environment, the specific terms and conditions of each transaction and any upfront payments that may have been received. Fair value was estimated using the zero-coupon discounting method. This method calculates the future payments required by each swap, assuming that the current forward rates implied by the LIBOR swap yield cUIVe are the market's best estimate of future spot interest rates. These payments are then discounted using the spot rates implied by the current yield curve for a hypothetical zero-coupon rate bond due on the date of each future net settlement on the swaps. As of June 30, 2007, the fair value of the swaps were in favor of the City as follows: ' ·

Related Bond Issue

2002 Elec::tric System Reven11e COP

2005 Electric System Revenue COP, Series B Bear Steams Financial Products loc. Morgan Stanley Capital Services Inc.

20031:1 Waste~>'aler Sys1em Refunding Revenue Bonds

Fair Value

S832,731

1,907,330 2,860,995

578 405

S6 !79,46!

Credit risk. As of June 30, 2007, the City was exposed to credit risk on the outstanding swaps because the swaps had positive fair values. These amounts may increase if interest rates increase in the future. However, if interest rates decline and fair values of the swaps were to become negative, the City would no longer be exposed to credit risk. The City will be exposed to interest rate risk only if a counterpart)' to a swap defaults or if the swap is terminated.

Basis risk. Basis risk is the risk that the interest rate paid by the City on the underlying variable rate bonds to the bondholders temporarily differs from the variable swap rates received from the applic~ble counterparty. The City bears basis risk on the swaps. The swaps have basis risk since the City receives a percentage of the LIBOR Index to offset the actual variable bond rates the City pays on the underlying COPs and Bonds. The City is exposed to basis risk should the • floating rate that it receives on a swap be less than the actual variable rate the City pays on the· bonds. Depending on the magnitude and duration of any basis risk shortfall, the expected cost of the basis risk may vary.

A portion of this basis risk is tax risk. The City is exposed to tax risk when the relationship between the taxable LIBOR based swaps and tax-exempt variable rate bonds changes as a result of a reduction in federal and state income tax rates. Should the relationship between LIBOR and the underlying tax-exempt variable rate bonds converge the City is exposed to this basis risk.

CITY OF ROSEVILLE Notell to Basic: Financial Statements

I NOTE 9- LONG-TERM DEBT (Continued) I

Ol ' ....

00

s.

Termination risk. The City may terminate if the other party· f~ils to perform under the tenns of the contract. The City will be exposed to variable rates if the counterparty to the swap contract defaults of if the swap contract is terminated. A termination of the swap contract may also result in the City's making or receiving a termination payment based on market intereSt rates at the time of the termination. If at the time oftennination the swap has a negative fair value, the City would be liable to the counterparty for a payment equal to the swap's fair value.

Swap payments and associated debt. Using rates as of June 30, 2007, debt service requirements of the City's outstanding variable-rate debt and net swap payments are as follows. As rates vary, variable-rate bond interest payments and net swap payments will vary. These payments below are included in the Debt Service Requirements at Q:

Interest Rate For the Year Variable-Rate Bonds SwaP:, Net

Ending June 30 PrinciP:al Interest Interest Total

2008 $927,105 $6,082,028 ($135,737) $6,873,396 2009 960,648 6,047,374 (134,372) 6,873,650 2010 1,599,190 6,002,289 (132,319) 7,469,160 2011 1,652,733 5,942,786 (128,914) 7,466,605 2012 1,711,275 5,881,246 (125,395) 7,467,126

2013-2017 18,684,041 27,522,143 (602,180) 45,604,004 2018-2022 22,260,638 23,754,257 (563,243) 45,451,652 2023-2027 50,215,596 17,678,196 (474,251) 67,419,541 2028-2032 39,531,475 12,287,427 (475,370) 51,343,532 2033-2037 25 075 000 5828213 1246,0521 30657161

$162,617,701 .$117,025 959 {$3t017,8332 $276 625 827

Debt Service Requir~ments

Annual debt service requirements are sho'Wn below for all long-term debt: Governmental Activities Business-~ Activities

For the Year Endins Juoe 30 Princi2al Interest Princi2al lnteresl

2008 $1,590,991 $2,636,062 $6,068,755 $26,438,189 2009 1,356,302 2,583,475 13,920,160 25,956,102 2010 1,324,016 2,534,072 15,149,303 25,427,060

. 2011 1,325,813 2,485,449 17,351,176 24,883,406 2012 1,378,714 2,433,837 18,158,512 24,169,541

2013-2017 7, 780,464 11,264,406 103,585,365 108,728,163 2018-2022 8,649,407 9,330,991 120,963,730 84,656,570 2023-2027 9,475,000 6,899,256 142,576,466 52,527,123 2028-2032 6,255,000 4,960,356 103,494,438 27,911,770 2033-2037 8,060,000 3,109,530 62,691,465 10,129,724 2038-2042 8 090000 816535

Tow $55,285,707 S49,053,969 603,959,370 $410,828,248

Re(onclll•tion of long-term debt Add deferred bond premium com 14,718,206 Less deferied amount on refunding !8,199 518)

Net long-term debt $610.478,058

76

CITY OF ROSEVILLE Notes to Basic: Financial Statements

/ NOTE 10 DEBT WITHOUT CITY COMMITMENT

A. Special Assessment Districts

Special Assessment Districts, including Mello Roos Districts, in various parts of the City have issued debt to finance infrastructure improvements and facilities within their boundaries. The City is the collecting and paying agent for the debt issued by these Districts, but has no direct or contingent liability or moral obligation for the payment of this debt. Therefore, this debt is not recorded as long-term debt of the City. The outstanding balance of each of these issues as of June 30, 2007 is as follows:

Nonh RoseviU.,.Rocklin Sewer Refun<!ing District

Northeasl Ro~ille Community Facilities District ~I & ~2

Nonh. RO'IeviUe Community Facilities Distria Ill

Nonh CentJal Roseville Community facilities DistriCI #I

Northwest Rase•ille Community f8l:ilities District #I

Woodcreek West Community Facilities Djjtrict #I, Sfflcs 2005 ·

Stone Point Commtmity facilities D1strie1 N I

Fiddymenz Ranch Community Faciliti" District~ I

Longmeadow Parks ide Communzty Facilnics District# 1

w.,tpark Community facilitiH District# I

Roseville finance Authority Revenue Bozds. Series 2006 A ltld B

Stone Point Community Facilities District #5, Series 2006

Diamond Crtek Community Facilities District #1, SeriH 2007

Special Tu Rn-enuc Refunding Bonds, Series 2007 A Senior Lien Bonds

Special T•~ Revenue Rdimding Bonds, Series 2007 B Junion Lien Bonds

'""

$395,000

\4,355,000

20,825,000

38,840,000

23,&15,000

20,\85,000

!0,170,000

00,000,000

. 9,165,000

SO,OOO,OOO

39.240,000

5.310,000

7,075,000

44,075,000

10,350,000

S4iJ.I 400 000

In May 2007, the Roseville Finance Authority issued Special Tax Revenue Refunding Bonds, Series 2007 A Senior Lien Bond in the principal amount of $44,0075,000 and Series B Junior Lien Bonds in the principal amount of $10,350,000, to refund the Stoneridge ParCel l Community Facilities District #I Series 2000 Special Tax Bonds, the Stoneridge West Community Facilities District #I Series 2001 Special Tax· Bonds, the Stoneridge East Community Facilities District #1 Series 2001 Speciai Tax Bonds, the Crocker Ranch Community'Facilities District #1 Series 2002 Special Tax Bonds, and the Crocker Ranch Community Facilities District #I Series 2003 Special Tax Bonds. District property owners pay assessments on their property under the respective Stoneridge Parcel \, Stoneridge West, Stoneridge East, and Crocker Ranch Bond indentures to the Trustee as owner of these Bonds. The Trustee then uses these assessments to ·pay debt service on the Revenue Bonds. Neither the faith and credit nor the general taxing power of the City of Roseville have been pledged to the payment of the Bonds. Therefore, the investment and the Bonds have not been included in the accompanying financial statements. . '

CITY OF ROSEVILLE Notes to Basic Financial Statements

j NOTE 11 -NET ASSETS AND FUND BALANCES

Net Assets

Net' Assets is the excess of all the City's assets over all its liabilities, regardless of ftmd. Net Assets are divided into three captions. These captions apply only to Net Assets, which is determined only at the Gove_rnment-wide level, and are described below:

Invested in capital assets, net of related debt describes the portion of Net Assets which is represented by tbC current net book value of the City's capital assets, less the outstanding balance of any debt issued to fmance these assets.

Restricted describes the portion of Net Assets which is restricted as to use by the terms and conditions of agreements with outside parties, governmental regulations, laws, or other restrictions which the City cannot unilaterally alter. These principally include developer fees received for use on capital projects (expended) or contributions received in pennanent funds (unexpended), debt service requirements, and redevelopment funds restricted to low and moderate income purposes.

Unrestricted describes the portion of Net Assets which is not restricted to use.

B. Fund BaitJnces, Reserves and Designations

In the Fund fmancial statements, fund balances represent the net current assets of each fund. Net current assets· generally represent a fund's cash and receivables, less its liabilities. Portions of a fund's balance may be reserved or designated for future expenditure.

Reserves

Reserves are restrictions placed by outside entities, such as other governments, which restrict the expenditures of the reserved funds to the purpose intended by the entity, which provided the funds. The City cannot modifY or remove these restrictions or reserves. At June 30, 2007, resetvations included:

Reserves for advances, inventories, deferred receivables and notes receivable, and prepaids are the portions of fund balance set aside to indicate these items do not represent available, spendable resources even though they are a component of assets.

Reserve for encumbrances represents the portion of fund balance set aside for open purchase orders.

Reserve for capital projects is the portion of fund balance to be used for projects approved by the Council.

Reserve for low and moderate income housing is the portion of redevelopment fund balance legally required to be set-aside for low and moderate income housing expenditures.

Resetve for debt service is the portion of fund balance legally restricted for the payment of principal and interest on long-term liabilities.

CITY OF ROSEVILLE Notes to Basic Financial Statements

j NOTE 11 NET ASSETS AND FUND BALANCES (Continued)

D.

E.

Desig1Ultions

A portion of unreserved fund balance may be designated to indicate plans for financial resource utilization in a future period. Designations are imposed by City Council to reflect future spending plans or concerns about the availability of future resources. Designations may be modified, amended or removed by Council action.

Designated for economic reserve is the portion of fund balance which represents I 0% of the original adopted operating expenditure budget to be used in the event of fiscal need.

Designated for carryover of capital improvement projects is the portion of fund balance to be used for approved capital projects.

Fund Balance and Net Asst'ts Defu:its

The Roseville Natural Gas Financing Authority Enterprise Fund and Automotive Services Internal Service Fund had deficit fund balances at June 30, 2007 in the amounts of $4,895,486 and $57,270, respectively. Future revenues are expected to offset these deficits.

NOTE 12 - PENSJON PLAN I CALPERS Safety and Miscellaneous Employees Plans

Substantially all City employees are eligible to participate in pension plans offered by California Public Employees Retirement System (CALPERS), an agent multiple employer defmed benefit pension plan which acts as a common investment and administrative agent for its participating member employers. CALPERS provides retirement and disability benefits, annual cost of living adjustments and death benefits to plan members, who must be public employees and beneficiaries. The City's employees participate in the separate Safety (police and fire) and Miscellaneous (all other) Employee Plans. Benefit provisions under both Plans are established by State statute and City resolution. Benefits are based on years of credited service; one year of credited service is equal to one year of full time employment. Funding contributions for both Plans are determined annually on an actuarial basis as of June 30 by CALPERS; the City must contribute these amounts. The Plans' provisions and benefits in effect at June 30, 2007, are summarized as follows:

Benefit vesting schedule Benefit payments Retirement age Monthly benefits, as a% of annual salary Required employee contribution rates Required employer contribution rates Actuarially required contributions

Safety 5 years service

monthly for life 50

3% 9%

27.393% $7,157,144

Miscellaneous 5 years service

.monthly for life 55

2.7% 8%

14.790% $14,625,385

The City's labor contracts require it to pay employee contributions as well as its O\VJI.

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CITY OF ROSEVILLE Notes to Basic Financial Statements

I NOTE 12 - PENSION PLAN (Continued)

CALPERS detennines contribution requirements using a modification of the Entry Age Nonnal Method. Under this method, the City's total normal benefit cost for each employee from date of hire to date of retirement is expressed as a level percentage of the related total payroll cost. Normal benefit cost under this method is the level amount the City must pay annually to fund an employee's projected retirement benefit. This level percentage of payroll method is used to amortize any unfunded actuarial liabilities. The actuarial assumptions used to compute contribution requirements are also used to compute the actuarial accrued liability. The City uses the actuarially detennined percentages of payrOll to· calculate and pay contributions to CALPERS. This results in'no net pension obligations or unpaid contributions. Annual Pension Costs, representing the payment of all contributions required by CALPERS, for the years ended June 3{), 2001, 2006 and 2005 amounted to $21,782,529, $14,201,560 and $16,350,444 respectively .. The City does not have a net pension obligation since it pays these actuariallY required contributions monthly.

CALPERS uses the market related value method of valuing the Plan's assets. An investment rate of return of 7 .75%' is assumed; including inflation at 3.00%. Annual salary increases are assumed to vary by duration of service. Changes in liability due to plan amendments, changes in actuarial assumptions, or changes in actuarial methods are amortized as a level percentage of payroll on a closed basis over twenty years. Investment gains and losses are accumulated as they are realized and ten percent of the net balance is amorti:?.ed annually.

The Plans' actuarial value (which differs frorn market value) and funding progress over the past three years are set forth below at their actuarial valuation date of June 30:

Sfay~·

"""""' ,., .... Urlinbl ....... """"" """""" ·- -· '""""""' - '"""" '""""""' ""' """"' - Idlil~ ""' ~· ao;%of~l ----;;;;;- . $80,707,509 S66,152,9t2 $14,554,597 "'-"' Sl2,7'1),408 113.713"/o

'"" 91,938.30< 75,2611,002 22.678,302 76.8% 15,457,592 t46713% lOOS 110,611,333 89,817,398 2(),793,935 81.2% 17,4@,00 t19.033%

,1-hn-/m.u:, fu..-

"""""' ,., .... """"" -.. """"" Valu.cim """"" -· '""""""' - """"' '""""""' """ ·Li:lbili!l: - Idli!!!l:: - - a-; "fool'~ ----;;;;;- Sl66,048,078 $124,996,283 $41,051,795 75.3"/o $l6.JOI.J29 !!8.647"/o

2005 194,259,046 145,741,567 48,517,479 75.01'. "'"'""' 92185"/o 200\ . 223,055,8111 177,980,691 45,075,189 79.8"/o 58,688,&17 76.804%

Audited annual fmancial1

statements and ten-year trend information are available from CALPERS at P.O. Box 942709, Sacramento, CA 94229-2709.

80

CITY OF ROSEVILLE Notes to Basic Financial Statements

I NOTE 13 - RISK MANAGEMENT

A.

The City manages risk of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters by participating in the public entity risk pools described below and by retaining certain risks. The City maintains insurance coverage from a commercial carrier for its long-tenn disability and dental benefit plan.

Public entity risk pools are formally organized and separate entities established Wlder the Joint Exercise of Powers Act of the State of California. As separate legal entities, those entities exercise full powers and authorities within the scope of the related Joint Powers Agreements including the preparation of annual budgets, accountability for all funds, the power to make and execute contracts and the right to sue and be sued. Each risk pool is governed by a board consisting of representatives from member agencies. Each board controls the opemtions ·of the respective risk pool, including selection of management and approval of opemting budgets, independent of any influence by member agencies beyond th_eir representation on that board. Obligations and liabilities of these risk pools are not the City's responsibility.

Risk Coverage

The City is a member of the California Joint Powers Risk Management Authority (CJPRl\.1A) which covers general liability claims up to $40,000,000, property damage up to $5,000,000, and boiler and machinery up to $21,250,000. The City has a self-insured retention or deductible of $500,000, $25,000, and $5,000, respectively, per claim. Once the City's self-insured retention for general liability claims is met, CJPRMA becomes responsible for payment of all claims up to the limit. CJPRMA has purchased commercial insurance against property damage and boiler and machinery claims. During the fiscal year ended June 30, 2007, the City contributed S795,295 for liability, $297,790 for property and $37,294 for boiler and machinery for coverage during the

. current year and received a refund of $165,925 of prior year excess contributions.

The City is also a member of the Local Agency Workers' Compensation Excess Joint Powers Authority (LAWCX), which covers workers' compensation claims up to $4,750,000 and provides additional coverage up to $195,000,000. The City has a self-insured retention of up to $250,000 per claim. During the fiscal year ended June 30,2007, the City contributed $566,175 for current year coverage.

The contributions made to each risk pool equal the ratio of their respective payrolls to the total payrolls of all entities participating in the same layer of each program, in each program year. Actual surpluses or losses are shared according to a fonnula developed from ovemll loss costs and spread to member entities on a percentage basis after a retrospective rating.

Financial statements for the risk pools may be obtained from CJPRMA, 2333 San Ramon Valley Blvd., Suite 250, San Ramon, CA 94583 and LAWCX, c/o James P. Marta, CPA, 5921 Landis Avenue, Suite I, Cannichael, CA 95608.

B. Insurance Internal Service Funds

The Governmental Accounting Standards Board (GASB) requires municipalities to record their liability for uninsured claims and to reflect the current portion of this liability as an expenditure in their fmancial statements. As discussed above, the City has coverage for such claims, but it has retained the risk for the deductible, or uninsured portion of these claims.

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CITY OF ROSEVILLE Notes to Basic Financial Statements

I NOTE 13 • RISK MANAGEMENT (Continued)

The chan~e in the Workers' Compensation Internal Service Fund's claims liability, including claims incurred but not reported is based on an independent acruarial study prepared annually and was computed as fo!lows for the years ended June 30:

2007 2006

Claims liability, beginning of year S6,544,000 $5,432,000 Current year claims 1,000,000 2,000,000 Change in prior year claims (2,282,000) (477,000) Claims paid, current year claims (109,000) (330,000) Claims paid, prior year claims (406,000) (81,000l

·Claims liability, end of year $4,747,000 56,544,000

Current Claims Liabilities $463,000 $577,000

The City'S liability for wrinsured general liability claims, including claims incurred but not reponed is reported in the General Liability Internal Service Fund. The liability is based on an independent actuarial study prepared annually and was computed as follows for the years ended June 30:

2007 2006

Claims liability, beginning of year $1,926,000 $2,043,000 Current year claims 800,000 1,200,000 Change in prior year claims (863,000) (1,199,000) Claims paid, current year claims (82,000) (85,000) Claims paid, prior year claims (117,000) (33,000)

Claims liability, end of year $1,664,000 $1,926,000

Current claims liabilities $158,500 $994,500

The Unemployment Reserve and Vision Internal Service Funds had no outstanding claims liability at June 30, 2007.

jNOTE 14. PREPAID PURCHASED ELECTRICITY

During fiscal 1999 the City paid $6,138,335 to the Northern California Power Agency (NCP A) (see Note 15) as a capital contribution for the Geothermal and Hydroelectric Projects debt refinancing. This contribution bas been capitalized on the City's balance sheet and will be amortized in conjunction with the related debt service savings. The amount amortized for fiscal year 2007 was $888;577.

CITY OF ROSEVILLE Notes to Basic Financial Statements

I NOTE 15 ·NORTHERN CALIFORNIA POWER AGENCY (NCPA)

A. General

The City participates in joint ventures through Joint Powers Authorities (JPAs) established under the Joint Exercise of Powers Act of the State of California. As separate legal entities, these JP As exercise full powers and authorities within the scope of the related Joint Powers Agreement, including the preparation of annual budgets, accountability for all funds, the power to make and execute contracts and the right to sue and be sued. Obligations and liabilities of the JP As are not those of the City.

Each JPA is governed by a board consisting of representatives from each member agency. Each board controls the operations of its respective JPA, including selection of management and approval of operating budgets, independent of any influence by member agencies beyond their representation on the Board.

The City is a member of NCP A, a joint powers agency which operates under a joint powers agreement among twenty-one public agencies. The purpose of NCP A is to use the combined strength of its members to purchase, generate, sell and interchange electric energy and capacity through the acquisition and use of electrical generation and transmission facilities, and to optimize the use of those facilities and the member's position in the industry. Each agency member has agreed to fund a pro rata share of certain assessments by NCPA and certain members have entered into take~r·pay power supply contracts with NCPA. While NCPA is governed by its mi!mbers, none of its obligations are those of its members unless expressly assumed by them.

The City receives no income from NCPA, and does not participate in all of its projects. Further, NCPA does not measure or determine The City's equity in NCPA as a whole. NCPA reports only The City's share of its General Operating Reserve, comprised of cash and investments, and The City's share of those Projects in which the City is a participant. These amounts are reflected in the fmancial statements as Investment in NCPA Reserve.

During the year ended June 30, 2007, the City incurred expenses. totaling $17,259,759 for purchased power and assessments and prepaid assets paid to· NCPA.

The City's interest in certain NCPA Projects and Reserve, as computed by NCPA using unaudited informalion, is set forth below.

General Operating Reserve (including advances) · Associated Member Services (including advances)

Undivided equity interest, at cost, in certain NCPA PoWer Projects: Geothermal Projects Calaveras Hydroelectric Project Combustion Turbine Project No. Geothermal Public Power Line Combustion Turbine Project No.2 Graeagle Hydroelectric Project

June 30, 2007

$1,547,923 722,580

441,082 933,179

7,694 Nil

134,135 Nil

$3,786,593

·.•,

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CITY OF ROSEVILLE Notes to Basic Financial Statements

(NOTE 15- NORTHERN CALIFORNIA POWER AGENCY (NCPA) (Continued)

B.

The General Oper<o~ting Reserve represents the City's portion of funds which resulted from the settlement with third parties of issues with financial consequences and reconciliations of several prior years' budget:; for programs. It is recognized that all the flUlds credited to the City are linked to th,e collection of revenue from the City's ratepayers, or to the settlement of disputes relating to ele~tric power SUPD!y and that the money was collected from the City's ratepayers to pay power bills. Additt~nally, the NCP A Commission identified and approved the funding of specific reserves for working capital, accumulated employees post-retirement medical benefits, and billed property taxes for th_e geothf:rmal project. The Commission also identified a number of contingent liabilities that may or may not be realized, the cost of which in most cases is difficult to estimate at this time. O~e _S!-~Ch co~tinget~t liability is the steam field depletion which will require funding to cover debt serviCe and operational costs in'excess ofthb expected value of the electric power. The General Operating Reserve is intended to minimize the nwnber and amount of individual reserves needed for each project, protect NCPA's financial condition and maintain its credit worthiness. These funds are available 01l dem':ind, but the City has left them with NCP A as a reserve against these contingencies identified by NCPA.

Members ofNCPA may participate in an individual project ofNCPA without obligation for any other project.' Meil:lber assessments co\lected for one project may not be used to finance other projects ofNCPA without the member's permission.

Projects

Geothermal Projects

A purchased power agreement with NCPA obligates the City for 7.880% of the operating costs and debt service of the two NCPA 110-megawatt geothermal steam powered generating plants, Plant Number I and Plant Number 2.

NCPA's Geothermal Project·has experienced a greater than originally anticipated decline in steam production from gE:otherrnal wells on its leasehold property. NCPA has continued to monitor the wells while pursuing alternatives for improving and extending reservoir performance, including supplemental wat~r reinjection, plant equipment modifications, and changes in operating methodology. NCJlA, along with other steam field operators, has observed a substantial increase in steam production in the vicinity of reinjection wells and has evaluated a number of alternatives to increase water reinjection at strutegic locations. NCP A, together with other steam developers and the Lake County SlUlitation District, has completed the construction of a wastewater pipeline project that greatly increased the amount of water available for reinjection.

NCPA will continlle to monitor the wells while pursuing alternatives for improving and extending reservoir perfonnance, including· supplemental water reinjection, plant equipment modifications, and changes in 0\)erating methodology. NCPA, along with other steam field operators, has observed a substatltial increase in steam production in the vicinity of reinjection wells and is attempting to increase water reinjection at strutegic locations. NCPA, other steam developers, and the Lake County Sanitation District have constructed a wastewater pipeline project that greatly increased the amount of water available for reinjection.

CITY OF ROSEVILLE Notes to Basic Financial Statements

I NOTE 15- NORTHER!" CALIFORNIA POWER AGENCY (NCPA) (Continued)

Based on an iJJiernaJ assessment of the melded costs of power from the Geothe~al Project and all other resources available to the members, NCPA believes its members will continue to be able to operate their electric utilities on a competitive basis, when compared to local investor-owned utility rates, while meeting all electric system obligations including those to NCPA. In January 1996, NCP A issued $167,940,000 (1996 Refunding Series B), and $5,420,000 ( 1996 Tax.able Series C) in variable rate revenue bonds, the proceeds of which were used to refund a portion of the 1987 Refunding Series A Revenue Bonds. In August 1998, NCPA remarketed $121,590,000 (1996 Refunding Series A) of revenue bonds changing the interest rate from a weekly interest rate to a long tenn rate. The City is obligated to pay its contractual share of the debt until it is fully satisfied, regardless of resulting cost or availability of energy. At June 30, 2007, the book value of this Project's plant, equipment and other assets was $144,795,307, while its long-term·debt totaled $101,055,554 and other liabilities totaled $43,739,753. The City's share of the Project's long-term debt amounted to $7, 963,178 at that date.

On October 28, 2004 NCPA approved a resolution to finance the expansion and remodeling of NCPA main office building located in Roseville. The expansion is included as part of the Geothennal Projects fimded by the bonds mentioned above.' ,The City will_ recover its 7.880% share. of the cost of the expansion which was $204,958, with a 5% return on the investment over a ten year period. A5 of June 30, 2007 the City was owed $176,054.

ColaveNJs Hydroelectric Project

In July 1981, NCPA agreed with Calaveras County Water District to purchase the output of the· North Fork Stanislaus River Hydroelectric Development Project and to finance its construction. Debt service payments to NCPA began in February 1990 when the project was declared substantially complete and power was delivered to the participants. Under its power purchase agreement with NCPA, the City is obligated to pay 12% of this Project's debt service and operating costs. On April 16, 2002, NCPA completed the $86,620,000 refunding of revenue bonds at a weekly variable interest rate, initially set at 5.097o/o, and a net present value savings of$10, 160,431. During fiscal year 2002 the City paid $11.6 million to NCPA for its share of refunding the 1992 Refunding Series A Bonds and costs of issuance related to the 2002 Refunding Series A, B and C Bonds. At June 30, 2007, the book value of this Project's plant, equipment and other assets Was $508,146,517 while its long-term debt totaled $480,611,061 and other liabilities totaled $27,535,456. The City's share of the Project's long·tenn debt amounted to $57,673,327 at that date.

Combustion Turbine Project No. J

In October 1984, NCPA financed a five-unit, 125-megawatt combustion turbine project. The project, built in three member cities, began full commercial· operation in June 1986, providing reserve and peaking power. In December 1989, NCPA issued $68,958,257 in fixed rate revenue bonds, the proceeds of which were used to defease the bonds then outstanding. Under the NCPA power purchase agreement, the City is obligated to pay 13.5840% of this Project's debt service and operating costs. At June 30, 2007, the book value of this Project's plant, equipment and other assets was $18,212,266, while its long-term debt totaled $15,210,893 and other liabilities totaled $3,001,373. 7The City's share of the Project's long-term debt amolUlted to $2,065,639 at that date.

CITY OF ROSEVILLE Notes to Basic Financial Statements

j NOTE 15- NORTHERN CALIFORNIA POWER AGENCY (NCPA) (Continued)

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Geothermlll Public Power Line

In 1983, NCPA, Sacramento Municipal Utility District, the City of Santa Clara and the Modesto Irrigation District Goint owners) initiated studies for a Geothermal Public Power Line (GPPL) which would carry power generated at several existing and planned geothermal plants in the Geysers area to a location where the joint owners could receive it for transmission to their load centers. NCPA has an 18.5% share of this Project and the City has a 14.1756% participation in NCPA's share. In 1989, the development of the proposed Geothennal Public Power Line was discontinued because NCP A was able to contract for sufficient transmission capacity to meet its needs in the Geysers. However, because the project financing provided funding for an ownership interest in a PG&E transmission line, a central dispatch facility and a performance bond pursuant to the Interconnection Agreement with PG&E, as well as an ownership interest in the proposed GPPL, NCPA issued $16,000,000 in long-term, fixed-rate revenue bonds in November 1989 to defease the remaining variable rate refunding bonds used to refmance this project. The City is obligated to pay its 14.1756% share of the related debt service, but debt service costs are covered through NCPA billing mechanisms that allocate the costs to members based on use ofthe facilities and services.

At Jtme 30, 2007, the book value of this Project's plant, equipment and other assets was $3,346,061, while its long-term debt totaled $3,298,170 and other liabilities totaled $47,891. The City's share of the Project's long-term debt amounted to $467,680 at that date.

Combustion Turbine Project No, 2 (Steam injected Ga.~ Turbine Project)

The City is a participant in a 49.8 megawatt Steam Injected Gas Turbine project which was built under turnkey contract near the City of Lodi and declared substantially complete on April 23, 1996. In October 1992, NCPA issued $152,320,000 of Multiple Capital Facilities Revenue Bonds to fmance this project, a similar project for the Turlock Irrigation District in Ceres, and Lodi system facilities. Under the NCPA power purchase agreement, the City is obligated to pay 36.500/o of the debt senice ~d operating costs for the Lodi unit.

The City's participation in procurement of natural gas for fuel for existing and new combustion tW'bine units was approved in 1993. Although there is currently no additional debt fmancing, the City and NCP A have conunitted to long-term payments for gas transmission pipeline capacity, and entered a purchase contmct for natural gas. The City is obligated to pay 17.9218%.

At June 30, 2007, the book value of this Project's plant, equipment and other assets was $67,749,862, while its long-term debt totaled $65,067,009 and other liabilities totaled $2,682,853. The City's share ofthe Project's long-tenn debt amounted to $23,749,458 at that date.

GrQeagle Hydroelectric Project

The City's participation in this small hydroelectric project was approved in 1993. Although this project does not involve any fmancing, it does involve a long-tenn contmctual conunitment to purchase the power produced by the project.

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CITY OF ROSEVILLE Notes to Basic Financial Statements

j NOTE 15 -NORTHERN CALIFORNIA POWER AGENCY (NCP A) (Continued)

c. NCPA Financiallnformlllion

NCP A's financial statements can be obtained from NCP A, 180 Cirby Way, Roseville, CA 95678.

j NOTE 16 SOUTH PLACER WASTEWATER AUTHORITY

The City is a member of the South Placer Wastewater Authority (SPWA), a joint powers agency which operates Wlder a joint powers agreement among three public agencies; the City of Roseville, South Placer Mtmicipal Utility District and Placer Cotmty. The purpose of SPWA is to provide for the planning, financing, acquisition, O'A-Tiership, construction and operation of the Regional Wastewater Facilities. '

Under the terms of a funding agreement, the City will own and operate the Regional Wastewater Facilities. Under the terms of this agreement the member agencies will share the opern.ting costs of the Facilities after construction is complete. The Regional Wastewater Facilities include the Dry Creek Plant and the Pleasant Grove Plant. In November 2000, the,SPWA issued Revenue Bonds Series A and Series B in the original principal amotmts of $109,775,000 and $70,000,000 respectively. The purpose of these bonds is to partially finance the costs of acquisition and construction of the Pleasant Grove Wastewater Treatment Plant. On September 2003, the SPWA issued Refunding Revenue Bonds in the original principal atnotmts of S97 ,000,000. The purpose of these bonds is to advance refund the 2000 Revenue Bonds Series A. The three agencies are responsible for the repayment of the Revenue Bonds. The City's share of this obligation was determined to be 54.17%. As a result, this portion of the debt was recorded on the City's financial statements, as discussed in Note 9. ·

During the year ended Jtme 30, 2007, the City paid $9,677,804 to SPWA based on connection fees collected during the fiscal year.

The City records its share of income and expenses from SPWA in the Wastewater Enterprise Fund and these changes are reflected in the Statement of Revenues, Expenses and Changes in Retained Earnings. The City's Interest in SPWA Reserves at June 30, 2007 was $115,434,780.

SPWA's fmancial statements can be obtained from the City of Roseville, 311 Vernon Street, Roseville, California, 95678.

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CITY OF ROSEVILLE Notes to Basic Financial Statements

NOTE 17- MUNICIPAL SOLID WASTE LANDFILL CLOSURE AND POST CLOSURE CARE COSTS

State and federal laws and regulations require that the City perfonn certain maintenance and monitoring functions at the Roseville sanitary !afldfill site, which is closed, through the year 2024. Accordingly, the City has recorded a liability and expense i~ the Enterprise ~olid Waste Fund for the estimated postclosure care cost. The recorded amount 1s based on apphcable state and local laws and regulations concerning closure and postclosure care. If additional postclosure care requirements are detetmined {due to changes in technology or applicable Jaws or regulations, for example), these costs may result in increased ch<U"ges to future landfill users or the usage of future tax revenues. As of June 30, 2007, landfill closurt liability was $3,546,209.

I NOTE 18 COMMITMENTS AND CONTINGENT LIABILITIES

Under the terms of its NCPA joint venture agreer11ent, the City is contingently liable for a portion of the bonded indebtedness issw!d by these agencies under take-or-pay or similar agreements, as discussed in Note IS. The City's estimated share of such debt outstanding at June 30, 2007 was $91,919,282. Under certain circumstarices, the City may also be responsible for a portion of the costs of operating these entities. Under certain circumstances, such as default or bankruptcy of other participants, the City may also be liable to pay a por:t~on of the debt of these joint ventures on behalf of the other partiCipants. ·

The City participates in Federal and State grant programs. These programs haVe been audited by the City's independent accowiuints in accordanc~ with the provisions of the federal Single Audit Act amendments of 1996 and applicable State requirements. No cost disallowances were proposed as a result of these audits; however, these prognuns are still subject to further examination by the grantors and the affiount, if any, of exPeriditures which may be disallowed by the granting agencies cannot be determined at this time. The City expects such amounts, if any, to be immaterial.

,. The City is subject to litigation arising in the norflUll course of business. In the opinion of the City Attorney there is no pending litigation, other 1han disclosed above, which is likely to have a material adverse effect on the financial position of the City.

On September 30, 2005 the City signed a I-ease and Sublease Agreement with ROseville Investments, LLC for the de·:.relopment of two hotels and a conference center within the North Central Roseville specific Plan Area. According to the terms of the Agreement, the City will lease the property in an aggregate amount of $10 mi1\ion from the Developer. The City will advance the lease payments for the public improvements at the site. The Developer will then subleaSe the public improvements from the City commencing upon the issuance of a certificate of occupancy for the first hotel for a term of terl years. At t~e. end of th~ I 0-year period, the Developer is required to make a balloon payment for any remammg rental payments up to the ~I 0 million.

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CITY OF ROSEVILLE Notes to Basic Financial Statements

I NOTE 18- COMMITMENTS AND CONTINGENT LIABILITIES (Continued) I Construction and Other Commitments

The City has the following outstanding construction co~itments at June 30, 2007:

Pro'ects Roseville Energy Park

WTP Expansion Phase IU

Amounts $9,862,077 3,000,000

i NOTE 19- GAS SUPPLY ACQUISITION AND RESALE

The City operates certain electrical generating plants which provide power for s~I: to the publi~ and needs reliable, economic supplies of natural gas to generate the needed electnc1ty. ]n pursmt of that objective the City and its component unit, the City of Roseville Redevelopment Agency formed the Authority for the purpose of acquiring, financing and supplying natural gas to the City. Summarized below are various agreements entered into by the Authority to itchieve its purpose.

A. Prepilid Gas Agreement

( ,;

, ..

Pursuant to an Agreement for the Purchase and Sale of Natural Gas dated January 24, 2007, the Authority used a portion of the proceeds of its $209,350,000 of Gas Revenue Bonds, Series 2007 (the Bonds) to prepay Merrill Lynch Commodities, Inc. (Gas Supplier) for a twenty year supply of natural gas. Commencing January I, 2008 and continuing through December 31, 2027, the Gas Supplier'is obligated to deliver daily contract quantities of natural gas on a firm basis to the designated delivery point. Daily contract quantities vary from month to month but not. from year to year. This commitment totals 2,352,000 MMBtus (millions of British thermal units) per year or 47,040,000 MMBtus for the twenty year contract period. The Authority has recorded a Prepaid Natural Gas asset which is to be amortized as daily contract quantities are delivered. During the period·ended June 30, 2007, the Seller had not commenced delivery of gas and amortization of the prepaid had not commenced. ' ,. · ·

The itgreement provides for payments to be made·by the'Gas Supplier if it fails to deliver·the daily contract quantities and may lie terminated by the Authority in the event of non-performance by the Supplier. The A@'eement will automatically terminates if there is a termination of the Commodity Swap (See note 3 C below) which is not due to default by the Authority or if there is an event of default under the swap agreement entered into by the Gas Supplier and a third party. Upon early termination, whether due to the aboye or due to any other optional tennination event as defined iri the agreement, the Gas Supplier iS required to make a tennination payment to the Authority that.is expected to be sufficient, together with other available funds, to redeem the Bonds. The Gas Supplier's commitments imder this agreement are guaranteed by its parent company, Merrill Lynch&. Co. Inc. wider a guarantee agreement with the Authority.

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89

CITY OF ROSEVILLE NotelltO Ba!liC Financial Statements

j NOTE 19- GAS SUPPLY ACQUISITION AND RESALE (Continued)

·B. Funding Agreement

c.

0:1 ' v. v. D.

Under certain conditions specified in a Funding and Assignment Agreement dated January 24, 2007 between the Authority and Gas Supplier, the Gas Supplier has agreed to advance funds to the Trustee to pay debt service when due or to redeem bonds in the event of early termination. Advances are required under covered swap deficiencies and covered termination deficiencies and optional advances may also be made. Advances are repayable from by the responsible party causing the deficiency requiring an advance under this agreement. This agreement is coterminous with the :Bonds. The Gas Supplier's commitment under this agreement is guaranteed by its parent company, Merrill Lynch & Co. Inc. under a guarantee agreement with the Authority.

There wc;re no advances outstanding as of June 30, 2007.

Supply Agreement

Pursuant to a Natural Gas Supply Agreement dated February I, 2007, the Authority has agreed to sell to the City a twenty year supply of natural gas. This Supply Agreement is coterminous with and provides for the delivery of natural gas in quantities which are matched to the Prepaid Gas Agreement, discussed above. For each MMBtu delivered (sold) to the City, the Authority will receive a variable revenue stream based on a first of the month index for the delivery location.

The Agrt:ement tenninates upon tennination of the Prepaid Gas Agreement or upon the City's failure to make any required payment within two business days of the due date.

Commodity Sw11p Agreement

In order to have its gas price exposure consistent with prevailing market rates, the Authority entered into a natural gas Commodity Swap Agreement with JPMorgan Chase Bank (Counterparty). For the term of deliveries under the Prepaid Gas Agreement and the Supply Agreement, the ·Authority will pay an index price per MMBtu to the Counterparty, and the Counterpart)' will pay a fixed price to the Authority. The index price paid by the Authority is expected to approximate the price paid by the City under the Supply Agreement.

The monthly quantity and term of the Commodity Swap Agreement are matched to those of the Supply A~reement

REQUIRED SUPPLEMENTARY INFORMATION

MODIFIED APPROACH TO REPORTING STREET PAVEMENT COSTS AND PARKS AND LANDSCAPING COSTS

GASB Statement 34 allows the City to use the Modified Approach with respect to infrastructure assets instead of depreciating these assets. The Modified Approach may be used if two requireme~ts are met:

I) The City must have an asset management system (AMS) with certain features.

2)

-/ It must maintain an up·ttrdate inventory of the infrastructure assets. -/ It must estimate the annual costs to maintain and preserve those assets at the condition level the

City has established and disclosed through administrative or executive policy or legislative action.

-/ The AMS must be used to assess the condition of the assets periodically, using a measurement scale.

-/ The condition assessments must be replicable as those that are based on sufficiently understandable and complete measurement methods such that different measurers using the same methods would reach substantially similar results.

The City must document that the roads, parks and landscaping are being preserved approximately at or above the condition level the City has established and disclosed. This documentation must include the results of the three most recent complete condition assessments and must provide reasonable assurance that the assets are being preserved approximately at or above the intended condition le\'ei. · ·

Street Pavement . -' The City has elected to use the Modified Approach to report street pavement costs. The City uses a computerized Pavement Management System to track thC condition levels of each of the street sections.

The condition of the pavement is based on a weighted average of seven distress factors found in pavement surfaces. The pavement management systeffi uses a measurement scale that is based on a condition index ranging from zero for a failed pavement to I 0 for pavement with perfect condition. The condition iti.dex is used to classify pavement in good or better condition (7.0·10.0), fair condition (5.5-6.9), and substandard condition (less than 5.5).

The City's maintenance costs are budgeted to be $5,929,683 in fiscal 2008. The Pavement Quality Index (PQ.I) for the City's street pavement for the last nine years iS as follows:

Year

99/00 00/01 01/02 02/03 03/04 04105 05/06 06/07 07/08

Arterial! Collector

N/A 7.7 7.8 7.8 7.6 7.5 7.5 7.7 7.9

POI

Residential NIA 7.6 7.5 7.9 7.6 7.9 7.9 8.0 8.0

"

Maintenance Budget

$3,967,410 3,615,450 2,784,660 4,766,980 . 5,733,500

6,499,729 7,794,196 5,521,428 5,929,683

Actual Maintenance '.$2,386,645

1,240,576 3,730,265 2,665,863

2,925,909 4,284,993 ,7,213,261

. 9,206,007 NIA

·:

tl:l ' Vo a-·

REQUIRED SUPPLEMENTARY INFORMATION (Continued)

The City's polil;:y based on current funding is to maintain arterial and collector roadways at an average Pavement Quality Index (PQI) of7.5 and residential roadways at an average PQI of6.5. Thls rating allows for minor cracking and revealing of the pavement along with minor roughness that could be noticeable to drivers traveling at posted speed. The City expended $9,206,007 for street preservation in fiscal 2007.

Parks and Landscaping

The City has also elected to use the Modified Approach to report parks and landscaping costs. The City uses a computerized Grounds Management System to track the condition levels of each of the parks and landscaping.

The condition of the parks and landscaping is based on a weighted average of six levels of condition. The ground management system uses a measurement scale that is based on various levels ranging from six for an undeveloped natural area to one for parks and landscaping with high-quality, diverse landscaping with state-of-the art maintenance. The condition index is used. to classify parks and landscaping in the following levels: state-of-the-art to high-level maintenance (1-2), moderate to moderately low level maintenance (3-4), minimum-level maintenance (5), and natural area that is not developed (6).

The City's maintenance costs are·budgeted to be $5,309,367 in fiscal 2008. The Ground Management Index (GMT) for the City's parks and landscaping maintenance for the last ten years is as follows:

GMI (Level) Fiscal Parks and Maintenance Actual Year Landscal!ing Budget Maintenance 98/99 NIA NIA NIA 99/00 NIA N/A NIA 00/01 N/A NIA NIA 01/02 2 $3,213,790 $3,078,263 02/03 2 3;796,952 3,439,081 03{04 2 3,946,547 3,648,683 04/05 2 4,349,147 3,879,242 05/06 2 4,633,558 4,309,606 06/07 2 5,111,124 5,028,402 07/08 2 5,309,367 NIA

The City's policy based on current funding is to maintain parks and landscape at an average Ground Management Index (GMI) of Level 2. This rating allows for high-level maintenance and is the recommended level for most organizations. The City expended $5,028,402 for maintenance for fiscal 2007.

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NON-MAJOR GOVERNMENTAL FUNDS

SPECIAL REVENUE FUNDS

Lighting and Landscape and Service Districts Fund. To account for the colleCtion of assessment revenue from property owners for the maintenance of surrounding park and landscaping improvements within the boundaries of each district. · ·

State Gasoline Tax Fund. To account for revenue apportioned tO the City from the State:collected gas tax revenues and spent for construction and maintenance ofCity,streets. "

1 . ; .

Home Improvement Fund. To account for loan activiti~s for the production ofaffordablf? housing. . ~-·~ . • ... -

California Library Services Fund. To account for revenues .an4 grants from the ~tate to be expended for library related materials

Traffic Safetv Fund. To account for the City's share of fines generated from violations of the State M_otOr Yehicl~ Code.

FEMA Fund. To record revenues received from FEMA and OES for federal and/or state recognized disaster claims.

Trench Cut Recovery Fund. To acoount far the. co!lectio!l of f~es charged by the City for cutfi~g trenches. in paved roadway and spent for maintaining the ~tree! if useful life ~s decreased.

Law. Enforcement Block Grants Fund. To account for the collection of grants from the Federal Department of Justice ~ssista~~e and ex.pended for front line i<iW _:rfOrcC~ent. '

Fire Facilities Fund. To account for fees applied to new construction and ex.pended for construction or repair of fire facilities and equipment for which it creates a need.

Public Facilities Fund. To account for fees ,applied to new construction and expend_ed for the, development of public facilities for which it creates a need.

Park Development Fund. To account for collection fees applied t~ new construction and ex.pended for neighborhood and community park and recreation facilities. . · .

Pleasant Grove Drain Basin Fund. To account for collection of fees applied to new construction'and expended for mitigation of developmental impacts on the Pleasant Grove watershed. ·•

Tree Propagation Fund. To account for fees assessed on oak tree removal and expended on the continuation and preservation of tree planting within the City.

'. ··'

"

NON-MAJOR GOVERNMENTAL FUNDS (Continued)

Air Quality Mitigation Fund. To account for mitigation fees to fund future emission reduction projects for air quality.

Community Development Block Grant/HOME Fund. To account for monies received from the Department of Housing & Urban Development and expended for programs and activities to benefit low­income residents, and to account for funds received from tlte Federal government used to produce affordable housing and reltabilitate existing residential units.

Housing Autbority Section 8 Fund. To account for monies received from the U.S. Department of Housing and Urban Development and expended for rental assistance to low income households within the Roseville and Rocklin areas.

Affordable Housing Fund. To account for monies received from property whose land use was changed from residential to commercial and from affordable housing agreements. These monies are then used to fund other affordable housing pi"ojects.

Park and Recreation Donation Fund. To account for donations and revenues received by Park and Recreation Facilities and for Olympus Pointe Sculpture Park maintenance.

Forfeited Property Fund. To account for revenues received from confiscated property.

Storm Water Management Fund. To accumulate expenditures for future storm water mandates.

t::tl Traffic Signal Fund. To account for traffic signal coordination and maintenance funded by developers

1 and the Electric Fund. u. -.] Soutb Placer Animal Control Shelter. To account for the collection of fees for the construction of an

animal shelter.

Bike TraiiJOpen Space Maintenance. To account for the accumulation of funding for the maintenance of the City's bike trails and open spaces.

Traffic M.Jdgatlon. To account for revenues and expenses related to major roadways and related structures such as bridges or interchanges.

DEBT SERVICE FUND

Roseville Finance Authority Fund. To account for the accumulation of resources from lease payments and the payment oflong-tenn debt incurred by the Finance Authority.

CAPITAL PROJECTS FUNDS

Building Fund. To accowtt for approved capital projects within the City funded by various fees and sources.

General Capital Improvement Projects Rehabilitation Fund. To account for the approved rehabilitation of existing City property funded by the General Fund.

NON-MAJOR GOVERNMENTAL FUNDS (Continued)

PERMANENT FUNDS

Roseville Aquatics Complex Maintenance Fund. A permanent fund established to account for contribution from the High School District Only the interest earnings can be spent on helping maintain ~he Aquatics Complex.

Citizen• Benefit Fund. A permanent fund established to account for the proceeds from the.sale of any municipally owned Hospital and interest earnings expended for improving the quality of life for the citizens of the City of Roseville.

"

CITY OF ROSEVILLE NON-MAJOR GOVERNMENTAL FUND~

COMBINING BALANCE SHEET JUNE 30, 2007

SPECIAL REVENUE FUNDS SPECIAL REVENUE FUNDS

Ligbung and ...,_,. State California T=chCut uw Plea ... nt

... and Se!vice. Gaooline Home Ltbrary Traffic •==> Enforcement ,., Public ""' Grove Drain .. Di•tricti TM l~vement ~= Saf~ FE.\tA '~' Slock Grants facilitie< Factl!!ies Develo2ment Ba•in

ASSETS

Cqh and investment! in City Treuury $4,538,571 S6.114.S64 $741.454 $684.227 $64,037 $213,88(1 $7,71!1,571 $8,594,125 $22,(>78,176 $5,915,539

Res~cted cash and inve<tments wtth fiscal agen" .,., Rceeivable<: • •

1,389,610

Accounl5 166,249 4,213 "" Accrued inter""' · ' _,; 35,624 653,74!1 26,440 6,213 '" 2,917 87,774 90,266 271,044 58,607

Due from other government agencies 907,385 24,556 $192,742 $617,587

Due from other funds Advances to other funds 3,900,000

Defem:d receivables 357,685 367,178 55,467 198,875

Note• ~ceivables 55,970

Total Asset> $4,740,450 $11,579,902 $823,864 $714.996 $192.742 $617.587 $64,689 $216,797 $9,545.640 $9,051,569 $22,404.\137 $6,173,021

LIABILITIES

ttl Account. payable ,,· ' $338,642. $2,674,966 $31)) $29,132 $277,436 $442,317 SIOJ,t70

,, Accrued liahthtico """ Vo Due 10 other funds 192,641 $617.587 00 Due to other gov"'"'!"rnl agencies

Advance• from other funds 500,000

Deposiu

Defem:d revinue 337,448 S28,978' $203,697 357,594 $367,178 55,467 198,875

Defem:d liabilities 21,968 243,164

Total Liabilities 338,642 3,534,382 28,978 "' 192,741 617.587 203.697 386,726 644,614 740,948 302,045

FUND BALANCES

' '' Reserved for:

Advances 3,900,0<Xl

Eo~mnbrances 524,433 1,967,783 400,000 684,685 164.142 8,112

Deferred receivable< aad ~otc• :ecrivable 26,992

Deb! service

U=served: De•igna!ed for carryover of

capital improvement projects ... Undesignated 3,877,375 2,177,737 767,894 314.693 $64,689 ll.IOO 8,474.229 8,406,955 21,499,847 5,862,864

TOTAL FUND BALANCES 4,401.808 8,045,520 794,886 714,693 . 64.689 !3,100 9.158,914 8:406.955 21.663,9i9 5,870'.976

Total Liabiluies and Fund Bal""""' $4,740.450 $11.579,902 $823,864 S714,996 Sl92.742 $617,587 $64,689 S216.797 $9,545,640 $9,051.569 $22,404,937 S6,173,021

(~ontioucd)

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CITY OF ROSEVILLE NON-MAJOR GOVERNMENTAL FUl\TI~

COMBINING BALANCE SHEET JUNE 30, 2007

SPECIAL REVENUE FUNDS SPECIAL REVENUE FUNDS

~~ Development Hou•ing '"'""' South Placer BileTroill

T= Air Quality Block Autbol:ity Affordable Recrta!io.n Forfetted SIOnn Water T""' -- Open Space Traffic

Pr~·&•tio.n MniE;tion GnwVHOME Section 8 Hou•in~ Donotion Prope~ Mana1cment Si~l Control Sheller Main!eno.nce Mitie!!on

'""""' Cub and illvcstmc:nu LD City Tre&SUIY S5,151.659 . $115,241 $24,232 S657,256 S3,518.510 $355.257 $102.207 $267,426 $2.777,050 $30,864 $104,509 $19.223.546

Restricted cash ond investmenu with fiscol agmts 41,553

R.ueivabln;

Accounts 4.884 29,446 2,051 "' Accrued in~eren 53,267 '" 98,471 3,598 91< 2,515 30,254 m 1,374 177,080

Due from other gov~t ogencie• 508,651 25,403 427,087

Due from other fundi 50,000 200,000

Adv.tllce• to oth..- funds 150,000 200,000

Deferred receivabln 1,537.478

Notes ~vablet 7,922,044 2.161.053

Toii.IA5Set> $5.204.926 $116.176 $8.4$4.927 $729.096 $5.978.034 $358,855 $103.121 $269.941 $2,836,750 $31.040 $107.934 $21.765,746

UAB1UTIES

00 Accounts pa)'Dble $708 $49,974 $294,289 "' $6,806 $12.49<1 $15,470 $1,300,379

' Accrued liobthties 2,184 154,984 $1.589 4,888 17.648

Vo Due to other hmdi 274,044 212.500

"' Due to other government •&•ne•n 7.922,044

Adv.tllcC. from other fun<b Deposits

Deferred revenue 2<1.500 2,181,856 1,628.025

Deferred liabilities 94,335

708' 8.248.246 469.773 2.183.445 " 11.694 30.138 15,470 3,235,239

FUND BAlANCES

Rerervm for: Adv.tllces 150.000 $200.000

Enrumbnnoes Si,041 1,900 51.615 ll6,238 Si5,414 863.161

Deferred receivobleollld ootes receivable Oebt...,.,.jo;e

Unreservul.: Oe1igna.ted for canyaver of

c.piul improvnne:ct projects

Undesignated 5.203,177 $1!6.176 20o!.181 259.323 3.592.914 $358.79& SI03.12l 142.009 2.791.198 $31.040 S92,464 $17.467.346

TOTAL FUND BALANCES 5.204,218 116,176 206.681 259.323 3,794,589 358,798 103.121 258,247 2.,806.612 3l,Oo!O 92.464 18.530.507

Total Liabilitieo .tlld Fund Balance• $5.204.926 $116,176 $8.454,927 S129,0% $5.978.034 $358.855 $103.121 $269.9-41 $2.836.750 S31.040 $107.934 $21,765,746

{Coatinued)

99

to ' 0'>

0

ASSETS

Cosh ad ;,,·eotm"'lll in City T=sury R .. lricted cub BOd iov..mtenl> witb fiotal qCilt

Receinb1e.

Aoeounto

Accrued interest

Due from other government a,""cieo

Duo from other ti.mc!o Advom:n to <><her fuii<U Defu=l =:eivab1 .. Noles reccivab1 ..

TOialAsKlll

UABILITIES

Accounto payable Acauod lWuhnes Due to otherfun<b:

0u.e to otbe.-JOVcrm'bEIII agenci ..

Advanc .. from~ fundo

""""" Deferm:l n:vet>uc

Deferred liabilities

CITY OF ROSEVILLE NON-MAJOR GOVERNMENTAL FUNDS

COMBINING BALANCE SHEEl JUNE 30, 2007

DEBT SERVICE

FUND

Rooeville Fin.mce

Autb~

SSJ,649 [.395,681

. 28,205

$].417.535

CAPITAL PRDJECfS

""'"" General Capi!al

Improvement

Projecu Build!!!j Rdulbi1rtan(III

$5,420,078 $1S,802.~20

42,062 174,322

""

- $5,462,996 S15,977,142

$1,117.552

2,678

-----ToWLiabllnies 1.120,230

FUND EQUITY

Reserved for.

""·-~ 191.785 De fermi n:ceivablesiODd ooteo .. ce~vab1e

Debl_..'ice Sl,4n,Sl5 u,..._..·ed

Dm:~ed fm carryover of

capiW~projecto 4,150,981 $15,977,142 Undeaignal<d

TOTAL FUND BALANCES 1,477,535 4,342,766 15,977,142

ToW Lial>i!nies oDd FlUid Balanceo S1.477.SJS $5 462,996 $15,977,142

'"'

PERMANENT

""""' Roon-ille

Aquatio•

Complel Citizens

Munten:u~ce '"""' $597,375 $16,732.5~2

10,946 99,534

$608,321 $16.832.116

S6,458

000,000

606458

U6J $16.832,116

1.863 16,832,116

$608 321 $16.8J2,116

,.., Norunojor

""'~' '"""'

$127,589,411 2,826,1144

207,648

1.956,930 2,704,267

250,000

4.250,000 2,516,681

10,l39,067 Tbis Page Left Intentionally Blank

$152:440.8!0

S6,663.69l 1114,071

l,J.OJ,2JO 7,922,()44

500,000

600,000

5,379,618

359,467

22 912,121

4,250,000

4,990,369 26,992

1,471.53S

20,128,123

98 655.710

129,528,729

$152440.850

CITY OF ROSEVILLE NON-MAJOR GOVERNMENTAL FUNm

COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES FOR -THE YEAR ENDED JUNE 30, 2007

SPECIAL REVENUE FUNDS SPECIAL REVENUE FUNDS

Lighting ODd

'-'"<ho"' , .. C.Jifomi• Trench Cut Low Pleasant and Sen~cc Guolino H~ L1brazy Traffic ''""" ""~' '"' Public """ Gro~Drain

Di<tricto Tn I!!!.E!~t """= Safety FC'.IA '""" Block Gmrts Facilities Facil!nes Devol£E!:!!rnl Buin REVENUES

Tax•• $3,907,828 S2.017.309 Charges for Sl:Mo:es $99,735 Sl.3l7.90S S4,854,SI2 $865,738

Subventions and grants Sl.999.S42 60,417 $628.206 Sl47.450 60.814 376,000

Use of money aDd property 165.899 470.803 $37.746 56.456 $3,146 11,948 542,950 490,250 1.130.070 381.788

Frneo, forleitun:s ond (lellaltico S\,44{),468 Conmbutions from developtn Miocellancou• revenues 34.078 1,071.282 20.8!9 3,580 256.932 2.836 m

Total Revenues • 4,107,805 3,541.627 37.746 237.427 1.440.468 628.206 6.726 159.398 2.878.005 3,828,155 6.363.418 1.247.997

llXPENDrnJRES

""""'• General government 6.876 1.172 Community development aDd pl.a:ming 132,281

Puhlicworb 965.958

Pub~c safety:

t:ll '~ 742.643

' Library 12.000

a, Parb and rccreo11an 2,819,533 248,405

Housing auistaoce paymen!S Capital outlay 1\,189,319 11.225 445,153 3.335.885 218.240

Debt""f\'icc Principal rctinment 161,910

Interest and fiscal charge• 21.968 97.175

Tala! Expcruhtun:s 2.819.533 12.177.245 23.225 1,446.881 6.876 3.584.290 351.693

EXCESS (DEFICIENCY) OF REVENUES OVER EXPENOinJRES 1.288.272 (8,635.618) 17.746 214.202 1.440,468 628.206 6.726 159.398 1.411.124 3.82!,279 2,779,128 896,304

OrnER FINANCING SOURCES {USES) Transfers in ).6$5,715 1.696.4:54 696.214

Tnmsfcn(Olll) (340,999) (445.938) (340) (1.564.320) (628,206l (4!0) (146.755l (4.621.294) (~.171.200) (2.132.886) (240.493)

Total Other Financing Sourn:o (Uses) (340.999) 3.209.777 (340) (1.564.320) (628.206) (4101 (146.755) (2.924.84lll (4.171.200) (1.436.662) (240.491)

Net change in fund balances 947.273 (5,425,841) 37.746 213.862 (123,852) 6,316 12,643 (1,493,716) (349,921) 1,342,466 655,811

Fund b&lancn a1 the bepmting of !be period 3.454,535 !3.471.361 757.140 500.831 123.&53 58,373 "' 10,652,630 8.756.876 20,321.523 S,215,16S

Fund balances a1 the end of peri"' $4.401.808 S8.04S.SZO $794,886 $714,693 $1 $64.689 $13.100 S9.!58.914 $8,406.955 $21.663,989 S$,870.976

(Continued)

102 '"

CITY OF ROSEVILLE NON-MAJOR GOVERNMENTAL FUNm

COMBINING STATEMENT OF REVENUES, EXPENDITIJRES AND CHANGES IN FUND BALANCE5 FOR THE YEAR ENDED JUNE 30, 2007

OEBT SERVICE.

SPECIAL REVENUE FUNDS SPEctAL REVENUE FUNDS FUND

Commuruty

~vclopm<mt Housing Park and South Plaoer BtkeTraiV ,,~ '""'""" """' Authority Affordable Recreation Forfeited Stonn Water Traffic ""'"" OpiD Space- '""'' Rooev~llo Finance

~S!!tton Miti&ation Grant/HOME Section 8 Houoins Donation Pro~~ Man!!J!:ement Sie!1 Control Shelt...- Mailltenance Mitis•ri"" Authori!l: REVENUES

Taxes

Charges for services S254,1lS6 $48,231 $561,41)1 S58,692 S26.550 Sl2,377,771

Suhvmrions and grants $1,119,705 S3,730,019 1.515.612

U" of money and property 257,932 '·"" 11,664 38,113 183,830 $17.289 $3,702 $12,070 144,870 "' $4,720 S66,630 $1,652,522

Fines, forfe.tures and penalnes '" Contnbuti0111 from developers 899,645 52,002 28,692

Miscellaneouo revenu .. 668,672 22,744 15.375 56,134 1.276 45.800 Z,OS! S56.576 906,807

Total RevmuH. 512,018 52,328 1.800,041 3,790,886 1,644,876 32,664 59,836 13.596 301.364 27.139 35,463 15,616,589 2.559.329

EXPENOTTIJRES

Ctm't'nl:

Groetal govemmmt 2,564 150,697 936,494

Community ~dopmcm and planning 2,199,036 435,11}4 922.661 ?ublic worko 498,305 1,183,821 736.580

?ublic oafety:

to Fire

' ,_,_

"' Park• and recreation 1.057 '" N H<Jilling auimnce paymcnl!l 3,328,656

Capital outlay 15,169 143,121 8,559,172

Debt service:

Principal retirement 615,000

Intcrut and fisc:al charges 2.233,212

TotalE~tum 17,733 2,199,036 3,763,760 922,661 1,1157 "' 498,305 1.326.942 150,697 9,295.752 3,784,706

EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES 494.285 52,328 (398.995) 27.126 722,215 31,607 59,371 i484,709! (1.025,578) 27,139 i115,234! 6.320.837 (1,225,377!

OTIIER FINANCrNG SOURCES (USES)

Tnnsfcn ill 119,613 506.792 1.689.770 207,698 800,000 1,357,514

Transfer• (OUI) (5,900) (35.710) (1,250) {19,740! (lll.fl46) (1,111,420)

Total Other Financmg Sources (UIC'I) (5.900) ll9,613 !J5.710) (1.250! 487,052 1,558,724 207,698 (311,420) 1,357,514

Net change in fund balances -- 488.385 52.328 (279,382) (8,584) 720,955 31,607 59,371 2,343 533.146 27,139 92,464 6,009,417 132,!37 ---;--;-

Fund balances at the bepnnillgoftbe prnod 4,715.833 63,848 486,063 267,907 3,073,634 327.191 43,750 255.91}4 2,273,466 3,901 12,521.090 1,345,398

Flttld \>alances at the md of perioo SS.2fl4.21S $116.176 $206.681 $259,323 $3,794,589 $358,798 $103,121 $258,247 $2,806,612 $31,1}40 S92,464 $18.530,507 $1,477,535

(Conllnued)

104 . "'

tl:l ' a-w

CITY OF ROSEVILLE NON-MAJOR GOVERNMENTAL FUND~

COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE!: FOR TIIE YEAR ENDED JUNE 30, 2007

CAPITAL PROJECfS PERMANENT

ruND' ruND'

General Capit.IJ R<><~ville

Improvement Aquatics Proj~u Compte~ Citizen•

Build!!!!;: Rtbabililation Maintenance Benefit

REVENUES T= Charges for •erviccs Subver~iions and grants $17,361 Use of money and property 21\,117 $833,347 $3,649 S895,!78 Fine<, forfcirures and penaltieo Counibuti""' from developers Mi=llaneou< revenues "' 111.107

Toto! Revenues 229.196 83l.l47 3.649 !,006.285

EXPENDI11JRES C=r:

General govc:rnment 601,954 Commuwry development and planniDg Publicwork.s Public oafety:

""' Library Pa:k.s md n:crcanon Hou!lng aosistance p•ymenli

Capnal outllly 12.252,250 Debt oervice:

Pnncipal n:nn:tnent

ID~.r and fiocal chug"'

Total Expmdiruns 12.252.250 601.954

EXCESS (DEFICLENCY) OF REVENUES OVER EXPENDITIJRES (12.023.054) 833.347 3.649 404.331

OTHER FINANCING SOURCES (USES) Tratlders in 12.055.186 1,500,000 T!1llllfen (out) 03.250) (2,320,885)

Total Other Financing Sources (U•es) 12.041.936 (820,88~)

Net clwl~e in fund ba!&nces 18.882 12.462 3.649 404.331

Ftmd balan<:<s at the beiioning of tbe period 4.323.884 15,964.680 (1.786) 16.427.785

fiDid balances at tbe end of peri<:>< S4,342.766 Sl5,977.142 11.863 S16.832.116

"'

ToW Nonmajor

Governmental

'""" 15,925,137 22,4114,621 9,655,126 8,432,385 1,440,718

980.339 4,077.258

52.995.584 This Page Left Intentionally Blank

1,699,757 3,689.082 3,384.664

742,643 12,000

3,069,460 3,328,656

36.169,534

776,910 2,352.355

55,225,061

{2,229.477)

24,2&4,966 (17,932,0S2)

6,352.914

U23,437

125.405,292

1129,528,729

CITY OF ROSEVILLE BUDGETED NOJ'I-MAJOR Fl.lNm

COMBINING SCHEDULE OF REVENUES, EXPENDITIJRE:

REVEI\"UES n ... ~for><n·i<:e>

s"""""'""'' and gronto \11< ofmonoy and proper~)' fiaa..forfnlllr<•or>dp<mlti .. Cantnbotiom lroon *'<lopm

Miscellanoouo "'"""""'

EXPENDrnJRES

G~oraJ ji(O><mmmt

'~' Opetotings<r<i<<>ondoupplies C<Otnlll<r'll<<>

()pcming --.i< .. onoloopplie< Commun\ly dc:vo1opmeet and piMntns

CommoMy S<T>iceo Opentm~ .....K:es and "'f'Pli<>

Hooomg Salon<> and t>en<li<>

'Op<ratingkr>keoandooppli<> 1'\tblic~<orb

sw.i .. or><~t>en<n,. Op<raloll$ <a> ice> and "'t'''li<>

r..bliesaftly

''" ~ser.i<=ond"'''''li<>

Libmy Opetounli •eni< .. ll:ld •upplie<

Parbonolr=eation Operoung ,.,..;_., ond >opplioo

Hoo•"''! .,.;....,.,. poymee1> Cap!lllootlo~

O.l>tservi<e: l'ru\c~oeti=t IQ....,.. m;l fi><al c!wj!es

EXCI;SS (OEFICIEI\CY) Of RI,VENUES OVER EXPENDITURES

OTIIER FJNANC!Mi SOURCES j\JSES) Tranofe,.in

Tranofen\OUI)

1\'ET (flANGE IN FUND BALJ\1\'Cf~

Fond bal*'lon ll b<:ginrung ofyur

Fond bolmcnll «>dcfyeot

AND CHANGES IN FUND BALANCE! BUDGET AJ'ID ACTUAl

FOR TilE FISCAL YEA!t ENDED JUNE 30, 200~

LIGHTING AND LANDSCAPE S[R\'tCE DISTRKTS I!OMEJMPROVE\\ENT

Po<iti;o Pmt11\'e

~~~~~ l~eolli.ot

SII4.7.W

72,079 Sl7.746 SI0,006

------~ ~ ------ ------ ------J,RS6.904 ~ ~ ~ ~ ~

l.ll~.7'!6

""

CAllffiRMA liBRARY SER\'I(:E5 Tlti\FFIC SAFETY Yarionco

PO>ItlV< Poo1t,.e Politi><

~~~~~~~~ U"•E"'""'

SJHIOO 40,100 ~I.ZOO

412,000

$<N,7JS 00,417 }1>,4}1,

1!.000

\64,735

20.317 IS.2S6

""

$<100.1XJ0 ~1.440.4M

'"'

CITy OF ROSEVILLE , BUDGE'fi3D NON-Io.WOR FUND:

COMBINING SCHEDtn.E OF REVENUES, EXPENDITIJRE:

REVENUES 1 ....

Chari<• fm l<f>'l<e<

'"""'"''ono ond ~'""" t: .. or"""'<)< and prop<11y r'""· forfe1~ ond ~al<ios Cantnbu<iooo from d<V<I~•

Mo>e<ll-~ueo

EXPEI>Din:RES

('..,<n.l i"vcmmenl Cauncol

!)p«a<ing•<r•·ioooond•urrli., C..,.,..l...me.,

or""'''"8""''''""d•urplies c""""""''Y <1<\elopm<rn and pl.tnnmJ

Commun'I)O<rYioe•

Op<W.>o' """"'""'and •upplie. Houoing

Salanos and O<n<iil<

tp Pu~;::·~ bcnefolO

0'\ Opcrotong ''"'"<> ond suppli<S tJ'l l'ubho .. fc!y

t'in: ()p<nllllg Kf>'" .. ond ouwh«

''""" Open<ing><rvLocsondsupphes hrk>ood-oon

OpenBng><r>Le<>ondsopphes

''""''"' ....... ..,. poym<nll ("J'o<al<>ull>)

i'nndpol mifoon=< lnt<><"on<ll1,...1eluLfll<'

EXCESS (D[flt:IENCYI OF ll.f.VENt:ES

OV£11. E.XPENDIITII.I.S

OTII ER FINI\NCING SOURCES iUSfcSJ Toon<fonLn

AND CHANGES IN FUND BALANCE BUDGET A. "ill ACTUAl

FOR TiiE FISCAL YEAR ENDED JID.'E 30, 200~

ntL-.;CH CUT R.ECO\'EII.Y

S2.290

LAW ENFORCEMLNT BLOCK GIVLNTS v .... ,,.,, ruoi((ve

lransleli(ouL) --'-"-"' --'-"-"'

NET CHANOE IN FVI>O BALAI>CE~

--'-"-

'"

COl.iMUI'ITY 0[\'fUJP\IE~'T BLOCK 011.1\I'TI

PUBLICfi\CILITIES HOME

p.,.,,,., p.,.'""' ""'"''" ~~~~~ (Negou-.) ~~~

Sl,SOO.OOO S2.~17JOil (~8~.691)

S2.ROO.OOO 60.814 60,RI4

Jl1.4l0 l42,qsn 190,SJO 4&7,800

3.000.000 (),000,000)

~~

Q91.1RJ

817.171 1,41>4.447

161.9111 161,910

~~~

1,6%.4)4

~ 11.49),716) ~ ~

SJ,l.l7.90.\ S~l7.00S

SI.II4,24J 4901~ ~.4.10

6.876

200.000

Ill

Sl,ll9,70.1 li,M4

Hl.~

~-.~15

1.67H27

SSM8 ,_

(ll.Sl7J 511.~~1

1~0 .. 187)

ll:"orLL,noed)

RE\"Et;UES r .... , l"1wJ<'Iforoeni<n

SOO.on!lon> ond ~<'""" u .. oftnOnqon.lp<Op<lty fin<>. forfcllur<> ... ~ pcnolli<• C0111nbu!HlMiiunik-I-.I"P""

l.lisccllaneou•n:•rn••"

TotaiRo.-en""

CurmtL"

Gcn<tai~O\Otll>lltfll

Counc•l

Op<nti08 ><n<ke. and"""'""' Cotun.l-1«>

Opo:miog oav>Ocs on.! "'PI''"" Cornmumty ok<-dt•pmall and planning

Communuy ~.,..;,., Op<ntin~ ..Mocs on.! mpp~; ..

ll~uomg

~ ....... benefit> Operoung ..,.,.;.; .... d suppliO>

Publ><worl.o s..w; .. and l><nofil> l)perattn¥ ..,., ..... ,..,~ •upplics

Publk .. f<ty

fir< Ope.uing ...,;,.. ond iUppli<>

lllmlty Opo:ming ..men ODd "'f''''""

l'arl.• ondre=ation Op<rati•i ...rvic .. and ""P''h<>

llouoin~ uoi..-. p>ym<fl"

C•ptl.:lloutlay O.bl,....i«c

l'nndpal "''"""'""' ,......., .oo n>P~ _,..,

FXCESS {OEFICIEKCY)OF REVE!<UES

CITY OF ROSEVIJ,U ~UDGEl"ED NON-MAJOR FUND~

COMBINING SCHEDULE OF REVENUES, EXPENDITlfRE; AND CHANGES IN FUND BAlANCE!

BUDGET AND AC11JAI FOR THE FISCAL YEAR ENDED JUNE 30, 200:

I!QL"SIKG AIJTHORJTY ~Ecn01•; ~ llfFORD.~BLE I!OUSI!'.G

• P<»lll'< P0>11i"

~~ IN'H"'""e\ ~~~

SJ.MJ,270

~

450.997 1(6.119

$l.7JO.OI9

38.!23

~

390.!163 ••.241

S74.749

)H. I ~J

~

(109.786)

51.)16,001 1561.401 {5754.599)

'10.710 18J.HJO 93.120

899.1>-15 S99.M!i

--- ---

0\"ERF.XPENDmJRES ~ ~.~ ~ ~ ~

OTHER Fll'ANClN<i SOURl'E.S (USES)

Ttanofcnm Tnmofcn (out!

KliT CHM.JGE IN FUND BALANCE~

Fund bal•noe< oo b<~mn1nsofyeor

7!0.915~

---''""'"'~""'"' '"""'"''"~'"'"~'~·~c::;..:c':.=-- fRAffiC SIGNAl \'orianco BIKE TJV,LL·OPF.K SPACE M~~ri~AI-iCE I''""''" P<l>itivo Po"""

~~~ ~~~ ~~ IN<!l2'il·t!

~-

12.]40

""

(251.862)

1!14.9)0

1.1>89.770

14•.s7o

l~J.Ill

u;l!q.no

59.920

159.514 141.7)0

~5.JOO

~

251.4-10

197.1110

>Jl.l-1{;~~

'"

4.710 4.720

28.692 156.6Vi)

~ 2.051

~ (-19.8)71

150.697 100.743

207.69S {89.4611

92.-1(>4 (!)!.5561

CITY OF ROSEVILLE BUDGETED NON-l>WOR FUND!

COMBINING SCHEDULE OF REVENUES, EXPENDITURE:

REVE);Ufc~

Clwgt• for <a>•<<> Sub"'""""''"~ gtanl>

L'« or moocy llld propmy Fm<>,fort<uuresond f'OMILo<> Cooinbuo""' from d.-·oiOpa> Mo>«llon<OO>n:>on..,.

TotaiRovonU<s

(XPE!-.DITURES Curren!·

CnUildl Opotoo,.g ..,._..,..and >uppli<>

c·.,,.,..,,,,;o., Opotlouog ..,.,..;.., and "'''''li<>

Cummunoly d"·olopm<"' and planmn~

Communny oavice>

~""~ li<f\'i«sand >uppli"' u ...... ..,

Saloriosand!>enoli« Operal"''i ....... ic<>""" suppli ..

tz:j ru~lic"wks

1 Salan<iondl><ndi!S

0'1 Opernung ""'""" ond '"1'1'1•« -....] l'ubiJC .. f<ly

!'ire

0pera<lll8 S<n'k<l """ >uppliei Libraty

Opotlolin; !.<I'Vi= and •"''''h<> Por'<s .00 "'cr<l<ion

(lpor:lliog S<f\'i"'' lnd <uppli<>

Hou<<ns ""'""""' paymonu CapoalouUoy

O.bl..,.i<<; Princq>&Jn:o...emart ln~<r<>o ond fi><olch.or8<>

EXCESS !DF.fiCIF.~CY) OF REVD>UES OV!:REXPENDITURES

OTHJ'R FJNANCJNO 50URCLS (USIC>l

Tran,rm. m Tnnsl<r!IOULI

NET OIAI'WE II'> fUI\D IIALAI\CE'

fLmd bolane<> " bo~mmng of ycor

Juodb•laoe<l&l<n<iofyoar

AND CHANGES L"< FUND BALANCE! BUDGIIT AND ACTUAl

FOR THE FISCAL YEAR ENDED JUNE 30, 200~

GE~E RAL CAPITAL IM?RDVnH'KT

PROJECTS REHAB!LITATIOS

Po>""' """'"'' ~~~~~~

~Sl3,l47 $2~5.0)1

6ISJXXJ 615.000

~~~

1.246.300 l.l57JH 111..214 1..500.000 uoo.ooo

lll,IJJ~~

'"

CITIZEI'>S BF.'lEFIT

Vor!OttCO

P@b\~

~~~

S111.610 S89S.I7S

617.750 601.954

'"

This Page Left Intentionally Blank

L-------------------~·~N~TE~RN~AL~S~E~R~V~IC~E~FU~N~D~S~------------------~1. Internal Service Funds are used to finance and accoWlt for special activities and services perfonned by a designated department for other departments in the City on a cost reimbursement basis.

The concept of major funds introduced by GASB Statement 34 does not extend to internal service funds because they do not do business with outside parties. GASB Statement 34 requires that for the Statement of Activities, the net revenues or expenses of each internal service fund be eliminated by netting them against the operations of the other City departments which generated them. The remaining balance sheet items are consolidated with these same funds in the Statement of Net Assets.

However, internal service funds are still presented separately in the Fund financial statements, including the funds below.

Automotive Services Fund. To account for the maintenance of vehicles used by City departments. Funds are received by means of a rental fee charged to the various departments.

Automotive Replacement Fund. To accumulate resources and account for the purchase of vehicles used by City departments. The source of revenue for this fund is replacement fees charged to City vehicles.

Workers' Compensation Fund. To account for the City's self·insurance program for Workers' Compensation benefits and for the administration of various preventative programs.

General Liability Fund. To account for the cost of claims and administrative costs of the City's self· insured general liability program.

Unemployment Reserve Fund. To account for State and Federal mandated unemployment insurance benefits for employees.

Vision Fund. To account for the City's insurance program for Vision benefits.

Dental Fund. To account for the City's insurance program for Dental benefits.

Section 115 Fund. To account for the assets and liabilities of the employer's flexible benefits plan established under Internal Revenue Code Section 125.

Post Retirement Fund. To account for the contributions and benefits paid in relation to accrued employee retirement compensation.

Central Stores Fund. To account for stores inventory that gets allocated out at year·end to the General Fund and Enterprise Funds.

CITY OF ROSEVILLE INTERNAL SERVICE FUNDS

COMBINING STATEMENT OF NET ASSETS JUNE 30,2007

Selflnsura~~ce Funds Selflnrurrnc:e funds Automotive Automotive Wo<ker•' General Unemployment '""

,_, Semce< R~la'<men1 ComE••tiot~ !.iabilitr Reserve Vision ""'"' SectiOfl 125 Retirement ,_ Total

ASSETS

'-'~ Cash and inve•tments in Ctty T~aoury $15,114,064 $11,303,176 $7,573,073 $81,165 $263.094 $600,724 Sl5,922 S25,561,091 $214,617 $60,726,926 R.estrie1ed caUt and investmeau with fiscal agents 40,000 40,000 Re<:eivables:

Accounts $8,467 2,668 1!,135 Acc"'ed inte~Jt 1,198,497 105,887 71,630 1,007 2,707 5,773 " 249,368 1,634,935 Due from other govcrummt agmci .. 14,955 14,955

Due from other funds 934,099 934,099 lnvrntori .. 904,77? 45.636 950,413

Total Cum:nt A•sel> 928,199 17,249,]28 ]1,409,063 7,684.703 82,172 265,8(11 60M97 15,988 25,810,459 260.253 64,312,463

Not~ Current Ane" Advancn to other funds 4,648,2(11 4,648,201 Capital users, net of accwnulated depreciotiOfl 67.513 16,113.071 16.180,584

Tota!Aueu 995,712 38,010,600 11,409.063 7,684,703 82,172 265,8(11 606,497 15,988 25,810,459 260.253 85,141,248

UABILffiES Current Liabtltties

to Accou:nu payable 136,(137 50.663 . 98,053 30,542 23,844 21,562 228,164 588,865

' Acc"'ed liabilities 42,781 42,781 a.. Due to other filndJ 534,599 534,599

"" CompenAted oboeace• 169,964 169,964 Self-inn11ance claims payable 463.000 158.500 62t.SOO

Total Cum:nt Liabilities 883,38\ 50,663 561,(153 189,042 23,844 21,562 228,164 \,957,709

Long·tenn Liabilities Compensated ob5cnc: .. 169,601 \69,601 Sclf-tnsurance claims payable 4,284,000 1.505,500 5,789.500

Tou.l Liabllirieo 1.052.982 50.663 4,845,0S) 1,694.542 23,844 21.562 228,164 7.916,810

NET ASSETS l~veoted in capital anet• 67,513 16,1!3,(171 16,\80,584 Un=trictcd (124.783l 21,846,866 6,564.010 5.990.161 58,328 265,801 584,935 15,988 25,810,459 32,(189 61,043,85-4

Total Net Asset! ($57,270) Sl7,959,937 $6,564,010 $5,990.161 $58,328 $265,801 $584,935 S\5,988 $25,810,459 S32,089 $77,22-4,438

,,

'"

CrTY OF ROSEVILLE INTERNAL SERVICE FUNDS

COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS

FOR TI-lE YEAR ENDED JUNE 30, 2007

Self ln<u1'311<~ Funds Sdflnsurance Funds Antomotive Automohve Work""' General Unemp1oymc:n~ Poot Central

S<TVices R~l.acement Come;'!! .. tion Liability Re•erve Vil;inn Dental Section 125 Retirement Store< Total

OPERATING REVENUES Charges for services 17,274,194 SS,\01,651 S3,090,000 S2,01!,792 Sll1,434 Sl61,587 Si,360,583 $309,552 S2,498,387 $21,919,180

"""' 139,241 5,909 2,301,754 140.128 "' 2,587,208

1" oto\ Operating Revenues 1,4B,H5 s,Jm,sw 5,39\,154 2,\5\,92() \\\,434 161,16~ 1.~60,5'1.3 309552 2A%.3~1 24,5%,3&'1;

OPERATING EXPENSES

OpnmiOD$ 6,546,671 66,9ll !,585,827 730,729 158,100 179,903 !.311.034 299,190 2,870,056 13,748.421

Depreciation aDd amortiz.anon 6,5% 3,782,779 3,789,375

Claurue~ 616,436 899.975 1,516,411

To1al Operalins E,;pense• 6,553,267 3,849,690 2,202,263 1,630,704 158,100 179,903 1,3ll,034 299,190 2,870,056 19,054,207

0perall.flg lncomel~ss) 860,168 1,257,870 3,189.491 521,216 (46,666) (\8,140) 49.549 10,362 (371.669) 5,452.181

NONOPERATING (EXPENSES)

lntc<est revenue 97,887 802,621 496,819 346,345 5.378 13,567 27,346 "' l,l95,539 2,985,944

Other 252,679 252,679

Net Nooope111ting Revenu"" (Expense•) 97,887 1.055,300 496.819 346,345 5,378 13,567 27,346 '" 1,195,539 3,238,623

lncoD!e (lo .. ) Before TI11USfa• 958,055 2.313,170 3,686,310 867,561 (41.288) (4,573) 71>,895 10,804 8B,870 8,690,804

to Transfm in 2,519.588 2,840,124 5,359,712

• Transfers (out) (906,793) (1,7!1,874) (31.830) (19,960) '""' (1,550) (12.360) (3,500) (24,560) (2,713,387) _, 0 Change in Net Assets 51,262 3,120.884 3,654,480 847,601 (42,248) (6,123) 64,535 7,304 3,639,434 11.337,129

Net asoer. (ddlcit)-lxginni!lg (108,532) 34,839,053 2,909,530 5.142,560 100,576 27!.924 520.400 8,684 22,17!.025 $32,089 65,887,309

Nel as .. r. (drXK\t~ (SS7.210) S.l7.9';9.9l'l V..SM.0\0 S.S,99Q,l6l s.ss,ng SUS,801 S5M,93S 115,91\8 US,!!.J0,45'J $12,089 ~71.224.418

120 121

CITY OF ROSEVILLE INTERNAL SERVICE FUNDS

COMBINING STATEMENT OF CASH FLOWS FOR THE YEAR ENDED JUNE 30, 2007

Self Insurance Funds Se!f!DJur.mcc Furub Automotive AIJ!amctive Woden' '"""" Uncmploymont Post Cenlnll

Service• RS!Iacemmt Com~tinn Liability Re.erve Vision D.mral Section 125 Rt!irtmont ,_ Total

CASH FLOWS FROM OPERATING ACTIVITIES

Re<:eiptJ from customen $7,279.959 SS.o98.98J $3.090,605 $2,011.792 Slll,434 $161,587 $1,360,583 $309,552 $2,498,3&7 $21,922,882

Paymeulslo lUJllllicn (4,738,722) 48J,51J (1,514.799) (724,891) (159,599) {179,903) (1,306,786) (317,124) (2,870,056) $30,491 (11,297,876)

Paymonts to employecs {1,943,046) (1,943,046)

Clai111J paid (2,413,436) (1,161,975) {3,575,411)

Otha receipt! (payments) 139,241 5.909 2,301.754 140,128 '" 2,587,208

No:r cash provi<kd by open.tmg acuvirin 737.432 5.588,405 1.464.124 265,054 (48.165) 118,140) 53 797 \7.5n) 1371.669) 30.491 7,693,757

CASH FLOWS FROM NONCAPITAL

FINANCING ACTIVITIES (Increa.so) decrease in due from otha funds (594,599) (594,599)

~ (decrelse) iu due to nthn fuods 133,737 133,737 (locrea.so) decm..e in advances to orhn furub 459.500 459,500

Traasfers iu 2.519,588 2,840,124 5,359,712 Transfas (out) (906,793) (1,711,8741 (31,830) (19,960) '""' '(1.5501 (12.360) 13.500) (24,560) {2,713,3S7)

Cash Flows from Noocapilal Financing Activities {773,056) 672,615 (31,830) (19,9601 (960) 11.550) (12.360) 0.500) 2.815.564 2.644.963

CASH FLOWS FROM CAPITAL AND RElATED FINANCING ACf!V!TIES

Acquisition of capital asxts, net (62.263) (6.038.666) (6,100,929)

"''" 252,679 252,679

l:l:l Cash Flow• from Capilal aDd Related

' _, Fin&IIcing Acrivilies (62.263) 15.785.9871 (5,848,2501

CASH FLOWS FROM INVESTING ACTIVITIES Imere:st and dividends 97,887 668,954 455,882 323.169 5,109 12,919 25,163 "' 1,102,884 2,692,386

Cash Flows from Investing Activities 97.887 668.954 455,882 323.169 5,109 12.919 25,163 "' 1,102,884 2,692,386

Ne! inctea.e (d..::rea.e) in cash and ca.h equivalents 1,143,987 1,8S8,176 568,263 (44,016) (6,771) 66,600 (10,653) 3,546,779 30,491 7.182,856

Cash Wid rnvestments at beginnrng or period 13.970,077 9,4\5,000 7.044,810 125.181 269,865 534.124 26,575 22.014.312 184.126 53,584,070

Cash 1111d inveotmonts a\ end of perio S15,114,064 $11,303,176 $7,613,073 $81,165 $263,094 $600,724 S\5,922 $25.561.091 $214,617 S60,766.926

Reconciliation ofopnaling income (lou) 10 net caoh provided by opcrlllmgKDV!ties·

Operating income (looo) $860,168 $1,257,870 $3,189,491 $521,216 ($46,666) ($18,140) $49,549 $10,362 ($371,669) $5,452,181

AdjuJtmmts rn reconcile operating income ro ne1 cash provided by operlling activities·

Depreciation 6,596 3,782.779 3,789,375 Change iu lSsetll and liabi1itin:

Receivable•. net (23,094) (1,668) '" {$44,760) {69,917)

Prepaid 620,524 620.524 Accounts and other payable• {!06,238! {70.100! 11,725,972! (256.1621 (1,499) 4.248 (17.934! 75.251 p,098,4061

Net cash provi<kd by operating acti,~tie $737,432 $5,588,405 $1,464,124 $265,054 ($48.165) ($18.140) $53,797 ($7,5721 1Sl71.669! $30491 $7,693.757

122

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AGENCY FUI\'DS

Agency Funds account for assets held by the City as an agent for individuals, governmental entities, and non-public organizations. These funds include the following:

Special Assessments/Community Facility Districts (CFDs)

These funds account for the monies collected and disbursed for land-based debt, where the City is not obligated for the debt.

Payroll Re,·ohing Fund

This fund accounts for the payroll deductions and contributions that are held in transit.

Highway 65 JPA (Bizz Johnson JPA)

This JPA, which consists of the City, City of Rocklin and Placer County, was formed to fund interchanges off of Highway 65. The City acts as lead agency artd treasurer. The fees are collected via building permits.

Dry Freek Drainage Basin

Fees are collected via building pennits for the Dry Creek area and submitted quarterly to Placer County for drainage mitigation.

Disaster Reconry JPA (DRJPA)

The DRJP A was formed to provide disaster recovery for computer services. The members are the City, Yolo County of Education, City of West Sacramento, City of Alameda and Yolo County. The City of Woodland pays just for services (non-voting member). The City is acting as lead agency and treasurer. The agencies pay annual membership dues for maintenance of backup computer servers and capital outlay.

County Capital Facilities Fee

This fee was established by the Cowlly to fund future county capital facilities from development. It is collected via building permits and submitted quarterly to the County.

South Placer Wastewater Authority (SPWA)

SPW A is a Joint Powers Authority comprised of the City, Placer County and South Placer Public Utilities District. The City is acting as the treasurer and construction manager. This JPA was formed to issue debt to facilitate the construction of the regional wastewater infrastructure. The agencies collect regional wastewater connection fees and submit them to SPWA which is used for debt service payments and for the future expansion of facilities.

125

AGENCY FUI'ODS (Continued)

Special Sewer Benefit Area #3

This Sewer Special Benefit Area was established to reimburse from properties benefiting from certain sewer infrastructure and oversized pipelines in the northeast portion of the City. The reimbursements are made to various project participants.

Special Sewer Benefit Area #4

This Sewer Special Benefit Area was established to reimburse from properties benefiting from certain sewer infrastructure and oversized pipelines in the southeast portion of the City. The reimbursements are made to Southfork Partnership.

South Placer County Tourism Business lmpronment District (SPCTBID)

All hotels in the region are assessed fees for the purpose of promoting tourism in the area. These fees are fotwarded to the City quarterly and then submitted quarterly to the SPCfBID.

South Placer County Safe Kids Coalition

The fess are collected for and submitted to an organization in Placer County for child safety programs.

South Placer Regional Traffic Fee

This fee is collected via building permits and· submitted quarterly to Placer County Transportation t(=' Authority to fund regional traffic mitigation. _, w.City/County Traffic Mitigation Fund (TMF)

The fee is collected via building permits and submitted quarterly to Placer County to fund regional traffic mitigation due to new development.

Placer County Air Pollution Control Fund

The fee is collected to contribute towards construction of a future animal shelter in South Placer County.

Sierra College Boulevard Fund

To account for contributions to provide maintenance of bike trails and open space.

Other

To account for fees collected for Placer County's administration of the City's Special Assessments.

'"

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CITY OF ROSEVILLE AGENCY FUNDS Balance Balano::e

STATEMENT OF CHANGES IN ASSETS AND LIABILITIES June 30,2006 Addltlllll$ Re<luctl<>nS June 30, 2007

FOR THE FISCAL YEAR ENDED JUNE 30, 2007 Foothtll• Boulevard Extrosion S~i.al Ass"'smetlt District

Cash and investmeniS in City Treasury Sl.OSl.75S $25,243 $872,446 $204,552 .. ,_ '""~ Accrued interest receivable 5.291 7,662 5,297 1,662

June 30, 2006 Addirions Reduction• June 30,2007

Foothills Boulevard Special Assessment Dutrict Total Asset, Sl.057,052 $32,905 $877,743 $2\2,214

Cash and investments in City Treasm; $15,875 S15,875 Accounts payable $462 $462 Due to \>ondholdm \,056,590 $32,905 877.281 $212.214

~to bondholden Sl5,875 $15,875 Touii..Ubihties Sl.057.0S2 $32,905 $877,743 $212.214

Hill toE Si!!!:al A<sl'smlctll District Northeast Ro•eville Communi!l: Facilines District #1

Cash and illvcstmenls in City Treasury $1,015 " m $1,004 Cash and inv .. tments in City Treasu:y $2,702,702 $2,435.929 $2,450,306 $2,688.325

Restricted cash and investments with fiscal agents 841,118 30,603 113,116 758,605 TotalAssct:! $1,015 " m $1,004

Accrued inteRs! receivable 20,613 24319 20,613 24,319

Total As!<!!> $3,564,433 $2,490.851 $2.584,035 $3,471.249 Due to bondholdcn $1,015 " m $1,004

Accounts payable $1,466 $1,529 $1,466 $!.529 North Roseville/RoclJin Sewer S£ecialAJSeumen1 District Due to bondholders 3.562,967 2,489,322 2,582,%9 3,469,720

Casb and investments in City Treasury $392,482 $39,924 $73,162 $359.244 T oul Liabilities $3,564.433 $2,490,851 $2,584,035 $3,471,249 Accrued interest receivable '·""' !,S07 2,004 1,507

Tou!A!<rn $394.486 $4\,431 S75,166 $360,751

0:1 Northwest Ro•eville Communttv Faciltties Di<trict #l

' _, AccOUDts payable S289 $5.264 $289 $5,264 Ca•h and invesrments in Cuy Treasury $1,755,278 $2,679,917 $2,470.585 $1,964,610 ... Due to bondholdm 394,197 36.167 74,877 355,487 R"'niel<'d cash and investmmts ,.;th fiscal agent> 2,426,475 " 2.426.431

Accrued interest receivable 47.222 48,880 47.222 48,880 Total Liabthnes $394.486 $.41,431 $75,166 $360,751

Toto.! As"'" $.4,228.975 $2.728,797 S2.517.85l $.4,439,921

Roc~ Ri~e/Jbrdmt: S~ial Assesiii!Ient Di.<tnct ACCOlltlls payable $2,288 $2.265 12,288 S2,265 Due to bo~dbolder.< 4.226.687 2,726,532 2.515.563 4,437,656

Cuhond in.v~ in Cuy Treuucy t4S,SS9 S2,6iS U.oli $40,2()7 Accrued mrew.t n-ceivable !,730 n 1.730 n Total Liabihnes $4.218,975 S2.72R.797 S2.Sl7.85l $4.439.921

TolalAMel> $47,289 $2,688 $9,757 $40,220

Due to bondholders $47,289 $2,688 $9,757 $40,220 Stoneridt:e East CommUDi~ Facilit1e< Dutricl #I

Casb 1111d investtnems in City Treasury $831,9\5 $3,253,499 $3,189,&41 $895,573 Total LUbihti .. $47,289 $2,688 $9,757 $40,220 Re<tricted cash and inv .. rmenu; ,.;,b fiocalagents 1.188,956 15,616 1,173,340

Accru<'d interest receiv•ble 22.313 8,824 22,3!3 8.824

Cham£ion Oaks S~ial Assessment Dimict Total A"'"" $2,043,184 $3,262,323 $3,227,770 $2,077.737

Cash and investmenl> in Ctty T reasw: $19.287 S\9.287 AccoUDts pJyablc S\.987 $4,023 $1,987 $.4,023 Due lo bondholders 2,041,197 3,258,300 3,225,783 2.073,714

Due h> bondholder! $19.287 $19.287 Toul Liabthties $2,043.1&4 $3,262.323 $3,227,770 $2.077,737

(Continued)

12.9

CITY OF ROSEVILLE llalance .. ._ AGENCY FUNDS June 30. 2006 Addmons Reductio,. June 30, 2007

STATEMENT OF CHANGES IN ASSETS AND LIABILITTES FOR TilE FISCAL YEAR ENDED JUNE 30, 2007 Hi@nd Reserve Nmtb C0II1111unity Facilitie! District~~

""~· Balance Cub ond iDvutments in City Treasury $2,158,790 $933,492 $710,81$ $2,381,467

June 30,2006 Addition< Reduction< June 30. 2007 Restricted ca.h and investments With fiscal agents 2.989.551 1,251.855 1.571.523 2,663.883 Accrued interest ~Ucivable 32.591 57,864 32.591 57,864

Northeast Roseville Community Facilities District ~2 Tota[A.,ert $5,180,932 $2,243,211 $2.320,929 $5,103,214

Casb ond investme~ts iD Clty Treasury $832,(>40 $953,425 S992.ol5 $794,030 Restncted cash aod iDvemnent:s with fiscal agents l,ll8,553 S5,512 81,703 1,092,362

Accounts payable $2,780 $4,965 $2,7&0 S4.965 Aocnled mterest r«eivable 22.455 23.047 22,455 23.047 Due to bondholders S.l78.152 2,238.246 2.318,149 5,098.249

Total Asset> $1,973.648 SI,Oli,9S4 $1.096.193 $1.909,439 Total Liabilitieo $5,180,932 $2.243,211 $2,320.929 $5.103.214

Accounts payable $1,465 $1,528 $1,465 $1,528 Stoneridgc Parcell Cmmnunity Facilities Di1trict #l Due to bondholdon 1.972.183 l.030.4S6 1.094.728 1.907.911

Total Liabtlitics $].973.648 $].0)].984 $1,096.193 $1.909,439 Cash Md investments in City Treasury $98,006 $19,156 $78.850 Restricted casb and iDvcstments •mh fiscal agents 166,838 $310,309 339.603 137.544 Accruod interest receivable '"' m "" m

North Cmtntl Rowville CornmUDity F acilitics District N l Total Asset> $264.944 $310,741 $358.859 $216,826

Cash and investment! iD City T~asury S6,955.199 S5,422.0Sl SS.19l.328 $7,185,922 Restricted cash and rnvestments "1th fitcal agent! 4,908.636 6<i,43J 5,Q35,069

Accountspo~yahle $917 $2,899 S917 $2,899 Accrued int.,...t ~ceivable 72,495 135.338 72.495 135.338 Dtle to b<mdhol<kn 264.027 307.842 357.942 213.927

TotaiAnets Sll.9%.330 $5,623.822 $5,263.823 $12.3S6.329 Totalliab1htie• $264.944 $310.741 $358.859 $216.826

tl:) Accounts payable $2.913 $5.677 S2.9l3 $5,677

' Due to boodholden 11.991.417 5.618.145 5.260,9\0 12,350.652 Woo:>dcruk Eut C.:.mmunity Facilities District •1 _, vo Total Liobilitieo 111.9%.330 $5,623,822 $5.263.823 $12.356,329 Cash and investments io City Treasury $229,254 $596,073 $458,317 $367,010

Restricted casb and invcsbnents with fiscal agrnt• 598.403 103.978 494,425

North Ro~villc Community Facilities District •1 Accruod interest receivable 6.291 8.924 6.291 8.924

C...b and invntments in Clty T~asury $1,884,234 $1,932,423 $2,040,989 Sl.775.6<i8 Total Nisei> $833.948 $604.997 $568,586 $870.359

Restricted cash and inve•tments wnb fiscal agmts 1,787.945 56,1)91 104,456 1,739,580 Acetued inlereSI receivable 5.163 12.637 5.163 12.637

Accounts payable $1,721 $2.797 $1,721 S2.797

Tota!ASSCI! $3.677,:!42 $2.001.151 S2.150.b08 $3.527.885 Due to bondholders 832.227 602,200 S66.865 &67.562

Total Liabilities $833,948 $604.997 $568,586 $870.359

ACWUDt> payob\e S2.:>1b $2.1\0 s1.::m $2,2\0 Dtlc to boodhold..,.. 3,674,966 1.998,941 2,148,232 3.525,675

Stonendge West Communtty Facilities District #l

Total Liabilities $3,677.342 $2,00l.ISl $2.150,608 $3.527.885 Casb and inveslmenls in City T~osury $636,915 $178.669 $68,301 $747,283

Woodcreek West Community Facilities District #1 Restricted casb and inveotments With fiscal •~tmu 925.357 2.415.677 2.422,602 918,432 Accrued interest receivable 17.836 7,926 17,836 7,926

C...h and inveslme!!U iD City T ~asury $626,172 $1,50'1,133 $1,169,873 $963.432 Total Asset> $1.580,108 $2,602.272 $2,508.739 $1,673,641

Restricted ca.h and inve•tment• with fiscal agmts 1,446,142 68.225 tl!,802 1.402.565 Accrued in~erert r«Civable 24.311 25.S44 24.311 25.844

Accounts payable $1,977 $4.056 Sl,977 $4.056

Total Auets $2.096,625 $1,601.202 $1.305.986 $2.391.&41 Due to bondholders 1,578.131 2,598,216 2,506,762 1,669,585

Total Liabilities $1.580.108 $2,602.272 $2.508.739 $1.673,641

ACCOUDII payable S2.077 $2,068 $2,077 $2,068 Dtle to bondholdeo 2.094,548 1.599,134 1,303,909 2,389,773 (Continued)

Total Liabilities SUl96.625 S\.601.202 $].305 986 S2,39I.S41

"' '"

CITY OF ROSEVILLE AGENCY FUNDS Balance Balance

STATEMENT OF CHANGES IN ASSETS AND LIABILITIES June 30, 2006 Additions Reducuoo< June 30, 200? fid.hment Ranch Community f aci!ities District #I

FOR THE FISCAL YEAR ENDED JUNE 30, 2007 Cl.<h 811<1 w'-=enl!l iD Crry Tteasury $2,201 $3,374,420 $730,757 $2,645,864 . .,.,~ Balance l!.e•tncu:d coJh and mvestmento With fiscalagentJ 4,245,%5 5,813,975 3,868,389 6,191,551

June 30,2006 Additions Reductions June 30.2007 Accrued interest receivable 65,479 142,640 65,479 \42,640

CroCker Ranch Communitl Facilities District ~I Tout A<sm $4,3\3,645 $9,331.035 $4,664,625 $8,980.055

Cash and investments in Ciry Treasury S877,963 $39,698 $77,206 $840,455 Accounto payable $2,299 $363 $2,299 $363 Due to bondholders 4,311,346' 9,330.672 4,662,326 8,979,692

Re•tricted cash and rnvestments "~lh fiscal agents 1.439,986 3,995,485 4,048,478 \,386,993 Accrued Wtnest receivable 21.651 11.334 21.6SI 11,334 Totalliab1lities $4.313,645 $9,331,035 $4.664,625 $8.980,055

Total As.seu $2.339,600 $4.046,517 $4.147,335 $2,238,782 Lonl!!!!eadow Commwu~ Fac1lities Drstnct #I

Accouots payable $4,638 $3,?85 $4,638 $3,185 Cash and in~tmento in City Treasury $467,721 S\11,807 $355,914 Due to boodholdm 2.334,%2 4,042,732 4,142,697 2,234.997 Reslricted cash and investments "'ith fiscal agents $843,715 200,322 439,96!1 604,017

Accrued interest receivable 6.816 8,172 6,816 8,172 Totall..i.obthties $2.339,600 $4,046.517 S.t\47.335 S2,238,782

Total A>Set• $850,53! $676.215 $558,583 $968.163

StDM Point Comtntmity faCJ!itits Dtstrict #l

ACCOU!lts payable Cash and invemnenu iD C11y Treasury $709,7% $220,100 $132.336 $797,560 Due to bondholders $850.531 .$676.215 .$558,583 $968.163 Re•tncted O"-'b and rnv,.tmenr. wtth fisu! agents 913.225 625,742 60!,696 937.271 Accmed interest R'e<civab!e 11,501 11,325 !1.501 11,325 Total Liabilitioo S850.53l $676.215 S558,583 $968.163

Tot•! Asset> $],634,522 $857.167 $745.533 $1.746.156 NC SP PAR 44 CFD

Account• payable SJ.282 Sl.367 $3.282 Sl.367 Cash md investmento in CtryTreasury .$5,780 sn $5,263 S595 Due to bondholdm \,631.240 855,800 742,251 1.744,789 Aoorued interest receivable " n

Total Liabiltti"' $1,634,522 $857.167 $745.533 $\,746.156 Tota!Aoset> $5,780 "" $5.263 ""' tl:l ' Aox:Otlllto payable S5,780 $5,780 _,

Stone Point Commun1ry Facilitie• Dl•trict •s Due to others "" (517) '"" "" Cub ;md invOJtmettts in Clry Treasury S\5,547 $48,315 ($32,768) Total Lial>thties $5.780 "" SS.263 "'" Re•tricted c..,b and inveotments "itb fiscal agtnts 1.090.344 457.609 632,735

Diamood Ctuk t:ommuni2: facilities District N 1 TotalA<set! Sl.\05.891 .$505.924 $599,967

Cash and investmenu in CiryTreasury $20.758 Si2,853 $7,905 AOCOun\.ll)>lyable $5.142 S2.500 S5.142 $2,500 Restricted cash and investments wah ftscal •&ents 1.464,732 380.900 1.083,832

Due to bondholders (5,142) 1.103,391 500.782 597.467 Accrued intett51 ,..,.ceivable 4,575 4.575

T oral Liabdttie> $1.10'.891 $505.924 $599.967 Tota!Anet' $],490,065 $393,753 $1.096..112

Wes!£ark Communtry F aci111ies Dislrict # l Due to bondholder; $1,490,065 S393,753 $1.096,312

Cash and inve•tment• iD City T,..,.asury $3,056.168 $625.814 S2,430.35-l Total Liabilities $1.490,065 $393,753 $1,096.3\2 Reotrictcd cash and investments with fiscal agento $6,619,854 3,145.332 4,246,116 5,519.070 Accrued intereot receivable 96.513 108.144 96.513 108.744

Fountains Communi2: Facilities Dtstrict #I

Tota!A<sel:l $6,716,367 $6,310.244 $4.%8,443 S8.058.168 Casb and investmelll!l in City TteasUI)' $10,000 S!O,OOO

Acco<mts payzble Sl,571 S1,57l Accrued intettst receivable 2

Due to bondboldero 6.714,796 $6,310.244 4.966,872 $8,058.168 T"tal Asset! $10.002 Sl0.002

T uta! Liabilities $6,716.367 $6.310.244 $4,968.443 S8,058,168 Accounts payable $675 $615 Due to bondholders 9,327 9.327

Total Liabilities $10,002 Sl0.002

(Continued)

l3Z Ill

CITY OF ROSEVILLE ,.,_ ,...,~

AGENCY FUNDS ]lmC 30,2006 AddUUlllll Reductton• June 30,2007

STATEMENT OF CHANGES IN ASSETS AND LlABILITIES Coun~ Caeital Facihri"" Feo

FOR THE FISCAL YEAR ENDED JUNE 30, 2007 Cash and investments in City T~asury $505,694 S826,058 $469,900 S861,8S2 Accrucd interest r«eivable 3,118 4,121 3,118 4,721

-~ Balance Deferred receivables 62,966 62,966 1lme30,2006 Addltio!lll Reductioru June 30, 2007

l'al::!,2ll Revolvin& Total Asm• $508,812 $893,745 $473,018 $929,539

Cab and invemnenl3 in C1ty T~aur: $1,659,&23 S2,033.2JJ $1,846,518 SU46.518

Accounts payable S·t52,066 $809,702 $452,066 $809,702 Duetn otben 56,746 &4,043 20,952 119,837

Accotmll payable Sl,659,8Z3 $1,576 S\,659,823 Sl,S76 Due to others 2,031,637 186,695 J.S44,942 Total Liabilirie• $508,812' $893,745 $473,018 $929.539

Tntal Liabihtie• $1,659,823 $2,033,213 Sl,846,518 $1,846,518 Soutb Placer WastewatCT Autbori!l':

Hi&!!.,..,.~ 65 SPA Cash and inve•tments in CuyT~••ury $144,183,054 S!Sl,837,280 $144,183,054 St51,8J7.280 Reotrieled casb and investmn~ts witb fisul agmu 26,281,641 17,488,001 26,281,641 17,488,001

Cub and invWDlel!lS m City T~uury $9,812,800 $3,329,081 $26,634 $13,115,247 Accrued mterest receivable 684,162 1.297,774 6&4,162 1.297,n4 Accrued iPiereol r~eivabte 63,809 568,253 501,245 130,817 Due from nthCT govemmcm agenciC'!I 1,751,864 3,768,530 1,751,864 3.768,530 Due from ntber govemmem agencies 948,162 855.580 948,162 855.580

Total As.et! $172.900,721 - $174,391,585 $172,900.721 $174,391,585 Tnta1Asset5 $10,824,771 $4,752,914 $1.476,041 $14,101,644

Accnunu payable $303,990 $2,951,334 $303,990 $2,951,334 Due 10 mm~ber agmciC'!I $]1},824,771 $4.752,914 $!,476,04! $!4,101.644 Aooruod habilities 326,561 306,288 326,561 306,288

Due 10 member ageocie• 172.270.170 171,133.963 172,270,170 171,133,963 Total Liabilities $!0.824,771 $4.752,914 Sl.476,041 $14,101,644

T<>tal Liabiline1 $172,900,721 $174,391,585 $172,900,721 $174,391.585 Q!l:: Creek Dn.in:!!! Basin

Special Sewer Betlefit Area ~3 c..,h 1nd investments in City Treasury $12,591 $30,059 $!3,287 $29,363

o:l Accrued interest r~eivable "' "' "' '" Cash and inv.srments in City Troasury '"" $15,195 $897 $15,793

' TotalA»et> $0,003 $30,180 $13,699 $29,4&4 Accrued in1eresl receivable ' " ' " __, __, Tnta1 A!leU '"" $15,806 $898 $15,804

Accnlmt• Payable $13,287 $29.390 $13,287 $29,.390 Due to olhen (284) 790 "' "

Tntal Liabilihes $13.003 $30,180 $13,6'19 S29,4S4 AcOOUIIIs payable $15,774 $15,774 Duetonthcn "" " $898 "'

Total Liabilitio• $896 Disaster Recovery 1P A

$15,806 $898 $15,804

Balance Balance Cash and inveslmeots in City Treaury $39,365 $22,115 S6,882 $54,598

June 30, 2006 Additions Reductions June 30,2007 AccO<mt>' recei~ 887 887

Special Sewer Benefit Area 114 Accrued intereil receivable "' "" '" "'

Toi&IA!Kl> $40,546 $22,655 $8,063 $55,138 Cash and invenmenli in City Truswy $122,828 Sl24,512 $118,415 $128,925 Accrued interest receivable "' 1,337 "' 1,337

Total Asset• $123,720 $125,849 Sl\9307 $!30.262 Accounts payable $495 $495

Due 1<1 m~ agencies '"-"' 22.160 $8.063 54.643

T<>tal Liabil1rieo $40,546 $22,655 $8,063 $55,138 Accounu payable $\17,971 • Sll7,97t $117,971 Sll7,971 Due to others 5,749 7,878 1,336 12,291

Total Liabilirie> $123,720 $125,&49 $119,307 $130,262

(C<>!!tin~ed)

"'

Balan~ Balance CITY OF ROSEVTI..LE June 30, 2006 Addition! Reduci!OII' lllllt 30,2007

AGENCY FUNDS STATEMENT OF CHANGES IN ASSETS AND LIABILITIES Placer Collll~ Air PoUution Control

FOR THE FISCAL YEAR ENDED JUNE 30, 2007 Cash and investments m City Trea.<ury $8,849 $]0,889 S39.738

Balance Balance Accounts receivable '" $402

June 30,2006 Addtuons lhductioDS JUDe 30,2007 Accrued mtere<ll"ec<'i'11ble "' "' South Placer CoUDty Tourism Busine<~ Tota!Asseu $9,252 $31.194 $403 $40,043 Improvement Dtstnct (SPcTBID)

OWl and inw•tments m City Treasury S2,7JO $616,585 $614,008 $5,347 Due to olbm 9.252 S403 Account> receivable 159,604 160,654 159.604 160,654 $3[,194 Wl.043

Accrued intere<t receivable 252 "' 252 '" Total Li.1bthti., $9,252 Hl,l94 ""' S40,043

Total A>sel• $162,626 $777,602 $773,8!>4 $166,364 Sierra Colle&• Boulevard

ACCOUDt• payable $158,704 $160,654 $158,7(14 S\60,654 Cash and mve•tments in Cay Trea.ll!Y $5,848 $39,132 $44,980

Due to others 3,922 616,948 615,160 5,710 Accmed intere$1 re~ivable ' "' " "' Total Liabilitie. $162,626 $777.602 $773,8&4 $166.364 Tota1Asset! $5,850 $39.394 " $45.242

South Place-r Couri~ Safe Kids Coalinon Cash ODd mvestmenta m City Treasury $13,824 S\9.354 S\8.302 $14,876 Due to olhn• $5,850 $39,394 " $45,242

Accrued interest receivable '" "' "" , .. Totalltabilities " $5,850 $39.394 $45.242

Total As«!! $13.944 $19,498 S1S.422 $15,020

""'" Accounll payable $326 SJ.275 $326 Sl.275 Cas.b and inv .. tmeuto m City Treaswy $13,014 Sl3.014

""'•"""' 13,6\8 \8,223 18.096 13,745 TotalA.sseu $13,014 S\3,014

Tomlliabihties $13,944 $19,498 $18.422 $15,020

00 '

South Placer Regional Tratlic Fee Due to olbn go~erumeul agmcies S\3,014 $13.014

_, Cash and investments m C!ly Treasll!Y $427,896 $798,735 S-125,130 $801.501 Total Liabilities $13.014 $13.014

00 Accrued interet~ re~ivable 1,563 3,295 \,S63 3,295

TotalAsseu $429.459 $802,030 $426,693 $804.796 Total A&encl Funds C.,h and mv .. tments in Ctty Treasury $178,754,986 S\87,093,891 $169,302.176 $196,546,701

Accounts payable $423,100 $797,]72 $423,100 $797,172 Re•tricted cash ODd inv.,tmeo!S with fl'oail~ents 58,802,360 38,078,638 45,19~.232 51,685,766 Due to other• 6,359 4,858 3,593 7,624 Accounts receivable 160,893 160,654 160,893 160,654

Accrued interestl"ec<'ivab\e 1,237,559 2,527,906 1,674,995 2,090,470 Totalliabiliue, $429.459 U02.aJO $426.693 SSQ4,796 Due from other government age11cie. 2,700,026 4,624,\\0 2,700.026 4,624,110

O.forred reocivable 62,966 62,966 c, '/County TMF

TotalAoseu $241,655,824 $232,548,165 $2!9,033.322 $255,170,667

Casb and in~e.rmtnts in Ctty Treasury Sll2,9l7 $206,139 Sll9,605 Sl99,451 Accrued interest recei~ablc "' "' "' "' Account< payable $3,294,096 $5,133.092 $3.294,096. $5,133,092

TotalA>'Set! $113,469 $206,898 $120.157 $200.210 Accrued liabihtics 326,561 306,288 326,561 306,288 Due to other government agencie• 13,014 13,014 Due to member agencies 183,135,487 175.909,037 173,754.274 \85,290,2SO

Account. payable Sll9,399 $\99,778 Sl\9,399 $199,778 Due to bondholokr; .54,790,488 48,.157,541 40,810,603 6V37,426 Due to others (5,930) 7,120 758 '" Due to otbm %,178 2.842.207 847.788 2,090,597

Total Liabilities $113.469 $206.898 $120,157 S200.210 Totalli.abilities $241,655,824 S232,548,165 Sl\9,033.322 $255,!70,667

'"

This Page Left Intentionally Blank

STATISTICAL SECTION

This part of the City's Comprehensive Aruma! 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. In contrast to the financial section, the statistical section information is not subject to independent audit.

Financial Trends These schedules contain trend information to help the reader understand how the City's fmancial performance and well being have changed over time:.

I. Net Assets by Component 2. Changes in Net Assets 3. Fund Balances of Governmental Funds 4. Changes in Fund Balance of Governmental Funds

Revenue Capacity These schedules contain information to help the reader assess the City's most significant local revenue sources, the property tax and electric revenue:

I. Assessed Value and Estimated Value of Taxable Property 2. Property Tax Rates, All Direct Overlapping Governments 3. Principal Property Tax Payers 4. Property Tax Levies and Collections 5. Electric Customers, Rates and Revenues

Debt Capacity These schedules present information to help the reader assess the affordability of the City's cWTent levels of outstanding debt and the City's ability to issue additional debt in the future:

I. Ratio of Outstanding Debt by Type 2. Revenue Bond Coverage~ 2000 Wastewater Revenue Bonds~ Series A 3. Revenue'Bond Coverage -2000 V!Uiable Rate Demand Wastewater Revenue Bonds- Series B 4. Revenue Bond Coverage - 2003 Refunding Auction Rate-Synthetic Fixed Wastewater Revenue

Bonds 5. Bonded Debt Pledged Revenue Coverage- 2002 Redevelopment Tax Allocation Bonds 6. Bonded Debt Pledged Revenue Coverage -2006A Redevelopment Tax Allocation Bonds 7. Bonded Debt Pledged Revenue Coverage -2006AT Redevelopment Tax Allocation Bonds 8. Bonded Debt Pledged Revenue Coverage -2ri06HT Redevelopment Tax Allocation Bonds 9. Computation of Direct and Overlapping Debt 10. Computation of Legal Bonded Debt Margin

Demographic and Economic lnfonnation These schedules offer demographic and economic indicators to help the reader understand the environment within which the City's financial activities t:ll<e place:

I. Demographic and Economic Statistics 2. Principal Employers

'"

Cl ' 00 0

Operating Information These schedules contain service and infrastructure data to help the reader understand how the information in the City's financial report relates to the services the City provides and the activities it performs:

I. Full-Time Equivalent City Government Employees by Function 2. Operating Indicators by Function/Program 3. Capital Asset Statistics by Function/Program

Sources Unless otherwise noted, the infonnation in these schedules is derived from the Comprehensive Annual Financial Reports for the relevant year. The City implemented GASB Statement 34 in 2002; schedules presenting government-wide information include information beginning in that year.

'"

CITY OF ROSEVILLE NET ASSETS BY COMPONENT

LAST FIVE FISCAL YEARS (accrual basis of accounting)

$1.500.000.000 ,----------------------------------,

Sl.GOO.OOO.OOO

$1100,000.000

:1.-100.101,11111

noo..ooo.ooo

'"' '"" •Net of Related Debt • Restricted 13 Unrestricted

Fistal Ye•r Ended Jnne 30,

"" "" 200~ "~ Gm·emmmta/ ~ctMtie•

Invested in capttal assets,

n~ of related d~b! $501,785,07~ $540,714.6-47 SS79.757.9l9 S664.J3l,414

Remictod 14~,067,075 142,404,742 124,527.445 l49,7JS.04l

Unresnie1ed 63,933.275 73,230549 ~9.038..317 109.395.679

Total govcmm<ll!alao!ivitie• net a<Set.s $713,785.426 $756,:!-49.938 $793.323.681 S923.265,134

Bll,ii'W<W}"~ acli>-itir.

Invested in capital a'""''"'·

net of related debt $560.136.358 $774,624,921 $767,628,987 $8)8,373,690

Romictcd 85.285,040 89,408,729 31.082..339 28.178.946

unr,.lricted IRO.R28.3RR 191,964,333 295.60056(1 280.399.506

Total business-type acti••ti., net os= $826.2-19.786 $!,055,997,981 SI,094,3ll.S86 $1,146,952.142

Primary- /(t>W'mmem

lnveoted in capital a.set.s,

net of related debt Sl.061.92l,434 Si,315.339,568 Sl,347..386,906 $1,502,505,104

R"'nicted 233,352.115 231.813.471 155.609,784 l77,916,9g7

Unresnie1ed 244.761,663 265,1<).1.882 3&4.638.877 389.795.185 Total ['rimory government ne! ...,;.e~, Sl,540,035,212 Sl,812,347,921 Sl.887.635..567 $2.070217.276

The City of Roseville implemented GASB 34 for the fiscal year ended June 30, 2002. Information prior to the implementation ofGASB 34 is not available.

"'

,00,

$742,822,158

177.189.997

107,064 085

$1.027,076,.240

$938.933.934

34,5<;3.611

268.413.147

Sl.24l.900,M2

Sl.68l.756.092

211,743,1>()8

375,477 232

S2.2M,976,9J2

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CITY OF ROSEVILLE FU~D BALANCES OF GOVERNME..''IT FU:"'DS

LAST T£.."11 FISCAL YEARS (Modified Accrual Ba.sb of Accountillg)

f!O<ol \oar J•d«<Juno .10. ·- "" ·~ ,.,

SL-101.09> ».J4Mil Sli,l4,J% SIO.••-.m l.'ll.NI'l ~.'lOI, lOS ~ l!.'>fll.39l

~ 117.109 .•• 1 ~ ~

s;:,!JM84 SJ,091.7ll SJ,mn.lm IA.MHIJ

-ll.J1!4.(101; 0\776.~~· )1,810.1>7 61.189,0~·

!,l-l.,Ml 11.119.)40 41\,;JO,l<l--l 18J61.04'

~ ~ ~ ~

H•ul\o>rEod«<Ju .. lO. 100. 1000

11•.ss1.2n ~l!,'l-l.(>09 118.440/•ll. Si6,1-<i9.J-!8 li.OJJ.4U CJJ•ll.- ~ .,_ •• 12.690

~ ~ ~ ~

!Al.,ll,Jll Qj_9.9,!-<l Sll.lll,Oll lll.l'l-l.~

ll,lll.lll 87,880.)70 M.2M.7111i 64.441.2n

1',9!!,'!! 19Jll.2" 11,7H.9li 19.>11ll.8CI

~ l5,lll . .181 ~ ~ ~ ~ ~ ~

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,,_ ... ,!70

1\,44>1.819 10.01-l . .ll.l

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c::l ' 00

""

CITY OF ROSEVILLE ASSESSED V 4..LUE A.\'D ESTIMATED VALUE

OF TAXABLE PROPERTY last Five Fbul Years

sn,ooo

$16,000

$14,000

$12,000

;; $10,000

i $8,000

$6,000

...... $2,000

" 2003

a Total Rnl S..ourOO Proptrt\' a UoJHurod Prn!l!rh'

R<>ll' " Flocol Rn!deotial ComDienJal lmduh1al , ...• Proe•!:2 ~!!:2_ l'r!'f•!!l:

~' S6,466,979,SU S2.219.57l,il9 Sl,l0l.o28,7~

'~ g,J00,56~.492 2.525,160.445 1,084,29],005

'~ 9,317,20J,SI.l8 2,820,4&4.542 997,687,641

'"~ 1!,085,89!,082 l.l01,6J7.042 !.096.921 025 2007 11.747.175.826 l.Y>4,607,.SI.lt} !,JS7.610.8l2

flo<ol Un•r<urod Total Estlmotrd Yt.o.r Proe•rtr ADniKI.(ol fVU)I{ ..... <I(o)

~' $440,976,929 Sl0,811,678,364 $10.811.678.)64

'~ 458,621.2RO 12,172,1l7,838 12.172,137,838 ,00, 463,111.057 1Ml6.BoS,5-10 ll.6lb,80l.540

'~ 519,989,522 15,944,20l,M2 l'i,944.201.b82 2007 538,066,948 17.0D,620,946 l7,0ll.610,946

(ollbc: StU< Coa<t.l\ll.iom mjuir<s proper1y to be~ ot or, hlmo:I=J potecnt <>f lbe triO>\

m;eot pur<ho.<e price, plu.< an incre.ttlent of tw more lhlm "''o peroont ....,u.olly, p1w any local OV<J·ride6. n.... >olue> .,..._idem~ to be fWl tuat1:et voltl<S

(b) Coltfomia<ollndo- S<1 thcirooonduttttu llll<. The .C.~""""'""""' .,.,.bb<beo the""" at 1% md allot•tos • poroon oftbat !IIDount, by an IIIlllwol co1culotl0n, !<> •11 th< t.uing entttie.< within~ tax "" ""'"

'"

Utber

s:;gJ,lt9.l81 3,495,616

38,320,792 29,783,011

b,OS9,8i\O

, .. Olrut

Tu!Utr(bl

<% 0% <% 1% <%

Totollltol

~·~ l'ro~•rt>

S10.li0.701.4l5 ll,7ll.516.5S8 ll,17l,li94,483 15,414.212.160 t6,47'i.m,99R

CITY OF ROSEVILLE PROPERTY TAX RATES

ALL DIRECT OVERLAPPING GOVERNMENTS Last Ten Fiscal Yean

1998 lm "" ZOOt '"' 2003

B•ok Fbral Con~·

___I!!!_ Wl<lolny

1998 I 0000

'"' '0000 2000 I 00011

'""' 0.0000 2002 1.001){) 2003 '0000 2004 I 0000

'""' 1.0000

'""' 1.0000

'""' 1.0000

• Eureka School District C Roseville Elementary School! DSptdal Districts

turoka DryCr..,k

S<bool School

Dktrkt Dkuict

003(14 00227 0(133() 0.0347

0 02~4 0.0303

0.0323 0.0539

0027& O.OS02

0.0244 0.0411

0 026S 0036S

00240 0.0324

00234 00291

00222 0.0183

• San lLLIID Water bond matured and paid i1120C.WOS

·"''""' P/.,...,-Co••mT•'-<8'""""'11"""'"'""'" !ollp/,"""'p/"''·'""'"''""·'""'""~'""''-"""'P'

Ro•nillr Ell'mutary

Scboolo

0.0224 00223 0,0205 00204 0.0198 0.0!78

• 0 0362 (I_(IJ06

00360 0.0236

I"

Z004 '"' "'' • Dry Cruk School Dilltrlct 0 Hi~:h Schools

Jligh .~pc<'lal

~ Dbtrkl•

0.0208 00111 0.0220 00093 00222 '""" 0.0229 0.0093 0.02S3 0.0092 0.0223 OJ)Ot\S OOZIK 00079 00201 NIA• 0.0384 NIA" 00272 ~lA"

'"'

~

Ll074 1.1213 1.1109 Ll3Kg 1.1323 1.1121 1.12&9 L1071 1.1269 LI0\3

CITY OF ROSEVILLE PRINCIPAL PROPERTY TAX PAYERS

Current Year and Nine Years Ago

Tupayu

PL Roseville LLC

Hewlett Packard Co.

NEC Electronics USA Inc.

Roseville Shoppingtown LLC

Kobra Properties

Donahue Schriber Realty Group LP

John Mourier Construction Inc.

NNN Parkway Corporate Plaza LLC

SIVII LLC

t::J:j Walmart Stores Inc.

Oo Del Webb California Corporation v.

Albertsons, Inc.

Johnson Ranch Limited

Lincoln National Life Insurance

Spieker Properties LP

H.C. Elliott, Inc.

Minnesota Mining & Manufacturing Company

Olympus Co!pOrnte Center Associates

2006-2007 Local Secured Assessed Valuation:

1997-1998 Local Secured Assessed Valuation:

So~rt:e: C~lifornio M~nidpol Sttllistics. Inc.

2007

Percent of Total City

Taxable Taxable

Assessed Assessed

Value Value

$357,509,644.00 2.29%

328,036,807.00 2.11%

309,105,242.00 1.98%

198,422,197.00 1.27%

137,451,533.00 0.88%

94,434,929.00 0.61%

88,406,401.00 0.57%

66,221,460.00 0.42%

57,508,490.00 0.37%

55,317,403.00 0.36%

0.00%

0.00%

0.00%

0.00"/o

0.00%

0.00%

0.00%

0.00%

$1,334,904,462 8.6o/.

$15,581,643,348 $5,197,710,017

""

Taxable

Assessed

Value

1998

S267,194,570.00

• 645,461,558.00

54,241,384.00

40,440,202.00

29,995,360.00

26,822,134.00

21,105,447.00

17,759,963.00

16,750,675.00

16,350,952.00

Sl,l36,122,245

Percent of

Total City Taxable r

Assessed

Value

0.00%

5.14%

12.42%

0.00%

0.00%

0.00%

0.00%

0.00"/o

0.00"/o

0.00"/o

1.04%

0.78%

0.58%

0.52%

0.41%

0.34%

0.32%

0.31%

21.86%

CITY OF ROSEVILLE PROPERTY TAX LEVIES AND COLLECTIONS

LAST TEN FISCAL YEARS

S25,000,000

$20,000,000

515,000,000

SIO,OOO,OOO 1- - 1-

ss,ooo,ooo - - - - - - -

.. 1998 1999 2000 2001 2002 2003 2004

I 0 Total Tax Le~ D Total Tax Collections

Current Percent Delinquent

Fi1cal Total Tu of Levy Tu Year Tat Lew (a! Collections Collected Collections~~

1998 7,579,293 7,480,287 98.69% . so 1999 8,464,546 8,114,689 95.87% 0

2000 9,411,328 9,367,744 99.54o/.

2001 !0,457,636 10,552,003 100.90%

2002 11,995,194 12,056,708 100.51% 0

2003 13,800,915 13,460,448 97.53% 0

2004 14,747,241 14.582,072 98.88o/.

2005 16,653,884 16,469,026 98.89% 0

2006 18,987,819 18,695,407 98.46% 0

2007 23,231,927 22,616,281 97.35% 0

Note: Current tax collections beginning in 1993 have been reduced by a mandatory tall reallocation imposed by the State ofCa1ifomia.

(a) levies include real and personal property.

(b) During fiscal year 1995 the County began providing the City 100"/o of its tax levy under an agreement which allo'>1iS the County to keep all interest and delinquency

charges collected.

Source: Placer Counfl' Department of Finance

"'

I

1--

1-

-

2005 2006

Total

Tu CoUect!ons

7,480,287

8,114,689

9,367,744

10,552,003

12,056,708

13,460,448

14,582,072

16,469,026

18,695,407

22,616,281

1--

1-

-

2007

Percent

of Total

Tn CoUectlons

to Tax Levv

98.69%

95.87%

99.54%

100.90%

100.51%

97.53o/•

98.88%

98.89%

98.46%

97.35o/.

o:l ' 00

"'

Cc-~ cb:>o R.ue Commercial Medium Scllocl Role c""""""'ial Scbool R.ue rv Ccmmm:ial M~ GSI Commttoaal OS l wiGI=:l Fund Commeroia!GS! wiOrec:n Rs•l Ccmmm:ial GSZ wiJOO% Green Co~~~~~~m:ia!GS" 1:....-gy Common:•al M...,..d GS2 Commorcial GS~ "'IOrec:n Fmod Comm..-oial Gs: wiGJ-e., Rs¥1 C<>mm<r<ia!GSZ -..IOrec:n Rnl Blocl Commm:ial GS2 wiNot Metmni Commer<:ial GS~ w/Co-EII<rgy C""""""'iaJGSll'.D<Jgy Commet01ol OS3 Enngy wll'runazy DI>COWII C<>mme<tial GSl ,.-fPritn Dis< .,. G= Rn·L Bll

ResldefiUal M<ltnd Residential Medical Residential .\.lodu:al + Gr=:l Flll>d R=.drnll.Ol Mrd~e&l + ~ Rsvl Reotdentia!ERAP Residential ERAP + Grte:o Ftmd Re•i<l<ntiol EXAP +Green Rs>l Residential EP.AP.,. G= R..•l + Ftmd Ro!ldonoal Senior ReSidential s...x.- Gr= Fmod R.,idonl10l Soruor + Green Rs¥1 Rnidentaal Salior + Q..,.,. R...·l + Ftmd R"'identlal Green FUDd Re>i<katial Green RJvl Re.idenlialGreonRs\i + fUDd Ro•i<kauol PV Rnidrntlal rv + ~ Rsvl Ro•i<l<ntioiPV + Gto<n R.<vl +Fund

Modtcal D~<rount

'""~ Se:morDI.ocount

CITY OF ROSEVILLE ELECTRIC CUSTOMERS, REVENUES A:'lol> RATES

June 30, 2007

T~n LuuSI Electri~ Cu•to111~n •• nf 613012007

Customn T•:!! ofBusilaess NEC Electronics Manufacrunng Hewlett-Packard Offico'Monufacruring

City of Roseville Government

Kaiser Hospital Medical Suner RoseviUe Medical Center Medical

Cassie HiU Center Data Processing

Roseville Telephone Co Communications

Hines Property Management

Wai-Mart GrOCe!)'IS\11'('1' Store

Safeway, Inc. Groxery

El~tri~ Sales Reven11e as of6/3012007

Residemial

Conunercial Total Electric Revetllle

Current Electri~ Rat .. •• of 6130/2001

~TI

pttlr.Wb

0.07806 0.Q7()9S 0.0709S 008690 00&690 008690 o.on~o

0.07030 008240 008~40

0 08240 0.08240 008:\40

(0.05859) 0.06S70 0.06439 0.06439

~:~:=~:~:~ ~::=~=~::~ 0-500~\\b•0.0809; 5(1J-'l9'199l\\'h•O.JOS O-!i00l\\h•0.0809; 501·99'199\o\\'h•O (U8 0-500lWb•0.0809; 501-'19999kl>.'h~O.I08 0-500lVOh•0.08()9; 501-999991:\\'h~ 0.108 0-500lWh•O.OII09; 501-9999'1lWh -0.108 0-500LWb•0.0809; 501-SI9999k'il.'h•O.J08 0-500kWh• 0.01109; SOI-99999lWh •OJ08 0-500k\\'h•0.0809; S01-m9\llWh•O.JO~ 0->00lWh• 0.11~09; S01·99999kWh •0.108 0-500LWh• 0.0809; 50!-999991:\\'h ~o_JOS 0-500LWh • 0.01109; SOI-99999lWh -0.108 0-lOOk\\'h• 0.0809, SOI-99999k\Vb •0.108 0-5001\\'h • 0.0809; SOI-99999L\\'h •0.!08 0-500k\\'h • O.OM9, 501-999991\\'h •0.108 0-5001\\'h- 0.0809; 501-999991:;\\'b -0.108 0-500LWh• 0.0809. 50l-99999lWh •0.108

0-SOOkWb • -().04045; SOI-99999kWh• ·0.0162 0-500kl>.'h • 4MIZl4; SOl·99999kV.'h • .(1 016:: 0-SOOk\\'h • .(1_()971; SOI-99999kWh ~-0 0129~

'"

2.S9

3.79 3.714 3.714

·­.. , Rot<

·~ "" 6.SO 6.SO

"" "" "" 6.50

·~ ·~ "" 6.50 650

·~ 6.~0

6.50 6.50 6.50

0/o Total kWb 11.55% 4.91~.

2.84% !.85% !.44% !.24% 1.13%

1.07%

0.99%

0.86%

$44,302,447.00

65,565,709.00 SI09,868,15600

c ....... •.. Rol<

•• .. "' 6.~0

·~ ., ·~ ••

36.00 )6.00 ;ooo 0000 361)()

•• 15000 15000 ISO.OO

Subrat< p<rkWb 0.0!000

X

X

' ' ' ' X

X

This Page Left Intentionally Blank

S•brm Subnt< Snbrol< pork\o\b p<rkWb (Flot) ULOOO 0.01500 "'

' X X

X X

X

X

Sabroto Dit<-oaat Dlstoaat DIKo""t p<r II.Wb Mrdkol 'm S<olor U.Gt~

X

' X ' X X

X X X X.

X X X

X X

' ' X X

CITY OF ROSEVILLE RATIO OF OUTSTANDING DEBT BY ITPE

Last Ten FiKal Y tan

$600,000,000 4---------------------.n-1 $500,\IOO,too t-----------------,---,--1'.{ S4GO,-.ooo J-----------------.--IH $JOO,OOI,- +--------'-------1--11---111

• .,8 1999 2010 2101 liMll lllCil 2004 l!MIS l004o 1017

tiTota!GovenmeniA<thitln DTota!Bolsbtou-T~A<tlvlt<s I Buslllns-T e Atthill ..

"""" GolfCoorv Woler ................. Go

"''" Sytte"' ..,.. ... ·- Rnnue Konouo

~ Rovonoe -----'!!!!!!._ R.n-..... ... ~ .... :::;; 1998 $10,395,000 S9,095,000 sn.ooo.ooo w ""

8.995,000 8,930,000 3),000,1100

"'"' 29,175,000 8.755,000 11.960,000 ,00, 27,665,000 8.575,000 3().875,000 $97,384,118 ,00, 26,980,000 8,385,000 29.750,000 96,346,162 ,00, 40,774,524 8,185,000 2S.57S,OOO 95.JSS,022

'~ JS,H08,204 8,240,000 27.150,000 93,738,248 >OO> 21l,J25,()4J 7.945,000 26.075,000 92,39<l,603

""' 267,326.882 7,630,000 24,740,000 9<1,917.962 2007 266.098,723 7,310,000 23.345,000 89,494,K83 1224,()68,206

N<11e; Dehl amounlo e>.dudc o.ny premium•. dulo'<>unl•. Of oilier amorli2111ioo amoun"

Oc~orl""" Torm

Ul>!lpdoos

$241.925 234,607 226,924 218,857 210,387 201,493 192,155 182,351 172,056 161.246

Tu Allooallon ... ~

- S14,500,000 14.180,000 1),960,000 13,1lS,OOO 36.405,1)00

T••

$S2.731.92S 51.159,607 70,116,914

164,717.975 161,672,149 172,891,039 MS,J2g.607 399,917.~7

39<1,!146,900 610.478.058

\s1ThtK.,._>m~uiq~~ond.~ .. <hown<><llbo.~SW\o.tkspqt lbJ To!.•l 1''"'"""1 income infonnalloo 1101o.lilable.

,<;._,,..._-e.< The C.n·:, Con~>.-eh,•nm'<' Ann~u/1-'inm!< ial Rtporl.<

Sla"' <J_{California. Dqxmm~nt <1{ Finan(~' (f"'PP'latic>n) U.S. lNf'"''""'"' o(<'<•mmer.·,•. B<ll<'au .,[tl"• Cenw.• (in.·,omc/

This Page Left Intentionally Blank

B-87

Go .. rnmentot ANhittn Cutllloates -~· Ollt•rL .. l

"' Puuboe Term hrddpotloa O!>!lptloa Obllptlon• T""'

$21,755,000 52.838,564 $106.451 $24,700,015 21,200,000 MIS,96S 98,010 2S,2ll.97S 20.625,000 1,93$,971 88.632 22,6411.603 20.025.000 1,582,504 78.779 21.686,283 19.405,000 1,278.976 67,994 20,7S1,970 18,755,000 1.077,800 ll,716 34,344.516 18,275,000 635.743 9,08J 33,099.826 1?,710,000 306.140 6,250 31,982,391.1 17,105,000 2.436,986 '-'" 33.280,2()9 IM90.000 2.J9<l,707 55,285,707

Pertenl~&eol ToW Pb..,.rCoul)' -Primary Penonal '" Governmonl looome Jo! Copllo !•I

$77,431,940 10.25% 1.081 76,37_1,582 ·9.1Wo ,. 92,166.521 10.14% 1.170

186,404,258 18.99"/o 2,268 182,424,1!9 17.87% 2,126 207.2.1S,S5S 18.9Wo 2,18S 198,428,433 1663% 2.054 4J1.900,JS7 3}()4% 4,226 424,127,1()9 I> I 4,053 M5,163,16S I" I 6,26S

522,000,000

519,000,000

516,000,000

513,000,000

SIO,OOO,OOO

57,000,000

54,000,000

51,000,000

CIIT OF ROSEVILLE REVENUE BOND COVERAGE

ZOOO WASTEWATER REVENUE BONDS· SERIES A LAST EIGHT FISCAL YEARS

2000 2001 2002 2003 2004 2005 2006

• Net ReVenue C Debt Service Paymeut

D~bt Servin Rogu!romnb :.Oet Rtvonut

FUta! Op<radng Av.dlablt for Yt .. Grooo Rt>CIIQt !I) E1f!!D .... !1) Dtbt S.rvko Principal ~ ~

200<> $28,429,548 $6,733,043 S21,696,505 '" '" '" ""' 25,428,386 9.573.817 15,854,569 1.687,679 1,6S7,679 2002 24,695,97R 12,245,420 12.450,558 l,fl37,3511 2,955.498 3,992.854

""" 25,149,107 ll,l23,621 12,025,486 1,191,740 2,908,817 4,100,557

'"'" 24,3ll,564 10,199,81)6 14,113,758 1.237,785 50,867 1,288,652

"'" 23.385,997 13,383,537 10,002,460 1,286,546 401.434 1,687,980 2006 25,000,567 14,436,863 10,563,704 ]Jl7,999 3~7,589 1,685,588

"'" 33,584,461 15,417.452 18,167,009 1.394,878 290,123 1,685,000

Nor~.: {I) lnduks .t!l Wn1ewa1~ ~rmg Revcrwes, Noll-opecaring lnlenm Revc:>ue, Cmmeclinu Fee• :u otbor Non-operating ltcvcou•

(2) Includes all Wa!ltev.-.. m Operating ExpeoS<:sle., Depreciation and llll<:reS!

• Ref~JW~C<d voitb tbe 2003 Rtflllldiog Vanablc Rate Wa!ltewat~r R.-vcnue Borub

'"

2007

c~ ... ••&•

9.39

3.12 2.93

10.95

5.93 6.27

10.78

CITY OF ROSEVILLE REVENUE BOND COVERAGE

2000 VARIABLE RATE DEMAND WASTEWATER REVENUE BONDS · SERIES B LAST EIGHT FISCAL YEARS

2000 zoot 2002 2003 2004 2005 1006 2007

•Net Rtl'l'DUe • Debt Servi(c Payment

Debt Servlte Regull"f'mtnu :.Oet Rn·enll<

Fiscal Op•r•ting Anllabl• for Year GrouR<niiD<tl) Ese!n""s !1! Dobt Seniu Principal ~ ~

200<> $28,429,5~8 $6.733,0.;3 $21 ,696,505 $0 $0 $0

2001 25,428.386 9.573,817 15,854.569 709,607 71E,607

2002 24,695,978 12.245,420 12.450,558 699,238 699,238

2003 25,349,107 13,323,621 12.025.486 562.542 562,:>-12

20"' 24,313,564 10,199,806 14,113,758 464,168 464,168

200l 23.385.'~97 13,383,5)7 10.002,460 805,\82 805,182 2006 25,000,567 14,436,86) 10,563,704 1.252,978 1.252,978 2003 33,584.~1 15,417.452 18,167,009 1,465,264 1.465,264

Notes: (I) Includes all Wastewater Opc:rating Revenues, Non-operating 1ntell'SI Revenue, ConD<:>:tioo Fees am oilier Non-<>peralmg Revenut

(2) lndndes all Wastewater Opc:rating Expenses less Depredai!On and lnteres

'"

Co•·nago

U.» 17.81

21.38 )0.41

12.42

8.43

1240

t:O ' 00

""

CITY OF ROSEVILLE REVENUE BOND COVERAGE

2003 REFUNDING AUCTION RATE-SYNTHETIC FIXED WASTEWATER REVENUE BONDS LAST FOUR FISCAL YEARS

$19,000,000

$17,000,000

$15,000,000

$13,000,000

S II ,000,000

$9,000,000

$7,000,000

$5,000,000

$3,000,000

$1,000,000

"" r----2~·~··c_ ___ _c20~~c_-cc--__c2007 • Net Revenue D Drbt Srrvlc~ Payment

lkbt S..n-k<' R~'Jnlnm~llll

Net Revenue Fbul Optntin& Avalb.bl~ ror

...!!!!..... Grou Rrvnu.jl) E•!!!"'"' j1) ~btSrrvkr Principal l11l•rnt ~ Cov•rag•

200< S24,3ll,564 $10,1~,806 514,113,758 $866,720 $1,579,805 $2,446,525

2005 23,385,997 13,383,537 10,002,460 325,020 1,12M61 1,445,581

2000 25,000,567 14,436,863 10,563,7()4 338,563 1,441,94!1 l,'l80,51l

2007 33,584,461 15,417,452 18,167,009 352,105 1,575,6S1 1,927,756

Notes: (1) Includes all V/ll3tewoter0peratmg Rcve-nueo, Non-operating Interest Revenue, CO!lllettiO!I Fees ar olbcr N<>D--opmoliDg Revenues

(2} Includeo all v/astewaterOperanng Expenses \eso Depreciation and !ntereot

'"

5.11 0,92 5.93 9.42

S6,000,000

$5,000.000

'1-i,UUO,OOO

SJ,OUO,OOO

n.-.oot

SIJIOO.OOO

,_

I

Fiscal

~

2003

2""' 2005 2000 2007

r-

+-+-

CITY OF ROSEVILLE 2002 REDEVELOPMENT TAX ALLOCATION BONDS

Last Five Fiscal Years

r-

r-

,

,

l l , 1 ~

,..,....

1---

I, h1-'" 7007

D Tn Increment Revenue []Total Debt Servite

~bt Suvl~~ R~ulremenu

Tn lnc~m~nt Prlndpal IDk~st Total Prludpal Revenu~ Pnm~nt "" D~btSuvlu OutuandlnR Connge

$2.740,656.14 $205,692.08 $205,692.08 $14,500,000.00 0.13 3,630,050.00 $320,000.00 674,550.00 994,550.00 14,!80,000.00 ,,., 4,190,987.00 220,000.00 666,450.00 886,450.00 13,960,000.00 0.05 4,673.904 00 225,000.00 659.115.00 884,775.00 13,735,000.00 oos 5,581,407.00 (•) 275,000.00 651,875.00 926.875.00 13,460,000.00 ,,,.

(a) Tax l~>emnental Re-venue for RDA 2002, RDA 2006A, and RDA 2006AT are combU.cd U.to <>DC figure rep~senung thcircombU.ed moe-nue.

CITY OF ROSE\1LLE CITY OF ROSEVILLE 2006A REDEVELOPMENT TAX ALLOCATION BO!'ODS 2006AT REDEVELOPME!"iT TAX ALLOCATION BONDS

• Total Debt Service

CD Dtbt Strvi« R~ulrellltnti

' Fbul Tnlacr...,eat Prlacipal IDttrnt ""' Prilltlpll

'.0 ~ R .. veaa~ Pnment ••• ~btS•rvl<e Outstandin& c., .••• ,. 0 ,00, SS,S8!,407.00 ,,, $]90,407.99 $190,407.99 $13,155.000.00 0.29

~bt Senico R~lliremnts Flocal Tu IDnuatat Priadpal Interest ToW Priadpal

~ Revenu• Pa~meat ... Debt Servi« OutstaDdlDJii Cu.-on1•

2007 ,,, $5,581,407.00 $~6.168.16 SS6.168.l6 $3.285.000.00 0.99

(a) Tu lt>r:r==tal R~uc for RDA 2002. Rl>A 2006A. ud RDA 20061\ T an: combined into oue figure ~•ontUti their combiucd ~venue

(a) Ta~ IDcrem~ntal Revcnuc for RDA 2002, RDA 2006A, and RDA 2~AT are combtned into one figure ~pro>enting their combined r<:veniiC.

''" '"

Sl,lOG,IM

SI,OOO,OOO

SlOU,OOO

Fiscal

~

2007

CITY OF ROSEVILLE 2006HT REDEVELOPMENT TAX ALLOCATION BONDS

ZO% Set Add<'

$1,116,281.00

0 Tu: Increment Revenue

Debt Ser~lce Requlremcuts Prlndpal Interest PanPrnt D"

$114,894.97

""

Tntal Priaclpal Debt Service Ontstandlng

$114,894.97 $6,505,000.00

Cnvrr5<'

0.10

CITY OF ROSEVILLE COMPUTATION OF DIRECT AND OVERLAPPING DEBT

June 30, 2007

2006-07 Assessed Valuation· Redevelopmentlnc~n~~ental Valuation: Adjusted Assessed Valuation:

$16,123,028,725 653,294,954

$15,469,733,771

OVERLAPPING TAX ANQ ASSESSMENT QEBT

Roseville Joint Union High School District Rocklin Unified School District Dry Creek Joint School District Eurek..a Union Scllool Di~trict

Rosevil!e City School District City of Roseville Community facilities Districts City of Roseville 1915 Act Bonds California Statewide Communities Development Authority

Assessment District No. 04-01 CalifOrnia Statewide Communities Development Authority

Assessment District No. 05-01 California Statewide Communities Development Authority

Roseville Granite Bay Assessment District California Statewide Communities Development Authority

Roseville Woodlake Village TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT

Total Debt

~ SI09,170,343

86,622,312 16,823

8,686,931 37,917,378

406,010,000 935,000

1,553,9{)6

3,168,624

319,312

1,915,875

DIRECT AND OVERLAPPING GE."''tiRAL FUND OBLIGATION DEBJ< Placet County Certificates of Participation 522,000,000 Placer County Office ofF..ducation Certificates ot'Panicipation 2,770,000 Sie-na Joint Community College Di&trict Cenificatrs ofParticipati 10,050,000 Roseville Joint Union High School District Certificates ofParticip 5,165,000 Rocklin Unified School District Certificates ofPanicipation 19,890,000 Eureka Union School District Certificates of Participation 6,795,000 Roseville City School District Certificates of Participation 18,000,000 City ofRnsevllle Cl'rtificatn' of Participation 23,800,000

Percentage Applicable To City of

~ 73.562% 0.012%

56.835% 37.936% 98.088% ]()(} 000% ]00.000%

55.216%

6.70We

[QO_()O(l-/o

100.000%

30.549% 30.549"/o 22.472% 73.562% 0.012%

37.936% 98.088% 100.000~.

TOTAL DIRECT AND OVERLAPPING GENERAL FUND OBLIGATION DEBT

Amount Applicable To City of Ro§evi!le

$80,307,888 10.395

9,561,376 3,295,474

37,192.398 406,010,000

935,000

858,005

212,329

319,312

1,915,875 S540,618,052

$6,720,780 &46,207

2,258,436 3,799,477

2,387 2,577,751

17,655,840

COMBINED TOTAL DEBT $ 598):78,930 (2)

( l) Pm:en\age of e-ach overlapping agency's assessed valuatil)n located within the ~ of the city. (2) E:<cludcs tax and revenue llllticipation notrs, revenue, mortgage n:venue and tax allocation bonds and

non-bonded capital lease obligations

Ratios to 2006-07 Assessed Valuation:

Total Overlapping Tax and Assessment O.:bt

Ratios to Adjusted Asseued Valuation· Combinl'd Direct Debt ($24,735,000) Combined Total Debt

3.35%

O.IS'"/o 3.87o/o

STATE SCHOOL BUILDING AID REPAYABI E AS OF ~/3{)/07· $0

KD: ($425)

"'

Ill ' >D

N

CITY OF EXAMPLE COMPUTATION OF LEGAL BONDED DEBT MARGIN

JUNE 30, 2007

ASSESSED VALUATION:

Secured property assessed value; net of

exempt real property

BONDED DEBT LIMIT (3.75% OF ASSESSED VALUE) (a)

AMOUNT OF DEBT SUBJECT TO LIMIT:

Total Bonded Debt

Less Tax Allocation Bonds and Sales Tax Revenue

Bonds, Certificate of Participation not subject to limit

Amount of debt subject to limit

LEGAL BONDED DEBT MARGIN

Total Net Debt Legal Fiscal Debt Applicable to Debt Ym Limit Limit Marzin

2003 $358,392,538 0 $358,392,538

2004 394,584,662 0 394,584,662

2005 445,276,653 0 445,276,653

2006 500,173,479 0 500,173,479

2007 584,311,626 0 584,311,626

NOTE: The City of Roseville began preparing a CAFR in fiscal year 2003.

$15,581,643,348

$663,2ll,RI2

663,211,812

Total net debt applicable to the limit

as a percentage of debt limit

0,00"/o 0.00%

0.00%

0.00%

0.00%

(a) California Government Code, Section 43605 sets the debt limit at 15%. The

Code section was enacted prior to the change in basitig assessed value to full market

value when it was previously 25% of market value. Thus, the limit shown as 3.75%

is one-fourth the limit to account for the adjusunent of showing assessed valuation

at full cash value.

Smm:t•: Ciry ofRru<·nlle Finant·e l.Hparrment

162

$584,311,626

0

$584,311,626

CITY OF ROSEVILLE DEMOGRAPHIC AND ECONOMIC STATISTICS

Last Ten Fiscal Years

350,000 ,------------------------------------,

300,000 tc------------------:::;---

250,000 +----------,,.,---

150,000

100,000

50,000

1998 '"' 2000, 2000 2002 20m 200. 200S 2"' 2007

C City Population 0 Placer County Population

C"unt)· County C>tyof ·~ Per Capita ,_ City

fl8col Roso•·•lle Po<Sonal Per•owll UneDljlloymm• ,_ Population

~ ~ Income (a) --""""--- ~ ~ %ofCoUilty

·~· 71,600 $1,5SUS8 53:.665 4.3% 2:'9,700 JLm;

1999 76,700 8.346,24~ 34,642 3 4o/• 238,300 32.19~·

2~ 79,300 9,153,080 36.419 3.6% 246,100 3222% 2001 82.200 9.~15,673 37,066 3.9"/o 255.100 32.22~·

200: 85.800 10,209,270 36,604 4.8~· 265,700 32.29~;

2003 90,700 10.946,ll'42 37,303 4.9% 27S.600 )2.91%

'""' %.~ 11,933,069 38,958 4.5% 292,235 33.(1!5% 2005 102.191 l3,070,0g2 41,248 4-~· 30M1S JlAm

""' 104.655 ,., " 4.2~0 .116,508 3.1 07~0

200, 106.Z66 '" 0> '" 3:'4.495 32-75%

fa! In lhousan<h of doll= I b) illfoml.llbon not a•·ailablo

,.,

CITY OF ROSEVILLE PRINCIPAL EMPLOYERS

Current Year and Nine Years Ago

·~ '"' Percentage of Percentage of

Number of Total City Number of Total City

Emplo}eT Employea ~ EmployHI Emplovea ~ EmploHfl

Hewlen-Packard 3,600 4.6% 4,200 9.3%

Kaiser Permanente 3,289 4,2% 8., 1.9%

Sutter Roseville Medical Center 1,922 2.4% uoo 2.9%

Union Pacific Railroad 1,500 1.9% 1.300 2.9%

City of Roseville 1,248 1.6% "' 1.7o/o

Rosevil,le Joint Union High School District 915 1.2% 555 1.2%

Roseville Elemenwy School District 840 1.1% 5)1 1.2%

o:l NEC Electronics 800 1.0% 2,200 4.9% I

'D

"' PRIDE Industries 800 I.Oo/o "' Wai-Man 796 10 I.OOA.

Subtotal 15,770 20.0% 12,094 26.9"A.

Total Employment• 79,000 45,000

•Total Employment as used above rqrresents the total employment of all employees locakd "'ithin the City limits.

'"

""

CITY OF ROSEVILLE FULL~ TIME EQUIVALENT CITY EMPLOYEES BY FUNCTION

Last Ten Fiscal Years

"" 11100 lOOt 1002 10n 111114 '"" '"" 11107

•Geoerll government • Public Safely C Pnblk Work! BCommualty Dn ... opmea

1::1 Park! and Recrt"lllon 1:1 EnvttoniMntJol Ulllilln: CEieclric

Adopted for Fiscal Year Ended June 30,

"" "" 2000 1001 2002 2003 211114 2005 211116

Function General government 125.44 130.69 142.92 153.42 167.81 175.06 172.95 184.23 197.23 Public Safety 208.64 209.64 227.59 246.D7 259.D7 280.07 274.24 298.43 327.46 Public Works 7650 82.50 97.31 101.29 109.29 112.54 114.29 125.29 134.77 Community Development 33.50 33.00 41.50 44.00 48.00 46,74 47.63 43.63 52.63 Parks and Recreation 197.39 \94.84 225.81 242.50 251.09 265.33 256.83 281.12 287.86 Environmental Utilities: 118.42 11~.42 125.92 133.84 14~.09 161.47 171.57 178.82 203.74

Electric 73,50 75.00 81.46 83.46 85.80 91.46 94.46 102.46 132.46 •

Total 833,39 845.09 942.51 1.004.58 1,070.15 1.132.67 1,131.97 1.213.98 1.336.15

Sorrrce· Cr"·aJ Ro>e-.•rlle AnmNJI BrrJg<l

'"

2007

212.71 353.69 138.77 42.25

307.65 2li.Q3

139.46 1,40~.56

CITY OF ROSEVILLE OPERATING INDICATORS BY J<"UNCTIO!"o'/PROGRAM

Last Five Fiscal Years CITY OF ROSEVILLE CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAM

Fbaol Year Last Four Fiscal Years

~ ~ ~ ~ ~

Fuo•tioiLIPn>vam 2004 2005 ~ ~ Public safety: f~ Function/Program

Number of medical emcrgcnct .. onswered 5,063 5.234 5,228 6,458 6,622 !\'umber of Hoz..Mal alarms answered '" '" "' "' no Public safety:

Total NumberofolanuJ ~ 7,730 8,390 8,023 9,784 10,065 Fire stations Police stations

Pohce: Police patrol units 75 97 110 107 Law violations

Phyoical arrests (adult and juvenile) 4,652 4,120 5,578 7,602 7,360 Public works:

Trafficcitatwn• 19,432 JJ,lSl 15,260 18,587 19,893 Miles of streets 428 432 "' 475

Public worh· Number ofTraffic Lights 133 135 141 150 Total building penntts iS~ued 5,66.1 5,718 4,434 5,703 4.272 Total ~quare feel of Slrecl ma.intenmce pcrfonned 5,202,«0 3,174,672 9,529,760 3,763,328 7,707,910 Park and recreation:

Park and recruliou· Community services:

Community Service• City parks 40 48 53 56 !'umber of participants in Cullural An classes 4,767 6,582 3,02~ 3,447 1,926 Miles of creek 57 57 60 60 Totalan<ndattce toaquatto facilities 331,561 361.1().1 271,377 234.542 243,429 Golf courses (18 holes) 2

Swimming pools 4 4 4 4 Library:

Tennis courts 12 12 . 12 12 )';umber of materials cbed:ed out 508,809 510,421 554,174 627,JI7 685,097

Ol Wat(T; Libraiy:

' Avenge Daily Consumpli011 (in pllons) 26.6M 28.77M 26.82M 27.26M 3043M City Libraiies 'oO Number of meters sold 1.720 1,870 1,987 '·""" 1,031 .,. Number of badr.Jlow <levi= !<'Sled '·"' 3,8]7 4,122 3,836 4,348

Water

was~ .... -a~er: Miles of water mains 480 494 506 540

Number of miles of sower mains flushed , "" "' ~· "' m Fire hydrants 4,499 3,881 3,978 4,278 T ota\ preventati>"c work Olden completed 2,599 2,192 3,107 7,065 9,247

Wastewater Solid Wane·

Number of incomirtg phone caUs 37,954 37,9~3 22,6&4 23,672 26,870 Miles of saniwy sewers 600 460 447 472

Tons of solid waste collected 95,151 99,082 98,910 102,370 100,148 Miles of stonn drain 420 352 435 474

Electric: Solid Waste: Number of CUSIO!IIen paniriparing iJt =iY efficimcy programs 1.231 2,124 2,793 3,\23 3,663 Number of new residential refuse customers 1.490 1,062 70S S09 Number of uces pl.w!ted (Shade Tree Prognm) 1.065 "' "' '" '"

Electric: Note: The Library rotals include Main Library, Maidu Library and Bookmobile Number of residential customers 40,3!2 41,883 43,001 43,793

In 2002 & 2003 the wastewater treatm""t plont wa• still unda construction Number of commercial customers 5,101 5,410 5,523 5,788

Sourn·: CityofR"'e;·il/e Deparrment Staff

l '" '"

APPENDIX C

DEFINITIONS AND SUMMARY OF CERTAIN DOCUMENTS

The following is a brief summary of certain provisions of .the Trust Agreement and Master Contraci not fully described elsewhere in the Official Statement. This summary is not intended to be definitive. Reference is made to the actual documents (copies of which are available from the Authority) for the complete terms thereof

S~e 2008 CERTIFICATES - [Redemption], SECURITY FOR THE SERIES 2008 9ERTIFICA TES - General, -.Flow of Funds, - Parity Reserve Fund, for a description of the portions of the Trust Agreement relating to said topics. The provisions in the Trust Agreement relating to said topics and certain others are not summarized or repeated below.

CERTAIN DEFINITIONS

"Adjusted Annual Debt Service" means, for any Fiscal Year or any designated 12-month period in question, the Annual Debt Service for such Fiscal Year or 12-month period minus the sum of (i) for the purposes of the rate covenant of the City pursuant to the Master Contract, the earnings from the investments in the Parity Reserve Fund deposited in the Electric Revenue Fund in such Fiscal Year or 12-month period, and (ii) the amount of the Annual Debt Service paid from the proceeds of Parity Obligations or interest earned thereon (other than from the Parity Reserve Fund), all as set forth in a Certificate of the City.

"Adjusted Annual Net Revenues" means, for any Fiscal Year or any designated 12-month period in question, the Adjusted Annual Revenues during such Fiscal Year or 12-month period less the Maintenance and Operation Costs during such Fiscal Year or 12-month period.

"Adjusted Annual Revenues" means, for any Fiscal Year or any designated 12-month period in question, the Revenues during such Fiscal Year or 12-month period plus, for the purposes of determining compliance with the rate covenant of the City pursuant to the Master Contract, the amounts on deposit in the Rate Stabilization Fund (or any other unrestricted funds of the Electric System designated by the City Council by resolution and available for the purpose of paying Maintenance and Operation Costs and/or Annual Debt Service for such Fiscal Year or 12-month period) as of the first day of such Fiscal Year or 12-month period minus, for the purposes of determining compliance with the rate covenant of the City pursuant to the Master Contract, earnings from the investments in the Parity Reserve Fund that are deposited in the Electric Revenue Fund in such Fiscal Year or 12-month period.

"Annual Debt Service" means, for any Fiscal Year or any designated 12-month period in question, the required payments scheduled to be made with respect to all Outstanding Parity Obligations in such Fiscal Year or 12-month period; provided that for purposes of determining compliance with the rate covenant of the City pursuant to the Master Contract, the Reserve Fund Requirement and conditions for the execution of Parity Obligations:

(A) Generally. Except as otherwise provided by subparagraph (B) with respect to Variable Interest Rate Parity Obligations, and by subparagraph (C) with respect to Parity Obligations with respect to which ,a Payment Agreement is in force,

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interest on any Parity Obligation will be calculated based on the actual amount of interest that is payable under that Parity Obligation;

(B) ·Interest on Variable Interest ·Rate Parity Obligations. The amount of interest deemed to be payable on any Variable Interest Rate Parity Obligation will be calculated on the assumption that the interest rate on that Parity Obligation would be equal to the rate (the "a·ssumed RBI-based rate") that is ninety percent (90%) of the average' RBI~ during the twelve -(12) calendar month period immediateiy preceding the

c '· date in which the'calculation is made;

(C) Interest on Parity Obligations with Respect to Which a Payment Agreement is in Force: The ·amount of interest deemed io be payable on any Parity Obligations with respect to which a Payment Agreement is in force will, so long as the

· · Qualified Couriterparty thereto is not in default thereunder, be based on the net economic effect 'on the City expected to be· produced by the .. terms of such '.Parity Obligation and such Payment Agreement, including but not limited to the effects that (i) such Parity Obligation would, but for such Payment Agreement, be treated as an obligation bearing interest at a· Variabie' interest Rate instead will be treated as an obligation bearing interest at a fixed interest rate, and (ii) such Parity Obligation would,

- but for such Payment Agreement, be treated as' an obligation· bearing ihteirest at a fixed interest-rate instead will be treated as an obligation-bearing interest at a Variable Interest

- Rate;· and accordingly, the amount of interest deemed to be ·payable 'on any Piirity Obligation with respect to which a Payment Agreement is in force will, so long as the

·Qualified Counterparty thereto is ·not in default thereunder, be an amount equal to the --amount of interest that would be' payable at the rate cir rates stated in such Parity

Obligation plus the Payment -Agreement Payments minus the Payment Agreement Receipts, and for the purpose of calculating Payment Agreement Receipts and Payment

' Agreement Payments under such Payment Agreement, the following assumptions will ·be made: - '

(1) Counterparty Obligation to Pay Actual Variable Interest Rate on Variable Interest Rate Parity Obligations. If the Payment Agreement obligates a Qualified Counterparty to make payments to the City based on • the actual Variable Interest Rate on a Parity Obligation that would, but for the Payment Agreement, be treated as a Variable Interest Rate Parity Obligation and obligates

· the City to make payments to the Qualified Counterparty based on a fixed rate, payments by the City to the Qualified Counterparty will be assumed to be made at the fixed rate specified by the Payment Agreement and payments by the Qualified ·Counterparty to the City will be· assumed· to be· made at the actual Variable Interest Rate on such Parity Obligation, without regard to the occurrence of any event that, under the provisions of the Payment Agreement, would permit the Qualified Counterparty to make payments on any basis other than the actual Variable Interest Rate on such Parity Obligation, and such Parity Obligation will set forth a debt service schedule based on that assumption;

(2) Variable Interest Rate Parity Obligations ahd Payment Agreements Ha'ving the· Same Variable Interest Rate Components. · If 'both a Payment Agreement and the related Parity Obligation that would, but for the

·Payment Agreement, be treated as· a Variable Interest Rate Parity Obligation, include a variable:. interest rate· payment component' that is required to be cali::uhited ori tlie same basis (including, without limitation, on the basis of the

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same variable interest rate index}, it will be assumed that the variable interest rate payment component payable pursuant to the Payment Agreement is equal in amount to the variable interest rate component payable on such Parity Obligation;

(3) Variable Interest Rate Parity Obligations and Payment Agreements Having Different Variable Interest Rate Component. If a Payment Agreement obligates either the City or the Qualified Counterparty to make payments of a variable interest rate component on a basis that is different (including, without limitation, on a different variable interest rate index) from the basis that is required to be used to calculate interest on the Parity Obligation that would, but for the Payment Agreement, be treated as a Variable Interest Rate Parity Obligation it will be assumed:

(a) City Obligated to Make Payments Based on Variable Interest Rate Index.. If payments by the City under the Payment Agreement are based on a variable interest rate index and payments by the Qualified Counterparty are based on a fixed interest rate, payments by the City to the Qualified Counterparty will be based upon an interest rate equal to the assumed RBI-based rate, and payments by the Qualified Counterparty to the City. will be based on the fixed rate specified by the Payment Agreement; and ..

(b) City Obligated to Make Payment Based on Fixed Interest Rate. If payments by the City under the Payment Agreement are based on a fixed interest rate and payments by the Qualified Counterparty are based on a variable interest rate index, payments by the City to the Qualified Counterparty will be based on an interest rate equal to the rate (the "assumed fixed payor rate") that is one hundred and five percent (105%) of the fixed interest rate specified by the Payment Agreement to be paid by the City, and payments by the Qualified Counterparty to the City will be based on a rate equal to the actual variable interest rate on the Variable Interest Rate Parity Obligation,

(4) Certain Payment Agreements May Be Disregarded. Notwithstanding the provisions of subparagraphs (C)(1 ), (2) and (3) of this definition, the City will not be required to .(but may at its option }'lake into account as set forth in subparagraph (C) of this definition (for the purpose of determining Annual Debt Service) the effects of any Payment Agreement that has a remaining term of ten (1 0) years or less;

(D) Debt Service on Parity Payment Agreements. No interest will be taken into account with respect to a Parity Payment Agreement for any period during which Payment Agreement Payments on that Parity Payment Agreement are taken into account in determining Annual Debt Service on a related Parity Obligation under subparagraph (C) of this definition; provided, that for any period during which Payment Agreement Payments are not taken into account in calculating Annual Debt Service on any Parity Obligation because the Parity Payment Agreement is not then related to any Parity Obligation, interest on that Parity Payment Agreement will be taken into accourit by assuming:

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-:,.

(1) City Obligated to Make Payments Based on Fixed Interest Rate. If the City is obligated to make Payment Agreement Payments based on a fixed interest rate and the Qualified Counterparty is obligated to make payments based on a variable interest rate index, payments by the City will be based on the assumed fixed payor rate, and payments by the Qualified Counterparty will be based on a rate equal to the average rate determined by the variable interest rate index specified by the Payment Agreement during. the· quarter preceding the quarter'in which the calculation is made; and

- (2) City Obligated to Make Payments Based on Variable Interest Rate Index. If-the City is obligated to make Payment Agreement Payments based on a variable interest rate index and the Qualified Counterparty is obligated to make payments based on a fixed interest rate, payments by the City will be based on

·an interest rate equal to the average rate determined by the variable interest rate index specified by the Payment Agreement during the quarter preceding the quarter in which the calculation is made, and the Qualified Counterparty will make 'payments based -On the fixed rate specified by the Parity Payment Agreement; and

. ' '· ,·_·-

(3) Certain Payment( -'Agreements · May be Disregarded. Notwithstanding the provisions of-subparagraphs (D)(1) and (2) of this definition, the City will not be required to (but may at its option) take into account (for the purpose of determining Annual Debt Service) the effects of any Payment

. Agreement that has·a remaining term of ten (1 0) years or less;

(D) Balloon Parity Obligations. · For purposes of calculating Annual Debt Service on· any 'Balloon Parity Obligations; it will be assumed that the principal of those

· Balloon Parity Obligations, together with interest thereon at a rate equal to the assumed RBI-based rate, will be amortized in equal annual installments over a term of thirty (30) years from the date of issuance.

, . '. - . "Alternate Credit Facility" means an alternate irrevocable letter of credit or similar credit

facility issued by a commercial bank or savings institution, the terms of which will be to the extent dictated by the terms of the 2008 Certificates, the same as or similar to those of the initial Credit Facility, delivered to the Trustee pursuant to the terms of the Trust Agreement. The Alternate Credit. Facility may include a bond insurance policy and a liquidity facility combined or such other similar credit arrangement as may·be customary in the future for certificates similar to the 2008 Certificates.

"Auction Rate" means the interest rate to be determined for a Series of the 2008 Certificates pursuant to the Auction Procedures.

"Authority" means -the Roseville Finance Authority, a joint exercise of powers authority organized and existing under the laws of the State of California.

"Authorized .Denominations" means, as to each respective Series, denominations of $5,000. or any integral multiple thereof, provided that if the Interest Rate Mode for the 2008 Certificates is the Daily Rate, the Weekly Rate or the Commercial Paper Rate, the 2008 Certificates may be issued only in denominations of $100,000 and any larger denomination

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constituting an integral multiple of $1,000, and provided further that if the Interest Rate Mode for the 2008 Certificates is the Auction Rate, the 2008 Certificates may be issued only in denominations of.$25,000 and any integral multiple thereof.

"Average Annual Debt Service" means the sum of the Annual Debt Service for all Fiscal Years during the period commencing with the Fiscal Year in which such calculation is made (or if appropriate, the first full Fiscal Year followirg the issuance of Parity Obligations) and terminating with the last Fiscal Year in which payments are due under Outstanding Parity Obligations, divided by the number of such Fiscal Years.

"Balloon Parity Obligation" means any Parity Obligation described as such in such Parity Obligation. ·

"Bank" means, with respect to the initial Credit Facility, Dexia Credit Local, New York Branch, and thereafter the commercial bank or other financial institution issuing (or having primary obligation, or acting as agent for the financial institution so obligated under) a Credit Facility then in effect.

"Bank Certificates" means 2008 Certificates purchased with moneys drawn under (or otherwise obtained pursuant to the terms of the Credit Facility, but excluding 2008 Certificates no longer considered to be Bank Certificates under the terms of the Credit Facility) .

. "Business Day" means (i) any day other than (a) a Saturday or Sunday or legal holiday or a day on which banking institutions in the city or cities in which the Trust Office of the Trustee is located are authorized by law or executive order to close or (b) a day on which the New York Stock Exchange is closed, or (c) a day on which the offices of the Tender Agent at which the duties hereunder are to be performed or the office of the Bank at which draws under the Credit Facility are presented are authorized or required by law to close; or (ii) during an Auction Period, solely for purposes of conducting an Auction, any other day or days as may be agreed to in writing by the Auction Agent, the Broker-Dealers, the Trustee and the Authority.

"Certificates" means certificates of participation executed and delivered by the Authority in 1999, 2002, 2004, 2005 and the 2006 Certificates, in connection with Contracts. ,

, "City" means the City of Roseville, . a charter city and municipal corporation, duly organized and existing under and by virtue of the Constitution and laws of the State.

"Code" means the Internal Revenue Code of 1986, and the regulations issued thereunder, as the same may be amended from time to time, and any successor provisions of law. Reference to a particular section of the Code will be deemed to be a reference to any successor to any such section.

"Contract" means the Master Contract, as ·supplemented by the 1997 Supplemental Contract, the 1999 Supplemental Contract, the 2002 Supplemental Contract, the. 2004 Supplemental Contract, the 2005 Supplemental Contract and the 2008 Supplemental Contract and as otherwise amended or supplemented from time to time.

"Conversion" means, any conversion from time to time in accordance with the terms of the Trust Agreement of the 2008 Certificates from one Interest. Rate Mode to another Interest Rate Mode.

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"Conversion Date" means the date on which any Conversion becomes effective:· ~ '""' . ; •{ - ~ ·'+ -

"Costs of Issuance" means· ·au the costs of executing and delivering any '2008 Certificates, including, but not limited to, all printing and document preparation expenses in connection with ttie Trust: Agreement, any 2008 Certificates and any preliminary official statement and final official. statement pertaining to ·any 2008 Certificates; rating agency fees; CUSIP Service Bureau·cliarges; market study fees; legal fees and expenses of counsel to the City and the Authority; any computer and other expenses incurred in connection with any 2008 Certificates; fees and expenses of the Bank, the fees and· expenses· of ttie,·Trustee, the Remarketing Agent, fees related to the Credit Facility, and any Broker-Dealer and Auction Agent; 'and other fees and expenses incurred ·in ·connection with .the execution of the 2008 Certificates or the refunding of the 2008 Certificates to be refunded with proceeds of the 2008 Certificates, to the extent such fees and expenses are approved by the Authority or the City.

- .~ . . . •. :.. . . . ... ~: ~

"Credit Facility" means, initially the irrevocable· direct pay letter· of credit, and any extension ·and. renewal thereof, issued• by the initial Bank naming the Trustee beneficiary and delivered on the date of issuance and delivery of the 2008 Certificates pursuant to the Letter of Credit Reimbursement Agreement for the account of the Authority, and in the event such Credit Facility. is. no longer· available· for· either respective Series of the 2008 Certificates, any subsequent Alternate Credit Facility· issued for such Series. · · •

"Daily Rate" means the Interest Rate Mode in which the interest rate on a Series of the 2008 Certificates is determinea on each Business Day in accordance with the Trust Agreement. ' ,l t'f' : _:.1 . '. ;.• '- ' ..... ~ . - '

. ·~Daily Rate Period" means·any period,:each Cimsisting of one Business· Day, beginning on, and including, the" Conversion Date for· ·a· Conversion to the Daily Rate until the day preceding the earlier of the' Conversion to a different Interest Rate Mode· or the maturity of the 2008 Certificates· .. · · · ",. ~ '"' · : .. , ' ' :· · ; · ·

.. - -"

"Defeasance· Obligations" means· (a)' cash; (b) non-callable· direct obligations of the United States of America ("Treasuries"), or (c) evidences of ownership of proportionate interests in future interest .and principal payments· on Treasuries held by a bank 'or trusi• company as custodian, under. which the owner of the investment is'. the •real party in interest and has the right to proceed directly and individually against the obligor and the underlying Treasuries are not available to any. person 'claiming through the custodian or to whom the· custodian may be obligated (or any combination thereof).

"Fair Market Value" mean's the price at which a willing buyer would purchase the 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 refe'renced 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, (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, or (iv) any commingled investment fund in which the

C-6

Authority and related parties do not own more than a ten percent (1 0%) beneficial interest therein if the return paid by the fund is without regard to the source of the investment.

"Electric Revenue Fund" means the City of Roseville Electric Utility Fund continued pursuant to the Master Contract.

"Electric Service" means the service furnished, made available or provided by the Electric System.

"Electric System" means the electric public utility system of the City, compns1ng all electric generation, transmission and distribution facilities and all general plant facilities related thereto now owned by the City and all other properties, structures or works for the generation, transmission or distribution of electricity hereafter acquired by the City, including all contractual rights for electricity or the transmission thereof, together with all additions, betterments, extensions or improvements to such facilities, properties, structures or works or any part thereof hereafter acquired.

"Event of Default" means an event of default described in the Master Contract and the Trust Agreement.

"Federal Securities" means any of the following which at the time of investment are legal investments under the laws of the State for the moneys proposed to be invested therein:

(a) direct 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); and

(b) obligations of any department, agency or instrumentality of the United States of America the timely payment of principal of and interest on which are unconditionally and fully guaranteed by the United States of America.

"Fiscal Year" means the period commencing on July 1 of each year and terminating on the next succeeding June 30, or any other annual accounting period prescribed by law for local public agencies in the State of California.

"Generally Accepted Accounting Principles" means the uniform accounting and reporting procedures set forth in publications of the American Institute of Certified Public Accountants or its successor, or by. any other generally accepted authority on such procedures selected by the City, and includes, as applicable, the standards set forth by the Governmental· Accounting Standards Board or its successor.

"Improvement Fund" means the City of Roseville Electric System Improvement Fund established pursuant to the Master Contract.

"Independent Certified Public Accountant" means any certified public accountant or firm of such 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 identity of interest, direct or indirect, with the Authority or the City; and

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(c) is not and no member of which is 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.

"Interest Payment Date" means, with respect to the 2008 Certificates,

(a) (i) if the Interest Rate Mode for the 2008 Certificates is the Daily Rate or the Weekly Rate, the first Business Day of each month, (ii) if the Interest Rate Mode for the 2008 Certificates is the Commercial Paper Rate, the first Business Day following the last day of each Commercial Paper Rate Period for such 2008 Certificates and (iii) if the Interest Rate Mode for such 2008 Certificates is the Long-Term Rate, February 1 and August 1, provided, however, that if any February 1 and August 1 which is a Conversion Date for Conversion to the Daily Rate, the Weekly Rate or the Commercial Paper Rate, is not a Business Day, then the first Business Day immediately succeeding such February 1 and August 1, as applicable;

{b) if the Interest Rate Mode for the 2008 Certificates is the Auction Rate, "Interest Payment Date" will be as defined in the Trust Agreement;

(c) the Conversion Date or the effective date of a change to a new Long-Term Rate Period; and

(d) with respect to Bank Certificates, any date designated as an interest payment ~ate in the Reimbursement Agreement.

In any case, the final Interest Payment Date will be the maturity date of the 2008 Certificates.

· "Interest Period" 'means the period from, and including, each Interest Payment Date- for such 2008 Certificates to, and including, the day next preceding the next Interest Payment Date for such 2008 Certificates, provided, however, that the first Interest Period for any 2008 Certificates will begin on. (and include) the_ Issue Date of the 2008 Certificates and the final Interest Period will end the day next preceding the maturity date-of the 2008 Certificates.

"Interest Rate Calculation Date" means the date or dates on which the Interest Rate(s) for the next succeeding Interest Payment Date(s) are determined.

"Interest Rate Mode" means the Commercial Paper Rate, the Daily Rate, the Auction Rate, the Weekly Rate and the Long-Term Rate.

"Interest Requirement" means the amount of interest due and payable on the 2008 Certificates on the next occurring Interest Payment Date: ·

"Issue Date" means, as to any 2008 Certificates, the date on which such 2008 Certificates are delivered to the Purchaser thereof.

"Long-Term Rate" means the Interest Rate Mode in which the interest rate on a Series of the 2008 Certificates is determined in accordance with the applicable provisions of the Trust Agreement.

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"Long-Term Rate Period" means any period established by the Authority pursuant to the Trust Agreement and beginning on, and including, the Conversion Date for a Conversion to the Long-Term Rate and ending on, and including, the day preceding the last Interest Payment Date for such period and, thereafter, each successive period, if any, of substantially the same duration as that established period until the day preceding the earliest of the change to a different Long-Term Rate Period, the Conversion to a different Interest Rate Mode or the maturity of the 2008 Certificates.

"Mandatory Purchase Date" means any date upon which any 2008 Certificates have been called for mandatory tender for purchase in accordance with the Trust Agreement.

"Maintenance and Operation Costs" means the costs paid or incurred by the City for maintaining and operating the Electric System, determined in accordance with Generally Accepted Accounting Principles, including,. but not limited to, (a) all costs of electric energy and power generated or purchased by the City for resale, costs of transmission, fuel supply and water supply in connection with the foregoing, (b) all reasonable expenses of management and repair and other expenses necessary to maintain and preserve the Electric System in good repair and working order, (c) all administrative costs of the City that are charged directly or apportioned to the operation of the Electric System, such as salaries and wages of employees, overhead, taxes (if any) and insurance premiums, and (d) all other reasonable and necessary costs of the City or charges required to be paid by it to comply with the terms of the Master Contract or of any resolution authorizing the execution of any Contract or of such Contract or of any resolution authorizing the issuance of any Parity Obligations or of such Parity Obligations, such as compensation, reimbursement and indemnification of the trustee, remarketing agent or surety costs for any such Contracts or Parity Obligations, letter of credit fees for any such Contracts or Parity Obligations, fees and expenses of Independent Certified Public Accountants and Independent Engineers; but excluding in all cases depreciation, replacement and obsolescence charges or reserves therefor and amortization of intangibles. Anything contained in the Master Contract to the contrary" notwithstanding, "Maintenance and Operation Costs" will include all amounts required to be paid by the City under contracts with a joint powers agency for the purchase of capacity, energy, transmission capability or any other commodity or. service in connection with the foregoing, which contract requires payments by the City to be made thereunder to be treated as Maintenance and Operation Costs.

"Master Contract" means the Master Installment Purchase Contract executed and entered into as of November 1, 1997, by and between the City and the Authority, as the same may be amended or supplemented from time to time.

"Maximum Annual Debt Service" means the greatest Annual Debt Service payable on Parity Obligations in any Fiscal Year during the period commencing with the Fiscal Year in which the determination is being made and terminating with the last Fiscal Year in which payments are due under Outstanding Parity Obligations.

"Maximum Annual Payments" means the greatest total Payments payable in any Fiscal Year during the period commencing with the then current Fiscal Year and terminating with the last Fiscal Year in which payments are due under Outstanding Parity Obligations.

"Maximum Rate" means, (a) as to 2008 Certificates bearing interest at a rate other than an Auction Rate, and other than Bank Bonds, 12%, (b) as to 2008 Certificates bearing interest at an Auction Rate, the meaning assigned to such term in the Auction Procedures, and (c).with respect to Bank Certificates, the maximum rate allowed by the Reimbursement Agreement.

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,• f•' I I

"Moody's" means Moody's' Investors Service, Inc., a corporation duly organized and existing under and by virtue of the laws·of the State ·of Delaware, and its successors or assigns; except that· if such' corporation will. be dissolved ·or' liquidated or will no longer· perform the functions of-a securities rating agency, then the term ·"Moody's" will be deemed to refer to any other nationally recognized securities rating agency selected by the Authority and approved by the Bank.

"Net Proceeds" means, when used with respect' to any condemnation award or with respect to· any insurance proceeds, the amount of such condemnation award or such insurance proceeds remaining after payment of all expenses (including attorneys' fees) incurred in the colleCtion of such·award or· such proceeds. ' ·"

-· .~.' : . . . . . .. : <;-; -

. "Net Revenues~· means, -for any Fiscal Year or·' any- designated 12-month period in question, the -Revenues during such Fiscal Year or .12-month period less the Maintenance and Operation Costs during such Fiscal" Year or 12-montti·period.

.... . l • . l •. ~ . :.. ' ·_ . .. ' .. · "1997 Trust Agreement" means that certain Trust Agreement, dated as of November 1,

1997, by and between the· City and First Trust ·ot" California, National Association, as original trustee thereunder·.· · . · · .

. "Opinion of Special Counsel" means a written opinion of Special· Counsel:· . - - . ~ . : ~ ' '

"Outstanding", when used as of any< particular time-with reference to 2008 Certificates, means (subject to the provisions of the •Trust Agreement) all Certificates theretofore executed, issued and delivered by' the Authority unaer the Trust Agreement except - ' · ·

... J .

'. · ··· (a) ' 2008 Certificates theretofore cancelled by thi! Trustee· or surrendered to the Trustee for cancellation;

' , Iii,

· · (b) 2008 Certificates paid or deemed to have been paid within the meaning of the provisions of the Trust Agreement regarding defeasance; and · .. ,.

(c) 2008 Certificates in lieu of or in substitution for which other Bonds will have been executed; issued-and" delivered by the Authority pursuant to the Trust' Agreement or any Parity Obligations Instrument. · ·. ,. ·• · · · ··

"Owner'' means any person who will be the registered owner of any Outstanding 2008 Certificate as indicated in the registration books ofthe Trustee. ·

"Parity Bank Agreements" means an agreement with a bank or other financial institution relating to an irrevocable letter of credit; guarantee or other credit enhancement device providing liquidity or irrevocable credit or security for the payment of Parity Obligations.

"Parity Obligation Payment Fund" means the City of Roseville Electric System Parity Obligation Payment Fund established pursuant to the Master Contract.

"Parity Obligations" means a IF Supplemental Contracts and all other obligations hereafter incurred by the City the payment of which constitutes a charge an·d lien on the Net Revenues equal-to and on a parity with the charge and lien upon the Net Revenues for the payment of the Payments, including, except for purposes of application of the provisions of the Master Contract

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regarding the execution of parity obligations and other obligations, (i) Parity Payment Agreements and (ii) Parity Bank Agreements (provided that no amounts have been drawn under any such Parity Bank Agreements which have not been reimbursed by the City).

"Parity Payment Agreement" means a Payment Agreement which is a Parity Obligation.

"Parity Reserve Fund" means the City of Roseville Electric System Parity Reserve Fund established pursuant to the 1997 Trust Agreement.

"Payment Agreement" means a written agreement for the purpose of managing or reducing the City's exposure to fluctuations in interest rates or for any other interest rate, investment, .cash flow, asset or liability managing purposes, entered into either on a current or forward basis by the City and a Qualified Counterparty in connection with, or incidental to, the entering into of any Parity Obligation, that provides for an exchange of payments based on interest rates, ceilings or floors on such payments, cash flows, options on such payments, or any combination thereof or any similar device.

"Payment Agreement Payments" means the amounts required to be paid periodically by the City to the Qualified Counterparty pursuant to a Payment Agreement

"Payment Agreement Receipts" means the amounts required to be paid periodically by the Qualified Counterparty to the City pursuant to a Payment Agreement.

"Payment Date" means any date on which Payments are scheduled to be paid by the City under and pursuant to any Supplemental Contract.

"Payments" means the installment payments scheduled to be paid by the City under and pursuant to the Contracts.

"Permitted Investments" means any of the following obligations if and to the extent that they are permissible investments of funds of the City as stated in its current investment policy (copies of which the Authority will cause the City to provide on a current basis to the Trustee) and to the extent then permitted by law:

1. Direct obligations (other than an obligation subject to variation in principal repayment) of the United States of America ("United States Treasury Obligations"), (b) obligations fully and unconditionally guaranteed as to timely payment of principal and interest by the United States of America, (c) obligations fully and unconditionally guaranteed as to timely payment of principal and interest by any agency or instrumentality of the United States of America when such obligations are backed by the full faith and credit of the United States of America, or (d) evidences of ownership of proportionate interests in future interest and principal payments on-obligations described above held by a bank or trust company as custodian, under which the owner of the investment is the real party in interest and has the right to proceed directly and individually against the obligor and the underlying government obligations are not available to any person claiming through the custodian or to whom the custodian may be obligated .

. . . i"

2. Federal Housing Administration debentures.

3. The listed obligations of government-sponsored agencies which are not backed by the full faith and credit of the United States of America:

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···.· a) Federal Hom~ Loan Mortgage Corporation (FHLMC);

b) Participation certificates (excluded are stripped mortgage securities which are purchased at prices exceeding their principal amounts)- Senior Debt obligations;

c) Farm Credit Banks (formerly: Federal Land Banks, Federal Intermediate Credit Banks and Banks for Cooperatives) Consolidated system-wide bonds and notes;

d) Federal Home Loan Banks (FHL Banks) Consolidated debt obligations;

e) Federal National Mortgage Association (FNMA) Senior debt obligations Mortgage-backed securities (excluded are stripped mortgage securities which are purchased at prices exceeding their principal amounts);

f) Student Loan Marketing Association (SLMA) Senior debt obligations (excluded are securities that do not have a fixed par value and/or whose terms do not promise a fixed dollar amount at maturity or call date);

g) Financing Corporation (FICO) Debt obligations;

h) Resolution Funding Corporation (REFCORP) Debt obligations.

4. Unsecured certificates of deposit, time deposits, and bankers' acceptances (having maturities of not more than 30 days) of any bank the short-term obligations of which are rated "A-1" or better by S&P, including those of the Trustee and its affiliates.

5. Deposits the aggregate amount of which are fully insured by the Federal Deposit Insurance Corporation (FDIC), in banks which have capital and surplus of at least $5 million, including the Trustee and its affiliates.

6. · Commercial paper (having original maturities of not more than 270 days) rated "A-1+" by S&P and "Prime-1" by Moody's.

7. Money market funds rated "AAm" or "AAm-G" by S&P, or better, including funds for which the Trustee and its affiliates provide investment advisory or other management services.

8. "State Obligations": which means:·

a) Direct general obligations of any state of the United States of America or any subdivision or agency thereof to which is pledged the full faith and credit of a state the unsecured general obligation"debt of which is rated "A3" by Moody's and "A" by S&P, or better, or any obligation fully and unconditionally guaranteed by any state, subdivision or agency whose unsecured general obligation debt is so rated;

b) Direct general short-term obligations of any state agency or subdivision or agency thereof described in (A) above and rated "A-1+" by S&P and "MIG-1" by Moody's;

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c) . Special Revenue Certificates (as defined.in the United·States Bankruptcy Code) of any state, state agency or subdivision described in (A) above and rated "AA" or better by S&P and "Aa" or better by Moody's;

9. Pre-refunded municipal obligations rated ."AAA" by S&P. and "Aaa" by Moody's meeting the following requirements:

. a). the municipal obligations are. ( 1) not subject to prepayment prior to maturity or (2) the trustee for the municipal obligations t\as been given irrevocable instructions concerning their call and prepayment and the issuer of the municipal obligations has covenanted not to prepay such municipal obligations other than as set forth in such instructions;

b) the municipal obligations are secured by cash or United States Treasury Obligations which may be applied only to payment of the principal of, interest and premium on such municipal obligations;

c) the principal of and interest with respect to the United States Treasury Obligations (plus any cash in the escrow) has been verified by the report of independent certified public accountants to be sufficient to pay in full all principal of, interest, and premium, if any, due and to become due on the municipal obligations ('Verification");

d) the cash or United States Treasury Obligations serving as security for the municipal obligations are held by an escrow agent or trustee in trust for owners of the municipal obligations;

e) no substitution of a United States Treasury Obligation will be permitted except with another United States Treasury Obligation and upon delivery of a new Verification; and

f) the cash or United States Treasury Obligations are not available to satisfy any other claims, including those by or against the trustee or escrow agent.

10. Repurchase agreements:

With (1) any domestic bank, or domestic branch of a foreign bank, the long term debt of which is rated at least "A" by S&P and Moody's; or (2) any broker-dealer with "retail customers" or a related affiliate thereof which broker-dealer has, or the parent company (which guarantees the provider) of which has, long-term debt rated at least "A" by S&P and Moody's, which broker­dealer falls under the jurisdiction of the Securities Investors Protection Corporation; or (3) any other entity rated "A" or better by S&P and Moody's, provided that:

a) The market value of the collateral is maintained at 1 04%;

b) The Trustee or a third party acting solely as agent therefor or for the Authority (the "Holder of the Collateral") has possession of the collateral or the collateral has been transferred to the Holder of the Collateral in accordance with applicable state and federal laws (other than by means of entries on the transferor's books);

c) The repurchase agreement will state and an opinion of counsel will be rendered at the time such collateral is delivered that the Holder of the Collateral has a

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.. perfected first priority·security interest in th'e collateral; any substituted collateral and all proceeds thereof (in·· the-' case of bearer securities, this means the Holder of the Collateral is in possession); '· • ~ · ' ·

' . d) be met;

All ofher·requirements of S&P in,respect of repu-rchase agreements will ",

e) : The repurchase 'agreement· will. provide that ·if during its term the · · provider's rating by either' Moody's or S&P is withdrawn or suspended or falls below "A-" · by S&P or "A3" by Moody's, as appropriate, the provider must, at the direction of the Authority or the Trustee within 10 days of receipt of such direction; repu-rchase all collateral and terminate the agreement, with no penalty or premium to the Authority or Trustee;

Notwithstanding the above, if a repurchase agreement has a term of 270 days or less (with 110 evergreen provision), collateral levels need not be as specified in (A) above, so long as such collateral levels are 103% or better and the provider is rated at least "A" by S&P and Moody's, respectively.

11. Investment agreements with a domestic or foreign bank or corporation (other than a life or property casualty insurance company) the long-term debt of which, or, in the case of a guaranteed corporation the long-term debt, or, in the case of a monoline financial guaranty insurance company, claims paying ability[of the guarantor is· rated at least "AA" by S&P and "Aa" by Moody's; provided that, by the'terms:of the investment agreement:

a) interest payments are to be made to the Trustee at times and in amounts as necessary to pay debt service (or; if the investment agreement is for the construction fund, construction draws) on the 2008 Certificates;

b) the invested funds are available for withdrawal, for reasons under the Trust Agreement, without penalty or premium, upon not more than seven days' prior notice; the Authority and the Trustee thereby agree 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 will state that is the unconditional and general obligation of; and is not subordinated to any other obligation of, the provider thereof or, if the p'rovider is a bank, the agreement or the opinion of counsel will 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 op1mon of domestic counsel (which opinion will be addressed to the Authority) that such investment agreement is legal, valid, binding and enforceable upon the provider in accordance with its terms and of foreign counsel (if applicable); · ·

e) the investment agreement will 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 will, at its option, within 10 days of receipt of

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publication of such downgrade, either (i) collateralize the investment agreement by delivering or transferring in accordance with 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 least 104% (with a market value approach); or (ii) repay the principal of and accrued but unpaid interest with respect to the invest~ent, 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, within 10 days of receipt of such direction, repay the principal of and accrued but unpaid interest with respect to the investment, in either case with no penalty or premium to the Authority or Trustee, and

f) the investment agreement will state and an op1mon of counsel will 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);

g) the investmert agreement must provide that if during. its term:

i) the provider will default in its payment obligations, the provider's obligations under the investment agreement will, at the direction of the Authority or the Trustee, be accelerated and amounts invested and accrued but unpaid interest thereon will be repaid to the Authority or Trustee, as appropriate; and

ii) the provider will 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 will automatically be accelerated and amounts invested and accrued but unpaid interest thereon will be repaid to the Authority or Trustee, as appropriate.

12. .. shares in the California Asset Management Program.

13. the local Agency Investment Fund established under Section 16429.1 of the Government Code of the State of California, provided, however, that the Trustee must be allowed to make investments and withdrawals in its own name and the Trustee may restrict investments in the Local Agency Investment Fund if required to keep moneys available for the purposes of the Trust Agreement. ...

"Prepayment Price" means, with respect to any 2008 Certificate, the principal amount thereof, plus the applicable premium, if any, plus interest accrued to the prepayment date, payable upon prepayment thereof pursuant to the Trust Agreement.

"Prevailing Market Conditions" means, without limitation, the. following factors: existing short-term market rates for securities; indices of such short-term rates; the. existing market supply and demand and the existing yield curves for short-term and long-term securities for

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obligations of credit quality comparable to the 2008 Certificates; general economic conditions and financial conditions that may affect ·Or be relevant· to the 2008 Certificates; and such other facts, circumstances and conditions as the Remarketing Agent, in its sole discretion, will determine to be relevant to the remarketing of the 2008 Certificates, at the principal amount thereof.

"Principal Payment" meims with respect to ariy particular Principal Payment Date, an amount equal to the sum of (i) the aggregate principal amount of Outstanding Serial 2008 Certificates payable on such Principal Payment Date (but not including Sinking Fund Installments) and (ii) the aggregate of Sinking Fund Installments with respect to all Outstanding Term Certificates payable on such Principal Payment Date as determined thereby.

"Principal Payment Date" means (i) with respect to the 2008 Certificates, prior to the Long-Term Conversion Date, February 1, commencing with February 1, 2023, as to the 2008A Certificates, and February 1, commencing February 1, 2009, as to the 2008B Certificates; and (ii) with respect to any 2008 Certificates bearing interest at a Long-Term Rate, February 1, commencing with the February 1 immediately following the Long-Term Rate Date or otherwise as in accordance with a Supplemental Trust Agreement entered into pursuant to the terms thereof.

"Project" means any additions, betterments, extensions or improvements to the Electric System designated by the City Cou·ncil of the City as a Project, the cost of acquisition and construction of which (together with the incidental costs and expenses related thereto) is to be financed by the proceeds of any Parity Obligation as provided therein.

"Purchase Date" means,· with respect to any 2008 Certificate, (a) if the Interest Rate Mode is the Daily Rate or the Weekly Rate, any Business Day as set forth in the Trust Agreement, and (b) each day that such 2008 Certificate is subject to mandatory purchase pursuant to the Trust Agreement; provided, however, that the date of the stated maturity of such 2008 Certificate will not be a Purchase Date.

"Qualified Counterparty" means a party (other than the City) who is the other party to a Payment Agreement and (1) (a) whose senior debt obligations are rated in one of the three (3) highest rating categories of each of the Rating Agencies then rating any Parity Obligations (without regard to any gradations within a rating category), or (b) whose obligations under the Payment Agreement are guaranteed for the entire term of the Payment Agreement by a bond insurer or other institution which has been, or whose debt service obligations have been, assigned a credit rating in one of the three highest rating categories of each of the Rating Agencies then rating any Parity Obligations, and (2) who is otherwise qualified to act as the other party to a Payment Agreement with the City under any applicable laws. -

"Rate Stabilization Fund" means the fund by that name established pursuant to the Master Contract.

"Rate Period" means any period during which a single interest rate is in effect for the 2008 Certificates.

"RBI" means the Bond Buyer Revenue Bond Index or comparable index of long-term municipal obligations chosen by the City, or, if no comparable index can be obtained, eighty percent (80%) of the interest rate on actively traded thirty (30) year United States Treasury obligations. ·

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~ - ;.-

"Regular. Record Date" means (a) with respect to any Interest Period during which the Interest Rate_ Mode is the Daily Rate or the Weekly Rate, the close of business on the last Business Day of such Interest Period, (b) with respect to any Interest Period during which the Interest Rate Mode is the Auction Rate, tl)e second Business Day preceding an Interest Payment Date for such Interest Period, (c) with respect to any Interest Period during which the Interest Rate Mode is the Long-Term Rate, the fifteenth day (whether or not a Business Day) of the calendar month prior to the Interest Payment Date, and (d) with respect to any Interest Period -during which the Interest Rate Mode- is the Commercial Paper Rate, the Interest Payment Date for such Interest Period.

"Reimbursement Agreement" means the Letter of Credit Reimbursement Agreement dated as of the Issue Date between the City and Dexia Credit Local, New York Branch, or any similar agreement with respect to an Alternate Credit Facility. ·

"Remarketing Agent" means the remarketing agent appointed in accordance with the Trust Agreement, initially Morgan Stanley & Co. Incorporated.

"Remarketing Agreement" means the Remarketing Agreement, dated as of May 1, 2008, between the Authority and the Remarketing Agent, providing for the remarketing of 2008 Certificates tendered for purchase, as the same may be amended from time to time, and any remarketing agreement between the Authority and a successor Remarketing Agent.

"Representation Letter" means each Letter of Representations from the Authority and the Trustee to DTC, or any successor securities depository for the 2008 Certificates.

"Request of the Authority" means a request in writing signed by an Authorized Official.

"Reserve Fund Requirement" means, as of any date of determination and excluding any Parity Obligations which are not Supplemental Contracts and the debt service thereon, the least of (a) ten percent (10%) of the initial offering price to the public of the Parity Obligations as determined under the Code, or (b) the Maximum Annual Debt Service, or (c) one hundred twenty-five percent (125%) of the Average Annual Debt Service, all as computed and determined by the City and specified in writing to the Trustee; provided, that such requirement (or any portion thereof) may be provided by o.ne or more policies of municipal bond insurance or surety bonds issued by a municipal bond insurer or by a letter of credit issued by a bank or other institution if the obligations insured by such insurer or issued by such bank or other institution, as the case may be, have ratings at the time of issuance of such policy or surety bond or letter of credit equal to "Aa" or higher assigned by Moody's (if Moody's is then rating any of the Parity Obligations) and "AA" or higher assigned by S&P (if S&P is then rating any of the Parity Obligations) and that maintain at all times ratings at least equal to the lowest ratings (without giving effect to municipal bond insurance or other credit enhancement) on any of the Parity Obligations provided by Moody's (if Moody's is then rating any of the Parity Obligations) and by S&P (if S&P is then rating any of the Parity Obligations). If at any time obligations insured by any such municipal bond insurer issuing a policy of municipal bond insurance or surety bond or a bank or other institution issuing a letter of credit as permitted by this definition will no longer maintain ratings as required in accordance with the immediately preceding sentence, the City will provide or cause to be provided cash or a substitute municipal bond insurance policy or surety bond or a letter of credit meeting such requirements.

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"Revenues" means all gross income and revenue received or receivable by the City from the ownership or operation of the Electric System determined in accordance with Generally Accepted· Accounting Principles, including all rates and charge's received by the City for the Electric Service· and the other services and facilities of the Electric System and all-proceeds of insurance covering business interruption loss relating to the Electric System and all other income arid revenue·l1owsoever derived by the City from the'ownership'or operation of the Electric System· or--arising from the Electric System; including-all Payment Agreement Receipts; and including'all-income froni'the 'deposit or investment of any money in the Electric Revenue Fund, but excludirig:(i) proceeds of taxes, (ii)Tefundable deposits made to establish· credit and advances or contributions in aid of construction and line extension fees, and (iii) any charges collected by any person to amortize or otherwise relating to the payment of the uneconomic portion of costs associated with assets and obligations. ('stranded costs") of the Electric System or of any joint powers agency in which the City participates which' the City has decicated to the payment of obligations other than Contracts, the payments of which obligations will be applied to or pledged to or otherwise set aside for the reduction or retirement of outstanding obligations of the City or any joint powers agency in which the City participates relating to such 'stranded costs" of the City or of any such joint powers agency to the extent such 'stranded· costs" are attributable to, or the responsibility of, the City.

"Sinking Fund Installment" means, with respect to any particular date; the amount of money 'required thereby to be paid by the Authority on such date toward the retirement of any particular Term Certificates prior to their respective stated maturities.

"S&P" means Standard & Poor's Corporation, a corporation duly organized and existing under and by virtue of the laws of the State of New York, and its successors or assigns, except that if such corporation will be dissolved or liquidated or will no longer perform the functions of a securities rating agency, then the term "S&P" will be' deemed to refer to any other nationally recognized securities rating agency selected by the Authority and approved by the Bank.

"Subordinate Obligations" means obligations of the City authorized and executed by the City under applicable law, the payments under and pursuant to which are payable from·Net Revenues, subject and subordinate to payments under and pursuant to Parity Obligations and are payable from any fund established for the purpose of paying debt service on such Subordinate Obligations.

"Supplemental Contracts" means all installment purchase contracts of the City supplemental to the Master Contract and authorized and executed by the City under and pursuant to the Master Contract and applicable law, the installment payments under and pursuant to which are payable from Net Revenues.

"Supplementai,Trust Agreement" means any trust agreement then in full force and effect which has been duly executed and delivered by the Authority and the Trustee amendatory of or supplemental to the Trust Agreement; but only if and to the extent that such Supplemental Trust Agreement is specifically authorized under the Trust Agreement.

"Swap Agreement" means collectively, (i) the ISDA Master Agreement (including the Schedule thereto) dated as of December 13, 2002, as amended and supplemented by the Amendment to ISDA Master Agreement dated as of March 30,' 2005, and the Confirmation dated May 9, 2008, between the City and Morgan Stanley Capital Services, Inc., and (ii) the ISDA Master Agreement, dated as of May 1, 2008, the Schedule thereto dated as of May

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1, 2008, the Credit Support Annex thereto dated as of May 1, 2008, and the Confirmation, dated May 9, 2008, between the City and Bank of America, N.A.

"Swap Counterparty" means collectively, Morgan Stanley Capital Services, Inc. and its successors and assigns and Bank of America, N.A. and its successors and assigns.

"Swap Periodic Payment" means the periodic payments (which do not include any payment due upon early termination of the Swap Agreement or the transfer of Eligible Credit Support pursuant to the Credit Support Document, as defined in the Swap Agreement) due to or from the Authority and the Swap Counterparty under the Swap Agreement.

"Tax Certificate" means any certificate executed by the Authority at the time of execution and delivery of the 2008 Certificates relating to the requirements of Section 148 of the Tax Code, as such certificate may be amended or supplemented.

"Tax Code" means the Internal Revenue Code of 1986, as amended, and the regulations of the United States Department of the Treasury issued thereunder, and in this regard reference to any particular section of the Tax Code will include reference to all successors to such section of the Tax Code.

'Trustee" means The Bank of New York Trust Company, N.A., a national banking corporation association, duly organized and existing under the laws of the United States of America and having a principal corporate trust office located at San Francisco, California, and any other bank or trust company which may at any time be substituted in the place of the Trustee, as provided in the Trust Agreement.

"Trust Office" means the corporate trust office of the Trustee at 550 Kearney Street, Suite 600, San Francisco, CA 94108-2527, or such other or additional offices as may be specified to the Authority by the Trustee in writing.

"2008 Payments" means the installment payments of interest, principal, and prepayment premium, if any, payable by the City under and pursuant to the 2008 Supplemental Contract.

"2005 Supplemental Contract" means that certain 2008 Supplemental .Installment Purchase Contract, dated as of May 1, 2008, between the City and the Authority.

"Variable Index" means, on any date, a rate determined on the basis of The Securities Industry and Financial Markets Association Municipal Swap lndexTM as of the most recent date for which such index was published or such other weekly, high-grade index comprising seven­day, tax-exempt- variable rate demand notes produced by Municipal Market Data, Inc., or its successor, or otherwise designated by The Securities Industry and Financial Markets Association; provided that, if such index is no longer provided by Municipal Market Data, Inc. or its successor, the "Variable Index" will mean such other reasonably comparable index selected by the Remarketing Agent.

"Variable Interest Rate" means the Daily Rate, the Weekly Rate, the·Commercial Paper Rate and the Auction Rate.

"Variable Rate Period" means ·any period of. time during which any 2008 .Certificates evidence interest at a specified Variable Interest Rate determined:with regard to such period.

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·"Weekly Rate" means the Interest Rate Mode in which the interest rate with respect to a Series of the 2008 Certificates is determined weekly in accordance with the Trust Agreement.

"Weekly Rate Period" means the period beginning on, and including, the Conversion Date for a Conversion to the· weekly Rate and ending on, and including, the next Wednesday and thereafter the period beginning on, and including, any Thursday and ending on, and including, the earliest of the following Wednesday, the day preceding the Conversion of the 2008 Certificates to a· different Interest Rate Mode or the maturity of the 2008 Certificates.

THE MASTER INSTALLMENT PURCHASE CONTRACT

Under the Master Contract, the Authority agrees to finance and refinance the costs of the acquisition and construction of the Project for and to sell the Project to the City and appoints the City as its agent for the purpose of such acquisition and construction.· Certain provisions of the Master Contract are summarized below. THIS SUMMARY DOES NOT PURPORT TO BE COMPLETE OR DEFINITIVE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TERMS OF THE MASTER CONTRACT.

Acguisition, Construction and Sale of Projects; Funds

Acquisition, Construction and Sale of Projects. Pursuant to the Master Contract, the Authority agrees to finance and refinance the costs of the acquisition and construction of the Projects for and to sell the Projects to the·City, and in order to implement such provision, the Authority appoints the City as its agent for the purpose of such acquisition and construction, and the City agrees to enter into such agreements, construction contracts and purchase orders as may be necessary, as agent for the Authority, to provide for the complete acquisition and construction ofthe Projects. ·

The City agrees that as such agent it will cause the acquisition and construction of the Projects to be diligently completed after the deposit of funds in the Improvement Fund for such purpose pursuant to the Master Contract, and that it will use its best efforts to cause the acquisition and construction ·of the Projects to be completed in a timely fashion, unforeseeable delays beyond the reasonable control of the City only excepted, and the Authority agrees to and sells the Projects to the City. Notwithstanding the foregoing, it is expressly understood and agreed that the Authority will be under no liability of any kind or character whatsoever for the payment of any costs or expenses incurred by the City for the acquisition and construction of the Projects and that all such costs and expenses will be paid by the City, ·regardless of whether the funds deposited in the Improvement Fund are sufficient to cover all such costs.

Improvement Fw1d. The Master Contract establishes the City of Roseville Electric System Improvement Fund (the "Improvement Fund"), which fund the City· agrees to maintain until the completion of the ·acquisition and construction of the Projects to be funded from the separate accounts tci be established in such fund as provided in the Supplemental Contracts. All money in the Improvement Fund will be used and withdrawn by the City·to pay the ·costs of the Projects (or to reimburse the City for such costs) upon receipt of a Request of the City. The City will maintain on file-a record of all expenditures from the Improvement Fund, including appropriate Requests of the City evidencing the person to whom payment is to be made, the amount of money to be paid, the purpose for which the obligation to be paid was incurred and that such payment was a proper charge against the .Improvement Fund arid has not been the subject of a previous Request of the City. · After the completion of the acquisition and construction of each Project to be funded from the Improvement Fund, any remaining balance in

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the Improvement Fund allocable to such Project will be transferred by the City to the Electric Revenue Fund.

Rate Stabilization Fund. The Master Contract establishes a City of Roseville Electric System Rate Stabilization Fund (the "Rate Stabilization Fund"), which fund the City agrees to maintain so long as any Parity Obligations remain unpaid. The City may at any time deposit in the Rate Stabilization Fund any Net Revenues after providing for the payment. of Parity Obligations and any other money received and available to be used therefor, and the City may at any time withdraw any or all of the money from the Rate Stabilization Fund for any legal purpose. All interest or other earnings upon deposits in the Rate Stabilization Fund will be accounted for as Revenues. Notwithstanding the foregoing, no Revenues will be deposited in the Rate Stabilization Fund to the extent that such amount was included by the City in Adjusted Annual Net Revenues for purposes of determining compliance with the additional Parity Obligations test or the rate covenant of the City pursuant to the Master Contract and deduction of the amounts to be deposited in the Rate Stabilization Fund would have caused noncompliance with such section.

Electric Revenue Fund. In order to carry out and effectuate the obligation of the City contained in the Master Contract and in all Supplemental Contracts to pay the Payments, the City agrees and covenants that all Revenues received by it will be deposited when and as received in the City of Roseville Electric System Revenue Fund (the "Electric Revenue Fund"), which fund will be a continuation of the Electric Utility Fund established by the City and which fund the City agrees and covenants to maintain separate and apart from other moneys of the City (subject to the Master Contract) so long as any Parity Obligations remain unpaid, and all money on deposit in the Electric Revenue Fund will be applied and used only as provided in the Master Contract. The City will pay all Maintenance and Operation Costs (including amounts reasonably required to be set aside in contingency reserves for Maintenance and Operation Costs the payment of which is not then immediately required) from the Electric Revenue Fund as they become due and payable, and all remaining money on deposit in the Electric Revenue Fund will be set aside and deposited by the City at the following times in the following order of priority:

(a) Parity Obligation Payment Fund Deposits. On or before the third Business Day before each date on which interest or principal becomes due and payable under any Parity Obligation or any net payments become due and payable by the City under any Parity Payment Agreement, the City will, from the money in the Electric Revenue Fund, deposit in The City of Roseville Electric System Parity Obligation Payment Fund (the "Parity Obligation Payment Fund"), which fund is established and which fund the City agrees and covenants to maintain sep<:~rate and apart from other moneys of the City. (subject to the Master Contract) so long as any Parity Obligations remain unpaid, a $Um equal to the amount of interest and principal becoming due and payable under all Parity Obligations on such due date plus the net payments due on all Parity Payment Agreements on such due date, except that no such deposit need be made if the City then holds money in the Parity Obligation Payment Fund at least equal to the amount of interest and principal becoming due and payable under all Parity Obligations on the next succeeding date on which interest or principal becomes due and payable under any Parity Obligation plus the net payments due on all Parity Payment Agreements on such next succeeding due date. Moneys on deposit in the Parity Obligation Payment Fund will be transferred by the City to make and satisfy the payments due on the next applicable date on which interest or principal becomes due and payable under any Parity Obligation or any net payment becomes due and payable

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by the City under any Parity Paymenf Agreement at least one Business Day prior to such next applicable due date.

(b) Parity Reserve Fund Deposits. · On or before the third Business Day before each Payment Date, the"City will; from the remaining money on deposit in the Electric Revenue Fund after deposits and transfers pursuant' to paragraph (1) above, transfer to the Trustee for deposit in the Parity Reserve Fund that sum, if any, necessary to restore the· Parity Reserve Fund- to an amount equal to the Reserve Fund Requirement. The City will also, from such remaining moneys in the Electric Revenue Fund, transfer or cause to be transferred to any applicable reserve fund or account for any Parity ·Obligations for which a separate reserve has been funded pursuant to the

· Master Contract, without preference or priority between transfers made pursuant to this sentence and the preceding sentence, and in the event of any insufficiency of such moneys ratably without' any discrimination or preference, the sum or sums, if any, equal to the amount required to be deposited therein pursuant to such Parity Obligations.

After making the foregoing deposits and transfers required to be made, the City may apply any remaining money in the Electric Revenue Fund for any lawful purpose of the City, including for the payment of any Subordinate Obligations in accordance with the instruments authorizing such Subordinate Obligations; provided, however, that no moneys in the Electric Revenue Fund will be applied to the payment of any Subordinate Obligations in any Fiscal Year unless amounts on deposit in the Electric Revenue Fund will -be sufficient· to make the transfers !hereinabove required to be made in such Fiscal Year. -·

Investments. Any moneys held in the "Electric Revenue Fund or the Parity Obligation Payment Fund will be invested in. Permitted Investments which will, as· nearly as practicable, mature on or before the dates when such moneys are ·anticipated to be needed· for disbursement under the Master Contract. Any moneys held in the Rate Stabilization Fund will be invested in Permitted Investments which will mature at such dates as the City will determine but prior to the· final date on which payments are due under any outstanding Parity Obligation. All investment earnings from moneys or deposits in the Electric Revenue Fund, the Parity Obligation Payment Fund and the Rate Stabilization Fund will be retained in such fund.

The City may commingle any of the funds or accounts (except for funds held in any rebate fund, which will be held separately) established pursuant to the Master Contract into a separate fund or funds· for investment purposes. only; provided, however, that all funds or accounts held· by· the. City under the Master Contract will" be."accounted for separately notwithstanding such commingling.· For the. purpose of determining the amount in any such fund or account, all Permitted Investments credited to such fund or account will, except as otherwise provided ·in the Master Contract, be· valued at the lower of cost or market value (inclusive of all interest accrued but not paid).

Execution of Parity Obligations and Other Obligations

Conditions for the Execution of Parity Obligations. The City inay at any time execute any Parity Obligations the payments of which are payable from the Net Revenues on a parity with the Payments due under all Supplemental Contracts, provided, however, there will be on file with-the Trustee either: ' · ·' · ·· · '

-· . (1') · ·A Certificate of the City- demonstrating that during any twelve (12)

consecutive calendar months out of the immediately preceding eighteen (18) calendar

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month period, the Adjusted Annual Net Revenues were at least equal to one hundred ten percent (11 0%) of the Maximum Annual Debt Service for all existing Parity Obligations plus the Parity Obligations proposed to be executed; or

(2) An Engineer's Report showing that projected Adjusted Annual Net Revenues during the succeeding five (5) complete Fiscal Years beginning with the first Fiscal Year following issuance of such Parity Obligations in which interest is not capitalized in whole or in part from the proceeds of Parity Obligations, is at least equal to one hundred ten percent (110%) of the Maximum Annual Debt Service for all existing Parity Obligations plus the Parity Obligations proposed to be executed.

Notwithstanding the foregoing provisions, there will·be no limitations on the ability of the City to execute any Parity Obligation at any time to refund any Outstanding Parity Obligation.

Procedure far the Execution of Parity Obligations. Before the execution of any Parity Obligation, there will first be delivered to the City and the Trustee (which will serve as trustee in respect to each and every Parity Obligation which is a Supplemental Contract) the following documents or money or securities:

(i) An executed counterpart of the Supplemental Contract or other Parity Obligation;

(ii) A Request of the City as to the delivery of such Parity Obligation;

(iii) An Opinion of Counsel substantially to the effect that (a) the City has the right and power under applicable law to execute and deliver the Parity Obligation, and the Parity Obligation has been duly and lawfully executed and delivered by the City, is in full force and effect and is a valid and binding special obligation of the City and enforceable in accordance with its terms (except as enforcement may be limited by bankruptcy, moratorium, insolvency, reorganization, fraudulent conveyance and other similar laws relating to the enforcement of creditors' rights), and (b) such Parity Obligation has been duly and validly authorized and issued in accordance with the Master Contract;

(iv) A Certificate of the City or an Engineer's Report as required pursuant to the applicable provisions of the Master Contract, containing such statements as may be reasonably necessary to show compliance with the requirements of the applicable provisions of the Master Contract;

(v) either (a) if the Parity Obligation is a Supplemental Contract, an amount of . money to be deposited in the Parity Reserve Fund so as to increase the amount on deposit therein to the Reserve Fund Requirement, or (b) if the Parity Obligation is other than a Supplemental Contract, a Certificate of the City certifying that a separate reserve has been established for such Parity Obligation if required by the terms of such Parity Obligation and that provision has been made to fund such reserve or that no reserve is required by the terms of such Parity Obligation;

(vi) Such further documents, money and securities as are required by the provisions of the Master Contract and the resolution, indenture, contract or other

. obligation providing for the issuance of such Parity Obligation; and

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(vii) . With respect to any Parity Obligation issued in connection with a Payment Agreement, evidence that the incurrence of such Parity Obligation and Payment Agreement will not in and of itself cause a downgrade of the rating issued by the Rating Agencies then rating Parity Obligations.

Other Obligations. The City may incur Subordinate Obligations without meeting any of the tests set forth in the Master Contract.

Covenants

Compliance with Contracts. The City will punctually pay the Payments in strict conformity with the terms of the Master Contract, and will faithfully -observe and perform all the agreements, conditions, covenants and terms contained in the Master Contract required -to be observed and performed by it, and will not terminate the Contracts or fail to make any Payment required by a Contract for any cause including, without limiting the· generality of the foregoing, any acts or circumstances that may constitute failure of consideration, destruction of or damage to the Projects or the Electric System, commercial frustration of purpose, any change in the tax or other laws of the United States of America or of the State or any political subdivision of either or any failure of the Authority to observe or perform any agreement, condition, covenant or term contained in the Contracts required to be observed and performed· by it, whether express or implied, or any duty, liability or obligation arising out of or connected with any Contract or·the insolvency, or deemed insolvency, or bankruptcy or liquidation of the Authority or any force majeure, including acts of God, tempest, storm, earthquake, war, rebellion, riot, civil disorder, acts of public enemies, blockade or embargo, strikes, industrial disputes, lockouts, lack of transportation facilities, fire, explosion, or acts or regulations of governmental authorities .

. Use of Proceeds. The Authority and the City agree that the proceeds of the Contracts will be used by the City, as agent for·the Authority, to pay the costs of financing or refinancing the acquisition and construction of the Projects and to pay the incidental costs and expenses related thereto as provided in the Master Contract and therein.

Against Encumbrances. The City will pay or cause to be paid when due all sums of money that may become due or purporting to be due for any labor, services, materials, supplies or equipment furnished, or alleged to have been furnished, to or for the City in, upon, about or relating to the Electric System and will-keep the Electric· System free·of ariy and all liens against any portion of the Electric System." In· the event any such lien attaches to or is filed •against any portion ·of the Electric System, the City·will cause ·each such lien to be· fully discharged and released at the time the performance of any obligation· secured: by any such lien matures or becomes due, except that if the City desires to contest any such lien it may do so if contesting such lien-will not materially·impair operation of the Electric System. If any such lien will be reduced to final judgment and --such judgment or any process as may be issued for the enforcement thereof'is not promptly stayed, or if so stayed and such stay thereafter expires, the City, will forthwith pay or cause to be paid and discharged such judgment. The City will, to the maximum•extent permitted by law, indemnify and hold the Authority harmless from, and defend it against, any claim, demand, loss, damage, liability or expense (including attorneys' fees) as a result of any such lien or claim of lien against any portion of the Electric System .

. Sale· or Other Disposition of Property. The City will not sell, transfer or otherwise dispose of any of the works, plant, properties, facilities or other part of the Electric System or any real or personal property comprising a part of the Electric System if such sale, transfer or

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disposition would cause the City to be unable to meet the requirements of the rate covenant of the City pursuant to the Master Contract.

Prompt Acquisition and Construction of the Projects. The City will take all necessary and appropriate steps to acquire and construct the Projects in a timely fashion, unforeseeable delays beyond the reasonable control of the City only excepted, and in conformity with law.

Maintenance and Operation of the Electric System; Budgets. The City will maintain and preserve the Electric System in good repair and working order at all times and will operate the Electric System in an efficient and economical manner and will pay all Maintenance and Operation Costs as they become due and payable. The City will adopt and file with the Authority, not later than October 1 of each year, a budget approved by the City Council setting forth the estimated Maintenance and Operation Costs for the then current Fiscal Year and will take such action as may be necessary to include all Payments required to be made under the Master Contract in its annual budget; provided, that any such budget may be amended at any time during any Fiscal Year and such amended budget will be filed by the City with the Authority.

Compliance with Contracts for Use of the Electric System. The City will comply with, keep, observe and perform all agreements, conditions, covenants and terms, express or implied, required to be performed by it contained in all contracts for the use of the Electric System and all other contracts affecting or involving the Electric System to the extent that the City is a party thereto.

Insurance. The City will procure and maintain such insurance relating to the Electric System which it will deem advisable. or necessary to protect its interests and the interests of the Authority, which insurance will afford protection in such amounts and against such risks as are usually covered in connection with public electric utility systems similar to the Electric System; provided, that any such insurance may be maintained under a self-insurance program so long as such self-insurance is maintained in the amounts and manner as is, in the opinion of an accredited actuary, actuarially sound. All policies of insurance required to be. maintained in the Master Contract will proyide that the Authority will be given thirty (30) days' written notice. of any intended cancellation thereof qr reduction of coverage provided thereby.

Accounting Records; Financial Statements and, Other Reports. The City will keep appropriate accounti[lg records in which complete and correct entries will be made of all transactions relating to the Electric System, which records will be available for inspection by -the Authority at reasonable hours and under reasonable conditions.

The City will prepare and file with the Authority annually within one hundred eighty (180) days after the close of each Fiscal Year (commencing with the Fiscal Year ending June 30, 2005): .

(1) financial statements of the City for such Fiscal Year prepared in accordance with Generally Accepted Accounting Principles, together. ,with an Accountant's Report thereon and a special report prepared by the Independent Certified Public Accountant who examined such financial statements stating_that nothing came to its attention in connection with such examination that caused it to believe that the City was not in compliance with any of the agreements or covenants contained in the Master Contract; and

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(2) a detailed report as to all :insurance policies maintained and self-insurance programs maintained by the City with respect to the Electric System as of the close of such Fiscal Year, including the names of the insurers which have issued the policies and the amounts thereof and the property or risks covered thereby.

Protection of Security and Rights of the Authority The City will preserve and protect the security of the Payments under the Contracts and the rights of the Authority to the Payments under the Contracts and will warrant and defend such rights against all claims and demands of all persons.

Payment of Taxes and Compliance with Governmental Regulations. The City will pay and discharge all taxes, assessments and other governmental charges which may hereafter be lawfully imposed upon the Electric System or any part thereof when the same will become due. The City· will duly observe and conform with all valid regulations and requirements of any governmental authority relative to the operation of the. Electric System or any part thereof, but the City will not be required to comply with any regulations or requirements so long as the validity or application thereof will be contested in good faith and contesting such validity or application will not materially impair operation of the Electric System.

Amount of Rates, Fees and Charges. The City will at all times fix, prescribe and collect rates and charges for the services,- facilities and electricity of the Electric System during each Fiscal Year which are reasonably fair and nondiscriminatory and which will be at least sufficient to yield Adjusted Annual Net Revenues for such Fiscal Year equal to at least one hundred ten percent (110%) of Adjusted Annual Debt Service for such Fiscal Year. The City may make adjustments from time to time in such fees and charges and may make such classification thereof as it deems necessary, but will not reduce the rates and charges then in effect unless the Adjusted Annual Net Revenues from such reduced -rates and charges will at all times be sufficient to meet the requirements of the Master Contract.

Collection of Rates, Fees and Charges. The City will have in effect at all times rules and regulations requiring each consumer or customer located on any premises connected with the Electric System to pay the rates, fees and charges applicable to· the Electric Service to such premises and providing for the billing thereof and for a due date and a delinquency date ·for each bill. The City will not permit any part of the Electric System or any facility thereof to be used or taken advantage of-free of charge by any corporation, firm or person, or by any public agency (including the United States of America, the State and any-city, county, district, political subdivision, public corporation or agency of any thereof)~ Nothing therein will prevent the City, in its sole and exclusive discretion, from permitting other parties from selling electricity to retail customers within the service area of the Electric System; provided, however, that permitting such.sales will not relieve the City of its obligations under the Master Contract. ·

. ' .. . . Eminent Domain and Insurance Proceeds. If all or any part of the Electric System will be

taken by :eminent domain proceedings, or if the City receives any insurance proceeds resulting from a·casualty loss to the Electric System, the Net Proceeds thereof, at the option of the City, will be applied either to the proportional prepayment of Outstanding Parity Obligations or will be used to substitute other components- for the ·condemned or destroyed ·components of the Electric System. '•·, ' · •· .··•· · • .. J' ' '

Further Assurances. The City will adopt, deliver, execute and make any and all further assurances, instruments and resolutions as may be reasonably necessary or proper to carry out

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the intention or to facilitate the performance of the Contracts and for the better assuring and confirming unto the Authority of the rights and benefits provided to it in the Contracts.

Events of Default and Remedies

·Events of Default and Acceleration of Principal. If one or more of the following Events of Default will happen, that is to say-

(1) if default will be made in the due and punctual payment of any payment on any Parity Obligation when and as the same will become due and payable;

(2) if default will be made by the City in the performance of any of the agreements or covenants contained in the Master Contract or in any Parity Obligation required to be performed by it, and such default will have continued for a period of sixty (60) days after the City will have been given notice in writing of such default by the Authority; or

(3) if the City will file a petition or answer seeking arrangement or reorganization under the· federal bankruptcy laws or any other applicable law of the United States of America or any state therein, or if a court of competent jurisdiction will approve a petition filed with or without the consent of the City seeking arrangement or reorganization under the federal bankruptcy laws or any other applicable law of the United States of America or any state therein, or if under the provisions of any other law for the relief or aid of debtors any court of competent jurisdiction will assume custody or

· control of the City or of the whole or any substantial part of its property; ·

then and in each and every such case during the continuance of such Event of Default specified in clause (1) above, the Authority will, and for any other such Event of Default the Authority may, by notice in writing to the City, declare the entire principal amount of the unpaid Payments and ttie accrued interest thereon to be due and payable immediately, and upon any such declaration the same will become immediately due and payable, anything contained in the Master Contract to the contrary notwithstanding, subject to the condition, however, that if at any time after the entire principal amount of the unpaid. Payments and the accrued interest thereon will have been so declared due and payable and before any judgment or decree for the payment of the money due will have been obtained or enterea the City will deposit with the Authority a sum sufficient to pay the unpaid principal amount of the Payments or the unpaid prinCipal amount of any payments under any Parity Obligation referred to in clause (i) above due and payable prior to such declaration and the accrued interest thereon, with interest on such overdue installments at the rate or rates applicable to such unpaid principal amounts of the Payments if paid in accordance with their terms, and the reasonable expenses of the Authority, and ariy and all other defaults known to the Authority (other than in the payment of the entire principal amount of the unpaid Payments and the ·accrued interest thereon due and payable solely by reason of such declaration) will have been made good or cured to the satisfaction of the Authority or ·provision· deerned by the Authority to be adequate will have been made therefor, then and in every su.ch case the Authority, by written notice to the City, may rescind and annul such declaration and its consequences; but no such rescission and annulmeht will extend to or will affect any subsequent default or will impair or exhaust any right or power consequent thereon. · · ' ' ·

. - .

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Application of Net Revenues upon Acceleration. All Net Revenues upon the date of the declaration of acceleration by the Authority as provided in the Master Contract and all Net Revenues thereafter received will be applied in the following order:

First, to the payment of the costs and expenses of the Authority, if any, in carrying out the provisions of the Master Contract regarding events of default, including reasonable compensation to its agents, accountants and counsel and including any indemnification expenses;

Second, to the payment of the interest then due and payable on the entire principal amount of the unpaid Parity Obligations, and, if the amount available will not be sufficient to pay in full all such interest then due and payable, then to the payment thereof ratably, according to the amounts due thereon without any discrimination or -preference; and

Third, to the payment of the unpaid principal amount of the Parity Obligations which has become due and payable, whether on the original due date or upon acceleration, with interest on the overdue principal and interest amounts of the unpaid Parity Obligations at the rate or rates of interest then applicable to such Parity Obligations. if paid in accordance with their terms, and, if the amount available will not be sufficient to pay in full all the amounts due with respect to the Parity Obligations on any date, together with such interest, then to the payment thereof ratably, according to the principal amount due on such date, without any discrimination or preference. ·

Net Revenues may also be applied to make- payments required under any Parity Payment Agreement on a parity with the payments under paragraphs Second and Third above, to the extent and in the manner provided by the terms of such Parity Obligation relating to such Parity Payment Agreement.

Other Remedies. The Authority will have the right (a) by mandamus or other action or proceeding or suit at law or in equity to enforce its rights against the City or any director, officer or employee thereof, and to compel the City or any such director, officer or employee to perform and carry out its or his duties under the law and the agreements and covenants required to be performed by it or him contained in the Contracts; (b) by suit in equity to enjoin any acts or things which are unlawful or violate the rights of the Authority; or (c) by suit in equity upon the happening of an Event of Default to require the· City and its directors, officers and employees to account as the trustee of an express trust."

Non-Waiver. Nothing in the Master Contract will affect or impair the obligation of the City, which is absolute and unconditional, to pay the Payments from the Net Revenues to the Authority at the respective due dates or upon acceleration or prepayment, or will affect or impair the right of the Authority, which is also absolute and unconditional, to institute suit to enforce such payment by virtue.of the contract embodied in.the Contracts.

A waiver of any default or breach of duty or contract by the Authority will not affect any subsequent default or breach of duty or contract or impair any rights or· remedies on any such subsequent default or breach of duty or contract. No delay or omission by the Authority to exercise any right or remedy accruing upon any default or breach of duty or contract will impair any such right or remedy or will be construed to be a waiver of any such default or breach of duty or contract or an acquiescence therein, and every right or remedy conferred upon the Authority by law or by the Master Contract may be enforced and exercised from time to time and as often as will be deemed expedient by the Authority.

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If any action, proceeding or suit to enforce any right or exercise any -remedy is abandoned or determined adversely to the Authority, the City and the Authority will be restored to their former positions, rights and remedies as if such action, proceeding or suit had not been brought or taken.

Remedies Not Exclusive. No remedy in the Master Contract conferred upon or reserved to the Authority is intended to be exclusive of any other remedy, and each such remedy will be cumulative and will be in addition to every other remedy given under the Master Contract or now or hereafter existing in law or in equity or by statute or otherwise and may be exercised without exhausting and without regard to any other remedy conferred by law.

Discharge of Obligations

If the City will pay or cause to be paid all the Payments at the times and in the manner provided in the Master Contract, the right, title and interest of the Authority in the Master Contract and the obligations of the City under the Master Contract and under all Supplemental Contracts will cease, terminate, become void and be completely discharged and satisfied.

Any unpaid principal installment of any of the Payments will on its payment date or date of prepayment be deemed to have been paid within the meaning of and with the effect expressed in the foregoing paragraph if the City makes payment of such Payment and the prepayment premium, if applicable, in the manner provided therein.

All or any portion of unpaid principal installments ofthe Payments will, prior to their payment dates or dates of prepayment, be deemed to have been paid within the meaning of and with the effect expressed above if (i) there will have been deposited with the Trustee either money in an amount which will be sufficient, or Federal Securities which are not subject to redemption except by the holder thereof prior to maturity (including any such securities issued or held in book-entry form) or municipal obligations which have been defeased under irrevocable escrow instructions with Federal Securities and which are rated in the highest rating category by the Rating Agencies, the interest on and principal of which when paid will provide money which, together with money, if any, deposited with the Trustee, will be sufficient (as evidenced by a report of an Independent Certified Public Accountant regarding such sufficiency) to pay when due the principal installments of such Payments or such portions thereof on their payment dates or their dates of prepayment, as the case may be, the interest installments of such Payments due on and prior to such payment dates or dates of prepayment, and the prepayment premiums, if any, applicable thereto, and (ii) an Opinion of Counsel is filed with the Trustee to the effect that the action taken as described in this subsection will not cause the interest installments of such Payments so paid to be includable in gross income under the Code for federal income tax purposes.

After the payment of all Payments and prepayment premiums, if any, as provided in this section, and payment in full of all fees and expenses of the Authority, the Authority, upon request of the City, will cause an accounting for such period or periods as may be requested by the City to be prepared and filed with the City and the Authority, and will execute and deliver to the City all such ·instruments as may be necessary or desirable to evidence such total discharge and satisfaction of the Contracts, and the Authority will pay over and deliver to the City, as an overpayment of Payments, all such money or investments held by it pursuant to the Master Contract other than such money and such investments as are required for the payment or prepayment of the Payments and interest installments of such Payments and the prepayment

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premiums, if any, applicable thereto, which money and investments will continue to be held in trust for th~ payment thereof.

Miscellaneous

Liability of City Limited to Net Revenues. Notwithstanding anything contained in the Master Contract, the City will not be required to advance any moneys derived from any source of income other than the Net Revenues for the payment of the Payments or for the performance of any agreements or covenants required to be performed by it contained in the Master Contract. The City may, however, advance moneys for any such purpose so long as such moneys are derived from a source legally available for such purpose and may be legally used by the City for such purpose.

The obliglltion of the City to make the Payments is a special obligation of the City payable solely from the Net Revenues as provided in the Master Contract. The general fund of the City is not liable, and neither .the credit nor taxing power of the City is pledged, for the payment of the Pllyments.

THE TRUST AGREEMENT

The Trust Agreement sets forth the terms of the 2008 Certificates, the nature and extent of the security therefor, various rights of the Owners, rights and duties and immunities of the Trustee and rights and obligations of the Authority. Certain provisions of the Trust Agreement are summarized below. THIS SUMMARY DOES NOT PURPORT TO BE COMPLETE OR DEFINITIVE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TERMS OF THE TRUST AGREEMENT.

Equal Security

In consideration of the acceptance of the 2008 Certificates by the Owners thereof, the Trust Agreement will be deemed to be and will constitute a contract between the Authority and the Owners from time to time of all 2008 Certificates authorized, executed, and delivered under the Trust Agreement llnd then Outstanding to secure the full and final payment of the interest, principal, and prepayment premiums, if any, evidenced and represented by the 2008 Certificates which may from time to time be authorized, executed, issued and delivered under the Trust Agreement, subject to the agreements, conditions, covenants and provisions contained in the Trust Agreement; and all agreements and covenants set forth in the Trust Agreement to be performed by or on behalf of the Trustee will be for the equal and proportionate benefit, protection and security of all Owners without distinction, preference or priority as to security or otherwise of any 2008 Certificates over any other 2008 Certificates by reason of the number or date thereof or the time of authorization, execution, or delivery thereof or for any cause whatsoever, except as expressly provided in the Trust Agreement or therein.

2008 Debt Service Fund.

Establishment and Maintenance of Accounts. Notwithstanding the provisions described immediately below, so long as the Trustee draws on the Credit Facility for payments of principal and interest with respect to the 2008 Certificates, such principal and interest will be paid from the 2008 Credit.Filcility Account and amounts in the 2008 Debt Service Fund will first be used to reimbwse the Bank for draws on the Credit Facility used to pay such principal and interest. In

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the event the Bank fails to allow a 'draw· under the Credit FaCility for ·any reason;' the moneys in ihe 2008 Debt Service Fund will be used for direct payment of the 2008 Certificates as proviaed below:· ' , · · · · · · .. -: · •:

'· . ~ I, .jL J L j '_' '.

Subject to certain provisions of the Trust Agreement, all money in the 2008 Debt Service Fund will' be set'aside by. the Trustee· in the following respective special accounts' within the 2008 Debt Service F. una in the folk>wing order of priority: · ' ·

_1' ·~ • t • ~ : . • • •

(i)' · 2008 I ntere·st Account, and

(ii) 2008 Principal Payment Account (with a 2008 Principal Subaccount and a 2008 Sinking Fund Subaccount therein). '

All money in each of such accounts and subaccounts will be held in trust by the Trustee for the benefit of the Bank and the Owners and will be applied, used and withdrawn only for the purposes authorized in the Trust Agreement.

2008 Interest Account. On the Business Day immediately preceding each Interest Payment Date, the Trustee will set aside from the·2008 Debt Service Fund and deposit in the 2008 Interest Account that amount of money which is equal to the amount of interest evidenced and represented by the 2008 Certificates becoming due and payable on such Interest Payment Date. No deposit need be made in the 2008 Interest Account if the amount contained therein is at least equal to the aggregate amount of interest evidenced and represented by the 2008 Certificates becoming due and payable on such Interest Payment Date. All money in the 2008 Interest Account will be used and withdrawn by the Trustee solely for the purpose of paying the interest as it will become due and payable (including accrued interest evidenced and represented by any 2008 Certificates purchased or prepaid prior to their respective Principal Payment Dat~).

2008 PrinCipal Payment Account. On the Business Day immediately preceding each February 1, commencing with February 1, 2009, the Trustee will set aside from the 2008 Debt Service Fund and deposit in the 2008 Principal Subaccount in the 2008 Principal Payment Account an amount of money equal to the principal amount evidenced and represented by the Outstanding Serial 2008 Certificates with a Principal Payment Date of such February 1 and in the 2008 Sinking Fund Subaccount in the 2008 Principal Payment Account the amount of all Sinking Fund Installments required to be made on such February 1.

No· deposit need be made in the 2008 Principal Payment Account if the amount contained in the 2008 Principal Subaccount is at least equal to the aggregate amount' of the principal evidenced and represented by the Outstanding serial 2008 Certificates with a Principal Payment Date of such February 1 and the amount contained in the 2008 Sinking Fund Subaccount is at least equal to the aggregate amount of all Sinking Fund Installments required to be made on such February 1. ·

All money in the 2008 Principal Subaccount in the 2008'Principal Payment Account will be used and withdrawn by the Trustee solely for the purpose of paying the principal evidenced and represented by the serial 2008 Certificates as they will become due and payable, whether at their respective Principal Payment Dates or on prior prepayment, and all money in the 2008 Sinking Fund Subaccount in the 2008 Principal Payment Account will be used and withdrawn by the Trustee only to purchase or to prepay or to pay term 2008 Certificates, and with respect to the 2008 Sinking Fund Subaccount, on each Sinking Fund Installment date, the Trustee will

apply. the Sinking Fund Installment-required on that date to:the prepayment (or .the payme_nt at Principal Payment Date, as the case may be) of the term 2008 Certificates upon the notice and in the manner provided in the Trust Agreement; provided, that at any time prior to giving such notice of such prepayment, the Trustee may, upon the Request of the Authority and receipt of moneys sulficient therefor, purchase for cancellation of term .200.~ .Certificates at public or private sale as and· w_hen and at such prices (including brokerage and other charges, but excluding accrued interest, which is payable from the 2008 Interest AccounJ) as may be directed in a Request of the Authority, except that the purchase price (excluding accrued interest) will not exceed the prepayment price that would be payable for. such term 2008 Certificates upon prepayment by application of such Sinking Fund Installment, and if during the twelve-month period immediately preceding any Sinking Fund Installment date the -Trustee has so purchased term 2008 Certificates, such 2008 Certificates so. purchased will be applied to the extent of the full principal amount evidenced and represented thereby to reduce the Sinking Fund Installment.

Other Funds and Accounts

Cost of Issuance Fund. There is created under the Trust Agreement a fund to be known as the "Roseville Finance Authority Refunding Revenue Certificates, 2008 Cost of Issuance Fund" (the "Cost of Issuance Fund"), which will be held in trust by the Trustee. The moneys in the Cost of Issuance Fund will be used solely for the purpose of the payment of Costs of Issuance upon receipt by the Trustee of Req~:~ests of the Authority therefor, on or after the Closing Date. Any funds remaining in the Cost of Issuance Fund on September 1, 2008, will be transferred by the Trustee (a) first to the 2008 Parity Reserve Account to the extent the amount on deposit therein is less than the Reserve Fund Requirement, and (b) second, to the 2008 Debt Service Fund.

2008 Parity Reserve Account. The Trustee will establish a 2008 Parity Reserve Account, which is to be initially funded in an aggregate amount equal to the Reserve Fund Requirement for such 2008 Certificates. An amount equal to the Reserve Fund Requirement in the form of either: (i) cash or Permitted Investments; or (ii) a reserve fund credit instrument meeting the requirements set forth in the definition of Reserve· Fund Requirement for the account of the 2008 Parity Reserve Account, will be maintained in the 2008 Parity Reserve Account at all times. Any deficiency in the 2008 Parity Reserve Account will be replenished from Net Revenues to the extent available hereunder.

Moneys on deposit in the 2008 Parity Reserve Account will be transferred by the Trustee to the 2008 Debt Service Fund to pay principal and interest evidenced and represented by the 2008 Certificates on any Interest Payment Date in the event amounts on deposit therein are insufficient for such purposes. The Trustee will also, from such amounts on deposit in the 2008 Parity Reserve Account, transfer or cause to be transferred to the debt service fund established under the 1997 Trust Agreement and any applicable debt service fund established under a trust agreement under which any obligations are issued in ·connection with a supplement to the Master Contract, without preference or priority ·between transfers made pursuant to this sentence and the preceding sentence, and in the event of any insufficiency of such moneys ratably without discrimination or. preference, that sum or sums, if any, equal to the amount required to be deposited therein.

Remarketing Account. Upon receipt of the proceeds of a remarketing of 2008A Certificates or 20088 Certificates on a Purchase Date, the Tender Agent will deposit such proceeds in the Remarketing Account of the Certificate Payment Fund for -application to the Purchase Price of such 2008A-Certificates or 20088 Certificates in accordance with the Trust

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Agreement and, if the Tender Agent is not a paying agent'with respect to· such 2008 Certikates, will transmit such proceeds to the Trustee for such application: Notwithstanding the foregoing, upon receipt of the proceeds of a remarketing of Bank Certificates, the Tender Agent will immediately pay such proceeds to the Bank. ·· · · ..

· Credit Facility Account. The Trustee will create within the Certificate Payment Fund a separate account called the "2008 Credit Facility 'Account," into' which all moneys drawn under the Credit Facility will be deposited and disbursed. The Authority will not have any right title or interest in the 2008 Credit Facility Account. The 2008 Credit Facility Account will be established and maintained by the Trustee and held uninvested and in trust apart from all other moneys and securities held under the Trust Agreement or otherwise, and over which the Trustee will have the exclusive and sole right of withdrawal for the exclusive benefit of the Owners of the 2008 Certificates with respect to which such drawing was made.

Deposit and Investments of Money in Accounts and Funds. Subject to certain provisions of the Trust Agreement, all money held by the Trustee in any of the accounts or funds established pursuant hereto will be invested in Permitted Investments at the Request of the Authority filed with the Trustee which such Permitted Investments will, as nearly as practicable, mature on or before the dates on which such money is anticipated to be needed for disbursement hereunder, and the Trustee will have no liability or responsibility for any loss resulting from any investment made in accordance herewith; provided, that if no such Written Request is received by the Trustee, the Trustee will invest such money in those Permitted Investments described in clause (7) of the definition thereof. Subject to certain provisions of the Trust Agreement, all interest or profits received on any money so invested will be deposited in the 2008 Debt Service Fund. Investments purchased with funds on deposit in the Parity Reserve Fund will have an average aggregate weighted term to maturity not greater than five years.

For Investment purposes only, the Trustee may commingle the funds and accounts established under the Trust Agreement, but will account for each separately.

The Credit Facility

The Trustee will hold and maintain the Credit Facility for the benefit of the Owners until the Credit Facility expires in accordance with its terms or is replaced by an Alternate Credit Facility. ·

The Trustee will enforce all terms, covenants and· conditions of the Credit Facility; including drawing on the Credit Facility as required to provide for all payments of principal of and interest with respect to, Prepayment Price and Purchase Price of 2008 Certificates (other than Bank Certificates), amounts due on acceleration upon an Event of Default, and all other provisions thereof relating to the payment of draws on; and reinstatement of amounts that may be drawn under, the Credit Facility, and will not consent to, agree to or permit any amendment or modification of the Credit Facility which would materially adversely affect the rights or security of the Owners of the 2008 Certificates. ,.

If at any time during the term of the Credit Facility any ·successor Trustee is appointed and qualified under the Trust Agreement, the resigning or removed Trustee will request that the Bank transfer the Credit Facility to the successor Trustee. If the resigning or removed Trustee fails to make this request, -the successor Trustee will do so before accepting appointment.

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.When the Credit Facility expires in accordance with its terms or is replaced by an Alternate Credit f:acility, .the Trustee will immediately surrender the Credit Facility to the Bank. -

(ii) The Trustee will draw moneys under the Credit Facility in accordance with the terms thereof in an amount necessary to make full and timely payments of (i) principal of and interest with respect to and Prepayment Price of the 2008 Certificates (other than Bank Certificates) during the Weekly Rate Period, Daily Rate. Period or ,Commercial Paper Rate Period when due at maturity, prepayment or acceleration and (ii) Purchase Price required to be made pursuant to the Trust Agreement.

(iii) If at any time there will have been delivered to the Trustee an Alternate Credit Facility meeting the requirements of the Trust Agreement, then the Trustee will accept such Alternate Credit Facility, draw on the existing Credit Facility to the extent required pursuant to the provisions thereof and of the Trust Agreement for payment of the Purchase Price, and after such draw has been honored, surrender the existing Credit Facility to the Bank, in accordance with the terms of such Credit Facility, for cancellation. The existing Credit Facility will be returned to the Bank only after the Bank has honored any draws required to pay the Purchase Price in accordance with the terms of the Trust Agreement.

If at any time there cease to be any 2008 Certificates Outstanding under the Trust Agreement, the Trustee will promptly surrender the Credit Facility to the Bank, in accordance with the terms of the Credit Facility, for cancellation. The Trustee will comply with the procedures set forth in the Credit Facility relating to the termination thereof.

Assignment to Trustee; Enforcement of Obligations

The Authority transfers, assigns and sets over to the Trustee all of the 2008 Payments and any and all rights and privileges it has under the Master Contract, including, without limitation, th~ right to collect and receive directly all of the 2008 Payments and the right to enforce the provisions of the Master Contract; and any 2008 Payments 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 also will, subject to the provisions of the Trust Agreement, take all steps, actions and proceedings required to be taken as provided in any Opinion of Counsel delivered to it, reasonably necessary to maintain in force for the benefit of the Owners of the 2008 Certificates the Trustee's rights in and priority to the following security granted to it for the payment of the 2008 Certificates: the Trustee's rights as assignee of the 2008 Payments under the Master Contract and as beneficiary of any other rights to security for the 2008 Certificates which the Trustee may receive in the future.

The Trustee may, in performing the obligations set out above, rely and will be protected in acting or refraining from acting upon an Opinion of Counsel furnished by the City.

Covenants

Compliance with Trust Agreement. The Trustee will not execute or deliver any 2008 Certificates in. any manner other than in accordance with the provisions of the Trust Agreement; and the Authority will not suffer or permit any default by it to occur under the Trust Agreement, but will faithfully comply with, keep, observe and perform all the agreements and covenants- to be observed or performed by it contained in the Trust Agreement an\l in the 2008 Certificates.

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Observance of Laws and Regulations. The Authority and the Trustee will faithfully comply with, keep, observe and perform all valid and lawful obligations or regulations now or hereafter imposed on them by contract, or prescribed by any law of the United States of America or of the State of California, or by any officer, board or commission having jurisdiction or control, as a condition of the continued enjoyment of each and every franchise, right or. privilege now owned or hereafter acquired by them, including their right to exist and carry on their respective businesses, to the end that such franchises, rights and privileges will be maintained and preserved and will not become abandoned, forfeited or in any manner impaired.

Tax Covenants. The Authority covenants with the Owners of the 2008 Certificates that, notwithstanding any other provisions of the Trust Agreement, it will not take any action, or fail to take any action, if any such action or failure to take action would adversely affect the exclusion from gross income of interest evidenced and represented by the 2008 Certificates under Section 103 of the Code. The Authority will not, directly or indirectly, use or permit the use of proceeds of the 2008 Certificates or any of the property financed or refinanced with proceeds of the 2008 Certificates, or any portion thereof, by any person other than a governmental unit (as such term is used in Section 141 of the Code), in such manner or to such extent as would result in the loss of exclusion from gross income for federal income tax purposes of interest evidenced and represented by the 2008 Certificates.

The Authority will not take any action, or fail to take any action, if any such action or failure to take action would cause the 2008 Certificates to be "private activity bonds" within the meaning -of Section 141 of the Code, and in furtherance thereof, will not make any use of the proceeds of the 2008-Certificates or any of the property financed or refinanced with proceeds of the 2008 Certificates, or any portion thereof, or any other funds of the Authority, that would cause the 2008 Certificates to be "private activity bonds" within the meaning of Section 141 of the Code. To that end, so long as any 2008 Certificates are Outstanding, the Authority, with respect to· such· proceeds and property and such other funds, will comply with applicable requirements of the Code and all regulations of the United States Department of the Treasury issued thereunder, to the extent such requirements are, at the time, applicable and in effect. The Authority will establish reasonable procedures necessary to ensure continued compliance with Section 141 of the Code and the continued qualifica~ion of the 2008 Certificates as "governmental bonds." , -

The Authority will not, directly or indirectly, use or permit the use of any proceeds of any 2008· Certificates·, or of any property financed or refinanced thereby, or other funds of the Authority, or take or omit to take any· action, that would cause the 2008 Certificates to be "arbitrage bonds" within the meaning of Section 148 of the Code. To that end, the Authority will comply with all requirements of Section 148 of the Code and all regulations of the United States Department of the Treasury issued thereunder to the extent such requirements are, at the-time, in effect and applicable to the 2008 Certificates .

. The Authority will not make any use of the proceeds of the 2008 Certificates or any other funds of the Authority, or take or omit to take any other action, that would cause the 2008 Certificates to be "federally guaranteed" within the meanin·g of Section 149(b) of the Code. . .

In furtherance of the foregoing tax covenants, the Authority· covenants that it will comply with the provisions of the Tax Certificate, which is incorporated in the Trust Agreement as if fully set forth in the Trust Agreement. These covenants will survive payment in full or defeasance of the 2008 Certificates.

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Accounting Records and Reports. The Trustee will keep or cause to be kept proper books of record and accounts in which complete and correct entries will be made of all transactions l"!lade by the Trustee relating to the receipts, disbursements, allocation and application of the 2008 Payment and the proceeds of the 2008 Certificates, and such books will be available for inspection by the Authority, at reasonable hours and under reasonable conditions. Not more than 180 days after the close of each Fiscal Year, the Trustee will furnish or cause to be furnished to the Authority a complete financial statement covering receipts, disbursements, allocation and application of 2008 Payments received by the Trustee for such Fiscal Year. The Authority will keep or cause to be kept such information as required under the Tax Certificate.

Prosecution and Defense of Suits. The Authority will defend against every suit, action or proceeding at any time brought against the Trustee upon any claim to the extent arising out of the receipt, application or disbursement of any of the 2008 Payments and the proceeds of the 2008 Certificates or to the extent involving the 'failure of the Authority to fulfill its obligations under the Trust Agreement; provided, that the Trustee or any affected Owner at its election may appear in and defend any such suit, action or proceeding. The Authority will indemnify and hold harmless the Trustee against any and all liability claimed or asserted by any person to the extent arising out of such failure by the Authority, and will indemnify and hold harmless the Trustee against any attorney's fees or other expenses which it may incur in connection with any litigation to which it may become a party by reason of its actions under the Trust Agreement, except for any loss, cost, damage or expense resulting from the active or passive negligence, willful misconduct or breach of duty by the Trustee. Notwithstanding any contrary provision of the Trust Agreement, this covenant will remain in. full force and effect even though all 2008 Certificates secured may have been fully paid and satisfied.

Amendments to Master Contract. Except for any Supplemental Contract delivered in accordance with the terms of the Master Contract, the Authority will not supplement, amend, modify or terminate any of the terms of the Master Contract, or consent to any such supplement, amendment, modification or termination, without the prior written consent of the Trustee, which such consent will be given only if (a) such supplement, amendment, modification or termination will not materially adversely affect ·the interests of the Owners or result in any material impairment of the security given for the payment of the 2008 Certificates, or (b) the Trustee first obtains the written consent of the Owners of a majority in aggregate principal amount evidenced and represented by the Certificates then ·Outstanding to such supplement, amendment, modification or termination; provided, however, that no such supplement, amendment, modification or termination will reduce the amount of 2008 Payments to be made to the Authority or the Trustee by the City pursuant to the Master Contract, or extend the time for making such 2008 Payments in any manner ·that would require the amendment of the Trust Agreement in any manner not in compliance with the Trust Agreement.

Recording and Filing. The Trustee upon receipt of a Written Request of the Authority will, at the expense of the Authority, file, record, register, renew, refile and rerecord all such documents, including financing statements (or.continuation statements in connection therewith), all in such manner, at such times and in such places as may be required and to the extent permitted by law in order to fully perfect, preserve and protect the security of the Owners and the rights and interests of the Trustee; provided, however, that the Trustee will not. be required to execute a special or general consent to service of process, or ·to qualify as a foreign corporation in connection with any such filing, .recording, registration, refiling or rerecording in any jurisdiction in which it is not now so subject.

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Further Assurances. Whenever and so often as reasonably requested to do so by the Trustee or any Owner, the Authority will promptly execute and deliver or cause to be executed and delivered all such other and further assurances, documents or instruments, and promptly do or cause to be done all such other and further things as may be necessary or reasonably required in order to further and more fully vest in the Trustee and the Owners all rights, interests, powers, benefits, privileges and advantages conferred or intended to be conferred upon them by the Trust Agreement.

Modification and Amendment of Trust Agreement

Amendment by Consent of Owners. The Trust Agreement and the rights and obligations of the Authority and of the Owners of the 2008 Certificates may be modified or amended at any time by a Supplemental Trust Agreement which will become binding when the written consent of the Bank (so long as the Credit Facility is outstanding and the Bank is not wrongfully dishonoring any· properly presented and conforming drawings thereunder or any amounts for reimbursement of draws under the Credit Facility remain owing to the Bank) and the Owners of a majority in aggregate principal amount of the 2008 Certificates then Outstanding (except the consent of the Holders will not be necessary so long as the Credit Facility is outstanding and the Bank is not wrongfully dishonorin·g any drawings thereunder), exclusive of 2008 Certificates disqualified as provided in the Trust Agreement, are filed with the Trustee. No such modification or amendment will (a) extend the maturity of or reduce the interest rate on any 2008 Certificate or otherwise alter or impair the obligation of the Authority to pay the principal, interest or prepayment premiums at the time and place and at the rate and in the currency provided therein of any 2008 Certificate without the express written consent of the Bank and the Owner of such 2008 Certificate, (b) reduce the percentage of 2008 Certificates required for the written consent to any such amendment or modification, or (c) without its written consent thereto, modify any of the rights or obligations of the Trustee. ·

Amendment Without Consent of 2008 Owners. The Trust Agreement and the rights and obligations of the Authority and of the Owners of the 2008 Certificates may also be modified or amended at any time by a Supplemental Trust Agreement which will become binding upon execution and delivery, without consent of any Owners, but only to the extent permitted by law and only for any" one or more of the following purposes-

(a) to add to the covenants and agreements of the Authority in the Trust Agreement contained, other covenants and agreements thereafter to be observed, or to limit or surrender any rights or power in the Trust Agreement reserved to or conferred upon the Authority; or

(b) to make such provisions for:tt\e' purpose ·of curing any ambiguity, or of curing, correcting or supplementing any defective provision contained in the Trust Agreement, or in any other respect whatsoever as the- Authority may deem necessary or desirable; ·provided under any circumstances that such modifications or amendments will not adversely affect the interests of the Owners of the 2008 Certificates or the Swap Counterparty;

(c) to make such additions, deletions or modifications as may be necessary or desirable to assure exemption from .federal income taxation of interest with respect to the 2008 Certificates., · · · '· ;:

(d) to modify, alter, amend or supplement the Trust Agreement in any other respect including amendments which would otherwise be described under:" Amendment by Consent of Owners" above, if such amendments will take effect:

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(1) on a mandatory tender date in connection with the. purchase of tendered 2008 Certificates;

(2) on a Conversion Date; or

(3) during a Weekly Rate if.notice of the proposed amended or supplemental indenture is given to 2008 Certificate Owners (in· the same manner as notices of prepayment are given) at least 30 days before the effective date of such amendment, modification, alteration or supplement and, on or before such effective date, the 2008 Certificate Owners have the right to demand purchase of the 2008 Certificates pursuant to the Trust Agreement.

Supplements to Trust Agreement. Additionally, the Trust Agreement may, without the consent of, or notice to, any of the Owners, be supplemented and amended, in such manner as will not be inconsistent with the terms and provisions of the Trust Agreement, for any one or more of the following purposes:

(i) to add to the agreements, conditions, covenants and terms required by the Authority to be observed or performed in the Trust Agreement other agreements, conditions, covenants and terms thereafter to be observed or· performed by the Authority, or to surrender any right or power reserved in the Trust Agreement to or conferred in the Trust Agreement on the Authority, and which in either case will not·materially adversely affect the interests of the Owners; or

(ii) to make such provisions forthe purpose of curing any ambiguity or of correcting, curing or supplementing any defective provision contained in the Trust Agreement or in regard to questions arising hereunder which the Authority may deem desirable or necessary and not inconsistent herewith, and which will not materially adversely affect the interests of the Owners; or

(iii) for any other reason, provided such . amendment or supplement does not materially adversely affect the interests of the Owners, provided; further that the Authority and the Trustee may rely in entering into any such amendment or supplement upon an Opinion of Special Counsel stating that the requirements described in this subsection (iii) have been met with respect to such amendment or supplement; or

(iv) to provide for the issuance of one or more additional series of Certificates; or

(v) to implement a conversion of the Interest Rate Mode; or

(vi) to provide for a Credit Facility or clarify certain terms of a Credit Facility.

Remarketing Agent.

Morgan Stanley & Co. Incorporated is thereby appointed the initial Remarketing Agent for the 2008 Certificates. Upon Conversion of any of the 2008 Certificates to the Daily Rate, Weekly Rate, Long-Term Rate or Commercial Paper Rate at a time when no Remarketing Agent is serving as Remarketing Agent for the 2008 Certificates, the Authority will appoint a Remarketing Agent for such 2008 Certificates. The Hemarketing Agent will be authorized by law to perform all the duties imposed upon it theret>y. The Remarketing Agent or any successor

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will signify its acceptance of the duties and obligations imposed upon it hereunder by a Remarketing Agreement under which the Remarketing Agent will agree to:

(i) determine the interest rates applicable to' such 2008 Certificates and give notice to the Trustee of such rates and periods in accordance with the Trust Agreement;

(ii) keep such books and records as will be consistent with prudent industry practice; and

(iii) use its best efforts to remarket 2008 Certificates in accordance· with the Trust Agreement and the terms thereof

·The Remarketing Agent will hold all amounts received by it in accordance with ·any remarketing of 2008 Certificates pursuant to the Trust Agreement in trust only for the benefit of the Owners of tendered 2008 Certificates and will not· commingle such amounts with any other moneys. · · ·

(b) · Each Remarketing Agent will be (i) a member of the National Association of Securities Dealers, Inc., having a capitalization of at least $50,000,000, and (ii) authorized by law to· perform all the duties imposed upon it by the Trust Agreement and the Remarketing Agreement. · ·

(c) Remarketing Agent may at any time resign and be discharged of the duties and obligations created by the Trust Agreement by giving at least 30 days' written notice to the Authority and 'the Trustee (with a copy of' such notice mailed by certified mail to each of the 2008 Certificate owners). A Remarketing Agent·may be removed at any time at the direction of the Authority, by an instrument signed by the Authority and filed at least 30 days prior to sui:li removal with the Remarketing Agent, the Credit Provider and th'e Trustee. · .. -·.·.. .· . ' .

'(d) Any corporation, association, partnership or firm which succe.~ds to the business of the Remarketing Agent as a whole or substantially as a whole, whether by ·sale, merger, consolidation or otherwise, will !thereby become vested with all th~ property, rights and powers of such Remarketing Agent hereunder. · ·' ·

(e) · : · In the· eveni that the Remarketing Agent will resign, be removed or be dissolved, or if the property or affairs of the Remarketing Agent will be taken under control of any state or federal court or administrative body because of bankruptcy or insolvency, or for any other reason; and. ttie Authority will not have appointed 'its successor within thirty (30) days, the Trustee\ivill apply to' a court of competent jurisdiction for such appointment. · · · . . '

The Trustee.

Appointment of Trustee. The Bank of New York Trust Company; ·N.A., in San Francisco, California, a national banking association organized and existing under the laws of the United States, is thereby appointed Trustee by the Authority for the purpose of receiving all moneys required to be 'deposited with the Trustee hereunder and to allocate, use and apply the same as provided in the Trust Agreement. The Authority agrees that it will maintain a Trustee having a corporate trust office in California, with a combined capital and surplus, or in the case of a bank or'trust company which is a member·of a bank holding company system, the related bank holding company will have a combined capital and surplus, of at least One Hundred Million Dollars ($100,000,000), and subject to supervision or examination by federal or State authority,

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so long as any Certificates are Outstanding. If such bank or trust company publishes a report of condition at least annually pursuant to law or to .the requirements of any supervising or examining authority above referred to, then for the purpose of this subsection of the Trust Agreement the combined capital and surplus of such bank or trust company or bank holding company will be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published.

The Trustee is thereby authorized to pay the Certificates when duly presented for payment at maturity, or on prepayment or purchase prior to maturity, and to cancel all Certificates upon payment thereof. The Trustee will keep accurate records of all funds administered by it and of all Certificates paid and discharged.

Removal of Trustee. The Bank (so long as the Credit Facility is outstanding and the Bank is not wrongfully dishonoring any properly presented and conforming drawings thereunder or any amounts for reimbursement of draws under the Credit Facility remain owing to the Bank) or the Owners of a majority in aggregate principal amount of the Outstanding Certificates may at any time, and the Authority may so long as no Event of Default will have occurred and then be continuing, remove the Trustee initially appointed; and any successor thereto, by an instrument or concurrent instruments in writing delivered to the Trustee (where applicable), whereupon the Authority, the Bank or such Owners, as the case may be, will appoint a successor or successors thereto; provided that any such successor will be a bank or trust company meeting the requirements set forth in the Trust Agreement.

Resignation by Trustee. The Trustee and any successor Trustee may at any time resign by giving thirty (30) days' written notice by registered or certified mail to the Authority. Upon receiving such notice of resignation, the Authority will promptly appoint a successor Trustee. Any resignation or removal of the Trustee and appointment of a successor Trustee will become effective upon acceptance of appointment by the successor Trustee. Upon such acceptance, the Authority will cause notice thereof to be given by first class mail to the Certificate Owners at their respective addresses set forth on the Certificate Registration Books. No resignation of the Trustee will take effect until a successor is appointed and has accepted.

Events of Default and Remedies.

Events of Default. The following events will. be, Events of Default under the Trust Agreement:

(a) Default in the due and punctual payment of the principal of any 2008 Certificate when and as the same will become due and payable, whether at maturity as therein expressed, by proceedings for prepayment, by declaration or otherwise;

(b) Default in the due and punctual payment of any installment of interest with respect to any 2008 Certificate when and as such interest installment will become due and payable;

(c) Default by the Authority in the observance of any other of ~he covenants, agreements or conditions on its part in the Trust Agreement or in any Parity Obligations Instrument or in the 2008 Certificates contained, and such default will have. continued for a period of sixty (60) days after the Authority will have been given notice in writing of such default by the Trustee; or

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(d) The filing by the Authority of a petition or answer seeking reorganization or arrangement under- the federal bankruptcy ·laws, insolvency, liquidation, debt adjustment or similar laws affecting the rights of creditors ·generally, or any other applicable law of the United States of· America, or a debt moratorium, debt adjustment, debt restructuring or comparable restriction with respect to debt of the Authority, or if a court of competent jurisdiction will approve a petition, filed with or without the consent of the Authority, seeking reorganization under the federal bankruptcy laws or any other applicable law of the United States of America, or if, under the provisions of. any other law for the relief or aid of debtors, any court of competent jurisdiction will assume custody or control of the Authority or of the whole· or any substantial part of its property.

· (e) If the Trustee receives written notice from the Bank that ail: event of default has occurred and is continuing under the Reimbursement Agreement and iri"structing the Trustee to accelerate the 2008 Certificates. ··· · · •·-·

Remedies; Rights of Owners. Upon the occurrence of an Event of Default, the Trustee may-pursue any available remedy, at law or in equity to enforce the payment of the principal of, premium, if any, and interest with respect to the Outstanding 2008 Certificates, and to enforce any rights of the Trustee under or with respect to the Trust Agreement and the Contract.

:: ·, .- . In the case of an Event of Default under (e) above, the Trustee will declare the full

amount of principal and applicable interest evidenced by the 2008 Certificates due and payable in· accordance with the Reimbursement Agreement and payment will be made within 7 days after receipt of the notice of default from the Bank. Any other provisions of the Trust Agreement notwithstanding, the Trustee will not be entitled to· require indemnification as a precondition to declaring ·the principal and interest with respect to the 2008 Certificates immediately due and payable or to'drawing upon the Credit Facility pursuant to the Trust Agreement.

Notwithstanding any other provision of the Trust Agreement, the Trustee may not declare an event of default, cause an acceleration of the payment of the amounts payable under the 2008 Certificates or exercise any remedy above· without the prior written consent of the Bank (so long as the Credit Facility is in effect and the Bank has not dishonored any properly presented and conforming draw thereunder or any amounts for reimbursement of draws under the Credit Facility remain owing to the Bank). In the event of an acceleration of the due date of the 2008 Certificates, interest will cease to accrue upon declaration of acceleration and the acceleration may be waived if the Trustee receives written notice from the-Bank that ·the Event of Default has been waived-and the Credit Facility has·:been fully reinstated. In the event the declaration of an Event of Default is rescinded, notice of such rescission will be given to the Authority, the Bank, S&P, Moody's and Fitch. · ··

~ · If an Event of Default will have occurred ·and be continuing and if requested so to do by the Bank ·or the Owners of at least twenty-five percent (25%) in aggregate principal amount of Outstanding 2008 Certificates and indemnified as provided in the Trust Agreement, the Trustee will be obligated to exercise such one or more of the rights and powers conferred by the Trust Agreement, as the Trustee, being advised by counsel, will deem most expedient in the interests ofthe Owners. - · , • ·

No remedy by the terms of the· Trust Agreement conferred upon or reserved to the Trustee (or to the Owners) is intended to be exclusive of any· other remedy, but each and every such remedy will be cumulative and will be in addition to any other remedy given to the Trustee or to the Owners hereunder or now or hereafter existing at law or in equity.

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No delay or omission to exercise any right or power accruing upon any Event of Default will. ·impair any such right or power or will be construed to be a waiver of any such Event of Default or acquiescence therein; such right or power .may be exercised from time to time as often as may be deemed'expedient. ·

The Swap Counterparty will receive immediate notice of any default described in. (a) or (b) above, and notice of any other default known to the Trustee or the Authority within 30 days of the Trustee's or the Authority's actual knowledge thereof.

The Swap Counterparty will be included. as a party in interest and as a party entitled to (i) notify the Authority, the Trustee, if any, or any applicable receiver, of the occurrence of an Event of Default and·{ij) request the· Trustee or receiver to intervene in judicial proceedings that affect the 2008 Certificates or the security therefor. The Trustee or receiver will be required to accept notice of an Event of Default from the Swap Counterparty.

All moneys received, other than from drawings on the Credit Facility, by the Trustee pursuant to any right given or action taken under the remedy provisions of the Trust Agreement will be applied by the Trustee in the order following upon presentation of the several 2008 Certificates and the stamping thereon of the payment if only partially paid or upon the surrender thereof if fully paid -

First, to the payment of the whole amount then owing and unpaid with respect to the 2008 Certificates for principal and interest, with interest with respect to the overdue principal and installments of interest at the rate or rates specified in the respective 2008 Certificates (but such interest with respect to overdue installments of interest will be paid only to the extent funds are available therefor following payment of principal and interest and interest with respect to overdue principal, as aforesaid), and in case such moneys will be insufficient to pay in full the whole amount so owing and unpaid with respect to the-2008 Certificates, then to the payment of such principal and interest without preference or priority of principal over interest, or of interest over principal, or of any installment of interest over any other installment of interest, ratably to the aggregate of such principal and interest; and

Second, to the payment of the fees, costs and expenses of the Trustee hereunder (including, but not limited to, the costs and expenses of itself and its counsel) and, after such payment to the Trustee, of the Bank and of the Owners in declaring such Event of Default, including reasonable compensation to its or their agents, attorneys and counsel.

Rights and Remedies of Owners. No Owner cif any 2008 Certificate issued hereunder will have the right to institute any suit, action or. proceeding at law or in equity, for any remedy under or upon the Trust Agreement, unless (a) such· Owner will have previously 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 all the 2008 Certificates then Outstanding will have made written request upon the Trustee to exercise the powers in the Trust Agreementbefore granted or to institute such action, suit or proceeding in its own name; (c) said Owners will have tendered to the Trustee indemnity reasonably acceptable to the Trustee against the costs, expenses and liabilities to be incurred in compliance with such request; and (d) the Trustee will have refused or omitted to comply with such request for a period of sixty (60) days after such written request will have been receiv~d by, and said tender of indemnity will have been made to, the Trustee:

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Such notification, request, tender of indemnity and refusal or om1ss1on are thereby declared, in every case, to be conditions precedent to the· exercise by any ·owner of 2008 Certificates of any remedy hereunder; it being understood and intended that no one or more Owners of 2008 Certificates will have any right in any manner whatever by his or their action to enforce any right under the Trust Agreement, except in the manner- in the Trust Agreement provided, and that all proceedings at law or in equity to enforce any provision of the Trust Agreement will be instituted, had and maintained in the manner in the Trust Agreement provided and for the equal benefit of all Owners of the Outstanding 2008 Certificates. ·

The right of any Owner of any 2008 Certificate to receive payment of the principal of and interest and premium (if any) on such 2008 Certificate as in the Trust Agreement provided or to institute suit for the enforcement of any such payment, will not be impaired or affected without the written consent of such Owner, notwithstanding any provisions of the Trust Agreement.

No Liability by the City to the Owners. Except for the payment when due of the 2008 Payments and the performance of the other agreements and covenants required to be performed by it contained in the Master Contract, the City will not have any obligation or liability to the Owners with respect to the Trust Agreement or the preparation, execution, delivery or transfer of the 2008 Certificates or the disbursement of the 2008 Payments by the Trustee to the Owners, or with respect to the performance by the Trustee of any right or obligation required to be performed by it contained in the Trust Agreement. -

. . - :·. " ~·

No Liability by the Trustee to the Owners. Except •as expressly ·provided in the Trust Agreement, the Trustee will ricit have any obligation or liability to the· Owners with respect to· the payment when due of the 2008 Payments.by'the City,-or with respect to the performance by the City of the other· agreements and covenants required to be performed by it contained in the Master Contract. · · , < - • _ _ •

'· Discharge of Trust Agreement.

i

When the obligations of the City under the Contract will cease (except for the· right-of the Trustee and the obligation of the City to have the money and securities applied to the payment of Payments as set forth in the Trust' Agreement), and ·the' obligations of the City under the Credit· Facility and Reimbursement Agreement will cease pursuant to the terms "thereof, the·n and in that case the obligations created by the Trust Agreement will thereupon cease; determine and become void except for the right of the Owners and the obligation of the Trustee to apply such moneys.and securities to the•payment of the Certificates as in the Trust Agreement set forth·and the right-of the Trustee to collect any fees or expenses due hereunder and the Trustee will turn over to th·e City, ·a·s 'an overpayment of 2008'Payments,' all balances remaining in any other funds or accounts other than moneys and Federal Securities held for the payment of tlie Certificates at maturity or on prepayment, which moneys and Federal Securities will continue to be held by the Tn:istee in trust for the benefit of the Owners and will be applied by the Trustee to the payment, when ·due, ·of the principal·and interest and premium 'if any represented by the Certificates, and after such payment, the Trust Agreement will become void, except for the Authority's obligation to indemnify the Trustee pursuant to any provision of the Trust Agreement.

. . . ' ~ . .

·If moneys or securities are deposited with and held by the Trustee as described above, the Trustee will mail a notice, first-class postage prepaid, to the Owners at the addresses listed on the registration books kept by the Trustee, stating that (a) moneys or Federal Securities are so held by it, and (b) that the Trust Agreement has been released in accordance with the provisions described therein. ·

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Whenever in the Trust Agreement or the Contract it is provided or permitted that there be deposited with or held in trust by the Trustee money or securities (certified to be sufficient by a report of an Independent Certified Public Accountant verifying the sufficiency of the escrow established to pay the 2008 Certificates in full on the maturity or prepayment date ) in the necessary amount to pay or prepay any 2008 Certificates, the money or securities to be so deposited or held may. include money or securities held by the Trustee in the funds and accounts established pursuant to the Trust Agreement and will be --

(a) lawful money of the United States of America in an amount equal to the principal amount represented by such 2008 Certificates and all. unpaid interest represented !thereby to maturity, except that, in the case of 2008 Certificates which are to be prepaid prior to maturity and in respect of which notice of such prepayment will have been given as provided in the Trust Agreement or provision satisfactory to the Trustee will have been made for the giving of such notice, the. amount to be deposited or held will·be the principal amount plus accrued interest to such date of prepayment plus a prepayment premium, if any, represented by such 2008 Certificates; or

(b) .federal Securities which are· not subject to prepayment except by the holder thereof prior to maturity (including any such securities issued or held in book-entry form), the principal of and interest with respect to which. when due will provide, in its opinion of an Independent Certified Public Accountant, delivered·to the Trustee, money sufficient to pay the principal plus prepayment premium •. if any, plus all accrued interest to maturity or to the prepayment date, as the case may be, represented by the 2008 Certificates, to be paid or prepaid, as such amounts become due, provided that; in the case of 2008 Certificates which are to be prepaid prior to the maturity thereof, notice of such prepayment will have been given as provided in the Trust Agreement or provision satisfactory to the Trustee will have been made for the giving of such notice; provided, in each case, that the Trustee will have been irrevocably instructed (by the terms of the Trust Agreement and the Contract or by written request of the City) to apply such money to the payment of such principal plus prepayment premium, if any, plus interest represented by such 2008 Certificates.

For defeasance of 2008 Certificates bearing interest other than for a Long-Term Rate Period ending on or after the date of prepayment, interest amounts to be provided described in paragraphs (a) or (b) above will be calculated atthe·Maximum Rate.

Notwithstanding anything contained in the. Trust Agreement to the contrary, in the event that the interest and/or the principal evidenced and represented by any of the 2008 Certificates will be paid by the Bank pursuant to the Credit· Facility, such 2008 Certificates will remain Outstanding hereunder for all purposes, will not. be defeased or otherwise satisfied and will not be considered paid, and the assignment and pledge of the Trust Agreement and all agreements, covenants and other obligations of the City under the Contract assigned to the Trustee for the benefit of the Bank will continue to exist and will run to the benefit of the Bank, and the. Bank will be subrogated to the rights of such Owners.

Anything contained in the Trust Agreement to the contrary notwithstanding, any money held by the Trus.tee in trust for the payment and discharge of any of the 2008 Certificates which remains unclaimed for two (2) years after the date when such 2008 Certificates have become due and payable, either at their stated Payment Dates or by call for prepayment prior to Payment Date, if such money was held by the Trustee at such date, or for two (2) years after the date of deposit of such money if deposited with the Trustee after the date when such 2008

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Certificates have become due and payable, will be repaid by the Trustee to the City as its absolute property free from trust, and the Trustee will thereupon be released and discharged with respect thereto and the Owners will look only to the City for the payment of the 2008 Payments evidenced and represented by the 2008 Certificates; provided, however, that before being required to make any such payment to the City, the Trustee will at the request of and at the expense of the City, cause to be mailed to all Owners and the Securities Depositories and the Information Services a notice that such money remains unclaimed and that, after a date named in such notice, which date will not be less than thirty (30) days after the date of the first publication of each such notice, the balance of such money then unclaimed will be returned to the City.

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[THJS PAGE lNTENTJON ALLY LEFT BLANK J

_'!• ,-.-. ' ••. ' · APPENDIX D. "~ ; ... PROPOSED FORM OF SPECIAL COUNSEL OPINION

'1 ·~ .

City Council City of Roseville 311 Vernon Street Rpseville, California 95678

[LETTERHEAD OF JONES HALl]

May 13, 2008

j -

OPINION: . City of Roseville Electric System Revenue Refunding Certificates of Participation, $90,000,000 Series 2008A

City of Roseville Electric System Revenue Refunding Certificates of Participation, $64,500,000 Series 2008B - -

Members of the City Council:

. We have acted as special counsel in connection with the delivery by the City of Roseville of a 2008 Supplemental Contract (the "2008 Supplement") dated as of May 1, 2008 between the City of Roseville (the "City") and the Roseville Finance Authority (the "Authority") which is a supplement to the following contracts between the City and the Authority: the 2005 Supplemental Contract, the 2004 Supplemental Contract, the 2002 Supplemental Contract, the 1999 Supplemental Contract and the 1997 Master Installment Purchase Contract;(collectively the "Installment Purchase Contract")_ Under a Trust Agreement dated as of May 1, 2008 (the "Trust Agreement"), between the Authority and The Bank of New York Trust Company, NA, as trustee (the "Trustee"), the Trustee has executed and delivered $90,000,000 aggregate principal amount of Electric System Revenue Refunding Certificates of Participation, Series 2008,6., and $64,500,000 aggregate principal amount of Electric System Revenue Refunding Certificates of Participation, Series 2008B, evidencing and representing proportionate interests of the owners thereof in the payments to be made by the City under the 2008 Supplement (the "Installment Payments")- We have examined the law and such certified proceedings and other papers as we deem necessary to render this opinion.

~ ' r

As to questions of fact material to our'opinion, we have relied upon representations of the· City contained in the 2008 Supplement and the Trust Agreement, and in certified proceedings and other certifications of public officials and -others furnished to us, without undertaking to verify the same by independent investigation.

Based upon the foregoing, we are of the opinion, under existing law, as follows:

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1. The City is a charter city and munifipal .corporation duly organized and existing under and by virtue of the Constitution and laws of the State of California, with the full power to enter into the 2008 Supplement and. the Trust Agreement and to perform the agreements on its part contained therein.

2. The Master Contract and the 2008 Supplement have been duly approved by the City and the Trust Agreement lias been duly approved by the Authority, and constitute valid and binding obligations of the City and the Authority enforceable against the City and the Authority in accordance with their respective terms.

3. The obligations of the City to make payments under the·Master Contract and the 2008 Supplement are special, limited obligations payable solely from and secured by a pledge of Net Revenues (as defined in the Master Contract) 'of the Electric System of the City on a parity with the Parity Obligations (as defined in the Master Contract) previously delivered pursuant to the Master Contract and any additional Parity Obligations. ·

4. The Certificates have been validly executed and delivered by the Trustee under the · Trust Agreement and, by virtue of the terms thereof and of the 2008 Supplement and the Master Contra.ct, the owners of the Certificates are entitled to the benefits of the 2008 Supplement.

5. The portion of the Installment Payments designated as and comprising interest and ·received by the owners of the Certificates is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; it should be noted, however, that, for the purpose of computing the alternative minimum tax imposed on corporations (as defined for federal income tax purposes), such interest is taken into account in determining certain income and earnings. The opinions set forth in the preceding sentence are subject to the condition that the City comply with all requirements of the Internal Revenue Code of 1986 that must be satisfied subsequent to the delivery of the 2008 Supplement in order that such interest be, or continue to be, excluded from gross income for federal income tax purposes. The City has covenanted iri the 2008 Supplement and other instruments relating to the Certificates to comply with each of such requirements. Failure to comply with certain of such requirements may cause the inclusion of such interest in gross income for federal income tax purposes to be retroactive to the date of delivery of the 2008 Supplement. We express no opinion regarding other federal tax consequences arising with respect to the 2008 Supplement and the Certificates.

6. The portion of the Installment Payments designated as and comprising interest and received by the owners of the Certificates is exempt from personal income taxation imposed by the State of California.

The rights of the owners of the Certificates and the enforceability of the 2008 Supplement and the Trust Agreement may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights heretofore or hereafter enacted and may also be subject to the exercise of judicial discretion in accordance with principles of equity or otherwise in appropriate cases.

Respectfully submitted,

A Professional Law Corporation

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APPENDIXE

FORM OF LETTER OF CREDIT '

IRREVOCABLE TRANSFERABLE DIRECT-PAY LETTER OF CREDIT

The Bank of New York Trust Company, N .A., as trustee for the benefit of Owners (the "Trustee") under a Trust Agreemen1 dated as of May I, 2008 (together- with any amendments and supplements or modifications thereto, the "Trust Agreement") by and between the Roseville Finance Authority (the "Authority") and the Trustee.

Dear Ladies and/or Gentlemen:

May 13, 2008 **U.S. $157,141,316

No. DCL 0805450

We hereby establish, at the request and for the account of the City of Roseville, California (the "City"), in your favor, as Trustee under the Trust Agreement pursuant to which $90,000,000 in aggregate principal amount of Electric System Revenue Refunding Certificates of Participation, Series 2008A (the "Series 2008A Certificates") and $64,500,000 in aggregate principal amount of Electric System Revenue Refunding Certificates of Participation, Series 2008B (the "Series 2008B Certificates", together with the Series 2008A Certificates, the "Certificates") are being executed and delivered, our Irrevocable Transferable Direct-Pay Letter of Credit No. DCL 0805450 (the "Letter of Credit") (as secured by the Letter of Credit Reimbursement Agreement dated May 13, 2008 between the City and us (as amended from tirrie to time, the "Reimbursement Agreement")) in the amount of $157,141,316 (including interest) (as more fully described below), effective immediately and expiring at 5:00p.m., New York City time (except as otherwise specified in the following sentence) on the Expiration Date. As used herein, "Expiration Date" shall mean the earliest of(a) the close of business on May 13, 2011, or such later date agreed to by the Bank and the City pursuant to a duly executed amendment of this Letter of Credit (the "Stated Expiration Date"), (b) ~he date on which the Bank receives notice from the Trustee in the form of Exhibit 4A hereto that the principal amount of and interest on all of the Certificates shall have been paid in full, (c) the date on which this Letter of Credit is surrendered to 'the Bank for cancellation as permitted by Section 23 of the Reimbursement Agreement with notice of such effect to the Bank, (d) the date on which the Ba'* receives notice from the Trustee in the form of Exhibit 4B hereto that all of the Certificates have been converted to a Non-Covered Interest Rate and (i) all Tendered Certific:;~tes have been remarketed or (ii) the

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Bank has honored the drawing in connection with the conversion, (e) the first to occur of (i) the date which is seven (7) calendar days after the Trustee has received a Termination Event of Default Notice in the form of Exhibit 6 hereto or (ii) the date, following. receipt of such Termination Event of Default Notice, upon which the Trustee has drawn upon this Letter of Credit the amount required thereby and as permitted under this Letter of Credit and the proceeds of the drawing have been distributed to the Trustee, or (f) the date upon which a Voluntary Termination shall be effective as set forth in a notice in the form of Exhibit 7 hereto received by the Bank from the Trustee.

We hereby irrevocably authorize you to draw on us in accordance with the terms and conditions hereinafter set forth, by your draft, an aggregate amount not exceeding $157,141,316 (including interest) (the "Letter of Credit Amount"), of which an aggregate amount not exceeding (a) $154,500,000 may be drawn upon with respect to (i) payment of the unpaid principal amount of the Certificates or (ii) the portion of the purchase price equal to the principal amount of Certificates tendered or deemed tendered for purchase pursuant to Sections 4.07(a) or 4.07(b) of the Trust Agreement and not remarketed pursuant to the Trust Agreement prior to such drawing (hereinafter referred to as "Eligible Certificates") and (b) $2,641,316'(but no more, in the case of any drawing, than an amount equal to interest accrued on the Certificates tor the immediately preceding fifty-two (52) days, calculated at a rate of 12% per annum and on the basis of the actual number of days elapsed in a year of 365 or 366 days, as applicable) may be drawn upon with respect to payment of interest accrued on the Certificates or the portion of the purchase price of Eligible Certificates representing interest thereon. The two foregoing maximum amounts comprising the Letter of Credit Amount shall be reduced from time to time upon notice from the Trustee in the form of Exhibit 4 hereto of the payment or redemption of Certificates by (A) in the case of the amount referred to in clause (a) above, the aggregate principal amount of the Certificates so paid or redeemed and (B) in the case of the amount referred to in clause (b) above, an amount that bears the same proportion to $2,641,316 as the principal amount of Certificates so paid or redeemed bears to $154,500,000. Notwithstanding any other provision of this Letter of Credit, (I) you are not authorized to draw on us hereunder unless at the time of such drawing the Certificates represent interest at a Covered Rate, (2) you are not authorized to draw on us with respect to the payment of any redemption or prepayment premium, (3) you are not authorized to draw on us hereunder with respect to any payment which comprises any part of the Bank Certificate Sale Consideration, (4) you are not authorized to draw on us hereunder with respect to any payment of principal, purchase price or interest on any Certificates registered in the name of the City or any Affiliate of the City or, to the best of your knowledge, held for the account of the City or any Affiliate of the City, and (5) from the date after the Bank receives notice from the Trustee in the form of Exhibit 4A hereto that payment or provision for payment of all the Certificates shall have been· made, only a draft to pay ·the purchase price of Eligible Certificates may be drawn on us hereunder.

Only you, as Trustee may make drawings under this Letter of Credit. Upon the payment to you of the amount specified in a draft drawn hereunder, we shall be fully discharged on our obligation· under this Letter of Credit with resp'ect to such draft, and we shall not thereafter be obligated to make any further payments under this Letter of Credit in respect of such draft or the amount drawn thereunder to you or t.o any other person, firm, corporation or other entity who may have made to you or who makes to you a demand for payment of principal of or interest on any Bond or the purchase price thereof. ·

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On the tenth (I 01h) day (provided that if such day is not a Business Day, then on the next succeeding Business Day) following each .drawing hereunder in accordance with a certificate in the form of Exhibit 2 hereto to pay scheduled interest on the Certificates, the amount so drawn shall be restored to the amount available to be drawn hereunder in respect of payment of interest on the Certificates (including th~ portion of the purchase price of Eligible Certificates representing interest thereon) accrued on or prior to the maturity thereof unless you shall have received (a) a notice in the form of Exhibit 8 hereto from us theretofore that such amount is not so reinstated because a previous drawing has been made under this Letter of Credit for which we have not been reimbursed in full when due by the City or (b) a Termination Event of Default Notice from us theretofore in the form of Exhibit 6 hereto. If after any drawing hereunder in accordance with a certificate in the form of Exhibit 3 hereto to pay the purchase price of Eligible Certificates, the City repays such drawing in full to us, the portion of the purchase price of such Eligible Certificates allocated to the principal of and accrued interest on such Eligible Certificates so drawn shall be restored to the amount of principal and interest, respectively, available to be drawn hereunder as confirmed by the Bank in a notice to the Trustee in the form of Exhibit 9 hereto. Subject to the two preceding sentences, drawings in respect of payments hereunder honored by us shall not, in the aggregate, exceed the Letter of Credit Amount and each drawing honored by the Bank hereunder shall pro tanto reduce the amount available under this Letter of Credit.

Funds under this Letter of Credit are available to you against presentation of (a) if the drawing is being made with respect to a payment of principal of the Certificates, your draft, payable on the date such draft is drawn on us in accordance with the terms hereof, and certificate signed by a duly authorized officer of the Trustee making such drawing (the "Drawer") in the form of Exhibit I attached hereto, completed, (b) if the drawing is being made with respect to a payment of interest on the Certificates, your draft, payable on the date such draft is drawn on us in accordance with the terms hereof, and certificate signed by the Drawer in the form of Exhibit 2 hereto, completed and (c) if the drawing is being made with respect to a payment of the purchase price of Eligible Certificates, your draft, payable on the date such draft is drawn on us in accordance with the terms hereof, and certificate signed by the Trustee in the form of Exhibit 3 attached hereto, completed. Such draft(s) and certificate(s) (and any other certificate or notice required or permitted to be provided to the Bank hereunder) shall be in writing and dated the date of presentation, and shall either be sent by first class registered or certified mail or express courier service, properly addressed and prepaid, or physically delivered to Dexia Cn\dit Local, New York Branch, 445 Park A venue, 8th Floor, New York, New York I 0022-2606, or, in the case of a drawing certificate hereunder, by facsimile to (212) 753-7522, in each case to Attention: Standby Letter of Credit Department, marked "URGENT SAME DAY PAYMENT." If we receive your draft(s) and certificate(s) at such office, all in strict conformity with the terms and conditions of this Letter of Credit, at or prior to 12:00 noon, New York City time, on a Business Day on or prior to the Expiration Date, we will honor the same by 2:00p.m., New York City time, on the same business day in accordance with your payment instructions. If we receive your draft(s) and certificate(s) at such office, all in strict conformity with the terms and conditions of this Letter of Credit, after 12:00 noon, New York City time, but prior to 4:00p.m., New York City time, on a Business Day prior to the Expiration Date, we will honor the same by 10:00 a.m., New York City time, on the next Business Day in accordance with your payment instructions provided that suc(l next business day is on or prior to the Expiration Date. If requested by the Drawer, payment under this Letter of Credit may be made by wire transfer of

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federal funds to the account of the Drawer or any other account of yours with any bank located in New York, New York or by deposit of immediately available funds into any such account. All such payments shall be made solely from our own funds.

In addition to the definitions set forth in the foregoing text, as used herein, (a) "Affiliate" means, with respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person, and (b) "Authorized City Representative" shall mean in the case of the City, its general manager or any assistant general manager or any officer authorized to do specific acts or to discharge certain specific duties and of whom another Authorized City Representative gives written notice to the Bank; provided, however, that in each case .for which a certification or other statement of fact or condition is required to be submitted by an Authorized City Representative pursuant to the terms of this Letter of Credit or any Exhibit hereto, such certificate or statement shall be executed only by an Authorized City Representative in a position to know or to obtain knowledge of the facts or conditions that are the subject of such certificate or statement, and (c) "Bank Certificates" has the meaning ascribed to the term Bank Certificates in the Trust Agreement, and ( d)."Bank Certificate Sale Consideration" means the Sale Price as defined in the Reimbursement Agreement together with the amounts prescribed under Section 2(a)(ii) or (vii) as applicable of the Reimbursement Agreement, and (e) "Bank Rate" means a per annum rate equal to (i) for the period from and including the Purchase Date through the thirtieth (30th) day from the Purchase Date, the higher of (x) the Base Rate and (y) the Maximum Rate (with respect to Certificates that are not Bank Certificates), (ii) from the thirty-first (31 ")day from the Purchase Date and thereafter, the Base Rate plus one hundred basis points ( 1.0% ); provided, however, that during a Term Loan Period as defined in the Reimbursement Agreement, the Bank Rate means a per annum rate equal to the Base Rate plus two hundred basis points (2.0%), and·from and after an Event of Default or the date the related principal amount is due and payable, the Bank Rate means a per annum rate equal to the Default Rate; and provided further that at no time shall the Bank Rate be less than the applicable rate of interest on Eligible Certificates which are not Bank Certificates, and (f) Base Rate" means a per annum rate equal to the higher of (i) the Prime Rate or (ii) the Fed Funds Rate plus fifty basis points (0.50%); any change in the Base Rate shall take effect on the date specified in the announcement of such change, and (g) "Default Rate" means for any day the Base Rate plus an amount equal to three hundred' · basis points (3 .00% ), · and (h) "Business Day" has the meaning assigned to that term in the Trust Agreement,- and (i) "Covered Rate" means the Weekly Interest Rate and the Daily' Interest Rate, each as defined in the Trust Agreement and G) "Eligible Certificates" shall have the meaning assigned thereto hereinbefore in this Letter of Credit, at1d (k) "Fed Funds Rate" means for any day, a fluctuating interest rate per annum eq·ual to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve· Bank of New York, or, if such rate is not published for any day whiCh is a Business Day, the average of the quotations for such day on such transactions received by the Bank from three Federal funds brokers of recognized standing selected by it; (l) "Maximum Rate" means the per annum rate of twelve percent (12%) and (m) "Non-Covered Interest Rate" means the Bank Rate or any interest rate applicable to the Certificates other than a Covered Rate, and (n) "Outstanding Certificates" means, as of the time in question, all Certificates authenticated and delivered under the Trust Agreement except Certificates canceled or required to be canceled, Certificates with respect to which all liability of the City shall have

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been discharged in accordance with the requirements of the ,Trust Agreement, and Certificates in substitution for which other Certificates have been authenticated_ and delivered under the Trust Agreement,.and (o) "Prime Rate",means the fluctuating rate per annum equal-to the "prime rate" listed daily in the "Money Rate" section of The Wall Street Journal, or if The Wall Street Journal is not published on a particular Business Day, then, the "prime __ rate" published in any other national financial journal or newspaper selected by the !;lank, and if more than one such rate is listed in the applicable publication, the highest such rate shall be used, and (p) Termination Event of Default Notice means a notice given by the Bank to the Trustee under-Section 13(b)(i)(A) of the Reimbursement Agreement, which notice (i) shall notifY the Trustee that an Event of Default has occurred and is continuing and that the Letter of Credit shall terminate, and shall direct the Trustee to draw upon the Letter of Credit in accordance with its terms and (ii) may direct the Trustee to declare the principal of all or a designated portion of the Outstanding Certificates to be due and payable, and (q) "Voluntary Termination" means any election by the Trustee (at the direction of the City) to terminate the Letter of Credit in connection with an optional prepayment or optional redemption of all Outstanding Certificates. For purposes of the definition of Affiliate, "control" (including "controlled by" and "under common control with") means the power, directly or indirectly, to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or by contract or otherwise_

Upon the earlier of (a) the making by you of the last drawing available to be made hereunder and the distribution of the proceeds of such drawing to you or (b) 5:00 p,m,, New York City time (except as otherwise specified in the second sentence of this Letter of Credit), on the Expiration Date, this Letter of Credit shall automatically terminate.

This Letter of Credit is subject to the International Standby Practices (1998), International Chamber of Commerce, Publication No_ 590 (the "ISP 98")- This Letter of Credit shall be deemed made under the laws of the State of New York, including Article 5 of the Uniform Commercial Code, and shall as to matters not governed by the ISP 98, be governed and construed in accordance with the laws of said State, Communications with respect to the Trustee shall either be sent by first class registered or certified mail or express courier service, properly addressed and prepaid, or physically delivered to the address set forth on the first page of this Letter of Credit.

This Letter of Credit is transferable in its entirety (but not in part) to any transferee who has succeeded you as Trustee under the Trust Agreement and may be successively so transferred, Transfer of the available balance under this Letter of Credit to such transferee shall be effected by the presentation to us of this Letter of Credit accompanied by a certificate substantially in the form of Exhibit 5 attached hereto,

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This Letter of Credit sets ·forth in full our undertaking, and such undertaking 'shall not in any way be modified, amended;'·amplified or limited· by· reference to any document, instrument or· agreement referred to herein· (including;' Without limitation; the Certificates, the ·Trust Agreement, imd the Reimbursement Agreement), except' only the 'certificates and. the drafts referred to herein; and notwithstanding any such reference' (including, without limitation, the use herein of terms defined in the Reimburs'ement Agreement), no such reference shall· be deemed to incorporate herein by reference any document, instrument ·or agreement except for such certificates and such drafts.

[Remainder of page intentionally left blank]

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[Signature Page to Irrevocable Transfer<!ble Direct-Pay Letter of Credit No. DCL 0805450]

' Very truly yours,

DEXIA CREDIT LOCAL, New York Branch

By __________________________ _

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John W. Flaherty Managing Director

r,_, -. I '. . . EXHIBIT 1 TO THE;LETTER OF CREDIT ··'· ... '

DRAFT AND CERTIFI<;::ATE .FQR THE PAYMENT OF PRINCIPAL OF ELECTRIC SYSTEM REVENUE

,· :.:. ··· ,. , REFUNDING cERTIFICATES OF PARTICIPATION

$90,000,000 SERIES 2008A

- CITY OF ROSEVILLE, . . . '

:· · .. ..,. -_ - .,J

'·' .

$64,500,000 SERIES 20088

CITY OF ROSEVILLE

URGENT SAME DAY PAYMENT

The undersigned, a duly authorized officer of The Bank of New York Trust Company, N.A. (the "Trustee"), hereby certifies to Dexia Credit Local, New York Branch (the "Bank"), with reference to Irrevocable Transferable Direct-Pay Letter of Credit No. DCL 0805450 (the "Letter of Credit"; any capitalized term used herein and not defined herein shall have its respective meaning as set forth in the Letter of Credit) issued by the Bank in favor of the Trustee, that:

(a) The Trustee is the Trustee under the Trust Agreement for the holders of the Certificates, ·

(b) The Trustee is making a drawing under the Letter of Credit with respect to the payment of the principal, whether at stated maturity or upon redemption or prepayment (in whole or in part) or acceleration but not any redemption or prepayment premium or purchase price, of the Certificates in accordance with Section 5.08(a)(ii)(i) of the Trust Agreement.

(c) The amount of principal of the Certificates which is due and payable is $ , the amount of the draft set forth on this Certificate does not exceed such amount of principal and such payment is due on [DATE].

(d) Upon and with the drawing herein made, the amount available to be drawn under the Letter of Credit in respect of principal or purchase price shall be [$ ) and in respect of interest shall be [$ ] and such payment is requested on [DATE).

(e) The Certificates at the time of this drawing represent interest at a Covered Rate.

(f) None of the Certificates with respect to which this drawing is being made are, to the best of our knowledge, (i) registered in the name of the City or any Affiliate of the City or (ii) to the best of our knowledge, held for the account of the City or any Affiliate of the City.

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(g) The Trustee has not delivered notice to the Bank that payment or provision for payment of all the Certificates has been made pursuant to the Trust Agreement.

(h) The amount of the draft set forth on this Certificate does not exceed the amount available to be drawn under the Letter of Credit in respect of payment of principal of the Certificates and was computed in accordance with the terms and conditions of the Certificates and the Trust Agreement and the Letter of Credit.

Drawn under Dexia Credit Local, New York Branch, Irrevocable Transferable Direct-Pay Letter of Credit No. DCL DCL 0805450: Pay the amount of($ in principal of the Certificates as certified above.

IN WITNESS WHEREOF, the Trustee has executed and delivered this Certificate as of the __ day of , 20_.

THE BANK OF NEW YORK TRUST COMPANY, N.A., as Trustee

By ______________ __

Name ________________ ~-----------Title -----------------'---------'--------

.!

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EXHIBIT 2 TO THE LETTER OF CREDIT

DRAFT AND CERTIFICATE FOR THE PAYMENT OF INTEREST OF ELECTRIC SYSTEM REVENUE

REFUNJ?ING CERTIFICATES OF PARTICIPATION

$90,000,000 SERIES 2008A

·CITY OF ROSEVILLE

. $64,500,000 SERIES 2008B

CITY OF ROSEVILLE

URGENT SAME DAY PAYMENT

The undersigned, a duly authorized officer of The Bank of New York Trust Company, N.A. (the "Trustee"), hereby certifies to Dexia Credit Local, New York Branch (the~"Bank"), ·with reference to Irrevocable Transferable Direct-Pay Letter of Credit No. DCL 0805450 (the "Letter of Credit"; any capitalized term used herein and not defined herein shall have its respective meaning as set forth in the Letter of Credit) issued by the Bank in favor of the Trustee, that:

(a) . The Trustee is the Trustee under the Trust Agreement for the holders of the Certificates.

(b) The Trustee is making a drawing under the Letter of Credit with respect to the payment of interest accrued with respect to the Certificates in accordance with Section 5.08(a)(ii)(i) of the Trust Agreement.

(c) The amount of interest on the Certificates which is due and payable is $ , the amount of the draft set forth on this Certificate does not exceed such amount of interest and such payment is due on [DATE].

(d) Upon and with the drawing herein made, the amount available to be drawn under the Letter of Credit in respect of principal or purchase price shall be [$ ] and in respect of interest shall be [$ ] and such payment is requested on [DATE].

(e) The Certificates at the time of this drawing represent interest at a Covered Rate.

(f) The Trustee has not delivered notice to the Bank that payment or provision for payment of all the Certificates has been made pursuant to the Trust Agreement.

(g) None of the Certificates with respect to which this drawing is being made are, to the best of our knowledge, (i) registered in the name of the City or any Affiliate of the City or (ii) to the best of our knowledge, held for the account of the City or any Affiliate ofthe City.

E. I 0

(h) No portion of this drawing is to be used to pay all or any part of the Bank Bond Sale Consideration.

(i) . The amount of the draft set forth on this Certificate does not exceed the amount available on the da!e hereof to be drawn under the Letter of Credit in respect of payment of interest accrued on the Certificates on or prior to their stated maturity date or to the redemption or prepayment date, as the case may be, and the amount of the draft set forth on this Certificate was computed in accordance with the terms and conditions of the Certificates and the Trust Agreement and the Letter of Credit.

Drawn under Dexia Credit Local, New York Branch, Irrevocable Transferable Direct-Pay Letter of Credit No. DCL 0805450: Pay the amount of [$ . m interest with respect to the Certificates as certified above.

IN WITNESS WHEREOF, the Trustee has executed and delivered this Certificate as of the __ day of , 20_.

/

THE BANK OF NEW YORK TRUST COMPANY, N.A., as Trustee

By _____________ __ Name __________________________ __

Title-----------------------------

E-ll

EXHmiT 3 TO THE LETTER OF CREDIT

;.,!.

DRAFT AND CERTIFICATE FOR THE PAYMENT OF THE PURCHASE PRICE OF

! .

ELECTRIC SYSTEM REVEN'UE. . REFUNDING CERTIFICATES OF PA-RTICIPATION

' ' . . ' .

' '' $90,000,000 · ,_ .... ·SERIES 2008A .

CITY OF ROSEVILLE

. · ..,.

- $64,500,000 . SERIES 20088

CITY OF ROSEVILLE.

·' .• URGENT SAME DAY PAYMENT -..

The undersigrled, a duly authoriied offi~er 6f The Bank: of New York Tru-st Company, N .A. (the "Tender Agent"), hereby certifies to Dexia Credit Local, New Y oi-k Branch (the "Bank"), with reference to Irrevocable Transferable Direct-Pay Letter of Credit No. DCL 0805450 (the "Letter of Credit"; any capitalized term used herein and not defined herein shall have its respective meaning as set forth in the Letter of Credit) issued by the Bank in favor of the Trustee, that: ·

U) The Trustee is Trustee under the Trust Agreement for the holders of the Certificates.

(k) The Trustee is making a drawing under the Letter of Credit in accordance with Sections 4.07, 4.08 and. 5.08(a)(ii)(ii) of the Trust Agreement to enable the Trustee to pay the purchase price of Tendered Certificates that have not been remarketed pursuant to Sections 4.08 and 4.11 of the Trust Agreement ("Eligible Certificates").

(l) Upon and with the drawing herein made, the amount available to be drawn under the Letter of Credit in respect of principal or purchase price shall be [$ J and in respect of interest shall be [$ J and such payment is requested on [DATE].

(m) The Certificates at the time of this drawing represent interest at a Covered Rate.

(n) The Trustee has not delivered notice to the Bank that payment or provision for payment of all the Certificates has been made pursuant to Article X of the Trust Agreement.

( o) None of the Certificates with respect to which this drawing is being made are (i) registered in the name of the City or any Affiliate of the City or (ii) to the best of our knowledge, held for the account of the City or any Affiliate of the City.

(p) No portion of this drawing is to be used to pay all or any part of the Bank Bond Sale Consideration.

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(q) The purchase price of the Eligible Certificates is $ , the amount of the draft set forth on this Certificate does not exceed such purchase price and such payment is due on [DATE].

(r) The amount of the draft set forth on this Certificate does not exceed the amount available on the date hereof to be drawn under the Letter of Credit in respect of the purchase price of Eligible Certificates, and was computed in accordance with the terms and conditions of the Certificates and the Trust Agreement and the Letter of Credit.

Drawn under Dexia Credit Local, New York Branch, Irrevocable Transferable Direct-Pay Letter of Credit No. DCL 0805450: Pay the amount of [$ in purchase price of the Certificates as certified above.

IN WITNESS WHEREOF, the Trustee has executed and delivered this Certificate as of the __ day of , 20_.

THE BANK OF NEW YORK TRUST COMPANY, N.A., as Trustee

By _____________ __ Name ____________________________ __

Title---------------

E-13

EXHIBIT 4 TO THE LETTER OF CREDIT

INSTRUCTIONS TO REDUCE LETTER OF CREDIT AMOUNT

----,------' 20_.

Dexia Credit Local, New York Branch

Re: Irrevocable Transferable Direct-Pay Letter of Credit No. DCL 0805450

Dear Ladies and/or Gentlemen: •

We refer to the above-captioned Letter of Credit (the "Letter of Credit") issued pursuant to the Letter of Credit Reimbursement Agreement (as amended from time to time, the "Reimbursement Agreement") dated May 13, 2008 between City of Roseville (the "City") and Dexia Credit Local, New York Branch (the "Bank"). Terms used herein and not otherwise defined herein are used herein as defined in the Letter of Credit.

In accordance with the Trust Agreement, we hereby instruct you, subsequent to a payment or redemption of a portion (but less than all) of the Certificates pursuant to the Trust Agreement, to reduce the Letter of Credit Amount by the aggregate amount of$ ____ _ ( Dollars), of which (a) an aggregate amount of$ ( ____ _ Dollars) is being reduced with respect to principal of such Certificates and (b) an aggregate amount of$[ Dollars) is being reduced with respect to interest on the Certificates.

Very truly yours,

THE BANK OF NEW YORK TRUST COMPANY, N.A., as Trustee

By _____________ _ Name ______________ _ Title ______________ _

E-14

EXHIBIT 4A TO THE LETTER OF CREDIT

INSTRUCTIONS TO TERMINATE OR LIMIT LETTER OF CREDIT

______ ,20_

Dexia Credit Local, New York Branch

Re: Irrevocable Transferable Direct-Pay Letter of Credit No. DCL 0805450

Dear Ladies and/or Gentlemen:

We refer to the above-captioned Letter of Credit (the "Letter of Credit") issued pursuant to the Letter of Credit Reimbursement Agreement (as amended from time to time, the "Reimbursement Agreement") dated May 13, 2008, between City ofRoseville (the "City") and Dexia Credit Local, New York Branch (the "Bank"). Terms used herein and not otherwise defined herein are used herein as defined in the Letter of Credit.

In accordance with the Trust Agreement, we hereby instruct you to terminate the Letter of Credit as the principal amount of and interest on all of the Certificates has been paid or provision for such payment in full shall be deemed to have been made by the deposit of cash or securities.

Very truly yours,

THE BANK OF NEW YORK TRUST COMPANY, N.A., as Trustee

By ______________ _ Name ___________________________ __

Title----------------------------

E-15

EXHIBIT 4B TO THE LETTER OF CREDIT

INSTRUCTIONS TO TERMINATE LETTER OF CREDIT

______ ,20_

Dexia Credit Local, New York Branch

Re: Irrevocable Transferable Direct-Pay Letter of Credit No. DCL 0805450

Dear Ladies and/or Gentlemen:

We refer to the above-captioned Letter of Credit (the "Letter of Credit") issued pursuant to the Letter of Credit Reimbursement Agreement (as amended from time to time, the "Reimbursement Agreement") dated May 13, 2008, between City of Roseville (the "City") and Dexia Credit Local, New York Branch (the "Bank"). Terms used herein and not otherwise defined herein are used herein as defined in the Letter of Credit.

In accordance with the· Trust Agreement, we hereby' instruct you to terminate the Letter of Credit as all of the Certificates have been converted to a Non-Covered Interest Rate and [all Tendered Certificates have been remarketed] [the Bank has honored the drawing in connection with the conversion].

Very truly yours,

THE BANK OF NEW YORK TRUST COMPANY, N.A., as Trustee

By _____________ __

Name ---------------------------Title-----------------------

E-16

EXHIBIT 5 TO THE LETTER OF CREDIT

INSTRUCTION TO TRANSFER

Dexia Credit Local, New York Branch

Re: Irrevocable Transferable Direct-Pay Letter of Credit No. DCL 0805450

Dear Ladies and/or Gentlemen:

For value received, the undersigned beneficiary hereby irrevocably instructs you to transfer to:

(Name of Transferee)

(Address)

all rights of the undersigned beneficiary to draw under the above-captioned Letter of Credit (the "Letter of Credit"). The transferee has succeeded the undersigned as Trustee under the Trust Agreement dated as of May I, 2008, between The Bank ofNew York Trust Company, N.A., as Trustee, and the Roseville Finance Authority (the "Authority").

By this transfer, all rights of the undersigned beneficiary in the Letter of Credit are transferred to the transferee and the transferee shall hereafter have the sole rights as beneficiary thereof; provided, however, that no rights shall be deemed to have been transferred to the transferee until such transfer complies with the requirements of the Letter of Credit pertaining to transfers .

. The Letter of Credit is returned herewith and in accordance therewith we ask that this transfer be effected.

Very truly yours,

THE BANK OF NEW YORK TRUST COMPANY, N.A., as Trustee

By __________________________ __ Name ______________________________ __ Title ______________ _

E-17

EXHIBIT 6 TO THE LETTER OF CREDIT

TERMINATION EVENT OF DEFAULT NOTICE ELECTRIC SYSTEM REVENUE

REFUNDING CERTIFICATES OF PARTICIPATION

$90,000,000 SERIES 2008A

CITY OF ROSEVILLE

$64,500,000 SERIES 2008B

CITY OF ROSEVILLE

_ The undersigned, a duly authorized officer of Dexia Credit Local, New York Branch (the "Bank") hereby gives notice to The Bank of New York Trust Company, N.A. (the "Trustee") with reference to Irrevocable Transferable Direct-Pay Letter of Credit No. DCL 0805450 (the "Letter of Credit"; any capitalized term used herein and not defined herein shall have its respective meaning as set forth in the Letter of Credit) issued by the Bank in favor of the Trustee, that:

The Bank hereby gives notice, · pursuant to Section 13(b) of the Reimbursement Agreement, to the Trustee that an Event of Default has occurred and is continuing under the Reimbursement Agreement, and that in accordance with the terms of the Letter of Credit, the Letter of Credit' shall automatically . terminate on the Expiration Date, which in· the case of this Termination Event of Default Notice shall be the first to occur .of (a) the· date ~hich is seven (7) · calendar. days after-the Trustee has received this Termination Event of Default Notice, or (b) the date,' following receipt of this Termination Event of Default . ~·· . . Notice, upon which the, Trustee has drawn upon the Letter of Credit the amount

. required thereby and as permitted under the Letter of Credit and the proceeds of · · the drawing have been distributed to the Trustee.

Pursuant to Section 13(b) of the Reimbursement Agreement, the Trustee is directed to draw on the Letter of Credit and purchase all outst~nding Certificates.

IN WITNESS WHEREQF, the Bank,has executed and delivered this Termination Event of Default Notice as of the __ day of , 20_.

DEXIA CREDIT LOCAL, New York Branch

By _____________ _ Name ____________________________ _

.:Title ______________ _

E-18

EXHIBIT 7 TO THE LETTER OF CREDIT

NOTICE OF VOLUNTARY TERMINATION ELECTRIC SYSTEM REVENUE

REFUNDING CERTIFICATES OF PARTICIPATION

$90,000,000 SERIES 2008A

CITY OF ROSEVILLE

$64,500,000 SERIES 20088

CITY OF ROSEVILLE

In accordance with instructions from an Authorized Representative of the City of Roseville (the "City"), The Bank of New York Trust Company, N.A. (the "Trustee") hereby gives notice to Dexia Credit Local, New York Branch (the "Bank"), in reference to Irrevocable Transferable Direct-Pay Letter of Credit No. DCL 0805450 issued by the Bank in favor of the Trustee (the "Letter of Credit," any capitalized term used herein and not defined herein shall have its respective meaning as set forth in the Letter of Credit), that:

(i) the City hereby exercises its right of Voluntary Termination on and subject to the terms of the Letter of Credit and the Reimbursement Agreement;

(ii) such Voluntary Termination shall be effective as of .._ _____ , 20_], which is a date not less than ten (10) Business Days "from the date hereof.

IN WITNESS WHEREOF, the Trustee has executed and delivered this Notice as of the __ day of , 20_.

Very truly yours,

THE BANK OF NEW YORK TRUST COMPANY, N.A., as Trustee

By ______________ _ Name ______________ _

Title---------------

E-19

EXHIBIT 8 TO THE LETTER OF CREDIT

NOTICE OF NON~REINSTATEMENT ELECTRIC SYSTEM REVENUE

REFUNDING CERTIFICATES OF PARTICIPATION

$90,000,000 SERIES 2008A

CITY OF ROSEVILLE

$64,500,000 SERIES 2008B

CITY OF ROSEVILLE

The undersigned, a duly authorized officer of Dexia Credit Local, New York Branch (the "Bank") hereby gives notice to The Bank of New York Trust Company, N.A. (the "Trustee") with reference to Irrevocable Transferable Direct-Pay Letter of Credit No. DCL 0805450 (the "Letter of Credit"; any capitalized term used herein and not defined herein shall have its respective meaning as set forth in the Letter of Credit) issued by the Bank in favor of the Trustee, that:

The Bank hereby gives notice to the Trustee pursuant to the terms of the Letter of Credit that, following a drawing under the Letter of Credit to pay scheduled interest on the Certificates, the amount so drawn shall not be restored to the amount available to be drawn under the Letter of Credit in respect of payment of interest on the-Certificates (including the portion of the purchase price thereof representing interest thereon) accmed on or prior to the maturity thereof, because a previous drawing has been made under the Letter of Credit for which the Bank has "not been reimbursed in full when due by the City. .

IN WITNESS WHEREOF, the Bank has executed and delivered this Notice as of the __ day of , 20_.

DEXIA CREDIT LOCAL, New York Branch

By _____________ __ Name ___________________________ __

Title--------------------------

E-20

EXHIBIT 9 TO THE LETTER OF CREDIT

NOTICE OF RESTORATION ELECTRIC SYSTEM REVENUE

REFUNDING CERTIFICATES OF PARTICIPATION

$90,000,000 SERIES 2008A

CITY OF ROSEVILLE

$64,500,000 SERIES 2008B

CITY OF ROSEVILLE

The undersigned, a duly authorized officer of Dexia Credit Local, New York Branch (the "Bank") hereby gives notice to The Bank of New York Trust Company, N .A. (the "Trustee") with reference to Irrevocable Transferable Direct-Pay Letter of Credit No. DCL 0805450 (the "Letter of Credit"; any capitalized term used herein and not defined herein shall have its respective meaning as set forth in the Letter of Credit) issued by the Bank in favor of the Trustee, that:

The Bank hereby gives notice to the Trustee pursuant to the terms of the Letter of Credit that, following a drawing to pay the purchase price of Eligible Certificates, the City has repaid such drawing in full to us, in the aggregate amount of $ Dollars), of which (a) an aggregate amount of$ Dollars) is being restored with respect to principal of such Eligible Certificates and (b) an aggregate amount of $ J Dollars) is being restored with respect to interest on the Eligible Certificates, and the portion of the purchase price of such Eligible Certificates allocated to the principal of and accrued interest on such Eligible Certificates so drawn is hereby restored to the amount of principal and interest, respectively, available to be drawn hereunder.

IN WITNESS WHEREOF, the Bank has executed and delivered this Notice as of the __ day of , 20_.

DEXIA CREDIT LOCAL, New York Branch

By ___________________ _ Name ____________________________ __

Title-----------------------------

E-21

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APPENDIX F

DTC AND THE BOOK-ENTRY ONLY SYSTEM

The following description of the Depository Trust Company ("DTC'), the procedures and record keeping with respect to beneficial ownership interests in the Certificates, payment of principal, interest and other payments on the Certificates to DTC Participants or Beneficial Owners, confirmation and transfer of beneficial ownership interest in the Certificates and other related transactions by and between D TC, the D TC Participants and the Beneficial Owners is based solely on information provided by DTC . . Accordingly, no representations can be made concerning these matters and neither the DTC Participants nor the Beneficial Owners should rely on the foregoing information with respect to such matters, but should instead confirm the same with DTC or the DTC Participants, as the case may be.

Neither the issuer of the Certificates (the "Issuer') nor the trustee, fiscal agent or paying agent appointed with respect to the Certificates (the "Agent') take any responsibility for the information contained in this Appendix.

No assurances can be given that DTC, DTC Participants or Indirect Participants will distribute to the Beneficial Owners (a) payments of interest, principal or premium, if any, with respect to the Certificates, (b) certificates representing ownership interest in or other confirmation or ownership interest in the Certificates, or (c) redemption or other notices sent to DTC or Cede & Co., its nominee, as the registered owner of the Certificates, or that they will so do on a timely basis, or that DTC, DTC Participants or DTC Indirect Participants will act in the manner described in this Appendix. The current "Rules" applicable to DTC are on file with the Securities and Exchange Commission and the current "Procedures" of DTC to be followed in dealing with DTC Participants are on file with DTC.

1. The Depository Trust Company ("DTC"), New York, NY, will act as securities depository for the securities (the "Securities"). The Securities 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 Security certificate will be issued for each issue of the Securities, each in the aggregate principal amount of such issue, and will be deposited with DTC. If, however, the aggregate principal amount of any issue exceeds $500 million, one certificate will be issued with respect to each $500 million of principal amount, and an additional certificate will be issued with respect to any remaining principal amount of such issue.

2. 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 17 A 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

F-1

the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing ·corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has Standard & Poor's highest rating: AAA. 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 and www.dtc.org. The infoimation contained on this Internet site is not incorporated herein by reference.

3. Purchases of Securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the Securities on DTC's records. The ownership interest of each actual purchaser of each Security ("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 Securities are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Securities, except in the event that use of the book-entry system for the Securities is discontinued.

4. To facilitate subsequent transfers, all Securities 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 Securities with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Securities; DTC's records reflect only the identity of the Direct Participants to whose accounts such Securities 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. ·

5. 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 Securities may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Securities, such as redemptions, tenders, defaults, and proposed amendments to the Security documents. For example, Beneficial Owners of Securities may wish to ascertain that the nominee holding the Securities 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.

6. Redemption notices shall be sent to DTC. If less than all of the Securities within an issue are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.

1. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Securities unless authorized by a Direct Participant in accordance with DTC's MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to Issuer as soon as

F-2

possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy).

8. Redemption proceeds, distributions, and dividend payments on the Securities 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 Issuer or Agent, 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, Agent, or Issuer, 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 Issuer or Agent, 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.

9. DTC may discontinue providing its services as depository with respect to the Securities at any time by giving reasonable notice to Issuer or Agent. Under such circumstances, in the event that a successor depository is not obtained, Security certificates are required to be printed and delivered.

10. Issuer may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Security certificates will be printed and delivered to DTC.

11. The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that Issuer believes to be reliable, but Issuer takes no responsibility for the accuracy thereof.

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