Stinson Securities, LLC - CA.gov

NEW ISSUE -BOOK-ENTRY ONLY RATINGS: S&P: A+ (Underlying)

See "RATINGS" herein.

In the opinion of Robert M Haight, Special Counsel, interest with respect to the Certificates is exempt from California personal income taxes and interest with respect to the Certificates is not excludable from gross income of the owners thereof for federal income tax purposes. See "TAX MATTERS" herein.

Dated: Date of Delivery

$9,500,000 TAXABLE CERTIFICATES OF PARTICIPATION

(2019 CalPERS Financing Project) Evidencing Direct, Undivided Fractional Interests of the Owners Thereof in Lease Payments to be Made by the

CITY OF SHASTA LAKE (Shasta County, California)

as the Rental for Certain Property Pursuant to a Lease Agreement with the Public Property Financing Corporation of California

Due: July 15, as shown on the inside cover

The $9,500,000 Taxable Certificates of Participation (2019 CalPERS Financing Project) (the "Certificates"), are being executed and delivered to provide funds to (a) refinance a portion of the City's unfunded actuarial accrued liability with respect to its payment obligations to the California Public Employees' Retirement System, (b) fund capitalized interest with respect to the Certificates through July 15, 2020, and ( c) pay the costs of the execution and delivery of the Certificates, including purchasing a municipal bond insurance policy. See "FINANCING PLAN" herein. The Certificates will evidence direct, undivided fractional interests of the owners thereof in Lease Payments (as defined herein) to be made by the City of Shasta Lake (the "City") to the Public Property Financing Corporation of California (the "Corporation") for the use and occupancy of the Property (as defined herein) under and pursuant to a Lease Agreement, dated as of September 15, 2019, by and between the Corporation and the City (the "Lease Agreement"). The Corporation will assign its right to receive Lease Payments from the City under the Lease Agreement and its right to enforce payment of the Lease Payments when due or otherwise protect its interest in the event of a default by the City thereunder to MUFG Union Bank, San Francisco, California, as trustee (the "Trustee"), for the benefit of the registered owners of the Certificates.

The Certificates will be executed and delivered in book-entry form only, pursuant to a Trust Agreement, dated as of September 15, 2019, by and among the City, the Corporation and the Trustee, and will be initially registered in the name of Cede & Co., as nominee of The Depository Trust Company (referred to herein as "DTC"). Purchasers of the Certificates (the "Beneficial Owners") will not receive physical certificates representing their interest in the Certificates. Interest with respect to the Certificates accrues from their date of delivery and is payable semiannually on each July 15 and January 15, commencing July 15, 2020. The Certificates may be executed and delivered in denominations of $5,000 or any integral multiple thereof. Payments of principal and interest with respect to the Certificates will be paid by the Trustee to DTC for subsequent disbursement to DTC Participants who will remit such payments to the Beneficial Owners of the Certificates. (See "THE CERTIFICATES-Book-Entry-Only System" herein).

Under existing law, interest on the Certificates is exempt from State of California personal income taxes. Interest on the Certificates is not excludable from gross income for federal income tax purposes. See "Tax Matters" herein.

The Certificates are subject to redemption prior to maturity. See "THE CERTIFICATES-Redemption" herein.

The City will covenant in the Lease Agreement to make all Lease Payments due under the Lease Agreement, subject to abatement during any period in which by reason of damage or destruction of the Property, or by reason of eminent domain proceedings with respect to the Property, there is substantial interference with the use and occupancy by the City of the Property or any portion thereof. The City will covenant in the Lease Agreement to take such action as may be necessary to include all Lease Payments in its annual budgets and to make the necessary annual appropriations for all such Lease Payments.

NEITHER THE CERTIFICATES NOR THE OBLIGATION OF THE CITY TO MAKE LEASE PAYMENTS UNDER THE LEASE AGREEMENT CONSTITUTES A DEBT OR INDEBTEDNESS OF THE CITY OR THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATIONS OR RESTRICTION OR AN OBLIGATION FOR WHICH THE CITY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE CITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION.

MATURITY SCHEDULE SEE THE INSIDE COVER

The cover page contains certain information for general reference only. It is not a summary of all the provisions of the Certificates. Investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision. See "RISK FACTORS" herein for a discussion of special risk factors that should be considered, in addition to the other matters set forth herein, in evaluating the investment quality of the Certificates.

The Certificates will be offered when, as and if delivered and received by the Underwriter subject to approval by Robert M Haight, Santa Cruz, California, Special Counsel, and certain other conditions. Certain legal matters will be passed upon for the City by Robert M Haight, Santa Cruz, California, Disclosure Counsel, and by Kenny and Norine, Redding, California, the City Attorney. It is anticipated that the Certificates will be available for delivery through the facilities of DTC on or about October 8, 2019.

Stinson Securities, LLC Dated: October 8, 2019

$ 9,500,000 TAXABLE CERTIFICATES OF PARTICIPATION


CITY OF SHASTA LAKE (Shasta County, California)


$ 3,330,000.00 Serial Certificates

CUSIP Prefix: 820184

Maturity Principal

(July 15) Amount Interest Rate Yield Price CUSIP Suffixt

2022 $ 380,000 2.350% 2.350% 100 BVO

2023 $ 390,000 2.450% 2.450% 100 BW8

2024 $ 400,000 2.600% 2.600% 100 BX6

2025 $ 410,000 2.675 % 2.675 % 100 BY4

2026 $ 420,000 2.800% 2.800% 100 BZl

2027 $ 430,000 2.900% 2.900% 100 CA5

2028 $ 445,000 2.950% 2.950% 100 CB3

2029 $ 455,000 3.000% 3.000% 100 CCl

$~6~5~0~,0~0~0~-~2~.0"-'5~0'-% Term Certificates maturing July 15, 2021, Price: 99.739-CUSIPt BU2

$-=2=,5=2=0=--·=0-=-0-=-0-~3'-'-.4"""5"-'0'-% Term Certificates maturing July 15, 2034, Price: 97.728-CUSIPt CD9

$_3~10_0_0~1_0_0_0 __ 3_.7_0_0_% Term Certificates maturing July 15, 2039, Price: 97.257-CUSIPt CE7

tCopyright 2018, American Bankers Association. CUSIP® is a registered trademark of the American Bankers Association. CUSIP data herein is provided by CUSIP

Global Services, operated by S&P Capital IQ. This data is not intended to create a database and does not serve in any way as a substitute for CUSIP Global

Services. CUSIP numbers have been assigned by an independent company not affiliated with the City and are included solely for the convenience of the

registered owners of the Certificates. Neither the City nor the Underwriter is responsible for the selection or uses of these CUSIP numbers and no

representation is made as to their correctness on the Certificates or as included herein. The CUSIP number for a specific maturity is subject to being

changed after the delivery of the Certificates as a result of various subsequent actions including, but not limited to, a refunding in whole or in part or as a

result of the procurement of secondary market portfolio insurance or other similar enhancement by investors that is applicable to all or a portion of

certain maturities of the Certificates.

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

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

The information set forth herein has been obtained from the City and from other sources and is believed to be reliable but is not guaranteed as to accuracy or completeness. The information and expressions of opinions herein are subject to change without notice and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the City since the date hereof. This Official Statement is submitted in connection with the sale of the Certificates referred to herein and may not be reproduced or used, in whole or in part, for any other purpose, unless authorized in writing by the City. All summaries of the Certificates, the Lease Agreement, the Trust Agreement, the Assignment Agreement, the Site Lease Agreement, or other documents, are made subject to the provisions of such documents and do not purport to be complete statements of any or all of such provisions. Reference is hereby made to such documents on file with the Director of Finance for further information. See "INTRODUCTION-Other Information."

The Underwriter has provided the following sentence for inclusion in this Official Statement: The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CERTIFICATES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE UNDERWRITER MAY OFFER AND SELL THE CERTIFICATES TO CERTAIN DEALERS, INSTITUTIONAL INVESTORS AND OTHERS AT PRICES LOWER THAN THE PUBLIC OFFERING PRICES STATED ON THE INSIDE COVER PAGE HEREOF AND SUCH PUBLIC OFFERING PRICES MAY BE CHANGED FROM TIME TO TIME BY THE UNDERWRITER.

Certain statements included or incorporated by reference in this Official Statement constitute "forward-looking statements." Such statements are generally identifiable by the terminology used such as "plan," "expect," "estimate," "budget" or other similar words. The achievement of certain results or other expectations contained in such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements described to be materially different from any future results, performance or achievements expressed or implied by such forwardlooking statements. No assurance is given that actual results will meet the City's forecasts in any way. Neither the City nor the Corporation is obligated to issue any updates or revisions to the forward-looking statements if or when its expectations, or events, conditions or circumstances on which such statements are based occur or do not occur.

The execution, sale and delivery of the Certificates has not been registered under the Securities Act of 1933 or the Securities Exchange Act of 1934, both as amended, in reliance upon exemptions provided thereunder by Sections 3(a) and 3(a)(12), respectively, for the issuance and sale of municipal securities.

The City maintains a website. Unless specifically indicated otherwise, the information presented on such website is not incorporated by reference as part of this Official Statement and should not be relied upon in making investment decisions with respect to the Certificates.

[THIS PAGE INTENTIONALLY LEFT BLANK]

TABLE OF CONTENTS

INTRODUCTION ................................................................ 1 Employee Retirement Plans 26 General ........................................................................... 1 Other Post-Employment Benefits .................................. 29 The City .......................................................................... 2 Short-Term General Fund-Secured Obligations ............ 31 Source of Payment for the Certificates ............................ 2 Long-Term General Fund-Secured Obligations ............ 31 Redemption .................................................................... 2 Other Obligations.. 31 Continuing Disclosure.. 2. Overlapping Debt ......................................................... 31 Summaries of Documents ............................................... 2 Other Information ............................................................ 3

THE CORPORATION ........................................................ 33

ESTIMATED SOURCES AND USES OF FUNDS .............. 3

PLAN OF FINANCING ........................................................ 3

RISK FACTORS ................................................................ 33 Lease Payments Are Not Debt ..................................... 33 Valid and Binding Covenant to Budget and Appropriate. 34

THE PROPERTY ................................................................ 4 Additional Obligations of the City ................................... 34

DEBT SERVICE SCHEDULE ............................................. 5 ~·~~---·································································~

No Acceleration Upon Default ...................................... 34 THE CERTIFICATES .......................................................... 6 Risk of Uninsured Loss ................................................. 34

~nfil~ ........................................................................... 6 Eminent Domain ........................................................... 35 Redemption .................................................................... 6 Hazardous Substances ................................................ 35 Transfer and Exchange of Certificates ............................ 8 Natural Calamities ........................................................ 35 Book-Entry Only System.. 9 Bankruptcy.. 36

SOURCE OF PAYMENT FOR THE CERTIFICATES ........ 9 Pension Benefit Liability ............................................... 36

General ......................................................................... 9 Early Redemption Risk ................................................. 36

Lease Payments; Covenant to Appropriate ................... 10 Insurance ...................................................................... 10

Limitations on Remedies .............................................. 37 Dependence on State for Certain Revenues ................. 37

Abatement .................................................................... 11 Secondary Market Risk ................................................ 37

Eminent Domain ........................................................... 11 Changes in Law ........................................................... 38

Reserve Fund ............................................................... 11 STATE BUDGET INFORMATION ..................................... 38 Optional Redemption .................................................... 11 2018-19 State Budget .................................................. 38 Mandatory Redemption from Net Proceeds of Insurance, Title Insurance or Eminent Domain ............................. 12

Future State Budgets .................................................... 39 CONSTITUTIONAL AND STATUTORY LIMITATIONS ON

Substitution or Release of Site or Facility ....................... 12 TAXESANDAPPROPRIATIONS ................................. 39 Events of Default and Remedies .................................... 14 Article XIIIA of the California Constitution ...................... 39 Amendment of Lease Agreement .................................. 14 Article XI 11 B of the California Constitution ...................... 40

THE CITY ......................................................................... 16 Articles XIIIC and XIIID of the California Constitution .... 41

CITY FINANCIAL INFORMATION .................................... 16 Financial Statements and Budgetary Process ............... 16 City Financial Management Policies .............................. 20 Current Investments ...................................................... 20

Proposition 62 .............................................................. 41 Proposition 1A; Proposition 22 ...................................... 42 Proposition 26 .............................................................. 42 Possible Future Initiatives ............................................. 43

Principal Sources of General Fund Revenues ............... 20 ABSENCE OF LITIGATION .............................................. .43

Property Taxes ............................................................. 21 CONTINUING DISCLOSURE ........................................... 43 Assessed Valuation ...................................................... 22 Sales and Use Taxes .................................................... 24

LEGAL MATTERS ............................................................ 44

Motor Vehicle In-Lieu Tax ............................................. 24 TAX MATTERS ................................................................ 44

Other Revenue Sources ............................................... 24 UNDERWRITING ............................................................. .44

OTHER FINANCIAL INFORMATION ................................ 26 RATINGS ......................................................................... .44 Labor Relations ............................................................. 26 FINANCIAL STATEMENTS .............................................. .45 Risk Management ......................................................... 26

ADDITIONAL INFORMATION ........................................... 45

APPENDIX A

APPENDIX B

APPENDIX C

APPENDIX D

APPENDIX E

APPENDIX F

GENERAL, ECONOMIC AND DEMOGRAPHIC INFORMATION RELATING TO THE CITY AND THE COUNTY

COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY FOR THE YEAR ENDED JUNE 30, 2018 FORM OF OPINION OF SPECIAL COUNSEL

SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS

DTC'S BOOK-ENTRY ONLY SYSTEM

FORM OF CONTINUING DISCLOSURE CERTIFICATE

LOCATION MAP OF THE CITY OF SHASTA LAKE

Shasta County

Shasta County

/ Citv of Shasta Lake .,:;r"'!f'f!

City of Redding

CITY HALL COMPLEX BUILDINGS

THE LEASED PROPERTIES

CITY OF SHASTA LAKE 4477 Main Street

Shasta Lake California 96109

CITY COUNCIL MEMBERS

Greg Watkins,

Janice Powell,

Larry Farr,

Pamelyn Morgan,

Rick Kern,

John Duckett,

Jessaca Lugo,

Wendy Howard,

Kurt Swanson,

CITY OFFICIALS

John Kenny Esq.,

Toni Coates,

Mayor Vice Mayor

Councilmember

Councilmember

Councilmember

City Manager

Asst. City Manager

Finance Director

Finance and General

Services Manager

City Attorney

City Clerk

SPECIAL SERVICES

Special Counsel and Disclosure Counsel Robert M. Haight,

Santa Cruz, California

Trustee MUFG Union Bank, N.A., San Francisco, California

$ 9,500,000 TAXABLE CERTIFICATES OF PARTICIPATION


CITY OF SHASTA LAKE {Shasta County, California)


INTRODUCTION

This introduction does not purport to be complete and reference is made to the body of this Official Statement, appendices and the documents referred to herein for more complete information with respect to matters concerning the captioned Certificates. Potential investors are encouraged to read this entire Official Statement. Capitalized terms used and not defined in this Introduction shall have the meanings assigned to them elsewhere in this Official Statement and in APPENDIX D-SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS-DEFINITIONS.

General

This Official Statement, including the cover page, the inside cover page and appendices hereto, is provided to furnish information in connection with the execution, sale and delivery of $9,500,000 City of Shasta Lake Taxable Certificates of Participation (2019 Cal PERS Financing Project) (the "Certificates"). The Certificates are being executed and delivered pursuant to a Trust Agreement, dated as of September 15, 2019 (the "Trust Agreement"), by and among the City of Shasta Lake (the "City"), the Public Property Financing Corporation of California (the "Corporation") and MUFG Union Bank, N.A., as trustee (the "Trustee").

The proceeds of the Certificates will provide funds to (a) refinance a portion of the City's unfunded actuarial accrued liability with respect to its payment obligations to the California Public Employees' Retirement System ("CalPERS"), (b) fund a reserve fund for the Certificates, and (c) pay delivery costs incurred in connection with the execution, delivery and sale of the Certificates. See "PLAN OF FINANCING."

The City will lease certain existing property (the "Property") to the Corporation pursuant to a Site Lease, dated as of September 15, 2019 (the "Site Lease"). The Corporation will lease the Property back to the City pursuant to a Lease Agreement, dated as of September 15, 2019 (the "Lease Agreement"). The Certificates represent direct, undivided fractional interests of the owners thereof in the lease payments (the "Lease Payments") to be made by the City to the Corporation pursuant to the Lease Agreement. See "SOURCE OF PAYMENT FOR THE CERTIFICATES" and "THE PROPERTY."

Interest with respect to the Certificates is payable on July 15 and January 15, of each year, commencing July 15, 2020. The Certificates will mature in the amounts and on the dates and be payable at the interest rates shown on the inside cover of this Official Statement. See "THE CERTIFICATES."

The Certificates will be delivered in fully registered form only, in the name of Cede & Co., as nominee of the Depository Trust Company, New York, New York ("OTC"). OTC will act as the depository for the Certificates and all payments due with respect to the Certificates will be made to Cede & Co. Ownership interests in the Certificates may be purchased only in book-entry form. See "THE CERTIFICATES-BookEntry Only System" and APPENDIX E-DTC'S BOOK-ENTRY ONLY SYSTEM.

The City

The City of Shasta Lake was incorporated on July 2, 1993, and has an estimated population of 10, 190. It is located in west central Shasta County and is north of Redding, population 90,755, and thirty miles north of Red Bluff, population 14, 157. Shasta Lake is situated along Interstate 5 and is 170 miles north of Sacramento, the state capital. The City is a general law city and it employs the council- manager form of government. The governing council is responsible, among other things, for passing ordinances, adopting the budget, and appointing committees. The Council appoints a City Attorney as legal counsel and a City Manager who is the administrative head of the government.

See "THE CITY", "CITY FINANCIAL INFORMATION" and "APPENDIX A-GENERAL, ECONOMIC INFORMATION RELATING TO THE CITY".

Source of Payment for the Certificates

The Certificates represent direct, undivided interests of the Owners thereof in the Lease Payments to be paid by the City to the Corporation pursuant to the Lease Agreement. The Lease Payments are payable by the City from its general fund for the right to use and possess the Property. The Lease Payments are subject to abatement during any period in which by reason of damage or destruction there is substantial interference with the use and occupancy by the City of the Property or any portion thereof. The City will covenant under the Lease Agreement to take such action as necessary to include the Lease Payments in its annual budget and to make all necessary appropriations therefor (subject to abatement under certain circumstances described in the Lease Agreement). Pursuant to an Assignment Agreement, dated as of September 15, 2019 (the "Assignment Agreement"), by and between the Corporation and the Trustee, the Corporation will assign to the Trustee, for the benefit of the Owners of the Certificates, certain of its rights under the Lease Agreement, including its right to receive Lease Payments from the City. See "SOURCE OF PAYMENT FOR THE CERTIFICATES" and "RISK FACTORS."

NEITHER THE CERTIFICATES NOR THE OBLIGATION OF THE CITY TO MAKE LEASE PAYMENTS UNDER THE LEASE AGREEMENT CONSTITUTES A DEBT OR INDEBTEDNESS OF THE CITY OR THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATIONS OR RESTRICTION OR AN OBLIGATION FOR WHICH THE CITY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE CITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION

Redemption

The Certificates are subject to optional and mandatory redemption. See "THE CERTIFICATESRedemption."

Continuing Disclosure

The City will covenant in a Continuing Disclosure Certificate to prepare and deliver an annual report to the Municipal Securities Rulemaking Board (the "MSRB") through the MSRB's Electronic Municipal Market Access system. See "CONTINUING DISCLOSURE" and APPENDIX F- FORM OF CONTINUING DISCLOSURE CERTIFICATE.

Summaries of Documents

This Official Statement contains descriptions of the Certificates, the Trust Agreement, the Site Lease, the Lease Agreement, the Assignment Agreement and various other agreements and documents. The descriptions and summaries of documents herein do not purport to be comprehensive or definitive and reference is made to each such document for the complete details of all terms and conditions. All statements herein are qualified in their entirety by reference to each such document and, with respect to certain rights and remedies, to laws and principles of equity relating to or affecting creditors' rights generally. Copies of the various documents described herein are available for inspection during business hours at the corporate trust office of the Trustee at 350 California, 17th Floor, San Francisco, CA 94104.

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Other Information

This Official Statement speaks only as of its date as set forth on the cover hereof, the information and expressions of opinion herein are subject to change without notice and neither the delivery of this Official Statement nor any sale made hereunder shall under any circumstances create any implication that there has been no change in the affairs of the City since the date hereof.

Unless otherwise expressly noted, all references to internet websites in this Official Statement, including without limitation, the City's website, are shown for reference and convenience only and none of their content is incorporated herein by reference. The information contained within such websites has not been reviewed by the City or the Underwriter and neither the City nor the Underwriter makes any representation regarding the accuracy or completeness of the information therein.

ESTIMATED SOURCES AND USES OF FUNDS

The following table shows the estimated sources and uses of the proceeds from the sale of the Certificates:

Sources

Par Amount of the Certificates

Less: Original Issue Discount

Total Sources

Uses

Payment to CalPERS

Deposit to Reserve Fund

Deposit to Delivery Cost Fund<1l

Total Uses

$ 9,500,000.00

$ 141,240.90

$ 9,358,759.10

$ 8,383,292.00

$ 670,465.00

$ 304,402.10

$ 9,358,759.10

111 Delivery Costs include the Underwriter's discount, fees and expenses of the special counsel, disclosure counsel, Trustee's expenses, printing expenses, rating fees, title insurance, and other costs.

PLAN OF FINANCING

The City is a member of Cal PERS and, as such, is obligated by the Public Employees' Retirement Law, constituting Part 3 of Division 5 of Title 2 of the California Government Code (the "Retirement Law''), and the contract between the Board of Administration of CalPERS and the City Council, dated December 30, 2012, as amended (the "CalPERS Contract"), to make contributions to CalPERS to (a) fund pension benefits for City employees who are members of CalPERS, (b) amortize the unfunded actuarial liability (the "Unfunded Liability") with respect to such pension benefits, and (c) appropriate funds for the purposes described in (a) and (b).

Pursuant to the Retirement Law, the City Council is required to make the appropriations to pay the amounts required to be paid by the City pursuant to the Retirement Law, including the Unfunded Liability that is evidenced by the Certificates. See "SECURITY FOR THE BONDS."

In August 2018, CalPERS calculated the amount of the Unfunded Liability for the City's Miscellaneous Plan based on the actuarial valuation reports as of June 30, 2017 (the "2018 CalPERS

3

Reports"), which is the most recent actuarial valuation performed by CalPERS. The funding ratio as of June 30, 2017 based on the market value of assets and the Unfunded Liability as of June 30, 2017 and the estimated Unfunded Liability as of June 30, 2017 is as follows:

Miscellaneous Plan

CITY OF SHASTA LAKE CalPERS FUNDING RATIO

As of June 30, 2017

Funded Ratio Unfunded Liability as of June 30, 2017 as of June 30, 2017

77.1% 7,240,188

Source: August 2018 Cal PERS Annual Valuation Report as of June 30, 2018

Estimated Unfunded Liability as of September 30, 2017

7,600,000

Proceeds of the Certificates will be used to (a) fund substantially all of the City's estimated Unfunded Liability for the Miscellaneous Plan as of September 26, 2019, (b) fund Reserve Fund and (c) pay the delivery costs incurred in connection with the execution, delivery and sale of the Certificates.

Going forward, CalPERS will be implementing changes in the discount rates used to calculate the Unfunded Liability for the fiscal year ending June 30, 2020 causing a new Unfunded Liability to be created when CalPERS releases its next report in August 2019. With respect to the future new Unfunded Liability, the City could choose to pay it in a lump sum amount or in installments when due to CalPERS, or the City could choose to issue additional pension obligation bonds. Failure by CalPERS to achieve its target investment returns or certain future amendments to the CalPERS Contract which add additional value to any of the three plans in which the City participates could also generate additional Unfunded Liability for the City (which could be paid as described in the foregoing sentence).

THE PROPERTY

Pursuant to the Site Lease Facility, the City will lease the Property to the Corporation. Pursuant to the Lease Agreement, the Corporation will, in turn, lease the Property back to the City. See APPENDIX DSUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS-Site Lease and APPENDIX D-SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS-Lease Agreement.

The Property consists of the City's City Hall, Community Center, and Law Enforcement Center located on the Site at Shasta Lake, California, including the following improvements: all structures, building, and improvements located at the site, Shasta County Assessor's Parcel Number 005-280-030, and shown on the City Hall Complex Buildings above.

For a description of certain terms of the Lease Agreement see "SOURCE OF PAYMENT FOR THE CERTIFICATES" and APPENDIX D-SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS-LEASE AGREEMENT.

Pursuant to the Lease Agreement, the City may substitute the Property, in whole or in part, by other properties, upon the satisfaction of certain conditions. For more information regarding the substitution of property see "SOURCE OF PAYMENT FOR THE CERTIFICATES-Substitution or Release of Site or Facility" and APPENDIX D-SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS-Lease Agreement.

4

The City has not granted any security interest in the Property for the benefit of the Certificates and there is no remedy of foreclosure on the Property upon the occurrence of an Event of Default under the Lease Agreement. For a discussion of remedies upon an Event of Default under the Lease Agreement, see "RISK FACTORS-Limitations on Remedies."

DEBT SERVICE SCHEDULE

The following table shows the scheduled annual debt service for the Certificates:

Maturity Date Principal Interest Balance 07 /15/2020 $280,000 $232,468.40 $512,468.40 01/15/2021 148,192.50 07 /15/2021 370,000 148,192.50 666,385.00 01/15/2022 144,400.00 07 /15/2022 380,000 144,400.00 668,800.00 01/15/2023 139,935.00 07 /15/2023 390,000 139,935.00 669,870.00 01/15/2024 135,157.50 07 /15/2024 400,000 135,157.50 670,315.00 01/15/2025 129,957.50 07 /15/2025 410,000 129,957.50 669,915.00 01/15/2026 124,473.75 07 /15/2026 420,000 124,473.75 668,947.50 01/15/2027 118,593.75 07 /15/2027 430,000 118,593.75 667,187.50 01/15/2028 112,358.75 07 /15/2028 445,000 112,358.75 669,717.50 01/15/2029 105,795.00 07 /15/2029 455,000 105,795.00 666,590.00 01/15/2030 98,970.00 07 /15/2030 470,000 98,970.00 667,940.00 01/15/2031 90,862.50 07 /15/2031 485,000 90,862.50 666,725.00 01/15/2032 82,496.25 07 /15/2032 505,000 82,496.25 669,992.50 01/15/2033 73,785.00 07 /15/2033 520,000 73,785.00 667,570.00 01/15/2034 64,815.00 07 /15/2034 540,000 64,815.00 669,630.00 01/15/2035 55,500.00 07 /15/2035 555,000 55,500.00 666,000.00 01/15/2036 45,232.50 07 /15/2036 580,000 45,232.50 670,465.00 01/15/2037 34,502.50 07 /15/2037 600,000 34,502.50 669,005.00 01/15/2038 23,402.50 07 /15/2038 620,000 23,402.50 666,805.00 01/15/2039 11,932.50 07 /15/2039 645,000 11,932.50 668,865.00

$9,500,000 $3,713,193.40 $13,213,193.40

5

THE CERTIFICATES

General

The Certificates will be executed and delivered in the aggregate principal amount and will mature on the dates and interest with respect thereto will be payable at the rates per annum as set forth on the inside cover page of this Official Statement. The Certificates will be delivered in the form of fully registered Certificates without coupons in the denomination of $5,000 or any integral multiple thereof. Interest with respect to the Certificates will be calculated on the basis of a 360-day year of twelve 30-day months and will be payable on July 15 and January 15 of each year, commencing July 15, 2020 (each an "Interest Payment Date"), until maturity or earlier redemption thereof. The Certificates will be initially executed, delivered and registered in the name of "Cede & Co." as nominee of OTC and will be evidenced by one Certificate maturing on each of the maturity dates in a denomination corresponding to the total principal therein designated to mature on such date. See "THE CERTIFICATES-Book-Entry Only System" and APPENDIX E-DTC'C BOOK-ENTRY ONLY SYSTEM.

Interest with respect to the Certificates will be payable from the Interest Payment Date next preceding the date of execution thereof, unless: (i) it is executed as of an Interest Payment Date, in which event interest with respect thereto shall be payable from such Interest Payment Date; or (ii) it is executed after a Record Date (i.e., the close of business on the 15th day of the month preceding each Interest Payment Date, whether or not such 15th day is a Business Day) and before the following Interest Payment Date, in which event interest with respect thereto shall be payable from such Interest Payment Date; or (iii) it is executed on or before January 15, 2020, in which event interest with respect thereto will be payable from its dated date; provided, however, that if, as of the date of execution of any Certificate, interest is in default with respect to any Outstanding Certificates, interest represented by such Certificate shall be payable from the Interest Payment Date to which interest has previously been paid or made available for payment with respect to the Outstanding Certificates. Payment of defaulted interest shall be paid by check mailed to the Owners as of a special record date to be fixed by the Trustee in its sole discretion, notice of which shall be given to the Owners not less than ten (10) days prior to such special record date.

Payment of interest due with respect to any Certificate on any Interest Payment Date will be made to the person appearing on the Registration Books as the Owner thereof as of the Record Date immediately preceding such Interest Payment Date, such interest to be paid by check mailed on the Interest Payment Date by first class mail to such Owner at his or her address as it appears on the Registration Books as of such Record Date or, upon written request filed with the Trustee prior to the Record Date by an Owner of at least $1,000,000 in aggregate principal amount of Certificates, by wire transfer in immediately available funds to an account in the United States designated by such Owner in such written request. Any such written request shall remain in effect until rescinded in writing by the Owner. The principal and redemption price with respect to the Certificates at maturity or upon prior redemption shall be payable by check denominated in lawful money of the United States of America upon surrender of the Certificates at the Principal Corporate Trust Office.

Redemption

Optional Redemption. The Certificates maturing before July 15, 2029, are not subject to optional redemption prior to maturity. The Certificates maturing on and after July 15, 2029, are subject to optional redemption in whole or in part on any date in such order of maturity as shall be designated by the City (or, if the City shall fail to so designate the order of redemption, in pro rata among maturities) and by lot within a maturity, on or after July 15, 2029, at a redemption price equal to the principal amount of the Certificates to be redeemed, together with accrued interest, without premium, to the date fixed for redemption, from the proceeds of the optional prepayment of Lease Payments made by the City pursuant to the Lease Agreement.

Extraordinary Redemption from Net Proceeds of Insurance, Title Insurance, Condemnation or Eminent Domain Award. The Certificates are subject to mandatory redemption in whole or in part on any date from the Net Proceeds of an insurance, title insurance, condemnation, or eminent domain award to the extent credited towards the prepayment of the Lease Payments by the City pursuant to the Lease Agreement, at a redemption price equal to the principal amount thereof to be redeemed, together with accrued interest to the date fixed for redemption, without premium.

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Mandatory Redemption. The Certificates maturing on July 15, 2021, are subject to mandatory redemption in part on July 15, 2020, and on each July 15 thereafter, to and including July 15, 2021, from the principal components of scheduled Lease Payments required to be paid by the City pursuant to the Lease Agreement with respect to each such redemption date, at a redemption price equal to the principal amount thereof to be redeemed, together with accrued interest to the date fixed for redemption, without premium, as follows:

Year (July 15)

2020 2021

Principal Amount of Certificates to be Redeemed

$ 280,000 $ 370.000

The Certificates maturing on July 15, 2034, are subject to mandatory redemption in part on July 15, 2030, and on each July 15 thereafter, to and including July 15, 2034, from the principal components of scheduled Lease Payments required to be paid by the City pursuant to the Lease Agreement with respect to each such redemption date, at a redemption price equal to the principal amount thereof to be redeemed, together with accrued interest to the date fixed for redemption, without premium, as follows:

Year (July 15)

2030 2031 2032 2033 2034


$ 470,000 $ 485,000 $ 505,000 $ 520, 000 $ 540,000

The Certificates maturing on July 15, 2039, are subject to mandatory redemption in part on July 15, 2035, and on each July 15 thereafter, to and including July 15, 2039, from the principal components of scheduled Lease Payments required to be paid by the City pursuant to the Lease Agreement with respect to each such redemption date, at a redemption price equal to the principal amount thereof to be redeemed, together with accrued interest to the date fixed for redemption, without premium, as follows:

Year (July 15)

2035 2036 2037 2038 2039

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$ 555,000 $ 580,000 $ 600,000 $ 620,000 $ 645,000

In the event that the Trustee redeems Certificates in part but not in whole pursuant to subsections "Optional Redemption" or "Extraordinary Redemption from Net Proceeds of Insurance, Title Insurance, Condemnation or Eminent Domain Award" provisions provided above, the amount of the Certificates to be redeemed in each subsequent year pursuant to this Mandatory Redemption section shall be reduced to correspond to the principal components of the Lease Payments prevailing following such redemption as determined pursuant to the Lease Agreement

Selection of Certificates for Redemption. Whenever provision is made in the Trust Agreement for the redemption of Certificates and less than all of the Outstanding Certificates are to be redeemed, the Trustee will select Certificates for redemption from the Outstanding Certificates not previously called for redemption in such order of maturity as will be designated by the City (and, in lieu of such designation, pro rata among maturities) and by lot within a maturity. The Trustee will select Certificates for redemption within a maturity by lot in any manner which the Trustee will, in its sole discretion, deems appropriate. For purposes of such selection, Certificates will be deemed to be composed of $5,000 portions and any such portion may be separately redeemed. The Trustee will promptly notify the City in writing of the Certificates so selected for redemption. Selection by the Trustee of Certificates for redemption will be final and conclusive.

Notice of Redemption. Unless waived in writing by any Owner of a Certificate to be redeemed, notice of any such redemption will be given by the Trustee on behalf and at the expense of the City, by mailing a copy of a redemption notice by first class mail, postage prepaid, at least 20 days and not more than 60 days prior to the date fixed for redemption, to such Owner of the Certificate or Certificates to be redeemed at the address shown on the Registration Books or at such other address as is furnished in writing by such Owner to the Trustee; provided, however, that neither the failure to receive such notice nor any defect in any notice will affect the sufficiency of the proceedings for the redemption of the Certificates.

Any notice of optional redemption of the Certificates may be conditional and if any condition stated in the notice of redemption shall not have been satisfied on or prior to the redemption date, (i) said notice shall be of no force and effect, (ii) the City shall not be required to redeem such Certificates; (iii) the redemption shall be cancelled and (iv) the Trustee shall within a reasonable time thereafter give notice to the persons and in the manner in which the conditional notice of redemption was given, that such condition or conditions were not met and that the redemption was cancelled. The actual receipt by the owner of any Certificates of notice of such cancellation shall not be a condition precedent to cancellation, and failure to receive such notice or any defect in such notice shall not affect the validity of the cancellation.

Effect of Redemption. If notice of redemption has been given as described above, the Certificates or portions of Certificates so to be redeemed will, on the redemption date, become due and payable at the redemption price therein specified, and from and after such date, interest with respect to such Certificates or portions of Certificates will cease to be payable.

Partial Redemption of Certificate. Upon surrender of any Certificate redeemed in part only, the Trustee will execute and deliver to the Owner thereof a new Certificate or Certificates of authorized denominations equal in aggregate principal amount to the unredeemed portion of the Certificate surrendered and of the same interest rate and the same maturity.

Transfer and Exchange of Certificates

The registration of any Certificate may, in accordance with its terms, be transferred upon the Registration Books by the person in whose name it is registered, in person or by his or her attorney duly authorized in writing upon surrender of such Certificate for cancellation at the Principle Corporate Trust Office, accompanied by delivery of a written instrument of transfer in a form approved by the Trustee, duly executed. Whenever any Certificate or Certificates shall be surrendered for registration of transfer, the Trustee shall execute and deliver a new Certificate or Certificates for like aggregate principal amount in authorized denominations. The City shall pay any costs of the Trustee incurred in connection with such transfer, except that the Trustee may require the payment by the Certificate Owner requesting such transfer of any tax or other governmental charge required to be paid with respect to such transfer. The Trustee shall not be required to transfer (i) any Certificates or portion thereof during the period between the date fifteen (15) days prior to the date of selection of Certificates for redemption and such date of selection, or (ii) any Certificates selected for redemption.

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Certificates may be exchanged, upon surrender thereof, at the Principal Corporate Trust Office for a like aggregate principal amount of Certificates of other authorized denominations of the same maturity. Whenever any Certificate or Certificates shall be surrendered for exchange, the Trustee shall execute and deliver a new Certificate or Certificates for like aggregate principal amount in authorized denominations. The City shall pay any costs of the Trustee incurred in connection with such exchange, except that the Trustee may require the payment by the Certificate Owner requesting such exchange of any tax or other governmental charge required to be paid with respect to such exchange. The Trustee shall not be required to exchange (i) any Certificate or any portion thereof during the period between the date fifteen (15) days prior to the date of selection of Certificates for redemption and such date of selection, or (ii) any Certificate selected for redemption.

Book-Entry Only System

The Certificates will be initially executed, delivered and registered as one fully registered certificate for each maturity, without coupons, in the name of Cede & Co., as nominee of OTC. OTC will act as securities depository of the Certificates. Individual purchases may be made in book-entry form only, in the principal amount of $5,000 and integral multiples thereof. Purchasers will not receive physical certificates representing their interest in the Certificates purchased. Principal and interest will be paid to OTC which will in turn remit such principal and interest to its participants for subsequent disbursement to the beneficial owners of the Certificates as described herein. So long as DTC's book-entry system is in effect with respect to the Certificates, notices to Owners of the Certificates by the City or the Trustee will be sent to OTC. Notices and communication by OTC to its participants, and then to the beneficial owners of the Certificates, will be governed by arrangements among them, subject to then effective statutory or regulatory requirements. See APPENDIX E- DTC'S BOOK-ENTRY ONLY SYSTEM.

In the event that such book-entry system is discontinued with respect to the Certificates, the City will cause the Trustee to execute and deliver replacements in the form of registered certificates and, thereafter, the Certificates will be transferable and exchangeable on the terms and conditions provided in the Trust Agreement. In addition, the following provisions would then apply: Payment of interest due with respect to any Certificate on any Interest Payment Date will be made to the person appearing on the Registration Books as the Owner thereof as of the Regular Record Date immediately preceding such Interest Payment Date, such interest to be paid by check mailed on the Interest Payment Date by first class mail to such Owner at his or her address as it appears on the Registration Books as of such Regular Record Date or, upon written request filed with the Trustee prior to the Regular Record Date by an Owner of at least $1,000,000 in aggregate principal amount of Certificates, by wire transfer in immediately available funds to an account in the United States designated by such Owner in such written request. Any such written request will remain in effect until rescinded in writing by the Owner. The principal and redemption price with respect to the Certificates at maturity or upon prior redemption shall be payable by check denominated in lawful money of the United States of America upon surrender of the Certificates at the Principal Corporate Trust Office.

SOURCE OF PAYMENT FOR THE CERTIFICATES

General

Each Certificate represents a direct, undivided interest of the Owners in the Lease Payments. Pursuant to the Lease Agreement, the City will lease the Property from the Corporation and agree to make Lease Payments. See "THE PROPERTY." Upon satisfaction of certain conditions set forth in the Lease Agreement, the City may substitute the Property with other properties. See "Substitution or Release of Site or Facility."

As security for the Certificates, the Corporation will assign to the Trustee for the payment of principal and interest with respect to the Certificates, the Corporation's rights, title and interest in the Lease Agreement (with certain exceptions), including the right to receive Lease Payments to be made by the City under the Lease Agreement. The Lease Payments are payable by the City from any source of legally available funds.

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THE OBLIGATION OF THE CITY TO MAKE LEASE PAYMENTS UNDER THE LEASE AGREEMENT DOES NOT CONSTITUTE AN OBLIGATION OF THE CITY FOR WHICH THE CITY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE CITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. NEITHER THE CERTIFICATES NOR THE OBLIGATION OF THE CITY TO MAKE LEASE PAYMENTS UNDER THE LEASE AGREEMENT CONSTITUTES AN INDEBTEDNESS OF THE CITY OR THE STATE OR ANY OF ITS POLITICAL SUBDIVISIONS WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATIONS.

Lease Payments; Covenant to Appropriate

Pursuant to the Lease Agreement, the City has agreed to make Lease Payments for the lease of the Property. Lease Payments will be made by the City to the Trustee on July 1 and January 1 in each year, in advance of the corresponding July 15 and January 15 Interest Payment Dates. The City will also pay as additional payments ("Additional Payments"), amounts required for the payment of all costs and expenses incurred by the Corporation to comply with the provisions of the Trust Agreement or in connection with the execution and delivery of the Certificates. The City has covenanted under the Lease Agreement to take such action as may be necessary to include all Lease Payments in its annual budget and to make the necessary annual appropriations for all such payments. Under certain circumstances described under the Lease Agreement, however, Lease Payments are subject to abatement during periods of substantial interference with the City's use and occupancy of the Property or any portion thereof. See "SOURCE OF PAYMENT FOR THE CERTIFICATES

-Abatement."

Insurance

The City is required to keep or cause to be kept casualty insurance against loss or damage by fire and lightning, with extended coverage and vandalism and malicious mischief insurance, in an amount at least equal to the lesser of (i) 100% of the replacement cost (without deducting for depreciation) of the Property and (ii) the aggregate principal amount of Certificates at the time outstanding. Such insurance shall, as nearly as practicable, cover loss or damage by explosion, windstorm, riot, aircraft, vehicle damage, smoke and such other hazards as are normally covered by such insurance.

To insure against loss of rental income caused by perils mentioned above, the City is required to maintain, or cause to be maintained throughout the term of the Lease Agreement, rental interruption or use and occupancy insurance to cover loss, total or partial, of the use of any part of the Property as a result of any of the hazards described above in an amount at least equal to the maximum Lease Payments coming due and payable during any two consecutive fiscal years during the remaining term of the Lease Agreement.

Public liability and property damage insurance coverage is required in the minimum liability limits of $1,000,000 for personal injury or death of each person and $3,000,000 for personal injury or deaths of two or more persons in each accident or event, and in a minimum amount of $150,000 (subject to a deductible clause of not to exceed $250,000, or such higher amount as the City shall determine, provided that such higher deductible shall be considered a self-insured retention) for damage to property resulting from each accident or event. Such public liability and property damage insurance may, however, be in the form of a single limit policy in the amount of $3,000,000 covering all such risks. Such liability insurance may be maintained as part of or in conjunction with any other liability insurance coverage carried by the City and may be maintained in the form of insurance maintained through a joint exercise of powers authority created for such purpose or in the form of self-insurance by the City. The net proceeds of such liability insurance shall be applied toward extinguishment or satisfaction of the liability with respect to which the insurance proceeds shall have been paid.

The City shall provide, from moneys in the Costs of Issuance Fund or at its own expense, on the Closing Date, a CL TA title insurance policy in the amount of not less than the principal amount of the Certificates, insuring the City's leasehold estate in the Property, subject only to Permitted Encumbrances.

See APPENDIX D - SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS - LEASE AGREEMENT- Insurance.

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Abatement

Pursuant to the Lease Agreement, the amount of Lease Payments will be abated, during any period in which by reason of damage or destruction (other than by eminent domain which is otherwise provided for) there is substantial interference with the use and occupancy by the City of the Property or the Property or any portion thereof. The amount of such abatement shall be agreed upon by the City and the Corporation such that the resulting Lease Payments represent fair consideration for the use and occupancy of the portions of the Property not damaged or destroyed. Such abatement shall continue for the period commencing with such damage or destruction and ending with the substantial completion of the work of repair or reconstruction. In the event of any such damage or destruction, the Lease Agreement shall continue in full force and effect and the City waives any right to terminate the Lease Agreement by virtue of any such damage and destruction. However, notwithstanding any other provisions of the Lease Agreement, there shall be no abatement of Lease Payments to the extent that the proceeds of an eminent domain or insurance award are available to pay Lease Payments, orto the extent that moneys are available in the Lease Payment Fund, it being declared that such proceeds and amounts constitute special funds for the payment of the Lease Payments. See "SOURCE OF PAYMENT FOR THE CERTIFICATES- Insurance," APPENDIX DSUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS-Lease Agreement-Insurance and APPENDIX D-SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS -Lease Agreement-Abatement of Lease Payments in the Event of Damage or Destruction.

Eminent Domain

Pursuant to the Lease Agreement, if the Property is taken permanently under the power of eminent domain or sold to a government threatening to exercise the power of eminent domain, the term of the Lease Agreement shall cease as of the day possession shall be so taken. If less than all of the Property is taken permanently, or if the Property or any part thereof shall be taken temporarily, under the power of eminent domain, (1) the Lease Agreement shall continue in full force and effect and shall not be terminated by virtue of such taking and the parties waive the benefit of any law to the contrary, and (2) there shall be a partial abatement of Lease Payments as a result of the application of the Net Proceeds of any eminent domain award to the prepayment of the Lease Payments, in an amount to be agreed upon by the City and the Corporation such that the resulting Lease Payments represent fair consideration for the use and occupancy of the remaining usable portion of the Property. The City covenants to contest any eminent domain award which is insufficient to either: (i) prepay the Certificates in whole, if all of the Property is condemned; or (ii) prepay a pro rata share of Certificates, in the event that less than all of the Property is condemned.

Reserve Fund

The trust agreement provides that the trustee will establish and maintain a reserve fund (the "reserve fund") will be equal to the "reserve requirement". "Reserve requirement" means an amount equal to the lesser of: (i) 10% of the face amount of the Certificates, (ii) the maximum annual debt service on the Certificates, or (iii) 125% of average annual debt service on the Certificates, which amount shall be$ __ _ on the closing date.

Optional Redemption

Pursuant to the Lease Agreement, the City has an option to prepay the principal components of the Lease Payments in full, by paying the aggregate unpaid principal components of the Lease Payments, or in part, in a prepayment amount equal to the principal amount of Lease Payments to be prepaid, together with accrued interest to the date fixed for prepayment, together with the premium set forth for the redemption of Certificates. See "THE CERTIFICATES-Redemption-Optional Redemption."

Said option may be exercised with respect to Lease Payments due on and after July 15, 20_, in whole or in part on any date, commencing July 15, 20_. In the event of prepayment in part, the partial prepayment will be applied against Lease Payments in such order of payment date as will be selected by the City. Lease Payments due after any such partial prepayment will be in the amounts set forth in a revised Lease Payment schedule which will be provided by, or caused to be provided by, the City to the Trustee and which will represent an adjustment to the schedule set forth in the Lease Agreement taking into account said partial prepayment.

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Mandatory Redemption from Net Proceeds of Insurance, Title Insurance or Eminent Domain

The City will be obligated to prepay the principal component of Lease Payments, in whole on any date or in part on any Lease Payment Date, from and to the extent of any Net Proceeds of an insurance, title insurance or condemnation award with respect to the Property theretofore deposited in the Lease Agreement Payment Fund for such purpose pursuant to the Lease Agreement and the Trust Agreement. The City and the Corporation agree that such Net Proceeds will be applied first to the payment of any delinquent Lease Payments, and thereafter will be credited towards the City's obligations under the mandatory prepayment provisions of the Lease Agreement. Lease Payments due after any such partial prepayment will be in the amounts set forth in a revised Lease Payment schedule which will be provided by, or caused to be provided by, the City to the Trustee and which will represent an adjustment to the schedule set forth in the Lease Agreement taking into account said partial prepayment. See "THE CERTIFICATESRedemption-Extraordinary Redemption from Net Proceeds of Insurance, Title Insurance, Condemnation or Eminent Domain Award."

Substitution or Release of Site or Facility

Substitution of Site or Facility. The City shall have, and is granted, the option at any time and from time to time during the Term of the Lease Agreement to substitute other land (a "Substitute Site") and/or a substitute facility (a "Substitute Facility") for the Site (the "Former Site"), or a portion thereof, and/or the Facility (the "Former Facility"), or a portion thereof, provided that the City shall satisfy all of the following requirements (to the extent applicable) which are declared to be conditions precedent to such substitution:

(i) If a substitution of the Site, the City shall file with the Corporation and the Trustee, an amendment to the Site Lease which adds thereto a description of such Substitute Site and deletes therefrom the description of the Former Site;

(ii) If a substitution of the Site, the City shall file with the Corporation and the Trustee, an amendment to the Lease Agreement which adds thereto a description of such Substitute Site and deletes therefrom the description of the Former Site;

(iii) If a substitution of the Facility, the City shall file with the Corporation and the Trustee, an amendment to the Site Lease which adds thereto a description of such Substitute Facility and deletes therefrom the description of the Former Facility;

(iv) If a substitution of the Facility, the City shall file with the Corporation and the Trustee, an amendment to the Lease Agreement which adds thereto a description of such Substitute Facility and deletes therefrom the description of the Former Facility;

(v) The City shall certify in writing to the Corporation and the Trustee, that such Substitute Site and/or Substitute Facility serve the purposes of the City, constitutes property that is unencumbered, subject to Permitted Encumbrances, and constitutes property which the City is permitted to lease under the laws of the State;

(vi) The City delivers to the Corporation and the Trustee, an Officer's Certificate of the City based on insurance values or any other reasonable basis of valuation received by the City (which need not require an appraisal) that the value of the Property following such substitution is equal to or greater than the Outstanding principal amount of the Certificates and confirms in writing to the Trustee that the indemnification provided pursuant to the Trust Agreement applies with respect to the Substitute Site and/or Substitute Facility;

(vii) The Substitute Site and/or Substitute Facility shall not cause the City to violate any of its covenants, representations and warranties made in the Lease Agreement or in the Trust Agreement, as evidenced by an officer's certificate delivered to the Trustee;

(viii) The City shall obtain an amendment to the title insurance policy required pursuant to the Lease Agreement which adds thereto a description of the Substitute Site and deletes therefrom the description of the Former Site;

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(ix) The City shall provide notice of the substitution to any rating agency then rating the Certificates which rating was provided at the request of the City or the Corporation;

(x) The City shall furnish the Corporation and the Trustee, with a written opinion of Bond Counsel, which shall be an Independent Counsel, stating that such substitution does not cause the interest components of the Lease Payments to become subject to State personal income taxes; and

Release of Site. The City shall have, and is granted, the option at any time and from time to time during the Term of the Lease Agreement to release any portion of the Site, provided that the City shall satisfy all of the following requirements which are declared to be conditions precedent to such release:

(i) The City shall file with the Corporation and the Trustee an amendment to the Site Lease Agreement which describes the Site, as revised by such release;

(ii) The City shall file with the Corporation and the Trustee, an amendment to the Lease Agreement which describes the Site, as revised by such release;

(iii) The City delivers to the Corporation and the Trustee, an Officer's Certificate of the City based on insurance values or any other reasonable basis of valuation received by the City (which need not require an appraisal) that the value of the Property, as revised by such release, is equal to or greater than the Outstanding principal amount of the Certificates and confirms in writing to the Trustee and the Corporation that the indemnification provided pursuant to the Trust Agreement applies with respect to the Site, as revised by such release;

(iv) Such release shall not cause the City to violate any of its covenants, representations and warranties made herein and in the Trust Agreement, as evidenced by an officer's certificate delivered to the Trustee;

(v) The City shall obtain an amendment to the title insurance policy required pursuant to the Site Lease Agreement which describes the Site, as revised by such release;

(vi) The City shall provide notice of the release to any rating agency then rating the Certificates which rating was provided at the request of the City or the Corporation; and

Release of Facility. The City shall have, and is granted, the option at any time and from time to time during the Term of the Lease Agreement to release any portion of the Facility, provided that the City shall satisfy all of the following requirements which are declared to be conditions precedent to such release:

(i) The City shall file with the Corporation and the Trustee, an amendment to the Site Lease which describes the Facility, as revised by such release;

(ii) The City shall file with the Corporation and the Trustee, an amendment to the Lease Agreement which describes the Facility, as revised by such release;

(iii) The City delivers to the Corporation and the Trustee, an Officer's Certificate of the City based on insurance values or any other reasonable basis of valuation received by the City (which need not require an appraisal) that the value of the Property, as revised by such release, is equal to or greater than the Outstanding principal amount of the Certificates and confirms in writing to the Trustee and the Corporation that the indemnification provided pursuant to the Trust Agreement applies with respect to the Facility, as revised by such release;

(iv) Such release shall not cause the City to violate any of its covenants, representations and warranties made herein and in the Trust Agreement, as evidenced by an officer's certificate delivered to the Trustee;

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(v) The City shall provide notice of the release to any rating agency then rating the Certificates which rating was provided at the request of the City or the Corporation; and

Generally. The Corporation and the City may at any time amend or modify any of the provisions of the Lease Agreement:

(i) to add to the covenants and agreements of the City contained in the Lease Agreement, other covenants and agreements thereafter to be observed, or to limit or surrender any rights or power herein reserved to or conferred upon the City;

(ii) to make such provisions for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective provision contained herein, or in any other respect whatsoever as the Corporation and the City may deem necessary or desirable, provided that, in the opinion of Bond Counsel, such modifications or amendments will not materially adversely affect the interests of the Owners; or

(iii) to amend any provision thereof relating to the Code, to any extent whatsoever but only if and to the extent such amendment will not adversely affect the exclusion from gross income of interest with respect to the Certificates under the Code, in the opinion of Bond Counsel.

Events of Default and Remedies

The following shall be "events of default" under the Lease Agreement:

(a) Failure by the City to pay any Lease Payment when due and payable, or failure to pay any other payment when due and payable.

(b) Failure by the City to observe and perform any covenant, condition or agreement on its part to be observed or performed, other than as referred to in paragraph (a) above, for a period of thirty (30) days after written notice specifying such failure and requesting that it be remedied has been given to the City by the Corporation, the Trustee or the Owners of not less than twenty percent (20%) in aggregate principal amount of Certificates then outstanding; provided, however, if the failure stated in the notice can be corrected, but not within the applicable period, the Corporation, the Trustee and such Owners shall not unreasonably withhold their consent to an extension of such time if corrective action is instituted by the City within the applicable period and diligently pursued until the default is corrected.

(c) The filing by the City of a voluntary petition in bankruptcy under Title 11 of the United States Code or any substitute or successor statute.

Whenever any event of default shall have happened and be continuing, it shall be lawful for the Corporation to exercise any and all remedies available pursuant to law or granted pursuant to the Lease Agreement; provided, however, that notwithstanding anything in the Lease Agreement or in the Trust Agreement to the contrary, there shall be no right under any circumstances to accelerate the Lease Payments or otherwise declare any Lease Payments not then in default to be immediately due and payable. Each and every covenant to be kept and performed by the City under the Lease Agreement is expressly made a condition and upon the breach thereof the Corporation may exercise any and all rights of entry and re-entry upon the Property, and also, at its option, with or without such entry, may terminate the Lease Agreement. In the event of such default and notwithstanding any re-entry by the Corporation, the City shall, as expressly provided in the Lease Agreement, continue to remain liable for the payment of the Lease Payments and/or damages for breach of the Lease Agreement and the performance of all conditions contained in the Lease Agreement and, in any event such rent and/or damages shall be payable to the Corporation at the time and in the manner as provided in the Lease Agreement.

Amendment of Lease Agreement

Except as provided below, without the prior written consent of the Trustee, the City will not alter,

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modify or cancel, or agree or consent to alter, modify or cancel the Lease Agreement, excepting only such alteration or modification as may be permitted by the Trust Agreement.

In addition, the Lease Agreement may be amended to obligate the City to pay additional amounts of rental thereunder for the use and occupancy of the Property or any portion thereof, but only if (a) such additional amounts of rental do not cause the total rental payments made by the City under the Lease Agreement to exceed the fair rental value of the Property, (b) such additional amounts of rental shall be pledged or assigned for the payment of any bonds, notes, leases or other obligations the proceeds of which shall be applied to finance the completion of public facilities and

(c) the City shall send notification of the additional financing to the rating agency then rating the Certificates.

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THE CITY

The City is a general law city. Municipal operations are conducted under the Council- Manager form of government. The five City Council Members are elected at large for four-year, staggered terms. The Mayor, and Vice Mayor are elected annually at the first City Council meeting in January. The Mayor presides over all City Council meetings. The City Manager is responsible for the day-to-day operation of the City.

See APPENDIX A-GENERAL, ECONOMIC INFORMATION RELATING TO THE CITY for a general description of the City as well as certain demographic and statistical information.

CITY FINANCIAL INFORMATION

Financial Statements and Budgetary Process

The City's accounting policies conform to generally accepted accounting principles. The audited financial statements also conform to the principles and standards for public financial reporting established by the Governmental Accounting Standards Board.

Basis of Accounting and Financial Statement Presentation. The government-wide financial statements are reported using the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met.

Governmental fund financial statements are reported using the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures are recorded only when payment is due.

Audited Financial Statements. The City retained Smith and Newell, certified public accounts, Yuba City, California, (the "City's Auditor''), to examine the general-purpose financial statements of the City as of and for the year ended June 30, 2018. The audited financial statements for fiscal year ended June 30, 2017, are included in APPENDIX B-COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY FOR THE YEAR ENDED JUNE 30, 2018. The City has not requested, and the City's Auditor has not provided, any review or update of such financial statements in connection with their inclusion in this Official Statement.

Budget Process. The City Council adopts an annual budget with appropriations for all City funds prior to the beginning of the fiscal year, which begins on July 1 of each year. The City Council has the legal authority to amend the budget at any time during the fiscal year. The City maintains budgetary controls to ensure compliance with legal provisions embodied in the appropriated budget approved by the City Council. The level of budgetary control (that is, the level at which expenditures cannot legally exceed the appropriated amount) for the City's operating budget is at the fund level. For the operating budget, the City Manager has the authority to move appropriations between accounts (without dollar limitation) within a budget program and within the same fund. All other appropriation changes require the approval of the City Council.

All appropriations lapse at the end of the fiscal year unless specific carryovers are approved by the City Council.

16

The following table shows the City's audited general fund balance sheet for the fiscal year ending June 30, 2018:

Table 1

General Fund Balance Sheet Statement of Net Positions

ASSETS Cash and investments

Receivables: Accounts, net Interest

Taxes

Intergovernmental Assessments

Deposits Prepaid costs

Inventory

Internal balances Restricted cash and investments

Loans receivable Land held for resale Capital assets:

Non-depreciable Depreciable, net

Total capital assets

Total Assets

DEFERRED OUTFLOWS OF RESOURCES Deferred pension adjustments

Deferred OPEB adjustments

Total Deferred Outflows of Resources

LIABILITIES Accounts payable Retentions payable

Salaries and benefits payable Due to other governments

Deposits payable Interest payable

Unearned revenues Long-term liabilities:

Due within one year

Due in more than one year

Net pension liability Net OPEB liability

Total Liabilities

DEFERRED INFLOWS OF RESOURCES Deferred housing loan payments

Deferred pension adjustments Deferred OPEB adjustments

Total Deferred Inflows of Resources

17

Governmental Activities

$

$

$

$

$

$

$

6,788,570

118,906 8,139

466,819

61,538 2,751,000

4,428

24,944 2,121,378

5, 177, 155

594,927

10,566,975 44,023,944

54,590,919

72,708,723

675,319

171,649

846,968

638,906 329,062

98,732 358,254

543,581

47,693

43,955 312,315

5,176,462

2,771,460 368,477

10,688,897

5,177,155

223,422 228,371

5,628,371

Business-Type Activities

21,023,578

3,180,580 17,037

2,313,951 565,729

589,446 116,468

392,891

(24,944) 204,938

7,374,885 29,581,307

36,956,192

65,335,866

1,290,599

506,000

1,796,599

1,529,582 145,636

113,816 796,578

3,900

58,054

482,636 4,066,706

4,817, 116 1,086,227

13,100,251

384,702 673,211

1,057,913

Total

27,812,148

3,299,486 25,176

466,819

2,375,489 3,316,729

593,874 116,468

392,891

2,326,316

5,177,155

594,927

17,941,860 73,605,251

91,547, 111

138,044,589

1,965,918

677,649

2,643,567

2,168,488 474,698

212,548 1,154,832

547,481

105,747

43,955 794,951

9,243,168

7,588,576 1,454,704

23,789,148

5,177,155

608,124 901,582

6,686,861

NET POSITION

Net investment in capital assets Restricted for:

Unrestricted

General government

Public Safety

Public ways and facilities

Community development

Debt service

Total Net Position

Sources: City of Shasta Lake Finance Department Audit Report 2017-18.

18

$

$

49,261,367 32,637,417 81,900,784

1,347,908 1,347,908

240 240

2,094,224 2,094,224

748,293 748,293

689,885 61,327 751,212 3,093,929 20,275,557 23,369,486

57 237 846 52 974 301 110 212 147

The following table shows the City's audited general fund revenues, expenditures and changes in fund balances for fiscal years 2014-15 through 2017-18.

Table 2 General Fund Statement of Revenue, Expenditures and Changes

in Fund Balances Fiscal Years 2014-15 through 2017-18.

FY2014-15 FY2015-16 FY2016-17 FY2017-18

Audited Audited Audited Audited

REVENUE

Taxes and Assessments $ 2,869,231 $ 3,111,277 $ 3,034,827 $ 3,575,341

Licenses and Permits 106,596 108,239 134,205 188,582

Fines and Forfeitures 18,671 8,277 13,838 8,779

Use of Money 21,089 95,846 49,391 75,214

Intergovernmental 2,218,629 2,090,513 2,488,244 1,618,431

Charges for Services 3,338,202 3,402,204 3,991,210 4,327,668

Other Revenues 28,329 21,726 9,267 10,788

Total Revenues $ 8,600,747 $ 8,838,082 $ 9,720,982 $ 9,804,803

EXPENDITURES

Current:

General Government $ 2,045,628 $ 2,192,284 $ 2,402,831 $ 2,546,560

Public Safety 2,770,937 2,895,330 2,976,402 3,216,529

Public Ways and Facilities 740,775 724,263 956,423 913,485

Planning 681,406 625,659 613,211 656,802

Culture and Recreation 247,479 239,766 193,793 309,626

Community Development 307,128 236,424 139,088 326,986

Debt Service

Principle 117,449 127,660 112,877 116,099

Interest 158,891 149,520 145,010 172,882

Capital Outlay 28,893 1,183,419 1,626,268 6,442,523

Total Expenditures $ 7,098,586 $ 8,374,325 $ 9,165,903 $ 14, 701,492

Excess of Revenues Over {Under) Expenditures $ 1,502,161 $ 463,757 $ 555,079 $ {4,896,689) 1

OTHER FINANCING SOURCES {USES)

Debt Proceeds 14,000 4,896,689

Transfers In 26,073 2,047,198 13,068 95,528

Transfers Out {91,073) {210,900) {493,163) {424,172)

Total Other Financing Sources $ {51,000) $ 1,836,298 $ {480,095) $ 2,171,356

Extraordinary Loss

Net Change in Fund Balances (Deficits) $ 1,451,161 $ 2,300,055 $ 74,984 $ (2,725,333)

Debt Service as a Percentage of Noncapital Expenditures 3.91 % 3.85 % 3.42 % 3.50 %

Sources: City of Shasta Lake Audit Report 2017-18 and City of Shasta Lake Finance Department. 1 Expenses incurred in building a new City Hall, Police Building, and Community Services Building.

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City Financial Management Policies

The City Council has adopted a comprehensive set of financial management policies to provide for: (i) establishing targeted general fund reserves; (ii) the prudent investment of City funds, and (iii) management of debt. The City's practice is to incur debt only after deliberation over the effect of such debt on the City's General Fund and other resources of the City, and in those circumstances where the use of debt would be appropriate to the scale and economic life of the asset being financed and the accumulation or availability of reserves to fund the capital requirement.

Investment Policy. The investment of funds of the City (except pension and retirement funds) is made in accordance with the City's Investment Policy, most recently approved in June 5, 2018, (the "Investment Policy"), and section 53601 et seq. of the California Government Code. The Investment Policy is subject to revision at any time and is reviewed at least annually to ensure compliance with the stated objectives of safety, liquidity, yield, and current laws and financial trends. All amounts held under the Trust Agreement are invested at the direction of the City in Permitted Investments, as defined in the Trust Agreement, and are subject to certain limitations contained therein. See APPENDIX C-INVESTMENT POLICY OF THE CITY and APPENDIX D-SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTSTRUST AGREEMENT-Investments.

Current Investments

The City's investment portfolio (par value), as of June 30, 2018, included cash and investments equal to$ 38,012,482.

Principal Sources of General Fund Revenues

In addition to the tax revenues described above, the City receives the following general fund revenues:

Type of Revenue Source

Intergovernmental

Licenses and Permits

Fines and Forfeitures

Use of Money and Property

Charges for SeNices

Other Revenues

Components

State Taxes, State Grants, County Grants, Federal Grants

Dog Licenses, Construction Permits, Other Permits (Concealed Weapon, Alarm System, Filming, Special Events

Penalties, Court Collected Fines, DUI Fines, Parking Fees, Citations, Forfeited Spay/Rabies Deposits

Investment Earnings/Interest, RenULease Revenue, Concessions

Abatement fees, construction plan check/inspection fees, recreation fingerprinting and livescan fees, vehicle impound fees, and processing fees

Donations, Sales (Reclamation Hay, ACO Supplies, Online Sales), Reimbursements, Refunds, Private Grants (NRA)

20

The following table shows the City's audited other general fund revenue sources by source for the most recent four fiscal years and budgeted other revenues for fiscal year 2017-18:

Table 3 General Fund Tax Revenues by Source.

Licenses Fiscal And Fines and Use of Inter- Charges for Year Taxes Permits Forfeitures Money governmental Services Miscellaneous

2014-15 $2,191,258 $ 106,596 $ 18,671 $ 10,447 $ 766,966 $3,151,335 $ 28,329 2015-16 2,475,254 108,239 8,277 81,624 872,576 3,187,583 21,726 2016-17 2,545,804 134,205 13,838 22,596 854,904 3,671,721 9,267 2017-18 3,011,001 188,582 8,779 6,873 871,379 3,781,525 10,788

Sources: City of Shasta Lake Financial Records

Note: Assessed valuation for 2018-19 has not been completed.

Property Taxes

Under Proposition 13, an amendment to the California Constitution adopted in 1978, the county assessor's valuation of real property is established as shown on the fiscal year 1975-76 tax bill, or, thereafter, as the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred. Assessed value of property may be increased annually to reflect inflation at a rate not to exceed 2% per year or reduced to reflect a reduction in the consumer price index or comparable data for the area under taxing jurisdiction or in the event of declining property value caused by substantial damage, destruction, market forces or other factors. As a result of these rules, real property that has been owned by the same taxpayer for many years can have an assessed value that is much lower than that of similar properties more recently sold and may be lower than its own market value. Likewise, changes in ownership of property and reassessment of such property to market value commonly will lead to increases in aggregate assessed value even when the rate of inflation or consumer price index would not permit the full 2% increase on any property that has not changed ownership.

Taxes are levied by the County for each fiscal year on taxable real and personal property which is situated in the County as of the preceding January 1. Real property which changes ownership or is newly constructed is revalued at the time the change in ownership occurs or the new construction is completed. The current year property tax rate will be applied to the reassessment, and the taxes will then be adjusted by a proration factor to reflect the portion of the remaining tax year for which taxes are due.

Local agencies and schools will share the growth of "base" sources from the tax rate area.

Each year's growth allocation becomes part of each local agency's allocation in the following year. The availability of revenue from growth in the tax bases in such tax rate areas may be affected by the existence of redevelopment agencies (including their successor agencies) which, under certain circumstances, may be entitled to sources resulting from the increase in certain property values. State law exempts $7,000 of the assessed valuation of an owner-occupied principal residence. This exemption does not result in any loss of revenue to local agencies since an amount equivalent to the taxes that would have been payable on such exempt values is supplemented by the State.

For assessment and tax collection purposes, property is classified either as "secured" or "unsecured," and is listed accordingly on separate parts of the assessment roll. The "secured roll" is that part of the assessment roll containing State-assessed property and property (real or personal) for which there is a lien on real property sufficient, in the opinion of the county assessor, to secure payment of the taxes. All

21

other property is "unsecured," and is assessed on the "unsecured roll." Secured property assessed by the State Board of Equalization is commonly identified for taxation purposes as "utility" property.

Property taxes on the secured roll are due in two installments, on November 1 and February 1 of each fiscal year, and if unpaid become delinquent on December 10 and April 10, respectively. A penalty of 10% attaches immediately to any delinquent payment. Property on the secured roll, with respect to which taxes are delinquent, becomes tax defaulted on or about June 30 of the fiscal year. Such property may thereafter be redeemed by payment of delinquent taxes and the delinquency penalty, plus costs and prepayment penalty of one and one-half percent per month to the time of prepayment. If taxes are unpaid for a period of five years or more, the property is subject to sale by the county treasurer.

Property taxes on the unsecured roll are due as of the January 1 lien date and become delinquent, if unpaid, on August 31. A 10% penalty attaches to delinquent unsecured taxes. If unsecured taxes are unpaid at 5 p.m. on October 31, an additional penalty of one and one-half percent per month attaches to such taxes on the first day of each month until paid. A county has four ways of collecting delinquent unsecured personal property taxes: (1) bringing a civil action against the taxpayer; (2) filing a certificate in the office of the county clerk specifying certain facts in order to obtain a lien on certain property of the taxpayer; (3) filing a certificate of delinquency for record in the county clerk and county recorder's office in order to obtain a lien on certain property of the taxpayer; and (4) seizing and selling personal property, improvements, or possessory interests belonging or assessed to the delinquent taxpayer.

Alternative Method of Tax Apportionment. The Board of Supervisors of the County has approved the implementation of the Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the "Teeter Plan"), as provided for in section 4701 et seq. of the California Revenue and Taxation Code. The Teeter Plan guarantees distribution of 100% of the general taxes levied to the taxing entities within the County, with the County retaining all penalties and interest penalties affixed upon delinquent properties and redemptions of subsequent collections. Under the Teeter Plan, the County apportions secured property taxes on a cash basis to local political subdivisions, including the City, for which the County acts as the tax-levying or tax-collecting agency. At the conclusion of each fiscal year, the County distributes 100% of any taxes delinquent as of June 301h to the respective taxing entities.

The Teeter Plan is applicable to secured property tax levies. As adopted by the County, the Teeter Plan excludes Mello-Roos Community Facilities Districts, special assessment districts, and benefit assessment districts.

The Teeter Plan is to remain in effect unless the Board of Supervisors of the County orders its discontinuance or unless, prior to the commencement of any fiscal year of the County (which commences on July 1 ), the Board of Supervisors receives a petition for its discontinuance joined in by resolutions adopted by at least two-thirds of the participating revenue districts in the County, in which event the Board of Supervisors is to order discontinuance of the Teeter Plan effective at the commencement of the subsequent fiscal year. The Board of Supervisors may also, after holding a public hearing on the matter, discontinue the Teeter Plan with respect to any tax levying agency or assessment levying agency in the County if the rate of secured tax delinquency in that agency in any year exceeds 3% of the total of all taxes and assessments levied on the secured roll in that agency. If the Teeter Plan is discontinued subsequent to its implementation, only those secured property taxes actually collected would be allocated to political subdivisions (including the City) for which the County acts as the tax-levying or tax-collecting agency, but penalties and interest would be credited to the political subdivisions.

The City is not aware of any petitions for the discontinuance of the Teeter Plan in the County.

Assessed Valuation

The City uses the facilities of the County for tax assessment and collection. City taxes are assessed and collected at the same times and on the same tax rolls as County, school and special district taxes.

Under California law, two additional types of exemptions were authorized beginning in the tax year 1969-70. The first of these exempts 50% of the assessed valuation of business inventories from taxation. The second provides an exemption of $7,000 of the assessed valuation of an owner- occupied dwelling from which application has been made to the County Assessor. Under a constitutional amendment that is effective

22

in Fiscal year 2018-19, the California Legislature can raise this exemption. Revenue estimated to be lost to local taxing agencies due to such exemption is reimbursed from State sources if funds are appropriated. The reimbursement is based upon total taxes due upon these exempt values and therefore is not reduced by any amounts for estimated delinquencies.

Summarized below is the assessed valuation and tax collection record of the City for the three most recent fiscal years.

Table 4 Assessed Valuations

Less: Fiscal Year Local Secured Unsecured Exemptions TotalC1l

2015-16 $ 685,887,452 $ 9,812,151 $ (32,243,707) $ 663,455,896

2016-17 $ 709,259,119 $ 12,750,395 $ (32,026,690) $ 689,982,824

2017-18 $ 741,259,119 $ 10,044,529 $ (31,656,372) $ 719,647,276

Source: The City of Shasta Lake (1) Totals may not add due to rounding. Note: Assessed Valuation for 2018-19 has not been completed

23

Principal Taxpayers. The following table sets forth the principal secured property taxpayers in the City as of the most recent fiscal year.

Table 5 Largest Local Secured Property Taxpayers Fiscal Vear

2017/2018

Taxpayer Type of Business Rank

Knauf Insulation LLC Industrial

Humboldt Flakeboard Industrial

Bobo Family Trust Commercial

Tau West LLC Industrial

Twin Lake Community LP Housing

W&B Construction Management Housing

Services Lbees LLC Commercial

Huli lnvestmentsLLC Commercial

Central Valley Investment Group Housing

Lake Shasta MHP Housing

Top Ten Secured Valuation

Total City of Shasta Lake Assessed Property Valuation Fiscal Year 2017/2018.

Source: Shasta County Assessor Annual Report 2018-19 Local Secured Assessed Valuation has not been completed.

Sales and Use Taxes

2

3

4

5

6

7

8

9

10

2018 Assessed Value

$ 118,656,812

11,043,123

5,886,329

5,334,140

3,226,772

2,958,000

2,000,000

1,836,000

1,518,909

1,501, 794

$153,961,879

$ 719,647,276

Percent of Total Assessed Value

15.79%

1.47%

0.78%

0.71%

0.43%

0.39%

0.27%

0.24%

0.20%

0.20%

20.49%

A sales tax is imposed on the privilege of consuming personal property in California. California does not tax services. The tax rate is established by the State Legislature, and is presently 7.25%, statewide. In addition, many of California's cities, counties, towns and communities have special taxing jurisdiction to impose a transaction (sales) or use tax. These so-called district taxes increase the tax rate in a particular area by adding the local option tax to the statewide tax. These district taxes can vary up to 1%, and more than one district tax may be in effect for a particular location. The State collects and administers the tax, and makes distributions on taxes collected within the City as follows:

24

Table 6 Sales Tax Rates

State General Public Safety and Local Revenue Funds

Shasta County Transportation Funds

City General Fund

Total

6.00%

0.25

1.00

7.25%

The State's actual administrative costs with respect to the portion of sales taxes allocable to the City are deducted before distribution and are determined on a quarterly basis.

As the chart below depicts, the largest source of revenues are charges for services followed by property taxes, which comprises 57.44 percent of total revenues for governmental activities.

Table 7 Revenues by Source

Governmental Activities For the Vear Ended June 30, 2018

Revenues Source Revenue Charges for services $ 4,525,029

Property taxes 1,144,906

Operating grants and contributions 1,003,351 Sales taxes 890,211

Motor vehicle in-lieu taxes 840,149

Other Tax 765,482

Capital grants and contributions 387,688

Franchise taxes 217,982

Interest investment earnings 75,214

Transient and occupancy taxes 11, 130

Miscellaneous 10,788

Total $ 9,871,930

25

%of Total 45.84%

11.60%

10.16% 9.02%

8.51%

7.75%

3.93%

2.21%

0.76%

0.11%

0.11%

100%

Labor Relations

Currently 23 full-time regular City employees and 28 Management or Other full-time staff are covered by 3 negotiated MOU agreements. The City has never had an employee work stoppage. Both of the negotiated agreements above have the following expiration dates: June 30, 2020.

Risk Management

The City is a member of the Small Cities Organized Risk Effort (SCORE) ml!~L!!~!!..YY.~"!..J.~:QL(_:1_Jl?ii,!;2ffi. The Authority is comprised of 18 California cities. SCORE was formed in 1986, pursuant to the California Government Code. The purpose of the Authority is to arrange, provide and administer risk management programs for pooling of self-insured losses, purchase of excess insurance coverage, group purchase of other lines of coverage, and consulting services.

The Board of Directors is comprised of 18 members, one representative from each member city.

General Liability Insurance. Annual deposits are paid by member cities and are adjusted retroactively to cover costs. Each member city has a specific retention level. The City has a retention level of $25,000 and pays 100% of all losses incurred under $25,000. The City does not share or pay for losses of other cities under $25,000. Losses of $25,001 to $250,000 are prorated among all participating cities on a payroll basis. Losses in excess of $250,000 are covered by excess insurance purchased by the participating cities, as a part of the pool, to a limit of up to $40,000,000 for most claims. This cost is also prorated on a payroll basis.

Workers' Compensation. The City has a Self-Insured Retention (SIR) of $25,000 per claim and additional coverage above the SCORE $250,000 SIR with the Local Agency Workers' Compensation Excess JPA (LAWCX). LAWXCX provides $5,000,000 million per claim, with additional coverage to the statutory limit through CSAC-EIA coverage. The CSAC-EIA is ranked as the second largest public entity risk pool and the largest property and casualty pool in the nation.

General liability and workers' compensations claims payable at June 30, 2019, were $1,004 and $187,441, respectively. Of the total claims payable, $4,700 is due within the next fiscal year. During the past three fiscal (claims) years two claims had exceeded the SIR and the excess insurance coverage kicked in to cover the difference. There have been no significant reductions in pooled or insured liability coverage in the prior year.

SEE APPENDIX B-COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY FOR THE YEAR ENDED JUNE 30, 2018.

Employee Retirement Plans

Plan Description. Substantially all City employees working the equivalent of 1,000 hours per fiscal year are eligible to participate in the Safety Classic, Miscellaneous Classic, Safety PEPRA or Miscellaneous PEPRA cost-sharing multiple employer defined benefit plans administered by California Public Employees Retirement System (CalPERS), which acts as a common investment and administrative agent for its participating member employers. The Classic Plans are closed to new entrants only eligible for employees hired prior to January 1, 2013. Employees hired after January 1, 2013 are eligible to enroll in the PEPRA plans. Benefit Provisions under the Plans are established by State statutes within the Public Employee's Retirement Law. CalPERS issues publicly available reports that include a full description of the pension plans regarding benefit provisions, assumptions and membership information that can be found on the CalPERS website. Copies of the CalPERS annual financial report may be obtained from the CalPERS Executive Office - 400 P Street, Sacramento, CA 95814.

Benefits Provided. CalPERS provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to plan members and beneficiaries. A classic safety and miscellaneous Cal PERS member becomes eligible for Service Retirement upon attainment of age 50 and 55, respectively, with at least 5 years of credited service. Public Employee Pension Reform Act (PEPRA) safety and miscellaneous members become eligible for service retirement upon attainment of age 57 and 62, respectively, with at least 5 years of service. The service retirement benefit is a monthly allowance equal to

26

http://wmv.scorejpa.org

the product of the benefit factor, years of service, and final compensation. The final compensation is the monthly average of the member's highest 12 full-time equivalent monthly pay. Retirement benefits for classic safety miscellaneous employees are calculated as 3% and 2.7%, respectively, of the average final 12 months compensation. Retirement benefits for PEPRA safety and miscellaneous employees are calculated as 2.7% and 2%, respectively, of the average final 36 months compensation.

Participant is eligible for non-industrial disability retirement if becomes disabled and has at least 5 years of credited service. There is no special age requirement. The standard non-industrial disability retirement benefit is a monthly allowance equal to 1.8% of final compensation, multiplied by service. Industrial disability benefits are not offered to miscellaneous employees.

An employee's beneficiary may receive the basic death benefit if the employee dies while actively employed. The employee must be actively employed with the City to be eligible for this benefit. An employee's survivor who is eligible for any other pre-retirement death benefit may choose to receive that death benefit instead of this basic death benefit. The basic death benefit is a lump sum in the amount of the employee's accumulated contributions, where interest is currently credited at 7.5% per year, plus a lump sum in the amount of one month's salary for each completed year of current service, up to a maximum of six months' salary. For purposes of this benefit, one month's salary is defined as the member's average monthly full-time rate of compensation during the 12 months preceding death.

Upon the death of a retiree, a one-time lump sum payment of $500 will be made to the retiree's designated survivor(s), or to the retiree's estate.

Benefit terms provide for annual cost-of-living adjustments to each employee's retirement allowance. Beginning the second calendar year after the year of retirement, retirement and survivor allowances will be annually adjusted on a compound basis by 2%.

Employees Covered. At June 30, 2017 (valuation date), the following employees were covered by the benefit terms for each Plan.

Table 8 Covered Employees

Inactive employee or beneficiaries currently receiving benefits Inactive employees entitled to, but not yet, receiving benefits Active employees

Total

Source: Cal PERS Actuarial Valuation, as of 6/30/17. * Includes transferred and separated employees

27

Miscellaneous Plan 55 32 47

134

Contributions. Section 20814(c) of the California Public Employees' Retirement Law (PERL) requires that the employer contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective on the July 1 following notice of a change in the rate. The total plan contributions are determined through the CalPERS' annual actuarial valuation process. For public agency cost-sharing plans covered by either the Miscellaneous or Safety risk pools, the Plan's actuarially determined rate is based on the estimated amount necessary to pay the Plan's allocated share of the risk pool's costs of benefits earned by employees during the year, and any unfunded accrued liability. The employer is required to contribute the difference between the actuarially determined rate and the contribution rate of employees. The City of Shasta Lake has no Safety Plans. The City contracts for law enforcement services with the County of Shasta, and fire services are provided by the Shasta Lake Fire Protection District which is not a part of the City. For the period beginning July 1, 2019 (based on the August 2018 valuation), the active contribution rate was 14.398% of annual payroll for the Miscellaneous Classic Plan, 6.985% for Miscellaneous PEPRA Plan, and 8.563% for the Miscellaneous Second Tier Plan.

Net Pension Liability. The City's net pension liability for both Plans is measured as the total pension liability, less the plan's fiduciary net position .. Net pension liability is measured as of June 30, 2018 (measurement date), using the Actuarial Valuation Report as of June 30, 2017 rolled forward to June 30, 2018 using standard update procedures. At June 30, 2018, the City reported a net pension liability of $7,588,576 million for the three Miscellaneous plans.

The following table is based on the GASS 68 Accounting Valuation Report and shows the changes in the net pension liability for the Miscellaneous and Safety Plans:

Balances at July 1, 2017 Net Changes Balances at June 30, 2018

Table 9

Changes in the Net Pension Liability

Total Pension Liability Plan Net Position

$ 8,283,687 (247,751)

$ 8,035,936

$ 5,978,934 602,298

$ 6,581,232

Net Pension Liability

$ 2,304,753 (850,049)

$ 1,454,704

For more information, including actuarial assumptions, a discussion of the discount rate used, and schedules of funding progress for the City's various pension plans, see APPENDIX B- COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY FOR THE YEAR ENDED JUNE 30, 2018.

Recent Actions Taken by CalPERS. At its April 17, 2013, meeting, CalPERS' Board of Administration (the "Board of Administration") approved a recommendation to change the CalPERS amortization and smoothing policies. Prior to this change, CalPERS employed an amortization and smoothing policy that spread investment returns over a 15-year period with experience gains and losses paid for over a rolling 30-year period. As a result, CalPERS now employs an amortization and smoothing policy that will pay for all gains and losses over a 20-year period with a five-year ramp-up, and five- year ramp- down, period. The new amortization and smoothing policy was used for the first time in the June 30, 2013 actuarial valuations in setting employer contribution rates for fiscal year 2017-18.

On February 18, 2014, the Board of Administration approved new demographic actuarial assumptions based on a 2013 study of recent experience. The largest impact, applying to all benefit groups, is a new 20-year mortality projection reflecting longer life expectancies and that longevity will continue to increase. Because retirement benefits will be paid out for more years, the cost of those benefits will increase as a result. The Board of Administration also assumed earlier retirements for Police 3%@50, Fire 3%@55, and Miscellaneous 2.7%@55 and 3%@60, which will increase costs for those groups. As a result of these changes, rates increased beginning in fiscal year 2016-17 (based on the June 30, 2014 valuation) with full impact in fiscal year 2020-21.

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On November 18, 2015, the Board of Administration adopted a funding risk mitigation policy intended to incrementally lower its discount rate - its assumed rate of investment return - in years of good investment returns, help pay down the pension fund's unfunded liability, and provide greater predictability and less volatility in contribution rates for employers. The policy establishes a mechanism to reduce the discount rate by a minimum of 0.05 percentage points to a maximum of 0.25 percentage points in years when investment returns outperform the existing discount rate, currently 7.5%, by at least four percentage points. CalPERS staff modeling anticipates the policy will result in a lowering of the discount rate to 6.5% in about 21 years, improve funding levels gradually over time and cut risk in the pension system by lowering the volatility of investment returns. More information about the funding risk mitigation policy can be accessed through CalPERS'web site at the following website address: https://www.calpers.ca.gov/page/newsroom/calpers-news/201/adopts- funding-risk-mitigation-policy.

The reference to this Internet website is provided for reference and convenience only. The information contained within the website may not be current, has not been reviewed by the City or the Underwriter and is not incorporated in this Official Statement by reference.

On December 21, 2016, the Board of Administration voted to lower its discount rate from the current 7.35% to 7.0% over the next three years according to the following schedule.

Fiscal Year

2017-18

2018-19

2019-20

Discount Rate

7.375%

7.250

7.000

For public agencies like the City, the new discount rate took effect on July 1, 2018. Lowering the discount rate means employers that contract with CalPERS to administer their pension plans will see increases in their normal costs and unfunded actuarial liabilities. Active members hired after January 1, 2013, under the Public Employees' Pension Reform Act will also see their contribution rates rise. The threeyear reduction of the discount rate will result in average employer rate increases of about 1 percent to 3 percent of normal cost as a percent of payroll for most miscellaneous retirement plans, and a 2 percent to 5 percent increase for most safety plans. Additionally, many CalPERS employers will see a 30 to 40 percent increase in their current unfunded accrued liability payments. These payments are made to amortize unfunded liabilities over 20 years to bring the pension fund to a fully funded status over the long-term.

CalPERS Amortization Period Reform. On February 13, 2018 the CalPERS Board voted to shorten the period over which actuarial gains and losses are amortized from 30 years to 20 years for new pension liabilities. The new 20-year amortization period begins with new gains or losses accrued starting with the June 30, 2019 actuarial valuations. The first payments on the new 20-year amortization schedule will take place in 2021.

A shorter amortization period will increase annual Unfunded Accrued Liability ("UAL") contributions for cities that participate in Cal PERS so long as Cal PERS remains underfunded. The shortened amortization period will also lead to reductions of periods of negative amortization of the UAL, interest cost savings, and faster recoveries of funded status after market downturns.

Cities that participate in Cal PERS will also see additional volatility in their future UAL contributions due to market performance as gains or losses will be amortized faster under the new amortization period.

The City cannot currently estimate the impact the shorter amortization period will have on its required contributions for its Miscellaneous and Safety Plans.

Other Post-Employment Benefits

Plan Description. The City is a part of the CalPERS vesting program under Government Code Section 22893. The City's defined benefit OPES plan (Plan) provides OPES for all permanent full-time employees of the City. The Plan provides retiree medical benefits for retirees and their dependents. Benefits are provided through CalPERS as permitted under the Public Employees' Medical and Hospital Care Act

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https://www.calpers.ca.gov/page/newsroom/calpers-news/201/adopts-

(PEMHCA). This coverage requires the employee to satisfy the requirements for retirement under Cal PERS, which requires attainment of age 50 (age 52, if a miscellaneous employee new to PERS on or after January 1, 2013) a minimum of 10 years of state service credit, with five of those years being performed at the City of Shasta Lake. Each additional service credit year increases the employer contribution by 5%. At 20 years the retiring employee is eligible for 100% of the employer contribution.

They also must commence payment of their pension benefit within 60 days of retirement with the City. The surviving spouse of an eligible retiree who elected spouse coverage under the CalPERS Health Plan is eligible for the employer contribution upon the death of the retiree.

Retired employees who have health coverage outside CALPERS do not get any premium reimbursement from the City. Details of benefits provided to retirees are noted in the tables contained in APPENDIX B- COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY FOR THE YEAR ENDED JUNE 30, 2018.

Funding Policy and Actuarial Assumptions. The ARC is calculated in accordance with certain variables which includes the Normal Cost and the component for amortization of the total unfunded actuarial accrued liability (UAAL) over a period not to exceed 30 years.

On May 8, 2009, the City entered into an agreement with CalPERS to prefund its other postemployment benefits through California Employer's Retiree Benefit Trust (CERBT) program. The plan is an agent multiple employer plan. It is the City's funding policy to contribute at least 100% of the annual required contribution as calculated in the actuarial valuation prepared biannually. OPES benefits are currently paid either directly to the eligible retirees who are not enrolled in the CalPERS Health Benefit program or to CalPERS for those eligible retirees who are enrolled in the CalPERS Health Benefit program. The total amount of these benefits paid may be deducted from the annual required contribution or be reimbursed directly from the trust. The actuarial assumptions are described in detail in in APPENDIX BCOMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY FOR THE YEAR ENDED JUNE 30, 2018.

The City has calculated and recorded the Net OPES Obligation, representing the difference between the ARC, amortization and contributions, as presented below:

Table 10 Net OPEB Obligation

Annual required contributions (ARC) Interest on Net OPES Obligation Adjustment to annual required contribution Annual OPES cost Contributions to OPES Trust Change in Net OPES Asset Net OPES Obligation (Asset) June 30, 2017 Net OPES Obligation (Asset) June 30, 2018

Source: City of Shasta Lake fiscal year 2017-18 CAFR.

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$ 472,498 152,679

0 319,819 472,498

1,702,455 $ 1,454,704

The Plan's annual required contributions and actual contributions for the last two fiscal years are set forth below:

Annual

Fiscal Year OPEB Cost

2015-16 $ 341,458 2016-17 523,527

Source: City of Shasta Lake fiscal year 2017-18 CAFR.

Table 11 Historical OPEB Obligation

Percentage Of Actual Annual OPEB

Contribution Cost Contributed $ 304,239 89.1%

473,268 90.4%

Net OPEB

Obligation (Asset) (1,320,440) (1,270,351)

For more information see APPENDIX B-COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY FOR THE YEAR ENDED JUNE 30, 2018.

Short-Term General Fund-Secured Obligations

The City has no outstanding short-term obligations secured by its general fund.

Long-Term General Fund-Secured Obligations

The City has one outstanding long-term obligations secured by its general fund, which is the 2018 Certificate of Participation issue in the principle amount of $2,500,000, dated on February 15, 2018, to the Rural Housing Service of the United States Department of Agriculture to help construct the City Hall/Community Center Project.

Other Obligations

The City has certain other outstanding obligations, including tax allocation bonds issued by its successor agency, which are not secured by the City's general fund.

Overlapping Debt

Set forth below is a direct and overlapping debt report (the "Debt Report") prepared by California Municipal Statistics, Inc. and effective August 1, 2019. The Debt Report is included for general information purposes only. The City has not reviewed the Debt Report for completeness or accuracy and makes no representation in connection therewith.

The Debt Report generally includes long-term obligations sold in the public credit markets by public agencies whose boundaries overlap the boundaries of the City in whole or in part. Such long-term obligations generally are not payable from revenues of the City (except as indicated) nor are they necessarily obligations secured by land within the City. In many cases, long-term obligations issued by a public agency are payable only from the general fund or other revenues of such public agency.

The contents of the Debt Report are as follows: (1) the first column indicates the public agencies which have outstanding debt as of the date of the Debt Report and whose territory overlaps the City; (2) the second column shows the respective percentage of the assessed valuation of the overlapping public agencies identified in column 1 which is represented by property located in the City; and (3) the third apportionment of the dollar amount of each public agency's outstanding debt of each agency by the percentage of the City's assessed valuation represented in column 2.

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Table 12

Direct and Overlapping Bonded Debt as of August 1, 2019

2018-19 Assessed Valuation: $ 734,248,854

OVERLAPPING TAX AND ASSESSMENT DEBT:

Shasta Regional Transportation Agency

Shasta-Tehama-Trinity Community College District

Gateway Unified School District

Shasta Dam Area Public Utility District 1915 Act

Bonds

TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT

DIRECT AND OVERLAPPING GENERAL FUND DEBT:

Shasta County General Fund Obligations

Shasta-Tehama-Trinity Community College District

Certificates of Participation

City of Shasta Lake Certificates of Participation

TOTAL DIRECT AND OVERLAPPING GENERAL FUND

DEBT

OVERLAPPING TAX INCREMENT DEBT

(Successor Agencies}:

COMBINED TOTAL DEBT

( 1) Excludes issue to be sold.

%

%

% Applicable

4.129

2.930 25.749

100.

4.129

2.930

100.

$

$

$

$

$

$

Debt 8/1/19

31,010

1,869,633 7,689,318 745.000

10,334,961

$1,027,295

191,769

2,469,000(l)

3,688,064

2,800,000

16,823,025(2)

(2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and non-bonded capital lease obligations.

CITY OF SHASTA LAKE

Ratios to 2018-2019 Assessed Valuation:

Overlapping Tax and Assessment Debt Total Direct Debt ($2,469,000) Combined Total Debt

1.41% 0.34% 2.29%

Ratios to Redevelopment Incremental Valuation ($457,496,943):

Total Overlapping Tax Increment Debt

Source: California Municipal Statistics, Inc. (1) Excludes issue to be sold.

0.61%

(2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and non-bonded capital lease obligations.

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THE CORPORATION

The Corporation was organized on April 15, 1991, as a California nonprofit public benefit corporation. The Corporation was formed for the specific and primary purposes of benefiting California governmental agencies by participating with such governmental agencies in projects to maintain, improve and assist the activities of such governmental agencies by acquiring, purchasing, selling, leasing or otherwise transferring real and personal property in connection with such projects, and assisting the governmental agencies in financing, acquiring and constructing of such projects, as well as other purposes as specified in the Corporation's articles of incorporation. The Corporation has no financial liability to the owners of the Certificates with respect to the payment of Lease Payments by the City or with respect to the performance by the City of the other agreements and covenants it is required to perform. The Corporation functions as an independent entity and its policies are determined by a board of directors. Under the bylaws of the Corporation, the board of directors of the Corporation consist of at least two but no more than five directors, holding office for terms of six years. The Corporation has no employees and the directors of the Corporation receive no compensation for work or service performed as Corporation directors.

RISK FACTORS

This section provides a general overview of certain risk factors which should be considered, in addition to the other matters set forth in this Official Statement, in evaluating an investment in the Certificates. This section is not meant to be a comprehensive or definitive discussion of the risks associated with an investment in the Certificates, and the order in which this information is presented does not necessarily reflect the relative importance of various risks. Potential investors in the Certificates are advised to consider the following/actors, among others, and to review this entire Official Statement to obtain information essential to the making of an informed investment decision. Any one or more of the risk factors discussed below, among others, could lead to a decrease in the market value and/or in the marketability of the Certificates. There can be no assurance that other risk factors not discussed herein will not become material in the future.

Lease Payments Are Not Debt

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

Although the Lease Agreement does not create a pledge, lien or encumbrance upon the funds of the City, the City is obligated under the Lease Agreement to pay the Lease Payments from any source of legally available funds and the City has covenanted in the Lease Agreement that, for so long as the Property is available for its use, it will make the necessary annual appropriations within its budget for the Lease Payments. The City is currently liable and may become liable on other obligations payable from general revenues, some of which may have a priority over the Lease Payments, or which the City, in its discretion, may determine to pay prior to the Lease Payments.

The City has the capacity to enter into other obligations payable from the City's general fund, without the consent of or prior notice to the Owners of the Certificates. To the extent that additional obligations are incurred by the City, the funds available to make Lease Payments may be decreased. In the event the City's revenue sources are less than its total obligations, the City could choose to fund other municipal services before making Lease Payments. The same result could occur if, because of State constitutional limits on expenditures, the City is not permitted to appropriate and spend all of its available revenues. The City's appropriations, however, have never exceeded the limitations on appropriations under Article XIIIB of the California Constitution. For information on the City's current limitations on appropriations, see "CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES, REVENUES AND APPROPRIATIONS-Article XIIIB of the California Constitution."

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Valid and Binding Covenant to Budget and Appropriate

Pursuant to the Lease Agreement, the City covenants to take such action as may be necessary to include Lease Payments due in its annual budgets and to make necessary appropriations for all such payments. Such covenants are deemed to be duties imposed by law, and it is the duty of the public officials of the City to take such action and do such things as are required by law in the performance of the official duty of such officials to enable the City to carry out and perform such covenants. A court, however, in its discretion may decline to enforce such covenants. Upon delivery of the Certificates, Special Counsel will render its opinion (substantially in the form of APPENDIX C-FORM OF OPINION OF SPECIAL COUNSEL) to the effect that, subject to the limitations and qualifications described therein, the Lease Agreement constitutes a valid and binding obligation of the City.

Additional Obligations of the City

The Lease Agreement does not prohibit the City from incurring additional lease and other obligations payable from the City's General Fund. In that regard, the City may, from time to time, incur general fund obligations to finance public improvements (see "CITY FINANCIAL INFORMATION"), which may also include lease obligations payable from its general fund.

Abatement

In the event of loss or substantial interference in the use and possession by the City of all or any portion of the Property caused by material damage, title defect, destruction to or condemnation of the Property, Lease Payments will be subject to abatement. In the event that such component of the Property, if damaged or destroyed by an insured casualty, could not be replaced during the period of time that proceeds of the City's rental interruption insurance will be available in lieu of Lease Payments, or in the event that casualty insurance proceeds or condemnation proceeds are insufficient to provide for complete repair or replacement of such component of the Property or prepayment of the Certificates, there could be insufficient funds to make payments to Owners in full. Reduction in Lease Payments due to abatement as provided in the Lease Agreement does not constitute a default thereunder.

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

No Acceleration Upon Default

In the event of a default, there is no remedy of acceleration of the total Lease Payments due over the term of the Lease Agreement and the Trustee is not empowered to sell a fee simple interest in the Property and use the proceeds of such sale to prepay the Certificates or pay debt service thereon. Any suit for money damages would be subject to limitations on legal remedies against public agencies in the State, including a limitation on enforcement of judgments against funds needed to serve the public welfare and interest as described below.

Risk of Uninsured Loss

The City covenants under the Lease Agreement to maintain certain insurance policies on the Property. See "SOURCE OF PAYMENT FOR THE CERTIFICATES-Insurance." These insurance policies do not cover all types of risk, and the City need not obtain insurance except as available on the open market from reputable insurers. The City does not insure its facilities against the risk of earthquake. Additionally, the Property could be the subject of an eminent domain proceeding. Under these circumstances an abatement of Lease Payments could occur and could continue indefinitely. There can be no assurance that the providers of the City's liability and rental interruption insurance will in all events be able or willing to make payments under the respective policies for such loss should a claim be made under such policies. Further,

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there can be no assurances that amounts received as proceeds from insurance or from condemnation of the Property will be sufficient to redeem the Certificates.

Under the Lease Agreement the City may obtain casualty insurance which provides for a deductible up to $250,000. Should the City be required to meet such deductible expenses, the availability of general fund revenues to make Lease Payments may be correspondingly affected.

Eminent Domain

If the Property is taken permanently under the power of eminent domain or sold to a government threatening to exercise the power of eminent domain, the term of the Lease Agreement will cease as of the day possession is taken. If less than all of the Property is taken permanently, or if the Property or any part thereof is taken temporarily, under the power of eminent domain, (a) the Lease Agreement will continue in full force and effect and will not be terminated by virtue of such taking, and (b) there will be a partial abatement of Lease Payments as a result of the application of net proceeds of any eminent domain award to the prepayment of the Lease Payments, in an amount to be agreed upon by the City and the Corporation such that the resulting Lease Payments represent fair consideration for the use and occupancy of the remaining usable portion of the Property. The City covenants in the Lease Agreement to contest any eminent domain award which is insufficient to either: (i) prepay the Lease Payments in whole, if all the Property is condemned; or (ii) prepay a pro rata share of Lease Payments, in the event that less than all of the Property is condemned.

Hazardous Substances

The existence or discovery of hazardous materials may limit the beneficial use of the Property. In general, the owners and lessees of the Property may be required by law to remedy conditions of such parcel relating to release or threatened releases of hazardous substances. The federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, sometimes referred to as "CERCLA" or the "Superfund Act," is the most well-known and widely applicable of these laws, but California laws with regard to hazardous substances are also similarly stringent. Under many of these laws, the owner or lessee is obligated to remedy a hazardous substance condition of the property whether or not the owner or lessee had anything to do with creating or handling the hazardous substance.

Further it is possible that the beneficial use of the Property may be limited in the future resulting from the current existence on the Property of a substance currently classified as hazardous but which has not been released or the release of which is not presently threatened, or may arise in the future resulting from the current existence on the Property of a substance not presently classified as hazardous but which may in the future be so classified. Further, such liabilities may arise not simply from the existence of a hazardous substance but from the method in which it is handled. All of these possibilities could significantly limit the beneficial use of the Property.

The City is unaware of the existence of hazardous substances on the Property site which would materially interfere with the beneficial use thereof.

Natural Calamities

General. From time to time, the City has been and could be subject to natural calamities, including, but not limited to, earthquake, flood or wildfire, that may adversely affect economic activity in the City, and which could have a negative impact on City finances. There can be no assurance that the occurrence of any natural calamity would not cause substantial interference to the Property, or that the City would have insurance or other resources available to make repairs to the Property in order to make the Lease Payments under the Lease. See "-Abatement" above.

Seismic. The City, like most regions in the State of California, is located in an area of seismic activity and, therefore, could be subject to potentially destructive earthquakes. The occurrence of severe seismic activity in or near the City could result in substantial damage and could lead to successful appeals for reduction of assessed values of property. Such a reduction of assessed valuations could result in a reduction of the general fund revenues available to pay the Certificates.

35

If there were to be an occurrence of severe seismic activity in the City, there could be substantial damage to and interference with the City's right to use and occupy all or a portion of the Property, which could result in Lease Payments being subject to abatement. See "-Abatement" above. Damage resulting from such an event could have a material adverse effect on the City's financial condition as well, through unexpected recovery costs and reduced tax and other revenues.

See "SOURCES OF PAYMENT FOR THE CERTIFICATES-Insurance" above. Also see "THE PROPERTY" for information about the Property.

Flood. Like most of California, the City is subject to unpredictable seasonal rainfall, with periods of intense and sustained precipitation occurring every few years. The Property is not located in the 100- year floodplain.

Bankruptcy

The City is a unit of State government and therefore is not subject to the involuntary procedures of the United States Bankruptcy Code (the "Bankruptcy Code"). However, pursuant to Chapter 9 of the Bankruptcy Code, the City may seek voluntary protection from its creditors for purposes of adjusting its debts. A City bankruptcy petition could have a material adverse effect on the payment of the Certificates. The following paragraphs present a discussion of certain potential consequences surrounding a potential City bankruptcy. It is not intended to be an exhaustive discussion of all potential adverse consequences or potential outcomes.

In the event the City were to become a debtor under the Bankruptcy Code, the City would be entitled to all of the protective provisions of the Bankruptcy Code as applicable in a Chapter 9 proceeding. Among the adverse effects of such a bankruptcy might be: (i) the application of the automatic stay provisions of the Bankruptcy Code, which, until relief is granted, would prevent collection of payments from the City or the commencement of any judicial or other action for the purpose of recovering or collecting a claim against the City; (ii) the avoidance of preferential transfers occurring during the relevant period prior to the filing of a bankruptcy petition; (iii) the existence of unsecured or court-approved secured debt which may have a priority of payment superior to that of Owners of Certificates; and (iv) the possibility of the adoption of a plan for the adjustment of the City's debt (a "Plan") without the consent of the Trustee or all of the Owners of Certificates, which Plan may restructure, delay, compromise or reduce the amount of any claim of the Owners if the Bankruptcy Court finds that the Plan is fair and equitable.

In addition, the City could either reject the Lease or assume the Lease despite any provision of the Lease which makes the bankruptcy or insolvency of the City an event of default thereunder. In the event the City rejects the Lease, the Trustee, on behalf of the Owners of the Certificates, would have a pre-petition claim that may be limited under the Bankruptcy Code and treated in a manner undera Plan overthe objections of the Trustee or Owners of the Certificates. Moreover, such rejection would terminate the Lease and the City's obligations to make payments thereunder.

Pension Benefit Liability

Many factors influence the amount of the City's pension benefit liabilities, including, without limitation, inflationary factors, changes in statutory provisions of Cal PERS retirement system laws, changes in the level of benefits provided or in the contribution rates of the City, increases or decreases in the number of covered employees, changes in actuarial assumptions or methods (including but not limited to the assumed rate of return), and differences between actual and anticipated investment experience of CalPERS. Any of these factors could give rise to additional liability of the City to its pension plans as a result of which the City would be obligated to make additional payments to its pension plans in order to fully fund the City's obligations to its pension plans.

Early Redemption Risk

Early redemption of the Certificates may occur in whole or in part without premium, on any date if the Property or a portion thereof is lost, destroyed or damaged beyond repair or taken by eminent domain

36

and from the proceeds of title insurance, or on any Interest Payment Date, without a premium (see "THE CERTIFICATES - Redemption"), if the City exercises its right to prepay Lease Payments in whole or in part pursuant to the provisions of the Lease Agreement and the Trust Agreement.

Limitations on Remedies

The enforcement of any remedies provided in the Lease Agreement and the Trust Agreement could prove both expensive and time consuming. Although the Lease Agreement provides that if the City defaults the Trustee may enter the Property and re-let the Property, portions of the Property may not be easily recoverable, and even if recovered, could be of little value to others because of the Property's specialized nature. Additionally, the Trustee may have limited ability to re-let the Property to provide a source of rental payments sufficient to pay the principal of and interest with respect to the Certificates so as to preserve the tax-exempt nature of interest with respect to the Certificates. Furthermore, due to the governmental nature of the Property, it is not certain whether a court would permit the exercise of the remedy of re-letting with respect thereto.

Alternatively, the Trustee may terminate the Lease Agreement and proceed against the City to recover damages pursuant to the Lease Agreement. Any suit for money damages would be subject to limitations on legal remedies against public agencies in the State, including a limitation on enforcement of judgments against funds needed to serve the public welfare and interest.

The rights of the Owners of the Certificates are subject to certain limitations on legal remedies against cities, redevelopment agencies and other governmental entities in the State, including but not limited to a limitation on enforcement against funds that are otherwise needed to serve the public welfare and interest. Additionally, the rights of the Owners of the Certificates may be subject to (i) bankruptcy, insolvency, reorganization, moratorium, or similar laws limiting or otherwise affecting the enforcement of creditors' rights generally (as such laws are now or hereafter may be in effect), (ii) equity principles (including but not limited to concepts of materiality, reasonableness, good faith and fair dealing) and the possible unavailability of specific performance or injunctive relief, regardless of whether considered in a proceeding in equity or law, (iii) the exercise by the United States of America of the powers delegated to it by the Constitution, and (iv) the reasonable and necessary exercise, in certain exceptional situations, of the police powers inherent in the sovereignty of the State and its governmental bodies in the interest of serving a significant and legitimate public purpose. Under Chapter 9 of the Bankruptcy Code (Title 11, United States Code), which governs bankruptcy proceedings for public agencies, there are no involuntary petitions in bankruptcy. If the City were to file a petition under Chapter 9 of the Bankruptcy Code, the Owners, the Trustee and the Corporation could be prohibited or severely restricted from taking any steps to enforce their rights under the Lease Agreement and from taking any steps to collect amounts due from the City under the Lease Agreement.

Special Counsel has limited its opinion as to the enforceability of the Lease Agreement to the extent that enforceability may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium, or other similar laws affecting generally the enforcement of creditor's rights, by equitable principles and by the exercise of judicial discretion. Additionally, the Certificates are not subject to acceleration in the event of the breach of any covenant or duty under the Lease Agreement. The lack of availability of certain remedies or the limitation of remedies may entail risks of delay, limitation or modification of the rights of the Owners.

Dependence on State for Certain Revenues

A number of the City's revenues are collected and dispersed by the State (such as sales tax and motor-vehicle license fees) or allocated in accordance with State law (most importantly, property taxes).

Therefore, State budget decisions can have an impact on City finances. In the event of a material economic downturn in the State, there can be no assurance that any resulting revenue shortfalls to the State will not reduce revenues to local governments (including the City) or shift financial responsibility for programs to local governments as part of the State's efforts to address any such related State financial difficulties.

Secondary Market Risk

There can be no assurance that there will be a secondary market for purchase or sale of the

37

Certificates, and from time to time there may be no market for them, depending upon prevailing market conditions, the financial condition or market position of firms who may make the secondary market and the financial condition of the City.

Changes in Law

There can be no assurance that the electorate of the State will not at some future time adopt additional initiatives or that the Legislature will not enact legislation that will amend the laws or the Constitution of the State resulting in a reduction of the general fund revenues of the City and consequently, having an adverse effect on the security for the Certificates.

STATE BUDGET INFORMATION

Information regarding the State Budget is regularly available at various State-maintained websites. The fiscal year 2018-19 State Budget further described below may be found at the website of the Department of Finance,www.dofca.gov, under the heading "California Budget." Additionally, an impartial analysis of the State's Budgets is posted by the Office of the Legislative Analyst at www.lao.ca.gov. The information referred to is prepared by the respective State agency maintaining each website and not by the City, and the City takes no responsibility for the continued accuracy of the internet addresses or for the accuracy, completeness or timeliness of information posted there, and such information is not incorporated herein by these references.

2018-19 State Budget

On June 27, 2018, the Governor signed into law the State budget for fiscal year 2018-19 (the "2018-19 Budget"). The state's budget has achieved structural balance for the last several fiscal years, and the 2018-19 Budget proposes a budget surplus.

Although the 2018-19 Budget reflects a balanced budget, the Department of Finance's summary of the 2018-19 Budget cautions that, since 2000, the State's short periods of balanced budgets have been followed by massive budget shortfalls. To protect against potential future economic recessions, the 2018-19 Budget fully funds the Budget Stabilization Account, also called the state's "rainy day fund," with a total deposit of over $4.4 billion and adds two additional reserves to State law: the Budget Deficit Savings Account, intended to facilitate supplemental payments to continue to fully fund the rainy day fund; and the Safety Net Reserve Fund, intended to protect against potential future cuts to certain health and welfare programs.

For Fiscal Year 2017-18, the 2018-19 Budget projects total general fund revenues and transfers of $129.8 billion and total expenditures of $127.0 billion. The State is projected to end the 2017-18 fiscal year with total available general fund reserves of $16.7 billion, including $7.3 billion in the traditional general fund reserve and $9.4 billion in the rainy-day fund. For Fiscal Year 2018-19, the 2018-19 Budget projects total general fund revenues of $133.3 billion and authorizes expenditures of $138. 7 billion. The State is projected to end the 2018-19 fiscal year with total available general fund reserves of $15.9 billion, including $2.0 billion in the traditional general fund reserve, $13.8 billion in the rainy-day fund and $200 million in the Safety Net Reserve Fund. The projected ending balance in the rainy-day fund at the end of the 2018-19 fiscal year is expected to equal the SSA's current constitutional maximum of 10 percent of the estimated general fund revenues for Fiscal Year 2018-19. The City cannot predict whether the State will take steps, in response to a future budget shortfall, which would reduce the amount of tax revenue available to the City.

The City does not provide assurance regarding the 2019-20 proposed State Budget nor can it predict the input that the 2019-20 proposed State Budget, or subsequent budgets, will have on its finance and operations.

Information about the State budget and State spending is available at various State maintained websites. Text of the 2018-2019 Budget, the 2018-19 Budget Summary and other documents related to the State budget may be found at the website of the State Department of Finance, www.dof.ca.gov. A

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http://www.dofca.gov

http://www.lao.ca.gov

http://www.dof.ca.gov

nonpartisan analysis of the budget is posted by the Legislative Analyst's Office at www.lao.ca.gov. In addition, various State official statements, many of which contain a summary of the current and past State budgets may be found at the website of the State Treasurer, www.treasurer.ca.gov.

Future State Budgets

The City receives a portion of its funding from the State. Changes in the revenues received by the State can affect the amount of funding, if any, to be received from the State by the City and other cities in the State.

The City cannot predict the extent of the budgetary problems the State will encounter in this fiscal year or in any future fiscal years, and, it is not clear what measures would be taken by the State to balance its budget, as required by law. In addition, the City cannot predict the final outcome of current and future State budget negotiations, the impact that such budgets will have on its finances and operations or what actions will be taken in the future by the State Legislature and Governor to deal with changing State revenues and expenditures. Current and future State budgets will be affected by national and State economic conditions and other factors, including the current economic downturn, over which the City has no control. See also "RISK FACTORS-Dependence on State for Certain Revenues."

CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS

The constitutional and statutory provisions discussed in this section have the potential to affect the ability of the City to levy taxes and spend tax proceeds for operating and other purposes.

Article XIIIA of the California Constitution

Basic Property Tax Levy. On June 6, 1978, California voters approved Proposition 13 ("Proposition 13"), which added Article XIIIA to the State Constitution ("Article XIIIA"). Article XIIIA limits the amount of any ad valorem tax on real property to 1 % of the full cash value thereof, except that additional ad valorem taxes may be levied to pay debt service on (i) indebtedness approved by the voters prior to July 1, 1978, (ii) (as a result of an amendment to Article XIIIA approved by State voters on June 3, 1986) on bonded indebtedness for the acquisition or improvement of real property which has been approved on or after July 1, 1978 by two-thirds of the voters on such indebtedness (which provided the authority for the issuance of the 2010 Note), and (iii) (as a result of an amendment to Article XIIIA approved by State voters on November 7, 2000) bonded indebtedness incurred by a school district or community college district for the construction, reconstruction, rehabilitation or replacement of school facilities or the acquisition or lease of real property for school facilities, approved by 55% of the voters of the district, but only if certain accountability measures are included in the proposition. Article XIIIA defines full cash value to mean "the county assessor's valuation of real property as shown on the 1975-76 tax bill under full cash value, or thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership have occurred after the 1975 assessment". This full cash value may be increased at a rate not to exceed 2% per year to account for inflation.

Article XIIIA has subsequently been amended to permit reduction of the "full cash value" base in the event of declining property values caused by damage, destruction or other factors, to provide that there would be no increase in the "full cash value" base in the event of reconstruction of property damaged or destroyed in a disaster and in other minor or technical ways.

LegislationlmplementingArticleXIIIA. Legislation has been enacted and amended a number of times since 1978 to implement Article XIIIA. Under current law, local agencies are no longer permitted to levy directly any property tax (except to pay voter-approved indebtedness). The 1 % property tax is automatically levied by the county and distributed according to a formula among taxing agencies. The formula apportions the tax roughly in proportion to the relative shares of taxes levied prior to 1979.

Increases of assessed valuation resulting from reappraisals of property due to new construction, change in ownership or from the annual adjustment not to exceed 2% are allocated among the various jurisdictions in the "taxing area" based upon their respective "situs." Any such allocation made to a local

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http://www.lao.ca.gov

http://www.treasurer.ca.gov

agency continues as part of its allocation in future years.

Inflationary Adjustment of Assessed Valuation. As described above, the assessed value of a property may be increased at a rate not to exceed 2% per year to account for inflation. On December 27, 2001, the Fresno County Superior Court, in County of Orange v. Fresno County Assessment Appeals Board No. 3, held that where a home's taxable value did not increase for two years, due to a flat real estate market, the Fresno County assessor violated the 2% inflation adjustment provision of Article XIIIA, when the assessor tried to "recapture" the tax value of the property by increasing its assessed value by 4% in a single year. The assessors in most California counties, including the County, use a similar methodology in raising the taxable values of property beyond 2% in a single year. The State Board of Equalization has approved this methodology for increasing assessed values. On appeal, the Appellate Court held that the trial court erred in ruling that assessments are always limited to no more than 2% of the previous year's assessment. On May 10, 2004 a petition for review was filed with the California Supreme Court. The petition has been denied by the California Supreme Court. As a result of this litigation, the "recapture" provision described above may continue to be employed in determining the full cash value of property for property tax purposes.

Section 40 of Article XIIIA also provides that cities, counties, and special districts cannot, without a two-thirds vote of the qualified electors, impose special taxes which has been interpreted to include special fees in excess as the cost of providing the service or facility for which the fee is charged, or fees levied for general revenuepurposes.

Both the California Supreme Court and the United States Supreme Court have upheld the validity of Article XIIIA.

Article XIIIB of the California Constitution

In addition to the limits Article XIIIA imposes on property taxes that may be collected by local governments, certain other revenues of the State and most local governments are subject to an annual "appropriations limit" imposed by Article XIIIB which effectively limits the amount of such revenues those entities are permitted to spend. Article XIIIB, approved by the voters in July 15979, was modified substantially by Proposition 111 in 1990. The appropriations limit of each government entity applies to "proceeds of taxes," which consist of tax revenues, State subventions and certain other funds, including proceeds from regulatory licenses, user charges or other fees to the extent that such proceeds exceed "cost reasonably borne by such entity in providing the regulation, product or service." "Proceeds of taxes" excludes tax refunds and some benefit payments such as unemployment insurance. No limit is imposed on the appropriation of funds which are not "proceeds of taxes," such as reasonable user charges or fees, and certain other non-tax funds. Article XIIIB also does not limit appropriation of local revenues to pay debt service on Bonds existing or authorized by January 1, 1979, or subsequently authorized by the voters, appropriations required to comply with mandates of courts or the federal government, appropriations for qualified capital outlay projects, and appropriation by the State of revenues derived from any increase in gasoline taxes and motor vehicle weight fees above January 1, 1990, levels. The appropriations limit may also be exceeded in case of emergency; however, the appropriations limit for the next three years following such emergency appropriation must be reduced to the extent by which it was exceeded, unless the emergency arises from civil disturbance or natural disaster declared by the Governor, and the expenditure is approved by two-thirds of the legislative body of the local government.

The State and each local government entity has its own appropriations limit. Each year, the limit is adjusted to allow for changes, if any, in the cost of living, the population of the jurisdiction, and any transfer to or from another government entity of financial responsibility for providing services. Proposition 111 requires that each agency's actual appropriations be tested against its limit every two years.

If the aggregate "proceeds of taxes" for the preceding two-year period exceeds the aggregate limit, the excess must be returned to the agency's taxpayers through tax rate or fee reductions over the following two years.

The City has never exceeded its appropriations limit.

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Articles XIIIC and XIIID of the California Constitution

General. On November 5, 1996, the voters of the State approved Proposition 218, known as the "Right to Vote on Taxes Act." Proposition 218 adds Articles XIIIC and XIIID to the California Constitution and contains a number of interrelated provisions affecting the ability of the City to levy and collect both existing and future taxes, assessments, fees and charges.

On November 2, 2010, California voters approved Proposition 26, entitled the "Supermajority Vote to Pass New Taxes and Fees Act." Section 1 of Proposition 26 declares that Proposition 26 is intended to limit the ability of the State Legislature and local government to circumvent existing restrictions on increasing taxes by defining the new or expanded taxes as "fees." Proposition 26 amendedArticlesXIIIAandXIIIC of the State Constitution. The amendments to Article XIIIA limit the ability of the State Legislature to impose higher taxes (as defined in Proposition 26) without a two-thirds vote of the Legislature. The amendments to Article XIIIC define "taxes" that are subject to voter approval as "any levy, charge, or exaction of any kind imposed by a local government," with certain exceptions.

Taxes. Article XIIIC requires that all new local taxes be submitted to the electorate before they become effective. Taxes for general governmental purposes of the City ("general taxes") require a majority vote; taxes for specific purposes ("special taxes"), even if deposited in the City's General Fund, require a two-thirds vote.

Property-Related Fees and Charges. Article XI 11 D also adds several provisions making it generally more difficult for local agencies to levy and maintain property-related fees, charges, and assessments for municipal services and programs.

Reduction or Repeal of Taxes, Assessments, Fees and Charges. Article XIIIC also removes limitations on the initiative power in matters of reducing or repealing local taxes, assessments, fees or charges. No assurance can be given that the voters of the City will not, in the future, approve an initiative or initiatives which reduce or repeal local taxes, assessments, fees or charges currently comprising a substantial part of the City's General Fund. If such repeal or reduction occurs, the City's ability to pay debt service on the Certificates could be adversely affected.

Burden of Proof Article XIIIC provides that local government "bears the burden of proving by a preponderance of the evidence that a levy, charge, or other exaction is not a tax, that the amount is no more than necessary to cover the reasonable costs of the governmental activity, and that the manner in which those costs are allocated to a payor bear a fair or reasonable relationship to the payer's burdens on, or benefits received from, the governmental activity." Similarly, Article XIIID provides that in "any legal action contesting the validity of a fee or charge, the burden shall be on the agency to demonstrate compliance" with Article XIIID.

Judiciallnterpretation of Proposition 218. The interpretation and application of Articles XI I IC and XI 11 D will ultimately be determined by the courts, and it is not possible at this time to predict with certainty the outcome of such determination.

Impact on City's General Fund. The City does not believe that any material source of General Fund revenue is subject to challenge under Proposition 218 or Proposition 26.

The approval requirements of Articles XIIIC and XIIID reduce the flexibility of the City to raise revenues for the General Fund, and no assurance can be given that the City will be able to impose, extend or increase the taxes, fees, charges or taxes in the future that it may need to meet increased expenditure needs.

Proposition 62

Proposition 62 was adopted by the voters at the November 4, 1986, general election and (a) requires that any new or higher taxes for general governmental purposes imposed by local governmental entities such as the City be approved by a two-thirds vote of the governmental entity's legislative body and by a

41

majority vote of the voters of the governmental entity voting in an election on the tax, (b) requires that any special tax (defined as taxes levied for other than general governmental purposes) imposed by a local governmental entity be approved by a two-thirds vote of the voters of the governmental entity voting in an election on the tax, (c) restricts the use of revenues from a special tax to the purposes or for the service for which the special tax was imposed, (d) prohibits the imposition of ad valorem taxes on real property by local governmental entities except as permitted by Article XIIIA, (e) prohibits the imposition of transaction taxes and sales taxes on the sale of real property by local governmental entities, and (f) requires that any tax imposed by a local govern mental entity on or after August 1, 1985, be ratified by a majority vote of the voters voting in an election on the tax within two years of the adoption of the initiative or be terminated by November 15,1988.

California appellate court cases have overturned the provisions of Proposition 62 pertaining to the imposition of taxes for general government purposes. However, the California Supreme Court upheld Proposition 62 in its decision on August 28, 1995, in Fresno County Transportation Authority v. Guardino. This decision reaffirmed the constitutionality of Proposition 62. Certain matters regarding Proposition 62 were not addressed in the Supreme Court's decision, such as what remedies exist for taxpayers subject to a tax not in compliance with Proposition 62, and whether the decision applies to charter cities. The City has not experienced any substantive adverse financial impact as a result of the passage of this initiative.

Proposition 1A; Proposition 22

Proposition IA. Proposition 1 A, proposed by the Legislature in connection with the State's Fiscal Year 2004-05 Budget, approved by the voters in November 2004 and generally effective in Fiscal Year 2006-07, provided that the State may not reduce any local sales tax rate, limit existing local government authority to levy a sales tax rate or change the allocation of local sales tax revenues, subject to certain exceptions. Proposition 1A generally prohibited the State from shifting to schools or community colleges any share of property tax revenues allocated to local governments for any Fiscal Year, as set forth under the laws in effect as of November 3, 2004. Any change in the allocation of property tax revenues among local governments within a county had to be approved by two-thirds of both houses of the Legislature.

Proposition 22. Proposition 22, entitled "The Local Taxpayer, Public Safety and Transportation Protection Act," was approved by the voters of the State in November 2010. Proposition 22 eliminates or reduces the State's authority to (i) temporarily shift property taxes from cities, counties and special districts to schools, (ii) use vehicle license fee revenues to reimburse local governments for State-mandated costs (the State will have to use other revenues to reimburse local governments), (iii) redirect property tax increment from redevelopment agencies to any other local government, (iv) use State fuel tax revenues to pay debt service on State transportation bonds, or (v) borrow or change the distribution of State fuel tax revenues.

Proposition 26

Proposition 26 ("Proposition 26"), which was approved by California voters on November 2, 2010, revises the California Constitution to expand the definition of "taxes." Proposition 26 re- categorizes many State and local fees as taxes and specifies a requirement of two-thirds voter approval for taxes levied by local governments.

Proposition 26 requires the State obtain the approval of two-thirds of both houses of the State Legislature for any proposed change in State statutes, which would result in any taxpayer paying a higher tax. Proposition 26 eliminates the previous practice whereby a tax increase coupled with a tax reduction that resulted in an overall neutral fiscal effect was subject only to a majority vote in the State Legislature. Furthermore, pursuant to Proposition 26, any increase in a fee above the amount needed to provide the specific service or benefit is deemed to be a tax and the approval thereof will require such two-thirds vote of approval to be effective. In addition, for State imposed fees and charges, any fee or charge adopted after January 1, 2010 with a majority vote of approval of the State Legislature which would have required a twothirds vote of approval of the State Legislature if Proposition 26 were effective at the time of such adoption is repealed as of November 2011 absent the re-adoption by the requisite two-thirds vote.

Proposition 26 amends Article XIII C of the State Constitution to state that a "tax" means a levy, charge

42

or exaction of any kind imposed by a local government, except (1) a charge imposed for a specific benefit conferred or privilege granted directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of conferring the benefit or granting the privilege; (2) a charge imposed for a specific government service or product provided directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of providing the service or product; (3) a charge imposed for the reasonable regulatory costs to a local government for issuing licenses and permits, performing investigations, inspections and audits, 30 enforcing agricultural marketing orders, and the administrative enforcement and adjudication thereof; (4) a charge imposed for entrance to or use of local government property or the purchase rental or lease of local government property; (5) a fine, penalty, or other monetary charge imposed by the judicial branch of government or a local government as a result of a violation of law; (6) a charge imposed as a condition of property development; or (7) assessments and property related fees imposed in accordance with the provisions of Proposition 218. See" - Proposition 218."

Proposition 26 applies to any levy, charge or exaction imposed, increased, or extended by local government on or after November 3, 2010, unless exempted, as stated above. Accordingly, fees adopted prior to that date are not subject to the measure until they are increased or extended or if it is determined that an exemption applies. As of the date hereof, none of the County's fees or charges has been challenged in a court of law in connection with the requirements of Proposition 26.

If the local government specifies how the funds from a proposed local tax are to be used, the approval will be subject to a two-thirds voter requirement. If the local government does not specify how the funds from a proposed local tax are to be used, the approval will be subject to a fifty percent voter requirement. Proposed local government fees that are not subject to Proposition 26 generally are subject to the approval of a majority of the governing body. In general, proposed property charges will be subject to a majority vote of approval by the governing body although certain proposed property charges will also require approval by a majority of the affected property owners.

POSSIBLE FUTURE INITIATIVES

Articles XI I IA, XIIIB,XIIIC andXIIIDand Propositions 62, 1A, 22 and26were each adopted as measures that qualified for the ballot pursuant to the State's initiative process. From time to time other initiative measures could be adopted, further affecting revenues of the City or the City's ability to expend revenues. The nature and impact of these measures cannot be anticipated by the City.

ABSENCE OF LITIGATION

At the time of delivery of and payment for the Certificates, the City will certify that there is no action, suit, proceeding, inquiry, or investigation, at law or in equity, before or by any courter regulatory agency, public board, or body pending or threatened against the City or the Corporation affecting their existence or the titles of their respective officers or seeking to restrain or to enjoin the issuance, sale, or delivery of the Certificates, or the application of the proceeds thereof in accordance with the Trust Agreement, or in any way contesting or affecting the validity or enforceability of the Certificates, any agreement entered into between the City and any purchaser of the Certificates, the Lease Agreement, the Trust Agreement, the Assignment Agreement, the Site Lease or any other applicable agreements or any action of the City or the Corporation contemplated by any of said documents, or in any way contesting the completeness or accuracy of this Official Statement or any amendment or supplement thereto, or contesting the powers of the City or the Corporation or their authority with respect to the Certificates or any action of the City or the Corporation contemplated by any of said documents, nor, to the knowledge of the City or the Corporation, is there any basis therefor.

CONTINUING DISCLOSURE

Pursuant to Rule 15c2-12 of the Securities and Exchange Commission (the "Rule"), the City has agreed, for the benefit of holders of the Certificates, to provide certain financial information and operating data relating to the City and the balances of funds relating to the Certificates, by not later than March 31 of each fiscal year commencing with the report for the 2019-20 fiscal year (the "Annual Information"), and to provide

43

notices of the occurrence of certain enumerated events. The Annual Information and notices of enumerated events will be filed by the City with the Municipal Securities Rule making Board (the "MSRB"), via its Electronic Municipal Market Access ("EMMA") system. The nature of the information to be provided in the Annual Information and the notices of enumerated events is set forth in APPENDIX F-FORM OF CONTINUING DISCLOSURE CERTIFICATE. For the past five years, the City has been compliant with respect to its continuing disclosure obligations pursuant to the Rule.

LEGAL MATTERS

All legal matters in connection with the execution and delivery of the Certificates are subject to the approval of Robert M. Haight, Santa Cruz, California, as Special Counsel. Special Counsel's opinion with respect to the Certificates will be substantially in the form set forth in APPENDIX C- FORM OF OPINION OF SPECIAL COUNSEL. Certain legal matters will also be passed on for the City by Robert M. Haight, Santa Cruz, California, as Disclosure Counsel, and by the City Attorney. be passed upon for the fees and expenses of Special Counsel, Disclosure Counsel and are contingent upon the execution and delivery of the Certificates.

TAX MATTERS

In the opinion of Robert M. Haight, Special Counsel, under existing law, interest on the Certificates is exempt from State of California personal income taxes. Special Counsel expresses no opinion as to any other tax consequences regarding the Certificates. Interest on the Certificates is not excluded from gross income for federal income tax purposes.

The federal tax and State of California personal income tax discussion set forth above with respect to the Certificates is included for general information only and may not be applicable depending upon a Beneficial Owner's particular situation. The ownership and disposal of the Certificates and the accrual or receipt of interest with respect to the Certificates may otherwise affect the tax liability of certain persons. Special Counsel expresses no opinion regarding any such tax consequences. BEFORE PURCHASING ANY OF THE CERTIFICATES, POTENTIAL PURCHASERS SHOULD CONSULT THEIR INDEPENDENT TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES RELATING TO THE CERTIFICATES AND THE TAXPAYER'S PARTICULAR CIRCUMSTANCES.

The complete text of the final opinion that Special Counsel expects to deliver upon the delivery of the Certificates is set forth in APPENDIX C-FORM OF OPINION OF SPECIAL COUNSEL.

UNDERWRITING

Stinson Securities LLC (the "Underwriter'') has agreed to purchase the Certificates at a price of $ __ (representing an aggregate principal amount of the Certificates of$ ___ , plus an original issue premium of$ , less an Underwriter's discount of$ ).The Underwriter will purchase all of the Certificates if any are purchased, the obligation to make such purchase being subject to certain terms and conditions set forth in the certificate purchase agreement for the Certificates, including the approval of certain legal matters by counsel and certain other conditions. The Underwriter intends to offer the Certificates to the public at the offering prices set forth on the inside cover page of this Official Statement. The Underwriter may offer and sell to certain dealers and others at a price lower than the offering prices stated on the inside cover page hereof. The offering price may be changed from time to time by the Underwriter.

RATINGS

S&P is expected to assign the rating of "A+" (stable outlook) to the Certificates. These ratings reflect only the views of S&P and an explanation of the significance of such rating may be obtained from S&P. There is no assurance that such ratings will continue for any given period of time or that such ratings will not be revised downward or withdrawn entirely by S&P, if in the judgment of the S&P, circumstances so warrant. Any such downward revision or withdrawal of such rating may have an adverse effect on the market price of the Certificates.

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FINANCIAL STATEMENTS

The City's Audited Financial Statements for fiscal year ended June 30, 2018, and the City's Auditor's Report regarding such financial statements, are set forth in APPENDIX B- COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY FOR THE YEAR ENDED JUNE 30, 2018. The City's Auditor was not requested to consent to the inclusion of its report in Appendix Band it has not undertaken to update financial statements included in Appendix B. No opinion is expressed by the City's Auditor with respect to any event subsequent to its report. This and prior year's annual financial reports can also be obtained at: https:llwww.shastalake-ca.govlreports-a-awards

ADDITIONAL INFORMATION

All of the preceding summaries of the Certificates, the Trust Agreement, the Lease Agreement, the Assignment Agreement, the Site Lease, and other documents are made subject to the provisions of such documents respectively and do not purport to be complete statements of any or all of such provisions. Reference is hereby made to such documents on file with the City for further information in connection therewith.

This Official Statement does not constitute a contract with the purchasers of the Certificates.

Any statements made in this Official Statement involving matters of opinion or estimates, whether or not so expressly stated, are set forth as such and not as representations of fact, and no representation is made that any of the estimates will be realized.

References are made herein to certain documents and reports which are brief summaries thereof which do not purport to be complete or definitive and reference is made to such documents and reports for full and complete statements of the contents thereof.

The City will furnish a certificate dated the date of delivery of the Certificates, from an appropriate officer of the City, to the effect that to the best of such officer's knowledge and belief, and after reasonable investigation, (i) neither the Official Statement or any amendment or supplement thereto contains any untrue statement of a material fact or omits to state any material fact necessary to make the statements therein, in light of the circumstances in which they were made, not misleading; (ii) since the date of the Official Statement, no event has occurred which should have been set forth in an amendment or supplement to the Official Statement which has not been set forth in such an amendment or supplement, and the Certificates, the Trust Agreement, the Lease Agreement, the Assignment Agreement, the Site Lease, and other applicable agreements conform as to form and tenor to the descriptions thereof contained in the Official Statement; and (iii) the City has complied with all the agreements and has satisfied all the conditions on its part to be performed or satisfied under the Trust Agreement at and prior to the date of the issuance of the Certificates.

The execution and delivery of the Official Statement by the City have been duly authorized by the City Council on behalf of the City.

CITY OF SHASTA LAKE

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Isl John Duckett City Manager

https://www.shastalake-ca.gov/reports-a-awards

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APPENDIX A

GENERAL DEMOGRAPHIC INFORMATION REGARDING THE CITY OF SHASTA LAKE

Population And Economic Information

The following table contains the population of the City, and its personal income for the last five years.

Year 2014

2015

2016

2017

2018

2These are annual average rates

Source:

CITY OF SHASTA LAKE, Population and Economic Information

(as of January 1)

Per Population Personal Income Capita

10,044 $ 380,717,820 37,905

10,541 414,819,667 39,353

10,523 437,988,306 41,622

10,386 436,243, 158 42,003

10,275 470,268,500 45,768

California Employment Development Department

U.S. Department of Commerce, Bureau of Economic Analysis

A-1

Unemployment Rate2

9.1 %

6.0 %

5.5 %

5.0 %

4.9 %

The following tables summarize historical employment and unemployment for the Shasta MSA (which covers the County), the State of California and the United States:

Major Employers

The following table lists the top 10 employers within the City as of June 30, 2018.

Employer Number of Employees Rank

Gateway Unified School District 210 1

Sierra Pacific 155 2

Knauf Insulation 154 3

City of Shasta Lake 50 4

McDonald's 42 5

Farmers Market Place 37 6

Premiere Brand Meats 28 7

Fresinius Medical Care 20 8

Lawrence & Associates 18 9

530 Collective 13 10

Source: Shasta County fiscal year 2018-19 CAFR.

A-2

Construction Activity

The following table reflects the five-year history of building permit valuation for the City:

2014 2015

Valuation:

New Single-Family $ 2,425,977 $ 3,071,413

Res. Alterations/ Additions 267,794 191,964

Total Residential $ 3,890,500 $ 4,567,614

Total Non-Res 425, 749 798,000

Total All Building $ 4,316,249 $ 5,365,614

New Dwelling Units:

Single-Family 20 22

New Multiple-Family 0 0

Total Units 20 22

Source: Construction Industry Research Board: "Building Permit Summary." (1) Latest available full year data. Note: Totals may not add due to independent rounding.

A-3

2016 2017

$ 5,266,886 $ 9,556,605

159,575 151,800

$ 6,755,369 $ 11,831,109

1,094,931 6,097,770

$ 7,850,300 $ 17,928,879

29 40

0 0

29 40

2018

$ 9,945,081

145,476

$ 12,055,642

2,754,610

$ 14,810,252

39

0

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APPENDIX B

COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY FOR THE VEAR ENDED JUNE 30, 2018

The Auditor was not requested to consent to the inclusion of its report in this Appendix B and it has not undertaken to update financial statements included in this Appendix B. No opinion is expressed by the Auditor with respect to any event subsequent to its report.

B-1

City ofShasta take State• of California

City of Shasta Lake, California

Comprehensive Annual Financial Report

For the Year Ended June 30, 2018

Prepared By: Finance Director

Laura L. Redwine, CPA

CITY OF SHASTA LAKE Comprehensive Annual Financial Report


Table of Contents

INTRODUCTORY SECTION Pa.ge

Transmittal Letter ..................................................................................................................................... i-iii

Government Finance Officer's Association Certificate of Achievement .................................................... iv

City Officials ................................................................................................................................................. v

Organizational Chart .................................................................................................................................... vi

FINANCIAL SECTION

Independent Auditor's Report .................................................................................................................... 1-3

Management's Discussion and Analysis (Unaudited) ............................................................................. 4-16

Basic Financial Statements:

Government-Wide Financial Statements:

Statement of Net Position ......................................................................................................... 17-18 Statement of Activities ................................................................................................................... 19

Fund Financial Statements:

Governmental Funds: Balance Sheet .......................................................................................................................... 20 Reconciliation of the Governmental Funds Balance Sheet to the Government-

Wide Statement of Net Position - Governmental Activities ............................................. 21 Statement of Revenues, Expenditures and Changes in Fund Balances ................................... 22 Reconciliation of the Statement of Revenues, Expenditures and Changes in

Fund Balances of Governmental Funds to the Government-Wide Statement of Activities - Governmental Activities ........................................................... 23

Proprietary Funds: Statement of Net Position ................................................................................................... 24-25 Statement of Revenues, Expenses and Changes in Net Position ............................................ 26 Statement of Cash Flows .................................................................................................... 27-28

Fiduciary Funds: Statement of Fiduciary Net Position ....................................................................................... 29 Statement of Changes in Fiduciary Net Position ..................................................................... 30

Notes to Basic Financial Statements ............................................................................................... 31-72

Required Supplementary Information (Unaudited):

City Pension Plan - Schedule of Proportionate Share of the Net Pension Liability ............................. 73 City Pension Plan - Schedule of Contributions .................................................................................... 74 City Pension Plan - Notes to City Pension Plan ................................................................................... 75 City OPEB Plan - Schedule of Changes in Net OPEB Liability and Related Ratios ........................... 76 City OPEB Plan - Schedule of Contributions ....................................................................................... 77 City OPEB Plan - Notes to City OPEB Plan ........................................................................................ 78 Budgetary Comparison Schedule - General Fund ................................................................................ 79 Budgetary Comparison Schedule - HOME .......................................................................................... 80 Notes to Budgetary Comparison Schedules ......................................................................................... 81



Table of Contents

FINANCIAL SECTION (CONTINUED)

Combining and Individual Fund Statements and Schedules:

Nonmajor Governmental Funds:

Page

Combining Balance Sheet .............................................................................................................. 82 Combining Statement of Revenues, Expenditures and Changes in Fund Balances ....................... 83

Special Revenue Funds: Narrative Summary ............................................................................................................ 84-85 Combining Balance Sheet ....................................................................................................... 86 Combining Statement of Revenues, Expenditures and Changes in Fund Balances ................ 87 Budgetary Comparison Schedules:

Law Enforcement Fund (COPS) ....................................................................................... 88 Water P & FCC Charges ................................................................................................... 89 State Trafficway ................................................................................................................ 90 Electric P & FCC Charges ................................................................................................ 91 CDBG Project Fund .......................................................................................................... 92 Wastewater P & FCC Charges .......................................................................................... 93 Parks P & FCC Charges .................................................................................................... 94 Housing Authority ............................................................................................................ 95

Debt Service Funds: Narrative Summary ................................................................................................................. 96 Combining Balance Sheet ....................................................................................................... 97 Combining Statement of Revenues, Expenditures and Changes in Fund Balances ................ 98 Budgetary Comparison Schedules:

Wastewater Treatment Debt ............................................................................................. 99 Riddle Road Water Bond ................................................................................................ 100 Davis-Grunsky Loan Act ................................................................................................ 101

Internal Service Funds: Narrative Summary ............................................................................................................... 102 Combining Statement of Net Position ................................................................................... 103 Combining Statement of Revenues, Expenses and Changes in Net Position ........................ 104 Combining Statement of Cash Flows .................................................................................... 105

Fiduciary Funds: Narrative Summary ............................................................................................................... 106

Agency Fund: Statement of Assets and Liabilities ................................................................................. 107 Statement of Changes in Assets and Liabilities .............................................................. 108



Table of Contents

STATISTICAL SECTION (UNAUDITED) Page

Narrative Summary ................................................................................................................................... 109

Financial Trend Information: Net Position by Component - Last Ten Fiscal Years ......................................................................... 110 Changes in Net Position - Last Ten Fiscal Years ........................................................................ 111-112 Fund Balances - Governmental Funds - Last Ten Fiscal Years ......................................................... 113 Changes in Fund Balances - Governmental Funds - Last Ten Fiscal Years ...................................... 114 General Fund Balance Compared to Annual Appropriations - Last Ten Fiscal Years ...................... 115 General Fund Revenues by Source - Last Ten Fiscal Years .............................................................. 116 General Fund Tax Revenues by Source - Last Ten Fiscal Years ....................................................... 117 Governmental Funds Expenditures by Function - Last Ten Fiscal Years .......................................... 118

Revenue Capacity Information: Assessed Value and Estimated Actual Value of Taxable Property - Last Ten Fiscal Years .............. 119 Property Tax Rates (Direct and Overlapping Governments) - Last Ten Fiscal Years ....................... 120 Property Tax Levies and Collections - Last Ten Fiscal Years ........................................................... 121 Shasta Dam Redevelopment Project Area Historic Tax Increment Revenues -

Last Nine Fiscal Years ................................................................................................................. 122 Principal Property Taxpayers - Current Year and Seven Years Ago ................................................. 123 Shasta Dam Redevelopment Project Area Ten Largest Property Taxpayers Fiscal

Year 2017/2018 ............................................................................................................................ 124 Property Value and Construction - Last Ten Fiscal Years ................................................................. 125

Debt Capacity Information: Ratio of Outstanding Debt by Type - Last Ten Fiscal Years ............................................................. 126 Ratio of Net Bonded Debt to Assessed Value and Net Bonded Debt per Capita -

Last Ten Fiscal Years ................................................................................................................... 127 Ratio of Annual Debt Service for Bonded Debt to Total General Expenditures -

Last Ten Fiscal Years ................................................................................................................... 128 Computation of Legal Bonded Debt Margin - Last Ten Fiscal Years ................................................ 129

Demographic and Economic Information: Economic Information - Last Ten Calendar Years ............................................................................. 130 Principal Employers - Current Year and Six Years Ago .................................................................... 131

Operating Information: Authorized Full-Time Equivalent Employees (FTE) by Department - Last Ten Fiscal Years .......... 132 Operating and Capital Indicators - Last Ten Calendar Years ............................................................. 1.33

INTRODUCTORY SECTION

• Letter of Transmittal

• Government Finance Officer's Association Certificate of Achievement

• City Officials

• Organizational Chart

December 10, 2018

PO BOX 77714477 Main Street Shasta Lake, CA96019

(530) 275-7400

ww1N.cityofshastalake.org

Honorable Mayor, Members of the City Council, and Citizens of the City of Shasta Lake:

I am pleased to present the Comprehensive Annual Financial Report (CAFR) of the City of Shasta Lake, California for the fiscal year ended June 30, 2018. The fiscal year covers financial transactions from July 1, 2017 to June 30, 2018 on a modified or full accrual basis, depending on the fund type. The format and content of this CAFR comply with the principles and standards of accounting and financial reporting adopted by the Governmental Accounting Standards Board (GASB) and contain all information needed for readers to gain a reasonable understanding of the City of Shasta Lakes' financial affairs.

This report was prepared by the City's Finance Department. Management assumes full responsibility for the completeness and reliability of the information contained in this report, based upon a comprehensive framework of internal controls that it has established for this purpose. Because the cost of internal controls should not exceed the anticipated benefits, the objective is to provide reasonable, rather than absolute, assurance that the financial statements are free of any material misstatements.

Smith & Newell CPAs, a firm of licensed certified public accountants, have issued an unmodified ("clean") opinion on the City's financial statements for the fiscal year ended June 30, 2018. The independent auditors' report is located at the front of the financial section of this report.

Management's discussion and analysis (MD&A) immediately follows the independent auditors' report and provides a narrative introduction, overview, and analysis of the basic financial statements. MD&A complement this letter of transmittal and should be read in conjunction with it.

Profile of the City and its Operations

The City of Shasta Lake was incorporated on July 2, 1993 and has an estimated population of 10, 190. It is located in east central Shasta County and is north to Redding, population 90, 755, and thirty miles north of Red Bluff, population 14, 157. Shasta Lake is situated along Interstate 5 and is 170 miles north of Sacramento, the state capital. The City is a general law city and it employs the council-manager form of government. The governing council is responsible, among other things, for passing ordinances, adopting the budget, and appointing committees. The Council appoints a City Attorney as legal counsel and a City Manager who is the administrative head of the government.

The City Manager is responsible for carrying out the policies and ordinances of the governing council, for overseeing day-to-day operations of the government, and for appointing the heads of the various departments. The City Manager is required to prepare and submit the annual budget to City Council and be responsible for its administration after adoption. The City Manager presents an operating and capital budget to City Council for review and adoption. The two-year operating budget of the city is adopted by the City of Shasta Lake City Council prior to July 1 on even numbered years, primarily on a cash basis. The City Manager is authorized to transfer budget amounts between departments within any fund, however, any revisions that alter the total expenditures of any fund requires City Council resolution.

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http://www.cityofshastaiake.org

The Council is elected on a non-partisan basis. Council members serve four-year staggered terms, with either two or three council members elected every two years. A Mayor and Vice-Mayor are selected by the Council from its members. An organization chart and list of the City Council members and other City officials, as of June 30, 2018, is included at the back of the Introductory Section of the CAFR.

The primary responsibility for financial administration of the City rests with the Finance Director. The Finance Director is appointed by the City Manager and is responsible for establishing and maintaining the accounting and management information for the City. The Director is also responsible for the receipt, investment, and disbursement of all City funds.

The City of Shasta Lake provides a full range of services, including police (through a contract with the Shasta County Sheriff's Department), planning, zoning and economic and community development, the maintenance of streets and other infrastructure, recreational activities, and cultural events. The City provides electric, water, sewer, and solid waste services to its citizens. The City also administers lowincome housing programs and manages landscape maintenance districts.

Local Economy and History

The modern history of the City of Shasta Lake goes back to at least the late 1930s when construction of the Shasta Dam was announced in 1937. Hundreds of workers and their families migrated to the area and many businesses flourished. By the time construction commenced in 1938, the workers and their families had created new communities known as Central Valley, Pine Grove, Project City, Tayan, and Summit City. Except for the period during World War 11 when many workers left the area to join the services, for the next thirty years the communities thrived as the area's timber industry grew. With the decline in timber production and public works projects in the 1970s, the communities declined. Businesses closed, leaving vacant buildings behind. Homes that had been constructed nearly fifty years earlier and designed for temporary housing continued to house individuals and families, without structural upgrades to assure safety.

Today, the communities that prospered during the Dam era, now comprise the City of Shasta Lake. Primary industry continues to include timber along with government and manufacturing. In response to the desire to beautify the City, public improvements such as curbs, gutters, street paving, and sidewalks in residential neighborhoods have come underway. Shasta Lake citizens set out independently, with their own resource to beautify their city with painted bikes at business locations. The City has a small town vibe and boasts community events such as Friday Night in the Park, Shasta Damboree, a Veterans' Day parade, and an annual Christmas Tree Lighting and Community Party.

Shasta Lake continues to provide a strong commitment to its residents' safety, well-being, and cultural activities. We are striving to be a self-contained community that meets the commercial, retail, social, cultural, educational, and recreational needs of its citizens.

Long-term Financial Planning

City Management believes that the City's financial position is distinctly different and more encouraging than it has been for many years. The City adopted a two-year budget in June 2018 for fiscal years ending June 30, 2019 and 2020. Budget projections for expenditures focus on renovation of existing deteriorated buildings and new capital improvement projects. Several vacant employee positions are now being sought for fulfillment. The significantly improved economy has allowed the City to look forward to new growth. Management continues to monitor expenditures to provide a fiscally sound and balanced budget without sacrificing core services.

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From an economic development perspective, the City is seeing renewed interest in numerous projects. The City is set to finalize the general plan, which includes the open space, conservation, housing, and land use components.

In August 2018, City Staff moved into the newly constructed City Hall. Next door to City Hall is a newly built community center which provides the heart for community gatherings, events and activities. The Wastewater Treatment Facility Direct Discharge upgrade is underway. City Staff anticipates the project to cost $20.8 million, with $17.4 million in assistance from the Clean Water State Revolving Fund Loan Program.

On July 26, 2018 the City suffered a city-wide blackout due to the Carr Fire. Two miles of the Keswick transmission power line was destroyed. The City was able to restore power to the City twenty four hours after the blackout by creating an island which allowed the transmission network only to serve the city. Even though power was restored, many parts of the City were evacuated for approximately seven days. The estimated cost to repair the electric assets is about one million dollars with over 90% of this being funded by FEMA and the State OES program. The City also suffered minor damage to the Water Treatment Plant which included a break in the raw water pipe line, hillside damage, a fracture in a pump, and software malfunctions. The City has completed temporary repairs with final repairs scheduled for the early part of fiscal year 2019.

Certificate of Achievement

The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City for its CAFR for the fiscal year ended June 30, 2017. The City achieved this prestigious national award for the first time in 2014. The Certificate of Achievement is the highest form of recognition in the area of governmental accounting and financial reporting. In order to be awarded a Certificate of Achievement, the City published an easily readable and efficiently organized CAFR. This report satisfied 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 CAFR continues to meet the Certificate of Achievement Program's requirements and we are submitting it to the GFOA to determine its eligibility for another certificate.

The preparation of this report would not have been possible without concerted efforts of the talented and dedicated staff of the Finance department. The CAFR demands hours upon hours of staff time. Appreciation must be given to all the departments for their assistance in providing the necessary data to complete this report. City staff's continued interest and support in maintaining the highest standards of professionalism in the management of the City of Shasta Lake finances is beyond vital.

Respectfully submitted,

Laura L. Redwine, CPA Finance Director

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Government Finance Officers A.ssociation

Certificate of i\chievement for :E,xcellence in Finan_cial Reporting

Presented to

Cit:y of Shasta I.Jake

California

For its Comprehensive A.nnual F inandal Repmi

Jor the Fi sea! Year Ended

June 30, 2017

Executive Director/CEO

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CITY OF SHASTA LAKE City Officials


Elected Officials

Larry Farr ................................................................................................................... Mayor

Greg Watkins .................................................................................................... Vice-Mayor

Pamelyn Morgan ..................................................................................................... Member

Richard Kern ........................................................................................................... Member

Janice Powell .......................................................................................................... Member

Administrative Personnel

John N. Duckett, Jr. ........................................................................................ City Manager

John Kenny ..................................................................................................... City Attorney

Laura Redwine ........................................................................................... Finance Director

James Takehara ............................................................................... Electric Utility Director

Jeff Tedder ...................................................................................................... City Engineer

Farhad Mortazavi ................................................................ Development Services Director

Tony Thomasy ................................................................. Water Treatment Superintendent

Tom Chism ............................................................. Wastewater Treatment Superintendent

Tom Campbell .......................................................................................... Sheriff's Captain

Toni Coates .......................................................................................................... City Clerk

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~- r·· f!NANCE & GENERAL' iSER.VICES: MANAGE>{'

MHE~ READER

_.,,----·----~ / CITIZENS -~

( OF THE \

\ CITY OF SHASTA )

~ LAKE •.• / ---c r-!cm l I ··r, n~ ,;-iy I COUNCIL )-. -I LI f A uR,JEY !

-=i=-r::ANAGER!

~

CI1Y OF SHASTA LAKE

ORGANIZATION CHART

REVISED: 9/2018

L:.;;~ TR~:M~~l ' OPERATORS - ' .,

FINANCIAL SECTION

• Independent Auditor's Report

• Management's Discussion and Analysis

• Basic Financial Statements

• Required Supplementary Information

• Combining and Individual Fund Statements and Schedules

INDEPENDENT AUDITOR'S REPORT

To the Honorable Mayor and Members of the.: City Council City of Shasta Lake Shasta Lake, Caiifomia

Report on fhe FirurnciaJ Statements

CERTiFJE[) PLJBLfC /\CCC)ut~~J

We have audited the accompanying financial statements of the governmental activities, the husinessAype activities, each major fi.md, and the aggregate remaining fond information of the City of Shasta Lake. Cafrfornia(City), as ofand forthe year ended Jun,~ 30, 2018, and the related notes to the financial statements, which collectively comptise the City's basic financial staw.:ments as listed in the table of contents,

Mam1gc~ment's R-esponsibnity for the, Financial Statements

Management is. responsible for the preparation and fair presentation of these financial statements in accordance \vith accounting principles generally accepted in the United States of America; this inCludes the design, implementation, and maintenance ofinternal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is tt) express opinions on these, financial statements based on our audit We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits c.ontained in Govemment Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from rnateria1 misstatement.

An audit involves perfonning procedures to obtafo audit evidence about the atnounts and disclosures in the financial staternents. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the finru1ciai statements, 1..vhether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to de,sign audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion cm the effectiveness ofthe entity's internal control, Accordingly, \1v'e express: no such opinion. An audit aiso includes eva!untii1g the: appropriateness of accounting policies used and the reasonableness of significant o.ccounting estimates made by management, as weii as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is suffic-icnt and appropriate to provide a basis for our audit opinions.

• 1 • 950 THi\Rf? i~C),'\1)~ St)lTF. 5CJ2 'y'UBA C!TY. Ci\ q5993 ·rEL: (S.30) 673-9?\tO

To the Honorable Mayor and Members of the City Council City of Shasta Lake Shasta Lake, California

Opinions

In our opinion, the 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 information of the City as of June 30, 2018, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Change in Accounting Principle

As discussed in Note 11 to the financial statements, in 201 7-18, the City adopted new accounting guidance, GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. Our opinion is not modified with respect to this matter.

Other Matters

Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis, City Pension Plan - Schedule of Proportionate Share of Net Pension Liability, City Pension Plan - Schedule of Contributions, Notes to City Pension Plan, City OPEB Plan - Schedule of Changes in the Net OPEB Liability and Related Ratios, City OPEB Plan - Schedule of Contributions, Notes to City OPEB Plan and budgetary comparison information as listed in the table of contents, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City's basic financial statements. The introductory section, combining and individual nonmajor fund financial statements and schedules, and statistical section, are presented for purposes of additional analysis and are not a required part of the basic financial statements.

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To the Honorable Mayor and Members of the City Council City of Shasta Lake Shasta Lake, California

The combining and individual fund financial statements and schedules are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such infonnation directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual fund financial statements and schedules are fairly stated in all material respects in relation to the basic financial statements as a whole.

The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on them.

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated December 10, 2018 on our consideration of the City's internal control over financial reporting and on our tests ofits compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City's internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City's internal control over financial reporting and compliance.

s~~~~ Yuba City, California December 10, 2018

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Management's Discussion and Analysis (Unaudited)

Management's Discussion and Analysis

As management of the City of Shasta Lake ( the City), we offer readers of the City's financial statements this narrative overview and analysis of the financial activities of the City for the fiscal year ended June 30, 2018. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our Letter of Transmittal, which can be found on pages iiii of this report. The Management's Discussion and Analysis is designed to: 1) assist the reader in focusing on significant financial issues, 2) provide an overview of the City's financial activity, and 3) identify changes in the City's financial assets. Comparative data on the government-wide financial statements is only presented in the Management's Discussion and Analysis.

Financial Highlights

Government-Wide

The assets and deferred outflows of resources of the City exceeded its liabilities and deferred inflows of resources at the close of the most recent fiscal year by $110,212,147 (net position). Of this amount, $23,369,486 (unrestricted net position) may be used to meet the government's ongoing obligations to citizens and creditors.

The government's total net position increased by $5,914,275. The governmental activities net position decreased by $370,915 and the business-type activities net position increased by $6,285,190.

The City's total debt increased by $2,500,000 during the current fiscal year due to a new loan with USDA The decrease of $356,227 is due to scheduled annual debt service payments.

Fund Financials

At the close of fiscal year 2017-18, governmental funds reported combined ending fund balance of $7,624,258, a decrease of $2,725,333 compared to the prior fiscal year's increase of $74,984, which decreased due to capital outlay costs associated with new city hall and community center construction. The ending fund balance is primarily identified as: $4,799,815 restricted (63.0 percent), $1,871,238 assigned (24.5 percent), and $953,205 unassigned (12.5 percent).

At the end of the current fiscal year, the combined fund balance for the General fund was $3,476,030. This represents an decrease of $2,636,471, which consists of $618,124 in restricted funds, $1,871,238 in assigned funds, and $986,668 in unassigned funds.

Proprietary funds reported a combined ending unrestricted net position of $22,097,793, an increase of $6,315,820, compared to the prior year increase of $2,905,625. This increase is primarily due to proceeds received for construction of new wastewater assets.

Overview of the Financial Statements

This discussion and analysis is intended to serve as an introduction to the City's basic financial statements. The City's basic financial statements are comprised of three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves.

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Government-Wide Financial Statements

The government-wide financial statements are designed to provide readers with a broad overview of the City's finances, in a manner similar to a private-sector business.

The Statement of Net Position presents information on all of the City's assets and deferred outflows, and liabilities and deferred inflows, with the difference between the two reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial assets of the City are improving or deteriorating.

The Statement of Activities presents information showing how the government's net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, all of the current year's revenues and expenses are taken into account regardless of when cash is received or paid (e.g., earned but unused vacation leave or uncollected taxes).

Government-wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City include general government, public safety, public ways and facilities, planning, culture and recreation, and community development. The business-type activities of the City includes water, electric, and wastewater operations, as well as an industrial park. Also included in the government-wide financial statements are the Successor Agency to the Former City of Shasta Lake Redevelopment Agency (all redevelopment agencies in the State of California were dissolved and ceased to operate as a legal entity as of February 1, 2012) and the Shasta Lake Public Financing Authority. While these agencies are legally separate agencies, their governing boards consists entirely of City Council members and function for all practical purposes as departments of the City, therefore, have been included as an integral part of the primary government.

The government-wide financial statements can be found on pages 17-19 of this report.

Fund Financial Statements

Fund financial statements are designed to report information about groupings of related accounts used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. City funds can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds.

Governmental Funds - Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government's near-term financing requirements.

Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government's near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities.

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The City maintains several individual governmental funds organized by their type (special revenue and debt service). Information is presented in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the General fund, Home Funding fund, and the 1995 Wastewater Debt Service fund, all of which are considered to be major funds. Data from the other governmental funds are combined into a single, aggregated presentation. Individual fund data for each of the nonmajor governmental funds is provided in the form of combining statements shown on pages 86-87 and 97-98.

The City adopts an annual appropriated budget for its general, special revenue, and debt service funds. A budgetary comparison statement has been provided for the General fund and all major special revenue funds to demonstrate compliance with this budget on pages 79-80.

The basic governmental fund financial statements can be found on pages 20-23 of this report.

Proprietary Funds - Proprietary funds are generally used to account for services for which the City charges outside customers or internal departments of the City. Proprietary funds provide the same type of information as shown in the government-wide statements, only in more detail. The City maintains the following two types of proprietary funds:

Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City uses enterprise funds to account for the operations of water, electric, wastewater, and industrial park.

Internal service funds are used to report activities that provide internal services for the City. The City uses internal service funds to account for its fleet of vehicles and for its public works maintenance activities. Because internal service funds predominantly benefit governmental rather than business-type functions, they have been included within governmental activities in the government-wide financial statements. The internal service funds are combined into a single, aggregated presentation in the proprietary fund financial statements. Individual fund data for the internal service funds is provided in the form of combining statements found on pages 103-105.

The basic proprietary funds financial statements can be found on pages 24-28 of this report.

Fiduciary Funds - Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statements, because the resources of those funds are not available to support the City's own programs. The basic fiduciary funds financial statements can be found on page 29-30 of this report.

Notes to the Financial Statements - The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 31-72 of this report.

Other Information - In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information (RSI), which can be found on pages 73-81 of this report.

Combining statements for nonmajor governmental funds and nonmajor proprietary funds are presented immediately following the RSI. Combining and individual financial statements and schedules can be found on pages 82-108 of this report.

Statistical tables regarding; fiscal trends, revenue capacity, debt capacity, demographic and economic information, and operation information can be found on pages 109-133 of this report.

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Government-Wide Financial Analysis

As noted earlier, net position may serve over time as a useful indicator of a government's financial assets. In the case of the City, assets and deferred outflows exceeded liabilities and deferred inflows by $110,212,147 at the close of the most recent fiscal year.

The following schedule displays a summary breakdown of the City's net position as of June 30, 2018 and 2017:

NET POSITION

Governmental Business-Type Activities Activities Total

2017 2018 2017 2018 2017 2018

Current and other assets $ 19,951,131 $ 18,117,804 $ 24,663,397 $ 28,379,674 $ 44,614,528 $ 46,497,478

Capital assets 49426571 54 590 919 34 594 825 36 956 192 84017396 91547111

Total assets 69373 702 72 708 723 59258 222 65 335 866 128 631924 138 044 589

Deferred outflows of resources 579 594 846 968 1176 409 1796599 1756003 6643 567

Current liabilities 2,160,689 2,372,498 1,762,742 3,130,202 3,923,431 5,502,700

Long-term liabilities 5 185 952 8 316 399 8447269 9970 049 13 633 221 18 286 448

Total liabilities 7 346 641 10 688 897 10 210 011 13 100 251 17 556 652 23 789 148

Deferred inflows of resources 196563 5 628 948 343 680 1057913 536 243 6 686 861

Net position Net investment in capital assets 46,478,920 49,263,367 30,035,922 32,637,417 76,514,842 81,900,784

Restricted 9,836,174 4,880,550 63,502 61,327 9,899,676 4,941,877

Unrestricted 6 098 998 3 093 929 19 781 516 20 275 557 25 880 514 23 369486

Total net position $ 66414092 $ 57,237,846 $ 49,880,940 $ 52,974,301 $ 112,295,032 $ 110,212,147

By far, the largest portion of the City's net position, $81,900,784 (74.3 percent) reflects its net investment in capital assets (e.g., land, buildings, machinery, and equipment), less any related debt used to acquire those assets that is still outstanding. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City's investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities.

Another portion of the City's net position, $4,941,877 (4.5 percent), represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net position, $23,369,486 (21.2 percent) may be used to meet the government's ongoing obligations to citizens and creditors, as well as to meet City imposed designations (e.g., reserves, pending litigations, contingencies and capital projects).

The statement of activities shows how the City's net position changed during the fiscal year. The City's net position decreased overall by $2,082,885 during the year. The City had a prior period adjustment of ($4,895,494) related to housing loans that were not deferred on the prior year financial statements. The City also had a cumulative effect change in accounting principle of ($3,101,666) related to changes for GASB 75 reporting of OPEB assets and liabilities.

At the end of the current fiscal year, the City was able to report positive balances in net position, for both governmental and business-type activities.

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The following schedule shows the various components that caused the City's net position to change:

Changes in Net Position

Governmental Business-Type Activities Activities Total

2017 2018 2017 2018 2017 2018

Revenues:

Program Revenues

Charges for services $ 4,139,253 $ 4,525,029 $ 25,287,363 $ 27,229,274 $ 29,426,616 $ 31,754,303

Operating grants and contributions 1,814,397 1,003,351 1,814,397 1,003,351

Capital grants and contributions 256,889 387,688 47,952 3,196,706 304,841 3,584,394

General Revenues Sales tax 887,066 1,108,193 887,066 1,108,193

Property tax 1,079,016 1,144,906 1,079,016 1,144,906

Transient and occupancy taxes 4,525 11,130 4,525 11,130

Other taxes 597,563 765,482 597,563 765,482

Motor vehicle in-lieu 807,631 840,149 807,631 840,149

Interest and investment earnings 49,391 75,214 66,178 122,405 115,569 197,619

Other 9267 10788 158 264 194998 167 531 205 786

Total revenues 9 644998 9 871930 25 559757 30 743 383 35 204 755 40 615 313

Expenses:

General government 2,691,742 2,764,877 2,691,742 2,764,877

Public safety 3,001,951 3,250,179 3,001,951 3,250,179

Recreation and culture 263,040 389,627 263,040 389,627

Planning 660,982 774,366 660,982 774,366

Public works 2,214,871 2,219,740 2,214,871 2,219,740

Community development 140,777 326,986 140,777 326,986

Interest and fiscal charges on

long-term debt 142,430 169,725 142,430 169,725

Water 2,785,859 2,981,721 2,785,859 2,981,721

Electric 18,798,738 19,216,691 18,798,738 19,216,691

Wastewater 2,493,080 2,538,654 2,493,080 2,538,654

Industrial park 70939 68472 70939 68472

Total expenses 9115 793 9 895 500 24 148 616 24 805 538 33 264409 34 701038

Increase (decrease) in net position

before transfers 529,205 (23,570) 1,411,141 5,937,845 1,940,346 5,914,275

Transfers (1366 331) (347345) 1366 331 347345

Change in net position (837,126) (370,915) 2,777,472 6,285,190 1,940,346 5,914,275

Net position, beginning of year 63,251,218 62,414,092 47,103,468 49,880,940 110,354,686 112,295,032

Cumulative effect-change in principal 90,163 (3, 191,829) (3,101,666)

Prior period adjustment (4 895 494) (4895 494)

Net position, as restated 63 251218 57 608 761 47103 468 46 689 lll 110 354 686 104297872

Net position, end of year $ 62414092 $ 57,237,846 $ 49,880,940 $ 52,974,301 $ 112,295,032 $ 110,212,147

-8-

Governmental Activities - Governmental activities decreased the City's net position by $370,915. Key elements of activities performed in the fiscal year ended June 30, 2018 are as follows:

Program revenues decreased $294,471 due to a decrease in operating grants and contributions and an increase in charges for services. The major changes are highlighted below:

Charges for services increased due to increases in plant and facility connection charges and administrative service fees. Operating grants and contributions decreased due to prior year new community and development CDBG grants. Capital grants and contributions increased due to current year asset contributions from other funds.

General revenues increased $521,403 due to tax revenue increases.

As the chart below depicts, the largest source of revenues are charges for services followed by operating grants and contributions, which comprises 64. 5 percent of total revenues for governmental activities.

City of Shasta Lake Revenues by Source

Governmental Activities For the Year Ended June 30, 2018

Revenues Source

Charges for services

Operating grants and contributions

Capital grants and contributions

Sales taxes

Property taxes

Transient and occupancy taxes

Franchise taxes

Motor vehicle in-lieu taxes

Interest investment earnings

Miscellaneous

Other tax

Total

-9-

Revenue

$ 4,525,029

1,003,351

387,688

890,211

1,144,906

11,130

217,982

840,149

75,214

10,788

765,482

$ 9,871,930

% of Total

41.39%

23.10%

4.17%

5.99%

11.35%

0.09%

2.12%

9.14%

0.22%

2.17%

0.24%

100.00%

Revenues by Source

!itllCbarges for services

~ Operating grants and contributions

iiiill Capital grants and contributions

!illl Sales taxes

!Ill Property taxes

Transient and occupancy taxes

lril Franchise ta.,'<.es

,1,;1 Motor vehicle in-lieu taxes

As shown below, public safety is the largest program followed by general government. General revenues, such as property and sales tax, are not shown by program, but are effectively used to support program activities citywide.

Functions/Programs

General government

Public safety

Culture and recreation

Planning


Connnunity development

Interest and charges on L IDebt

Total

lnternst a1~d drnrges on L TDebt

Comnnmity development


Planning

Culture ~nd recreation

Pubiic safety

Genera! government

Expenses

$ 2,764,877

3,250,179

389,627

774,366

2,219,740

326,986

169725

$ 9,895,500

Expenses and Program Revenues



% of Total Program Revenues

27.94% $ 3,759,310

32.85% 277,119

3.94% 3,177

7.83%

22.43% 1,823,856

3.30% 52,606

1.72%

100.00% $ 5,916,068

% of Total Net (Expense) Revenue

63.54% $ 994,433

4.68% (2,973,060)

0.05% (386,450)

0.00% (774,366)

30.83% (395,884)

0.89% (274,380)

0.00% (169 725)

100. 00% =$======(3=,9=7=9,=43=2=)

.Expenses and Program Revenues - Governmental

$- $500.000 $1.000,000 $1.500,000 $~.000.000 $2.500,000 $3.000.000 $3.500.000 $4.000,lJOO

-10-

Expenses increased $779, 707 over the prior year. Much of this increase is related to capital outlay projects. Salary raises also increased expenditures.

Business-Type Activities - Business-type activities increased the City's net position by $6,285, 190, compared to prior fiscal year's increase of $2,777,472. Key elements of this change are as follows.

Water Utility fund's net position increased $605,849, compared to the prior fiscal year's increase of $1,143,435. The increase was primarily due to new water rates that went into effect based upon a consultant rate study. Electric Utility fund's net position increased $1,882,114, compared to the prior fiscal year's increase of $1,011,846. The Electric Utility has had a delay in capital outlay projects and is due for a rate study for fiscal year ending June 30, 2019. Wastewater Utility fund's net position increased $3,841,066, compared to the prior fiscal year's increase of $766,491. This increase is temporary as the Wastewater Utility is currently undergoing the City's largest capital outlay project - a renovation and update to the treatment plant. Industrial Park fund ( other enterprise fund) decreased $13,209, compared to the prior fiscal year's decrease of $16,147. The decrease is comparable to prior years. Internal Service fund's net position decreased $66,112, compared to the prior fiscal year's decrease of $207,185. The decrease is due to a conscientious effort to spend down cash reserves in internal service funds, which are supported by all other funds.

As shown below, the Electric Utility fund had the greatest total expenses with $19,216,691 out of $24,805,538 in total business-type expenses. For all the business-type activities below, charges for services provide the largest share of revenues.

Funds Electric Industrial Park Wastewater Water

Total

$

$

Expenses 19,216,691

68,472 2,538,654 2 981 721

24,805,538

Expenses and Program Revenues

Business-Type Activities For the Year Ended June 30, 2018

% of Total Program Revenues 77.47% $ 20,840,389

0.28% 47,436 10.23% 6,129,267 12.02% 3 408 888

100.00% $ 30,425,980

-11-

% of Total Net (Expense) Revenue 68.50% $ 1,623,698

0.16% (21,036) 20.14% 3,590,613

11.20% 427167 100.00% $ 5,620,442

Ex.penses and P1·ogram Revenues - Business - Type Acthities

\Vat er

\Vastewater

-~ \

Industrial Park ! l 1 ·i

Electric

S- $.\000,000 $10.000JlOO

Financial Analysis of the City Funds

~~Expenses

·~ Program Revenues

$15, 000.000 $ 20, 000. 000 $2.'\000,000

As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with financerelated legal requirements.

Governmental Funds - The focus of the City's governmental funds is to provide information on nearterm inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City's financing requirements. In particular, unassigned fund balance may serve as a useful measure of a government's net resources available for spending at the end of the fiscal year.

At the end of the current fiscal year, the City's governmental funds reported combined ending fund balances of $7,624,258 a decrease of $7,620,827 when compared to the prior fiscal year. Assigned fund balance (available for specific purposes) of $1,871,238 consists of debt owed to the Electric Utility fund for the refinancing of debt mentioned above of $446,117, obligations for accounts payable and payroll of $1,354, 171. The remainder of fund balance, $4, 799,815, is restricted by outside sources. Refer to pages 20-23 for more detail of governmental funds.

The General fund is the chief operating fund of the City. At the end of the current fiscal year unassigned fund balance of the General fund was $986,668. Total fund balance at the end of the year is $3,476,030. The fund balance of the City's General fund decreased by $2,636,471 during the current fiscal year. The primary factor for this decrease has been discussed above. Refer to page 10 for more detail of fund balance.

General Fund Revenues for fiscal year 2017-18, including transfers in, were $7,974,455, an increase of $709,052 compared to prior fiscal year. Key elements of the changes are as follows:

Tax revenue increased primarily due to the special business tax and value of property tax. Slight increase in charges for services.

General Fund Expenditures for fiscal year 2017-18, including transfers out were $13,110,926, increased $6,367,519 (94.4 percent). Key elements of the changes are as follows:

Capital outlay increased by $5,810,971 due to the building of the new City Hall and Community Center. Salary increases due to employee raises. $240, 127 increase in law enforcement contract costs.

-12-

Other Major Governmental Funds - Wastewater Treatment Debt fund accounts for the 1995 Wastewater Revenue Bonds. Revenues and expenditures are comparable to the prior year.

Proprietary Funds - The City's proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail.

Unrestricted net position of the Water, Electric, Wastewater, and Industrial Park at the end of the year amounted to $22,097, 793. Other factors concerning the finances of these funds have already been addressed in the discussion of the City's business-type activities.

General Fund Budgetary Highlights

The General fund budget and actual report can be found on page 79. Differences between the original expenditure budget and the final amended budget was an increase of $6,954,990 for a total appropriations of $14,263,955. Some of the major changes are summarized below:

A $70,000 increase for a special election related to Cannabis. $62, 790 increase for various maintenance agreements. $6,365,768 increase for city hall and community center construction approved by Council resolution. $15,000 increase for the landscape maintenance contract. And a $55,940 increase for an additional contribution to OPEB trust fund.

Capital Asset and Debt Administration

Capital Assets - The City's investment in capital assets for its governmental and business type activities as of June 30, 2018, amounts to $91,547,111 (net of accumulated depreciation). This investment in capital assets includes land, general and utility plant, building and improvements, streets and drainage, parks, equipment and vehicles, other assets as well as construction in progress. Additional information on capital assets can be found on pages 47-49 in the notes to the basic financial statements.

Major capital asset events during the current fiscal year include the following:

$6,158,569 in construction for the new city hall and community center $332,863 on the John Beaudet Visitor's Center $1,23 2, 4 78 for the dewatering project $3,289,877 in construction for the wastewater treatment plant upgrade $96, 73 8 in new vehicles

-13-

Changes in capital assets consist of the following:

Changes in Capital Assets

Balance Balance July I, 2017 Additions Deductions June 30, 2018

Governmental activities Land, easements & rts of way $ 3,700,494 $ 47,746 $ $ 3,748,240

Infrastructure and land improvmnts 52,516,354 52,516,354

Buildings & improvements 9,193,303 332,863 9,526,166

Machinery & equipment 626,740 (24,396) 602,344

Vehicles 34,571 34,571

Construction in progress 631 142 6 520456 (332,863} 6 818 735

Total 66,702,604 6,901,065 (357,259) 73,246,410

Less accumulated depreciation (17,280,033} (1,375,458} (18,655,491}

Governmental activities Capital assets, net 49 422 571 5 525 607 (357,259} 54 590 919

Business-type activities

Land 1,877,370 (39,993) 1,837,377

General and utility plant 67,540,305 2,513,818 70,054,123

Building and improvements 1,317,699 1,317,699

Equipment and vehicles 3,616,513 115,415 (97,926) 3,634,002

Construction in progress 3 547 716 3 353 737 (1,363,945} 5 537 508

Total 77,899,603 5,982,970 (1,501,864) 82,380,709

Less accumulated depreciation (43,304,778} (2,175,183} 55 444 ( 45,424,517}

Business-type activities Capital assets, net 34 594 825 3 807787 (1,446,420} 36 956 192

Total $ 84 017 396 $ 9,333,394 $ (1,803,679) $ 91,547,111

-14-

Long-term Debt

The following schedule shows the changes in long-term debt for the year.

Long-Term Debt

Balance Adjustments/ Balance July 1,2017 Additions Deductions June 30,2018

Governmental activities Loans payable $ 87,426 $ 225 $ (9,099) $ 78,552

COPS 2,500,000 2,500,000

Revenue bonds 2,822,000 (105,000) 2,717,000

Special assessment debt 34000 (2,000} 32000

Governmental activities Long-term debt 2 943 426 2 500 225 016,099} 5 327 552

Business-type activities Loans payable 3,778,903 (210,128) 3,568,775

Special assessment debt 780 000 (30,000} 750000

Business-type activities Long-term debt 4 558 903 (240,128} 4 318 775

Total $ 7 502 329 $ 2,500,225 $ (356,227) $ 9,646,327

At the end of the current fiscal year, the City had total debt outstanding of $9,646,327. Of this amount, $3,647,327 comprises debt backed by the full faith and credit of the government and $782,000 is special assessment debt for which the government is liable in the event of default by the property owners subject to the assessment. The remainder of the City's debt represents bonds secured solely by specified revenue sources (i.e. revenue bonds). Additional information on long-term liabilities can be found on pages 51-55 in the notes to the basic financial statements.

The City's total debt increased by a net of $2,143,998 (28.6 percent) during the current fiscal year. The increase is due to new COPS and scheduled annual debt service payments.

Economic Factors and Next Year's Budgets and Rates

The focus of this annual report is to provide an overview of the financial condition of the City of Shasta Lake as of June 30, 2018, taking into consideration the global, national, and local economic conditions and their impacts on the City. The U.S. economy continues to rise and has shown economic growth. Average growth is expected for the local economy for the 2018-2019 fiscal year.

The City anticipates the General fund to decrease for the fiscal years ending 2019 and 2020 mainly due to expenditures related to new staff positions, wage increases, payments to the Electric Utility fund for reimbursement of the CalPERS side fund debt, and capital outlay projects. All of these factors were considered in preparing the City's budget for the 2017-18 fiscal year.

-15-

Request for Information

This financial report is designed to provide a general overview of the City's finances for all those with an interest in the government's finances. This report can be found with the City's audited financial statements on the City's website, www.cityofshastalake.org under departments, finance department, financial information. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to:

The City of Shasta Lake - Finance Director P.O. Box 777

Shasta Lake, CA, 96019

-16-

http://www.cityofshastalake.org

Basic Financial Statements

• Government-Wide Financial Statements

ASSETS Cash and investments Receivables:

Accounts, net Interest Taxes Intergovernmental Assessments

Deposits Prepaid costs Inventory Internal balances Restricted cash and investments Loans receivable Land held for resale Capital assets:


Total capital assets

Total Assets

DEFERRED OUTFLOWS OF RESOURCES Deferred pension adjustments Deferred OPEB adjustments

CITY OF SHASTA LAKE Statement of Net Position

June 30, 2018


$ 6,788,570

118,906 8,139

466,819 61,538

2,751,000 4,428

24,944 2,121,378 5,177,155

594,927

10,566,975 44 023 944 54 590 919

72 708 723

675,319 171 649

Total Deferred Outflows of Resources 846 968

LIABILITIES Accounts payable 638,906 Retentions payable 329,062 Salaries and benefits payable 98,732 Due to other governments 358,254 Deposits payable 543,581 Interest payable 47,693 U neamed revenues 43,955 Long-term liabilities:

Due within one year 312,315 Due in more than one year 5,176,462 Net pension liability 2,771,460 Net OPEB liability 368 477

Total Liabilities 10 688 897

DEFERRED INFLOWS OF RESOURCES Deferred housing loan payments 5,177,155 Deferred pension adjustments 223,422 Deferred OPEB adjustments 228 371

Total Deferred Inflows of Resources 5 628 948

The notes to the basic financial statements are an integral part of this statement.

-17-

Business-Type Activities Total

$ 21,023,578 $ 27,812,148

3,180,580 3,299,486 17,037 25,176

466,819 2,313,951 2,375,489

565,729 3,316,729 589,446 593,874 116,468 116,468 392,891 392,891 (24,944) 204,938 2,326,316

5,177,155 594,927

7,374,885 17,941,860 29 581 307 73 605 251 36 956 192 91547111

65 335 866 138 044 589

1,290,599 1,965,918 506 000 677 649

1 796 599 2 643 567

1,529,582 2,168,488 145,636 474,698 113,816 212,548 796,578 1,154,832

3,900 547,481 58,054 105,747

43,955

482,636 794,951 4,066,706 9,243,168 4,817,116 7,588,576 1086227 1 454 704

13 100 251 23 789 148

5,177,155 384,702 608,124

673 211 901 582

1 057 913 6 686 861

Continued(Page 1 of2)

NET POSITION Net investment in capital assets Restricted for:

General government Public safety Public ways and facilities Community development Debt service

U mestricted

Total Net Position


June 30, 2018


49,263,367

1,347,908 240

2,094,224 748,293 689,885 3 093 929

$ 57 237 846

Business-Type Activities Total

32,637,417 81,900,784

1,347,908 240

2,094,224 748,293

61,327 751,212 20 275 557 23 369 486

$ 52 974 301 $ 110,212,147

The notes to the basic financial statements are an integral part of this statement. Continued(Page2 of2)

-18-

Functions/Programs Governmental activities:

General government Public safety Public ways and facilities Planning Culture and recreation Community development Interest on long-term debt

Total Governmental Activities

Business-type activities: Water Electric Wastewater Industrial park

Total Business-Type Activities

Total

CITY OF SHASTA LAKE Statement of Activities


Program Revenues

$

Expenses

2,764,877 3,250,179 2,219,740

774,366 389,627 326,986

169 725

9 895 500

2,981,721 19,216,691 2,538,654

68 472

24 805 538

$ 34 701 038

Charges for

$

Services

3,609,505 177,120 735,227

3,177

4,525,029

3,408,888 20,815,974

3,004,412

27 229 274

$31754303

General reven ,es: Taxes:

Property taxe5 Sales and use taxes Transient occupancy taxes Franchise tax :s Other taxes

U mestricted grants and contributic Interest and investment earnings Miscellaneom

Transfers

Operating Grants and

Contributions

$ 24,125 100,000 826,620

52,606

1 003 351

Total General Revenues and Transfers

Change in Net Position

Net Position - Beginning

Prior period adjustment Cumulative effect of a change in accounting principle

Net Position - Beginning, Restated

Net Position - Ending


-19-

Capital Grants and

Contributions

$ 125,678

262,010

387 688

24,415 3,124,855

47 436

3 196 706

Net (Expense) Revenue and Changes in Net Position

Business-Governmental Type

Activities Activities Total

$ 994,431 $ $ 994,431 (2,973,059) (2,973,059)

(395,883) (395,883) (774,366) (774,366) (386,450) (386,450) (274,380) (274,380) (169,725) (169,725)

(3,979,432) (3,979,432)

427,167 427,167 1,623,698 1,623,698 3,590,613 3,590,613

(21,036) (21,036)

5 620 442 5 620 442

(3,979,432) 5,620,442 1,641,010

1,144,906 1,144,906 890,211 890,211

11,130 11,130 217,982 217,982 765,482 765,482 840,149 840,149

75,214 122,405 197,619 10,788 194,998 205,786

(347,345) 347 345

3 608 517 664 748 4 273 265

(370,915) 6 285 190 5 914 275

62,414,092 49,880,940 112,295,032

(4,895,494) ( 4,895,494) 90 163 (3,191,829) (3,101,666)

57 608 761 46689111 104 297 872

$ 57 237 846 $ 52 974 301 $ 110,212,147


• Fund Financial Statements


Accounts, net Interest Taxes Intergovermnental Assessments

Deposits Due from other funds Restricted cash and investments Loans receivable Land held for resale

Total Assets

LIABILITIES Accounts payable Retentions payable Salaries and benefits payable Interest payable Due to other govermnents Deposits payable Due to other funds Advances from other funds U neamed revenues

Total Liabilities

DEFERRED INFLOWS OF RESOURCES Unavailable revenues Deferred housing loan payments


FUND BALANCES Restricted Assigned Unassigned

Total Fund Balances

Total Liabilities, Deferred Inflows of Resources and Fund Balances

CITY OF SHASTA LAKE Balance Sheet

Governmental Funds June 30, 2018

General HOME

$ 3,513,624 $ 56,711

118,906 6,912

360,411 24,024

4,428 50,000

1,859,713 4,339,473

$ 5 913 994 $ 4,420,208

$ 628,886 $ 329,062

98,732 5,404

338,648 543,581

19,000 446,117

33 608

2 424 038 19 000

13,926 24,024 4 339 473

13 926 4 363 497

618,124 37,711 1,871,238

986 668

3 476 030 37 711

$ 5 913 994 $ 4,420,208


-20-

CITY OF SHASTA LAKE Reconciliation of the Governmental Funds Balance

Sheet to the Government-Wide Statement of Net Position - Governmental Activities

June 30, 2018

Total Fund Balance - Total Governmental Funds

Amounts reported for governmental activities in the statement of net position are different because:

Capital assets used in governmental activities are not financial resources and therefore, are not reported in the governmental funds balance sheet.

Other long-term assets are not available to pay for current period expenditures and therefore, are reported as unavailable revenues in the governmental funds.

Interest payable on long-term debt does not require the use of current financial resources and therefore, is not accrued as a liability in the governmental funds balance sheet.

Deferred outflows of resources related to pensions and OPEB are not reported in the governmental funds.

Deferred inflows of resources related to pensions and OPEB are not reported in the governmental funds.

Certain liabilities are not due and payable in the current period and therefore, are not reported in the governmental funds.

Loans payable Revenue bonds payable Special assessment bonds Certificates of participation Compensated absences Net pension liability Net OPEB liability

Internal service funds are used by management to charge the cost of certain activities, such as equipment maintenance and operations, to individual funds. The assets and liabilities of the

internal service funds must be added to the statement of net position.

Net Position of Governmental Activities


-21-

$ 7,624,258

54,590,919

2,826,465

(41,318)

846,968

( 451,793)

(78,552) (2,717,000)

(32,000) (2,500,000)

(161,225) (2,771,460)

(368,477)

471 061

$ 57 237 846

CITY OF SHASTA LAKE Statement of Revenues, Expenditures and Changes in Fund Balances

Governmental Funds For the Year Ended June 30, 2018

Wastewater Other Treatment Governmental

General HOME Deb Funds REVENUES

Taxes and assessments $ 3,011,001 $ $ 250,905 $ 313,435 Licenses and permits 188,582 Fines and forfeitures 8,779 Use of money and property 6,873 7,040 6,268 55,033 Intergovernmental 871,379 747,052 Charges for services 3,781,525 546,143 Other revenues 10 788

Total Revenues 7 878 927 7 040 257 173 1 661 663

EXPENDITURES Current:

General government 2,505,638 40,922 Public safety 3,116,529 100,000 Public ways and facilities 47,025 866,460 Planning 656,802 Culture and recreation 309,626 Community development 6,930 79,185 6,284 234,587

Debt service: Principal 105,000 11,099

Interest and other charges 43,536 124,617 4,729

Capital outlay 6 424 840 17 683

Total Expenditures 13 110 926 79 185 235 901 1 275 480

Excess of Revenues Over (Under) Expenditures (5,231,999) (72,145) 21,272 386,183

OTHER FINANCING SOURCES (USES) Proceeds from debt 2,500,000 Transfers in 95,528 Transfers out (424,172)

Total Other Financing Sources (Uses) 2,595,528 (424,172)

Net Change in Fund Balances (2,636,471) (72,145) 21,272 (37,989)

Fund Balances - Beginning 6,112,501 4,441,069 575,411 4,116,104

Prior period adjustment (4,331,213) (564,281)

Fund Balances - Beginning, Restated 6 112 501 109 856 575 411 3 551 823

Fund Balances - Ending $ 3 476 030 $ 37 711 $ 596 683 $ 3 513 834


-22-

Totals

$ 3,575,341 188,582

8,779 75,214

1,618,431 4,327,668

10 788

9 804 803

2,546,560 3,216,529

913,485 656,802 309,626 326,986

116,099 172,882

6 442 523

14 701 492

( 4,896,689)

2,500,000 95,528

(424,172)

2,171,356

(2,725,333)

15,245,085

(4,895,494)

10 349 591

$ 7 624 258

CITY OF SHASTA LAKE Reconciliation of the Statement of Revenues, Expenditures

And Changes in Fund Balances of Governmental Funds to the Government-Wide Statement of Activities - Governmental Activities


Net Change in Fund Balances - Total Governmental Funds

Amounts reported for governmental activities in the statement of activities are different because:

Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation

expense. Expenditures for capital outlay Less current year depreciation Various adjustments affecting capital assets including capital contributions

Debt proceeds provide current financial resources to governmental funds, but issuing debt increases long-term liabilities in the statement of net position. Repayment of principal is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the statement of net position.

Proceeds of debt Principal retirements

Some revenues reported in the statement of activities will not be collected for several m onths after the City's year end and do not provide current financial resources and therefore, are n ot reported as revenues in the governmental funds.

Change in unavailable revenues

Certain changes in deferred outflows and deferred inflows of resources reported in the tatement of

activities relate to long-term liabilities and are not reported in the governmental funds . Deferred outflows of resources related to pensions Deferred inflows of resources related to pensions Deferred outflows of resources related to OPEB Deferred inflows of resources related to OPEB

Some expenses reported in the statement of activities do not require the use of current financial resources and therefore, are not reported as expenditures in the governmental funds.

Change in compensated absences payable Change in net pension liability Change in net OPEB liability Change in accrued interest on long-term debt

Internal service funds are used by management to charge the cost of certain activities, such as equipment maintenance and operations, to individual funds. The net revenue (expense) of certain internal service funds is reported with governmental activities.

Change in Net Position of Governmental Activities


-23-

$ (2,725,333)

6,442,523 (1,398,876)

124,701

(2,500,000) 116,099

(58,551)

95,725 (30,859) 51,728

(228,371)

(29,628) (413,065) 215,317

3,157

(35,482)

$ (370,915)

ASSETS Current Assets:

Cash and investments Receivables:

Accounts, net Interest Intergovernmental Assessments

Deposits Prepaid costs

Inventory

Total Current Assets

Noncurrent Assets: Restricted cash and investments Advances to other funds Capital assets:


Total Noncurrent Assets

Total Assets

DEFERRED OUTFLOWS OF RESOURCES Deferred pension adjustments Deferred OPEB adjustments


Proprietary Funds June 30, 2018

Business-Type Activities - Enterprise Funds ----------"'M=a1'-"·oc::.r"""F~u"""n:..::d""s_ Nonmajor

Industrial __ W:...:...=a.::.:te:c:.r ___ ____.c::E::..ole::::.:c""t.:..eri""c- Wastewater Park

$ 2,603,414 $ 14,964,215 $ 2,600,940 $ 1,093

571,053 2,227,818 364,820 1,123 2,025 11,330 3,682

2,313,951 565,729

589,446 41,969 74,499

4 108 388 783

3 222 569 18 256 091 5 283 393 567 945

59,302 145,636 852,986

240,226 274,574 5,467,389 1,392,696 11362568 8 927 137 8,319,212

11662 096 10 054 697 13 932 237 1 392 696

14 884 665 28 310 788 19 215 630 1 960 641

137,587 643,948 128,534 64 512 154 232 43 099

Total Deferred Outflows of Resources 202 099 798 180 171 633


-24-

Governmental/ Business-Type

Activities Internal Service

Total Funds

$ 20,169,662 $ 853,916

3,164,814 15,766 17,037

2,313,951 565,729 589,446 116,468 392 891

27 329 998 869 682

204,938 852,986

7,374,885 28 608 917 972 390

37 041 726 972 390

64 371 724 1842072

910,069 380,530 261 843 244 157

1171 912 624 687

Continued (Page 1 of 2)


Proprietary Funds June 30, 2018

Business-Type Activities - Enterprise Funds Major Funds Nonmajor

Industrial Water Electric Wastewater Park

LIABILITIES Current Liabilities:

Accounts payable 12,459 377,201 1,112,953 975 Retentions payable 145,636 Salaries and benefits payable 11,143 55,298 12,672 Due to other governments 4,779 787,401 1,201 Deposits payable 3,900 Interest payable 44,929 13,125 Compensated absences payable 16,568 114,099 34,699 Loans payable 217,069 Bonds payable 35 000

Total Current Liabilities 310 847 1 333 999 1 307 161 49 100

Noncurrent Liabilities: Advances from other funds 73,505 74,014 Loans payable 3,351,706 Bonds payable 715,000 Net pension liability 408,448 2,453,061 462,774 Net OPEB liability 138 487 331 091 92 519

Total N oncurrent Liabilities 3 972 146 2 784 152 629 307 715 000

Total Liabilities 4 282 993 4 118 151 1 936 468 764 100

DEFERRED INFLOWS OF RESOURCES Deferred pension adjustments 35,427 197,644 36,335 Deferred OPEB adjustments 85 831 205 200 57 340

Total Deferred Inflows of Resources 121 258 402 844 93 675

NET POSITION Net investment in capital assets 8,034,019 9,201,711 13,786,601 642,696 Restricted for debt service 61,327 U mestricted 2 587 167 15 386 262 3 570 519 553 845

Total Net Position $ 10,682,513 $ 24 587 973 $ 17 357 120 $ 1 196 541

Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds.

Net Position of Business-Type Activities


-25-



Total Funds

1,503,588 25,994 145,636 79,113 34,703

793,381 3,197 3,900

58,054 165,366 65,201 217,069

35 000

3 001 107 129 095

147,519 259,350 3,351,706

715,000 3,324,283 1,492,833

562 097 524 130

8 100 605 2276313

11 101 712 2 405 408

269,406 115,296 348 371 324 840

617 777 440 136

31,665,027 972,390 61,327

22 097 793 (1,351,175}

53,824,147 $ (378,785}

(849,846}

$ 52 974 301


CITY OF SHASTA LAKE Statement of Revenues, Expenses and Changes in Net Position

Proprietary Funds For the Year Ended June 30, 2018

Business-Type Activities - Enterprise Funds

Total Operating Revenues

OPERATING EXPENSES Salaries and benefits Administration Power and water Insurance Supplies Repair and maintenance Professional services Depreciation Other expense

Total Operating Expenses

Operating Income (Loss)

NON-OPERATING REVENUES (EXPENSES) Intergovernmental Assessment revenue Gain (loss) on sale of capital assets Interest income Interest expense

Total Non-Operating Revenues (Expenses)

Income (Loss) Before Capital Contributions and Transfers

Capital contributions Transfers In Transfers Out


Total Net Position - Beginning

Cumulative effect of a change in accounting principle

Total Net Position - Beginning, Restated

OPERATING REVENUES Charges for services Other revenue

3 413 389

1,186,139 570,001 401,537

28,533 68,421 44,986 11,238

534,670 4 467

2 849 992

563,397

13,614 (125,541)

(111,927)

451,470

160,000 (5,621)

605,849

10,619,033

(542,369)

10 076 664

21075170

2,130,485 3,313,948

12,423,162 113,188

75,829 234,657 122,249 781,007

16 512

19 211 037

1,864,133

(77,925) 98,370

20,445

1,884,578

24,415

(26,879)

1,882,114

23,920,070

(1,214,211)

22 705 859

3 005 812

1,014,085 527,695 202,049

37,450 60,346 79,985 12,755

578,031 5 955

2518351

487,461

3,124,855

10,420 (1,515)

3,133,760

3,621,221

226,372 (6,527)

3,841,066

13,630,747

(114,693)

13 516 054

Water

$

Major Fund

Electric

$ - 3,408,888 7 826 4 50

7 826

8,070 14,433

454

5,877

28 834

(21,008)

47,436

(39,638)

7,799

(13,209)

(13,209)

1,209,750

1 209 750

Total Net Position - Ending $ 10 682 513 $ 24 587 973 $ 17 35 7,120 $ 1196 541 :::::'.::::::::'.::::==::'.:::::::::::'.::-----=:::::'.:::::::::'.:::::::::'.::::==:::".:-:.__~~:::::'.::::==--

Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds.

Change in Net Position of Business-Type Activities


-26-



Total Funds

$ 27,229,274 $ 2,577,897 272 923 429

27 502 197 2 578 326

4,330,709 1,540,603 4,419,714 615,371

13,041,181 179,625 4,687 204,596 27,702 359,628 162,263 152,119 33,442

1,893,708 281,475 26 934

24 608 214 2 665 543

2,893,983 (87,217)

3,124,855 47,436

(77,925) 45,117 122,405 (166,694) (5,311)

3 050 077 39 806

5,944,060 (47,411)

24,415 386,372 4,950 (39,027) (23,651)

6,315,820 (66,112)

1,007,883

(1,320,556)

(312,673)

$ (378,785)

(30,630)

$ 6 285 190

CITY OF SHASTA LAKE Statement of Cash Flows




CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers $ 3,265,820 $ 20,702,351 $ 2,969,420 $ 7,241 Receipts from interfund services Payments to suppliers (24,680) (12,823,722) (516,016) (6) Payments for interfund services (1,234,974) (2,607,862) (468,719) Payments to employees (1,135,355) (1,910,546) (953,488)

Net Cash Provided by Operating Activities 870 811 3 360 221 1 031 197 7 235

CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES

Transfers from other funds 160,000 226,372 Transfers to other funds (5,621) (26,879) (6,527) Interfund loans repaid (11,424) (11,503) (30,000) Interfund loans repayments received 132 568

Net Cash Provided (Used) by Non-Capital Financing Activities 142,955 105,689 208,342 (30,000)

CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES

Grants, assessments, and other receipts 621,199 810,904 93,760 Acquisition of capital assets (202,484) (285,754) (2,775,262) Disposal of capital assets (37,932) Principal paid on debt (210,128) (30,000) Interest paid on debt (128,075) (1,515) (40,163)

Net Cash Provided (Used) by Capital and Related Financing Activities (540,687) 297,513 (1,965,873) 23,597

CASH FLOWS FROM INVESTING ACTIVITIES Interest on investments 15 934 95 439 9 549

Net Cash Provided by Investing Activities 15 934 95 439 9 549

Net Increase (Decrease) in Cash and Cash Equivalents 489,013 3,858,862 (716,785) 833

Balances - Beginning 2 173 703 11 105 353 3 463 361 260

Balances - Ending $ 2 662 716 $ 14 964 215 $ 2 746 576 $ 1 093


-27-



Total Funds

$ 26,944,832

(13,364,424) ( 4,311,555) (3,999,389)

5 269 464

386,372 (39,027) (52,927) 132 568

426,986

1,525,863 (3,263,500)

(37,932) (240,128) (169,753)

(2,185,450)

120 923

120 923

3,631,923

16 742 677

$ 20 374 600

$ 11,044

$

2,551,516 (417,018) (443,583)

(1,410,112)

291 847

4,950 (23,651) (40,307)

(59,008)

(100,709) 91,571

(5,311)

(14,449)

218,390

635 526

853 916


CITY OF SHASTA LAKE Statement of Cash Flows




RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED BY OPERATING ACTIVITIES

Operating income (loss) $ 563,397 $ 1,864,133 $ 487,461 $ (21,008) Adjustments to reconcile operating income (loss) to net cash

provided by operating activities: Depreciation 534,670 781,007 578,031 Decrease (increase) in:

Accounts receivable (151,469) (372,819) (36,392) (585) Deposits 49,324 Prepaid costs (41,969) 519,472 30,788 Inventory (28,655) Pension adjustment - deferred outflows (15,902) (36,963) (15,572) OPEB adjustment - deferred outflows (19,441) (46,478) (12,988)

Increase (decrease) in: Accounts payable (26,995) (64,527) (59,701) (1,960) Salaries and benefits payable 260 (4,869) 1,796 Due to other governments (61,507) 392,347 1,201 Deposits payable 3,900 Compensated absences 3,061 (34,797) 3,907 Net pension liability 73,459 312,325 75,863 Net OPEB liability (80,925) (193,472) (54,063) Pension adjustment - deferred inflows 4,441 18,993 4,314 OPEB adjustment - deferred inflows 85 831 205 200 57 340

Net Cash Provided by Operating Activities $ 870 811 $ 3 360 221 $ 1031197 $ 7 235

NON CASH INVESTING, CAPITAL, AND FINANCING ACTIVITIES

Contribution of capital assets $ $ 24,415 $ $


-28-

$

$



Total Funds

2,893,983 $ (87,217)

1,893,708 281,475

(561,265) (15,766) 49,324

508,291 (28,655) (68,437) (45,753) (78,907) (73,577)

(153,183) (3,268) (2,813) 203

332,041 (13,868) 3,900

(27,829) (10,992) 461,647 228,768

(328,460) (306,272) 27,748 13,274 348 371 324 840

5 269 464 $ 291 847

$ 24,415 $



Cash and investments Receivables:

Taxes

Total Current Assets

Noncurrent Assets: Land held for resale

Total Noncurrent Assets

Total Assets


Accounts payable Interest payable U neamed revenues Loans payable Agency obligations

Total Current Liabilities

Noncurrent Liabilities: Loans payable

Total Noncurrent Liabilities

Total Liabilities

NET POSITION Net position held in trust

Total Net Position

CITY OF SHASTA LAKE Statement of Fiduciary Net Position

Fiduciary Funds June 30, 2018


-29-

Private Purpose

Trust Fund (Successor Agency)

$ 1,721,494

1 721 494

484

484

1 721 978

10,336 375,990 285,000

671 326

2 800 000

2 800 000

3 471 326

(1,749,348}

$ (1,749,348}

Agency Fund

$ 337,813

218

338 031

338 031

975

337 056

338 031

338 031

$

ADDITIONS Taxes and assessments Interest income

CITY OF SHASTA LAKE Statement of Changes in Fiduciary Net Position

Fiduciary Funds For the Year Ended June 30, 2018

Gain on disposal of capital assets

Total Additions

DEDUCTIONS Administrative expenses Interest expense

Total Deductions


Net Position - Beginning

Net Position - Ending


-30-

Private Purpose

Trust Fund (Successor Agency)

$ 544,232 9,896

371 936

926 064

90,065 127 492

217 557

708,507

(2,457,855)

$ (1,749,348)


• Notes to Basic Financial Statements

CITY OF SHASTA LAKE Notes to Basic Financial Statements For the Year Ended June 30, 2018

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. Reporting Entity

The City operates under a Council form of government and provides the following services: sanitation, electric, water and wastewater services; the construction and maintenance of highways, streets and infrastructure; recreational activities and cultural events.

Generally accepted accounting principles require government financial statements to include the primary government and its component units. Component units of a governmental entity are legally separate entities for which the primary government is considered to be financially accountable and for which the nature and significance of their relationship with the primary government are such that exclusion would cause the combined financial statements to be misleading. The primary government is considered to be financially accountable if it appoints a majority of an organization's governing body and is able to impose its will on that organization or there is a potential for the organization to provide specific financial benefits to or impose specific financial burdens on the primary government.

Reporting for component units on the City's financial statements can be blended or discretely presented. Blended component units are, although legally separate entities, in substance part of the City's operations and, therefore, data from these units are combined with data of the primary government. Discretely presented component units, on the other hand, would be reported in a separate column in the government-wide financial statements to emphasize it is legally separate from the government.

For financial reporting purposes, the City's basic financial statements include all financial activities that are controlled by or are dependent upon actions taken by the City Council. The financial statements of the individual component units may be obtained by writing to the City of Shasta Lake, 44 77 Main Street, Shasta Lake, CA 96019.

Blended Component Units

Shasta Lake Public Financing Authority (PFA) - The Authority, established in 1994, was created for the purpose of financing public capital improvements. The City is financially accountable for this entity. Financial accountability is primarily demonstrated by the City Council acting as the governing board for the PF A and its ability to impose its will. The financing activity of the PF A has been included in the City's financial statements in the major debt service fund, Wastewater Treatment Debt.

The City of Shasta Lake Housing Authority- The Authority, established in 1994, was created for the purpose of administering housing programs. The housing programs and services are clustered in two broad categories: affordable housing and special projects. Because of the nature of the programs and their intended outcomes, the categories will often overlap. The City is financially accountable for this entity. Financial accountability is primarily demonstrated by the City Council acting as the governing board for the Authority and its ability to impose its will. As an integral part of the City, the Authority is reported as a nonmajor special revenue fund of the City.

Discretely Presented Component Units

There are no component units of the City which meet the criteria for discrete presentation.

-31-


NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

A. Reporting Entity (Continued)

Joint Agencies

The City is a participant in Small Cities Organized Risk Effort (SCORE), the purpose of which is for member cities to share in the administrative costs of providing liability and workers' compensation insurance. SCORE is composed of 18 member cities and is governed by a board of directors appointed by the member cities. Complete financial information can be obtained from the SCORE offices in Sacramento, California. The City is not financially accountable for this organization and therefore it is not a component unit under Statement Nos. 14, 39 and 61 of the Governmental Accounting Standards Board.

The City is a participant in the Redding Area Bus Authority (RABA), the purpose of which is to provide a public transit system to the City of Redding, City of Anderson, City of Shasta Lake, and adjacent urbanized areas in unincorporated areas of Shasta County. The governing board of RABA is comprised of eight members, five appointed by the City of Redding and one member by the City of Anderson, City of Shasta Lake, and Shasta County. Complete financial statements for RABA can be obtained from the City of Redding Finance Division, 777 Cypress Avenue, Redding, California 96001. The City is not financially accountable for this organization and therefore it is not a component unit under Statement Nos. 14, 39 and 61 of the Governmental Accounting Standards Board.

B. Basis of Presentation

Government-Wide Financial Statements

The statement of net position and statement of activities display information on all of the nonfiduciary activities of the City and its blended component units. These statements include the financial activities of the overall government, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Interfund services provided and used are not eliminated in the process of consolidation. These statements distinguish between the governmental and business-type activities of the City. Governmental activities, which are normally supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent, on fees charged to external parties.

The statement of activities presents a comparison between direct expenses and program revenues for each different identifiable activity of the City's business-type activities and for each function of the City's governmental activities. Direct expenses are those that are specifically associated with a program or function and; therefore, are clearly identifiable to a particular function. Program revenues include 1) charges paid by the recipients of goods and services offered by the program, 2) operating grants and contributions, and 3) capital grants and contributions. Taxes and other items not properly included among program revenues are reported instead as general revenues.

Fund Financial Statements

The fund financial statements provide information about the City's funds, including fiduciary funds and blended component units. Funds are organized into three major categories: governmental, proprietary, and fiduciary. An emphasis is placed on major funds within the governmental and proprietary categories; each is displayed in a separate column. All remaining governmental and enterprise funds are separately aggregated and reported as nonmajor funds.

-32-



B. Basis of Presentation (Continued)

Fund Financial Statements (Continued)

The City reports the following major governmental funds:

The General fund is used to account for all revenues and expenditures necessary to carry out basic governmental activities of the City that are not accounted for through other funds. For the City, the General fund includes such activities as general government, public protection, community development, public ways and facilities, planning, and culture and recreation services.

The HOME fund is a special revenue fund used to account for the revenues and expenditures associated with the HOME grant program. Funding comes primarily from State and Federal grant revenues.

The Wastewater Treatment Debt fund is a debt service fund used to account for revenues and expenditures related to the 1995 Wastewater Revenue Bonds.

The City reports the following major proprietary funds:

The Water fund is an enterprise fund used to account for activity related to providing customers with water service and billing for service provided by the City.

The Electric fund is an enterprise fund used to account for activity related to providing customers with electric service and billing for service provided by the City.

The Wastewater fund is an enterprise fund used to account for activity related to providing customers with wastewater service and billing for service provided by the City.

The City reports the following additional fund types:

Internal Service funds (ISF) account for the City's motor pool and public works departments, which provide services to other departments on a cost reimbursement basis.

The Private Purpose Trust funds account for property held under other trust arrangements under which principal and income benefit individuals, private organizations, or other governments. The Private Purpose Trust fund includes the Successor Agency to the Redevelopment Agency of the City of Shasta Lake.

Agency funds account for resources held by the City as an agent for various local governments and for individuals. These resources include community facility districts.

-33-



C. Basis of Accounting and Measurement Focus

The government-wide and proprietary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. N onexchange transactions, in which the City gives ( or receives) value without directly receiving ( or giving) equal value in exchange, include property and sales tax, grants, entitlements, and donations. Under the accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenues from sales tax are recognized when the underlying transactions take place. Revenues from grants, entitlements, and donations are recognized in the fiscal year in which all eligibility requirements have been satisfied.

Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available. Property and sales taxes, interest, certain state and federal grants and charges for services are considered susceptible to accrual and are accrued when their receipt occurs within sixty days after the end of the fiscal year. Expenditures are generally recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures as well as expenditures related to claims and judgments are recorded only when payment is due. General capital asset acquisitions are reported as expenditures in the various functions of the governmental funds. Proceeds of governmental long-term debt and acquisitions under capital leases are reported as other financing sources.

Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the enterprise and internal service funds are charges to customers for sales and services. Operating expenses for enterprise and internal service funds include the cost of sales and services, administrative expenses, and depreciation of capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses.

Fiduciary funds include trust funds and agency funds. All trust funds are reported using the economic resources measurement focus and the accrual basis of accounting. Agency funds are reported using the accrual basis of accounting to recognize receivables and payables.

D. Non-Current Governmental Assets/Liabilities

Non-current governmental assets and liabilities, such as capital assets and long-term liabilities, are reported in the governmental activities column in the government-wide statement of net position.

E. Cash and Cash Equivalents

For purposes of the accompanying statement of cash flows, the City considers all highly liquid investments, including restricted cash and investments, with original maturity of three months or less and amounts held in the City's investment pool to be cash and cash equivalents.

-34-



F. Investments

The City pools cash and investments of all funds. Each fund's share in this pool is displayed in the accompanying financial statements as cash and investments.

Investment transactions are recorded on the trade date. The fair value of investments is determined monthly. Investments in nonparticipating interest-earning investment contracts are reported at cost; short term investments are reported at amortized cost, investments in the State of California Local Agency Investment Fund, an external pool, are reported at amortized cost which approximates fair value, and the fair value of all other investments are obtained by using quotations obtained from independent published sources or by the safekeeping institution. The fair value represents the amount the City could reasonably expect to receive for an investment in a current sale between a willing buyer and seller.

Income from pooled investments is allocated to the individual funds based on the fund or participant's average daily cash balance at quarter end in relation to the total pool investments. Income from non-pooled investments is recorded based on the specific investments held by the fund. The interest income is recorded in the fund that earned the interest.

G. Restricted Cash and Investments

Restricted assets in the governmental funds represent cash and investments held in the General fund for customer utility deposits of $53 7, 511 and $1,3 22,202 in unexpended certificate of participation debt proceeds and in the Wastewater Treatment Debt fund for debt service of $261,665. Restricted assets in the proprietary funds represent cash and investments held in the Water fund for debt service of $59,302 and in the Wastewater fund for retentions payable of $145,636.

H. Receivables

Receivables for governmental activities consist mainly of accounts, interest, taxes, intergovernmental revenues, and special assessments. Management records an allowance for doubtful accounts based on historical trends and the periodic aging of receivables. At June 30, 2018, the allowance for doubtful accounts was $326.

Receivables for business-type activities consist mainly of user fees, interest, taxes, intergovernmental revenues and special assessments. Management records an allowance for doubtful accounts based on historical trends and the periodic aging of receivables. At June 3 0, 2018, the allowance for doubtful accounts was $3,416.

I. Other Assets

Deposits

The City has recorded deposits in several funds. The General fund made payments during the year to various other agencies and the Electric fund of the City made payments during the year to Western Area Power Administration for future construction projects.

-35-



I. Other Assets (Continued)

Inventory

Governmental fund inventories are recorded as expenditures at the time inventory is purchased rather than when consumed. Records are not maintained of inventory and supplies on hand, although these amounts are not considered material.

Inventories are stated at cost for proprietary funds. Inventory recorded by the proprietary funds includes electric power equipment. Proprietary fund inventories are recorded as expenses when consumed.

Prepaid Items

Payments made for services that will benefit periods beyond June 30, 2018, are recorded as prepaid costs under both the accrual and modified accrual basis of accounting. The cost of prepaid items is recorded as an expense when consumed rather than when purchased.

J. Loans Receivable

A total of $5,177,155 was recorded as loans receivable at June 30, 2018. These represent low interest notes and related accrued interest to finance multi-family and single family construction and rehabilitation projects and homebuyer assistance for low income families. Loan terms are 15 to 55 years with an interest rate at O to 5 percent. The primary source of funding for these loans comes from grants from the federal Community Development Block Grant (CDBG) program and Home Investment Partnerships (HOME) program and the state CalHome program. The CDBG, HOME and CalHome grants contain monitoring requirements to ensure grant compliance. These requirements are reflected in the loan agreements.

K Land Held for Resale

Land held for resale is generally acquired under Developer Disposition Agreements in the normal course of Low and Moderate Fund activity. The Developer Disposition Agreements provide for transfer of property to developers after certain obligations have been fulfilled. This property is carried at cost until an event occurs to indicate a net realizable value.

L. Capital Assets

Capital assets, including public domain (infrastructure such as roads, bridges, sidewalks, sewer, and similar items) are defined by the City as assets with a cost greater than $5,000 for equipment, $25,000 for buildings and improvements, and $50,000 for infrastructure assets. Capital assets are recorded at historical cost or estimated historical cost if actual historical cost is unavailable. Contributed capital assets are recorded at their acquisition value at the date of donation.

-36-



L. Capital Assets (Continued)

Capital assets used in operations are depreciated or amortized using the straight-line method over the assets estimated useful lives in the government-wide financial statements. The range of estimated useful lives by type of asset is as follows:

Depreciable Asset

Electric, water and wastewater system assets Other system assets

Buildings Equipment Infrastructure

Estimated Lives

20-50 years 20-33 years

33 years 5-10 years

20-50 years

Maintenance and repairs are charged to operations when incurred. Betterments and major improvements which significantly increase values, change capacities or extend useful lives are capitalized. Upon sale or retirement of capital assets, the cost and related accumulated depreciation are removed from the respective accounts and any resulting gain or loss is included in the results of operations.

M. Property Tax

Shasta County assesses properties, bills, collects, and distributes property taxes to the City. The County remits the entire amount levied and handles all delinquencies, retaining interest and penalties.

Property taxes are levied on a fiscal year (July 1 - June 30). The secured property tax assessments are due on November 1 and February 1 and become delinquent after December 10 and April 10, respectively. The unsecured property tax assessments are due on August 1, and become delinquent after August 31. Property taxes become a lien on the property effective January 1 of the preceding year.

The City recognizes property taxes when the individual installments are due provided they are collected within sixty days after year-end.

N. lnterfund Transactions

Interfund transactions are reflected as either loans, services provided or used, reimbursements or transfers.

Loans reported as receivables and payables are referred to as either "due to/from other funds" (i.e. the current portion of interfund loans) or "advances to/from other funds" (i.e., the non current portion of interfund loans) as appropriate and are subject to elimination upon consolidation. Any residual balances outstanding between the governmental activities and the business-type activities are reported in the government-wide financial statements as "internal balances." Advances between funds, as reported in the fund financial statements, are offset by a nonspendable fund balance account in applicable governmental funds to indicate that they are not in spendable form.

Services provided or used, deemed to be at market or near market rates, are treated as revenues and expenditures or expenses. These services provide information on the net cost of each government function and therefore are not eliminated in the process of preparing the government-wide statement of activities.

-37-



N. lnterfund Transactions (Continued)

Reimbursements occur when the funds responsible for particular expenditures or expenses repay the funds that initially paid for them. Such reimbursements are reflected as expenditures or expenses in the reimbursing fund and reductions to expenditures or expenses in the reimbursed fund.

All other interfund transactions are treated as transfers. Transfers between funds are netted as part of the reconciliation to the government-wide presentation.

0. Unearned Revenues

Under the accrual and modified accrual basis of accounting, revenue may be recognized only when it is earned. When assets are recognized in connection with a transaction before the earnings process is complete, those assets are offset by a corresponding liability for unearned revenue.

P. Due to Other Governments

Accrued liabilities payable to other governmental entities are recorded in both the government-wide and fund financial statements.

Q. Compensated Absences

In the government-wide financial statements, vested or accumulated vacation leave that is expected to be liquidated with expendable available financial resources is recorded as an expense and related liability with the current portion estimated based on historical trends. In the governmental fund financial statements the expenditures and liabilities related to those obligations are recognized only when they mature. Vested or accumulated vacation leave of proprietary funds and in the government-wide financial statements is recorded as an expense and liability of those funds as the benefits accrue to employees.

Sick leave, however, does not vest to the employees and is payable only when sick leave is taken or when an individual has been employed by the City for ten years or longer. These employees receive twenty-five percent of their accrued sick pay, up to 100 hours, as additional termination pay.

In accordance with GASB Statement No. 16, no liability is recorded for non-vesting accumulating rights to receive sick pay benefits. However, a liability is recognized for that portion of accumulated sick leave benefits that is estimated to be taken as additional termination pay.

All vacation and sick leave is accrued when incurred in the government-wide and proprietary fund financial statements. In governmental funds, the cost of vacation and sick leave benefits is recognized when payments are made to employees.

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R. Pensions

For purposes of measuring the net pension liability and deferred outflows/inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the City's California Public Employees' Retirement System (CalPERS) plan (Plan) and additions to/deductions from the Plan's fiduciary net position have been determined on the same basis as they are reported by CalPERS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value.

S. Other Postemployment Benefits (OPEB)

For purposes of measuring the net OPEB liability, deferred outflows of resources and deferred inflows of resources related to OPEB, and OPEB expense, information about the fiduciary net position of the City's plan (OPEB Plan) and additions to/deductions from the OPEB Plan's fiduciary net position have been determined on the same basis. For this purpose, benefit payments are recognized when currently due and payable in accordance with the benefit terms. Investments are reported at fair value.

Generally accepted accounting principles require that the reported results must pertain to liability and asset information within certain defined timeframes. For this report, the following timeframes are used:

Valuation Date Measurement Date Measurement Period

T. Deferred Outflows/Inflows of Resources

June 30, 2017 June 30, 2017 June 30, 2016 to June 30, 2017

In addition to assets, the statement of financial position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period and so will not be recognized as an outflow of resources (expense/expenditure) until then. The City has two items which qualify for reporting in this category. These items relate to the outflows from changes in the net pension liability and the net OPEB liability and are reportable on the statement of net position.

In addition to liabilities, the statement of financial position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period and so will not be recognized as an inflow of resources (revenue) until that time. The government has four types of items which qualify for reporting in this category. One item, unavailable revenue, is reported only in the governmental funds balance sheet. The governmental funds report unavailable revenues for receivables that have not been received within the modified accrual period. These amounts are deferred and recognized as an inflow of resources in the period that the amounts become available. The second item relates to the housing principal and interest receivable amount and is reported in the statement of net position as well as the governmental funds balance sheet. The third and fourth items relate to the inflows from changes in the net pension liability and the net OPEB liability and are reportable on the statement of net position.

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U. Estimates

The preparation of basic financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

V. Implementation of Governmental Accounting Standards Board Statements (GASB)

The following Governmental Accounting Standards Board (GASB) Statements have been implemented, if applicable, in the current financial statements.

Statement No. 75, Accounting and Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans. This statement improves accounting and financial reporting by state and local governments for postemployment benefits other than pensions (OPEB). This statement also improves information provided by state and local governmental employers about financial support for OPEB that is provided by other entities.

Statement No. 81, Irrevocable Split-Interest Agreements. This statement improves accounting and financial reporting for irrevocable split-interest agreements by providing recognition and measurement guidance for situations in which a government is a beneficiary of the agreement.

Statement No. 85, Omnibus 2017. This statement addresses practice issues that have been identified during implementation and application of certain GASB Statements including issues related to blending component units, goodwill, fair value measurement and application, and postemployment benefits.

Statement No. 86, Certain Debt Extinguishment Issues. This statement improves consistency in accounting and financial reporting for in-substance defeasance of debt by providing guidance for transactions in which cash and other monetary assets acquired with only existing resources - resources other than the proceeds of refunding debt - are placed in an irrevocable trust for the sole purpose of extinguishing debt.

NOTE 2: STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY

A. Restatement of Fund Balance/Net Position

Adjustments resulting from errors or a change to comply with provisions of the accounting standards are treated as adjustments to prior periods. Accordingly, the City reports these changes as restatements of beginning fund balance/net position. During the current year, a prior period adjustment was made to reflect the prior period costs related to implementing the net OPEB liability as required by GASB Statement No. 75. The City also reported a prior period adjustment to correct an understatement of deferred housing loan payments.

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NOTE 2: STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY (CONTINUED)

A. Restatement of Fund Balance/Net Position (Continued)

The impact of the restatement on the net position of the government-wide financial statements as previously reported is presented below:

Net Position, June 30, 2017, as previously reported

Adjustment associated with: Deferred Housing Loan Payments Net OPEB Liability Adjustment

Total Adjustments

Net Position, July 1, 2017, as restated


$ 62,414,092

4,895,494) 90 163

4,805,331)

$ 57 608 761


$ 49,880,940

3,191,829)

3,191,829)

$ 46 689 111

The impact of the restatement on the fund balance of the fund financial statements as previously reported is presented below:

Fund Balance, June 30, 2017, as previously reported

Adjustment associated with:

Deferred Housing Loan Payments

Total Adjustments

Fund Balance, July 1, 2017, as restated $

HOME

$ 4,441,069

( 4 331213)

( 4 331213)

109 856

Other Governmental

Funds

$ 4,116,104

564281)

564 281)

$ 3,551,823

The impact of the restatement on the net position of the fund financial statements as previously reported is presented below:

Net Position, June 30, 2017, as previously reported

Adjustment associated with: Net OPEB Liability Adjustment

Total Adjustments

Net Position, July 1, 2017, as restated

B. Deficit Fund Balance/Net Position

Water Electric

$10,619,033 $23,920,070

542 369) ( 1,214,211)

542 369) ( 1,214 ,211)

$10 076 664 $22,705,859

The following nonmajor special revenue fund had a deficit fund balance:

Internal

Service

Wastewater Funds

$ 13,630,747 $ 1,007,883

114,693) ( 1,320,556)

114,693) ( 1,320,556)

$ 13 516 054 ($ 312 673)

The CDBG Project fund had a fund balance deficit of $33,463, which is expected to be eliminated in future years through grant revenues.

-41-


NOTE 2: STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY (CONTINUED)

B. Deficit Fund Balance/Net Position (Continued)

The following internal service fund had a deficit net position:

The Public Works fund had a net position deficit of$1,239,227, which is expected to be eliminated in future years through internal service reimbursements.

C. Rebatable Arbitrage

The Tax Reform Act of 1986 instituted certain arbitrage restrictions with respect to the issuance of tax exempt bonds after August 31, 1986. Arbitrage regulations deal with the investment of all tax exempt bond proceeds at an interest yield greater than the interest yield paid to bondholders. Generally, all interest paid to bondholders can be retroactively rendered taxable if applicable rebates are not reported and paid to the Internal Revenue Service (IRS) at least every five years. During the current year, the City performed calculations of excess investment earnings on various bonds and financing and at June 30, 2018, does not expect to incur a liability.

NOTE 3: CASH AND INVESTMENTS

A. Financial Statement Presentation

As of June 30, 2018, the City's cash and investments are reported in the financial statements as follows:

Governmental activities Business-Type activities Private Purpose trust fund Agency fund

Total Cash and Investments

As of June 30, 2018, the City's cash and investments consisted of the following:

Cash: Cash on hand

Deposits (less outstanding checks)

Total Cash

Investments:

In City's pool

Total Investments

Total Cash and Investments

B. Cash

$ 8,909,948 21,228,516

1,721,494 337 813

$ 32 197 771

$ 2,100

4 073 667

4 075 767

28 122 004

28 122 004

$ 32 197 771

At year end, the carrying amount of the City's cash deposits (including amounts in checking accounts and money market accounts) was $4,073,667 and the bank balance was $5,733,460. The difference between the bank balance and the carrying amount represents outstanding checks and deposits in transit. In addition the City had cash on hand of $2, 100.

-42-


NOTE 3: CASH AND INVESTMENTS (CONTINUED)

B. Cash (Continued)

Custodial Credit Risk for Deposits - Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, the City will not be able to recover its deposits or collateral securities that are in the possession of an outside party. The City's investment policy requires that deposits in banks must meet the requirements of the California Government Code. Under this code, deposits of more than $250,000 must be collateralized at 105 percent to 150 percent of the value of the deposit to guarantee the safety of the public funds. The first $250,000 of the City's deposits are insured by the Federal Deposit Insurance Corporation (FDIC). Deposits of more than the $250,000 insured amount are collateralized.

C. Investments

Pursuant to Section 53646 of the Government Code, the City prepares an investment policy annually and presents it to the City Council for review and approval. The investment policy provides the basis for the management of a prudent, conservative investment program. Funds are invested to provide the maximum security of principal with secondary emphasis on achieving the highest return, while meeting daily cash flow needs. All investments are made in accordance with the Government Code and, in general, the investment policy is more restrictive than state law.

Under the provisions of the City's investment policy the City may invest or deposit in the following:

Municipal Securities U.S. Treasuries Federal Agencies Banker's Acceptances Federally Insured Time Deposits Collateralized Time Deposits Certificate of Deposit Placement Service (CDARS) Negotiable Certificates of Deposit Repurchase Agreement Commercial Paper State of California Local Agency Investment Fund (LAIF) Corporate Medium Term Notes Asset-Backed, Mortgage-Backed, Mortgage Pass-Through Securities, and

Collateralized Mortgage Obligations Money Market Mutual Funds

Fair Value oflnvestments - The City measures and records its investments using fair value measurement guidelines established by generally accepted accounting principles. These guidelines recognize a three-tiered fair value hierarchy as follows:

Level 1: Level 2: Level 3:

Quoted prices for identical investments in active markets; Observable inputs other than quoted market prices; and, Unobservable inputs

The City's position in external investment pools is in its self regarded as a type of investment and looking through to the underlying investments of the pool is not appropriate. Therefore, the City's investments in external investment pools are not recognized in the three-tiered fair value hierarchy described above.

-43-



C. Investments (Continued)

At June 30, 2018, the City had the following recurring fair value measurements.

Fair Value Measurements Using Fair

Investment Tnie Value Level 1 Level 2 Level 3

Investments by Fair Value Level

Federal Agencies $ 7,391,960 $ 7,391,960 $ - $ U.S. Treasuries 4,611,589 4,611,889 Corporate Notes 4,886,796 4,886,796 Asset-Backed Securities 360,965 360,965 Certificates of Deposit 249 470 249 470

Total Investments Measured at Fair Value 17,500,780 $17500780 $ - $

Investments in External Investment Pools

Shasta County Investment Pool 261,665 LAIF 10 359 559

Total Investments $ 28 122 004

Interest Rate Risk - Interest rate risk is the risk of loss due to the fair value of an investment falling due to interest rates rising. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. To limit the exposure to fair value losses resulting from increases in interest rates, the City's investment policy limits investment maturities to a term appropriate to the need for funds so as to permit the City to meet all projected obligations. Any investments that mature more than five years from the date of purchase cannot occur without prior approval of the City Council.

As of June 30, 2018, the City had the following investments, all of which had a maturity of 5 years or less:

Maturities Weighted Average

Interest Fair Maturity Investment Ty12e Rates 0-1 year 1-5 years Value (Years)

Federal Agencies 0.875-2.500% $ 2,767,201 $ 4,624,759 $ 7,391,960 1.49 U.S. Treasuries 0. 750-1.750% 320,912 4,290,677 4,611,589 2.00 Asset-Backed Securities 1. 060-2.420% 4,370 356,595 360,965 1.82 Certificates of Deposit 1.750% 249,470 249,470 0.26 Corporate Notes 1.200-3.400% 553,692 4,333,104 4,886,796 0.73 Shasta County Investment Pool Variable 261,665 261,665 LAIF Variable 10 359 559 10 359 559

Total Investments $ 14 516 869 $ 13 605 135 $ 28, 122,004 0.87

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. The City's investment policy sets specific parameters by type of investment to be met at the time of purchase. Presented below is the minimum rating required (where applicable) by the California Government Code or the City's investment policy, and the actual rating as of year end for each investment type.

-44-



C. Investments (Continued)

Investment Type

Federal National Mortgage Association Federal Farm Credit Bank

Federal Home Loan Bank Federal Home Loan Mortgage Corporation U.S. Treasuries Corporate Notes Corporate Notes

Corporate Notes Corporate Notes Corporate Notes Corporate Notes

Corporate Notes Corporate Notes Corporate Notes Asset-Backed Securities Asset-Backed Securities

Government Assistance Shasta County Investment Pool

LAIF

Total

Minimum Legal

Rating

A A

A A A A

A A A A A

NIA NIA NIA

Standard andPoor's

Rating

A A+

AA-

A A+

AA AA-

AAA NR

AAA NR NR NR NR

Moody's

Rating

Al Al

Al A2 A2

AA3

AA2 AAA NR

AAA AAA

NR NR NR

%of

Portfolio

7.53% 7.62% 6.13% 5.01%

16.40% 1.64% 2.95% 1.51% 4.90% 1.16% 1.51% 1.70% 1.11% 0.89% 0.39% 0.89% 0.89% 0.93%

36.84%

100.00%

Custodial Credit Risk - Custodial credit risk for investments is the risk that, in the event of the failure of a depository financial institution, the City will not be able to recover its deposits or collateral securities that are in the possession of an outside party. To mitigate the custodial credit risk the City's investment policy requires that all of its managed investments be held in the name of the City in safekeeping by a third party bank trust department.

Concentration of Credit Risk - Concentration of credit risk is the risk of loss attributed to the magnitude of the City's investment in a single issuer of securities. When investments are concentrated in one issuer, this concentration presents a heightened risk of potential loss. The City's investment policy contains limitations on the amount that can be invested in any one issuer. Investments in any one issuer ( other than U.S. Treasury securities, mutual funds, and external investment pools) at June 30, 2018, that represent 5 percent or more of total City investments are as follows:

Investment Type

Federal National Mortgage Association Federal Farm Credit Bank Federal Home Loan Bank Federal Home Loan Mortgage Corporation

-45-

Amount Invested

$ $ $ $

2,117,293 2,143,769 1,722,929 1,407,969

%of

Investments

7.53% 7.62% 6.13% 5.01%



D. Investment in External Investment Pools

Shasta County Pooled Investment Fund - The Shasta County Pooled Investment Fund is a pooled investment fund program governed by the County which monitors and reviews the management of public funds maintained in the investment pool in accordance with the County investment policy and the California Government Code. The Board of Supervisors review and approve the investment policy annually. The County Treasurer prepares and submits a comprehensive investment report to the Board of Supervisors every month. The report covers the type of investments in the pool, maturity dates, par value, actual cost and fair value. Investments in the Shasta County Pooled Investment Fund are regarded as highly liquid as deposits and withdrawals can be made at any time without penalty. The Pool does not impose a maximum investment limit. Required disclosure information regarding categorization of investments and other deposit and investment risk disclosures can be found in the County's financial statements. The County of Shasta's financial statements may be obtained by contacting the County of Shasta Auditor-Controller's office at 1450 Court Street, Suite 238, Redding, CA 96001.

The City of Shasta Lake maintains an investment in the State of California Local Agency Investment Fund (LAIF), managed by the State Treasurer. This fund is not registered with the Securities and Exchange Commission as an investment company, but is required to invest according to California State Code. The Local Investment Advisory Board (Board) has oversight responsibility for LAIF. The Board consists of five members as designated by State Statute. At June 30, 2018, the City's investment in LAIF valued at amortized cost was $10,359,559 and is the same as the value of the pool shares. There are no restrictions on withdrawal of funds. The total amount invested by all public agencies in LAIF on that day was $88. 8 billion. Of that amount, 97.33 percent is invested in non-derivative financial products and 2.67 percent in structured notes and asset-backed securities.

-46-


NOTE 4: CAPITAL ASSETS

Capital assets activity for the year ended June 30, 2018, was as follows:

Governmental Activities Capital Assets, Not Being Depreciated:

Land, easements, and right of way Construction in progress

Total Capital Assets, Not Being Depreciated

Capital Assets, Being Depreciated:

Infrastructure and land improvements Buildings and improvements Machinery and equipment Vehicles

Total Capital Assets, Being Depreciated

Less Accumulated Depreciation For: Infrastructure and land improvements Buildings and improvements

Machinery and equipment Vehicles

Total Accumulated Depreciation

Total Capital Assets, Being Depreciated, Net

Governmental Activities Capital Assets, Net

Balance Balance

July 1 2017 Additions Retirements Transfers June 30 2018

$ 3,700,494 631 142

$ 47,746 $ 6 520 456

$ ____ - ( 332 863)

$ 3,748,240 6818735

4 3 31 636 6,568,202 ____ - ( 332,863) 10 566 975

52,516,354 9,193,303

626,740 34 571

- (

62 370 968 _____ - (

( 15,257,514) ( 1,064,877) ( 1,508,416) ( 310,863)

( 479,532) ( 23,136) ( 34 571) ___ _

( 17,280,033) ( 1,398,876)

45 090 935 ( 1,398,876)

24,396)

24 396)

23,418

23 418

978)

332,863

332 863

52,516,354 9,526,166

602,344 34 571

62 679 435

( 16,322,391) - ( 1,819,279)

- ( 479,250)

_ ___ - ( 34,571)

( 18,655,491)

332 863 44 023 944

$ 49 422 571 $ 5 169 326 (=$===9=7=8) =$=== $54590919

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NOTE 4: CAPITAL ASSETS (CONTINUED)

Balance July 1, 2017 Additions Retirements

Business-Type Activities Capital Assets, Not Being Depreciated:

Land $ 1,877,370 $ - ($ 39,993) Construction in progress 3 547 716 4 205 539

$

Balance Transfers June 30, 2018

$ ( 2,215,747)

1,837,377 5 537 508

Total Capital Assets, Not Being Depreciated 5 425 086 4 205 539 ( 39,993) ( 2,215,747) 7 374 885

Capital Assets, Being Depreciated:

General and utility plant Buildings and improvements Equipment and vehicles

Total Capital Assets, Being Depreciated

Less Accumulated Depreciation For:

General and utility plant Buildings and improvements

Equipment and vehicles

Total Accumulated Depreciation

Total Capital Assets, Being Depreciated, Net

Business-Type Activities Capital Assets, Net

Depreciation

67,540,305 1,317,699

3 616 513

298,071

115415

72474517 413 486 (

40,102,981) ( 1 ,840,090) 621,932)( 35,786)

2 579 865) ( 299 307)

43 304 778)( 2175183)

29 169 739 ( 1,761,697) (

$ 34 594 825 $2,443,842 ($

97,926)

97 ,926)

55 444

55 444

42 482)

82,475)

Depreciation expense was charged to governmental functions as follows:

General government Public safety Public ways and facilities

Planning Culture and recreation

Total Depreciation Expense - Governmental Functions

Depreciation expense was charged to business-type functions as follows:

Water Electric Wastewater Internal Service Funds

Total Depreciation Expense - Business-Type Functions

-48-

2,215,747

2 215 747

- ( - ( - (

2 215 747

$

70,054,123 1,317,699

3 634 002

75 005 824

41,943,071) 657,718)

2 823 728)

(45424517)

29 581 307

$ 36 956 192

$ 13,887 6,040

1,295,758

3,190 80 001

$ 1 398 876

$ 534,670 781,007 578,031

281 475

$ 2175183


NOTE 4: CAPITAL ASSETS (CONTINUED)

Construction in Progress

Construction in progress for governmental activities relates primarily to work performed on road projects, community center remodel and the new City Hall. Construction in progress for business-type activities relates primarily to work performed on water projects, electric projects, and the wastewater treatment plant.

NOTE 5: INTERFUND TRANSACTIONS

Due To/From Other Funds

During the course of operations, transactions occur between funds to account for goods received or services rendered. These receivables and payables are classified as due from or due to other funds. In addition, when funds overdraw their share of pooled cash, the receivables and payables are also classified as due from or due to other funds.

The following are due to and due from balances as of June 30, 2018:

Due From Due To Other Funds Other Funds

General Fund $ 50,000 $ HOME Fund 19,000 Nonmajor Governmental Fund 31 000

Total $ 50 000 $ 50 000

Advances To/From Other Funds

Advances to/from other funds are non-current interfund loans and are offset by a nonspendable fund balance account in applicable governmental funds to indicate they are not in spendable form.

The following are advances to/from other funds as of June 30, 2018:

Advances To Advances From Other Funds Other Funds

General Fund $ $ 446,117 Water 73,505

Electric 852,986 Wastewater 74,014 Internal Service Funds 259 350

Total $ 852 986 $ 852 986

Transfers

Transfers are indicative of funding for capital projects, lease payments or debt service, subsidies of various City operations and re-allocations of special revenues.

-49-


NOTE 5: INTERFUND TRANSACTIONS (CONTINUED)

Transfers (Continued)

The following are the interfund transfers for fiscal year ended June 30, 2018:

Transfers

General Fund Nonmajor Governmental Funds Water

Electric Wastewater Internal Service Funds

Total

NOTE 6: UNEARNED/UNAVAILABLE REVENUES

$

$

In

95,528 $

160,000

226,372 4 950

486 850 $

At June 30, 2018, components of unearned and unavailable revenues were as follows:

Unearned Unavailable General Fund

Utility bill prepayments $ 33,608 $ Grants receivable 13,926 HOME program grants receivable 24,024

Wastewater Treatment Debt Special assessments receivable 2,719,000

Nonmajor Governmental Funds

Grants receivable 37,515 Unspent payments in COPS funding 10,347 Special assessments receivable 32 000

Total $ 43 955 $ 2,826,465

-50-

Transfers Out

424,172 5,621

26,879 6,527

23 651

486 850

Total

$ 33,608 13,926 24,024

2,719,000

37,515 10,347

32 000

$ 2 870 420


NOTE 7: LONG-TERM LIABILITIES

The following is a summary of changes in long-term liabilities for the year ended June 30, 2018:

Amounts Balance Adjustments/ Balance Due Within

Tnie of Indebtedness July 1, 2017 Additions Retirements June 30, 2018 One Year

Governmental Activities Loans $ 87,426 $ 225 ($ 9,099) $ 78,552 $ 9,090 Revenue Bonds 2,822,000 - ( 105,000) 2,717,000 109,000

Special Assessment Bonds 34,000 - ( 2,000) 32,000 2,000 Certificates of Participation 2,500,000 2,500,000 31,000

Compensated Absences 131 822 135 093 105 690) 161 225 161 225

Total Governmental Activities $ 3 075 248 $ 2 635 318 ($ 221,789) $ 5 488 777 $ 312 315

Business-Type Activities Loans $ 3,778,903 $ - ($ 210,128) $ 3,568,775 $ 217,069 Special Assessment Bonds 780,000 - ( 30,000) 750,000 35,000 Compensated Absences 269 388 240 356 ( 279,177) 230 567 230 567

Total Business-Type Activities $ 4 828 291 $ 240 356 ($ 519 305) $ 4 549 342 $ 482 636

Internal service funds predominately serve the enterprise funds. Accordingly, long-term liabilities for these funds are included as part of the above totals for business-type activities.

Compensated absences for the governmental activities are generally liquidated by the fund where the accrued liability occurred, which is primarily the General fund. Principal and interest payments for the governmental activities are generally paid by a debt service fund.

For the business-type activities, all debt is accounted for in the proprietary fund where the liability occurred. Individual issues of debt payable outstanding at June 30, 2018, are as follows:

Governmental Activities Loans:

Davis-Grunsky Loan - Transferred from Shasta Dam Area Public Utility District - voter

approved 1972, $408,538 construction loan under the Davis-Grunsky Act for construction of

the complete Summit City water system, due in semi-annual installments, including interest at 2.50% per annum, totaling approximately $11,000 until maturity in 2026. Property tax is

levied to finance debt service, and taxes levied in excess of actual requirements are legally restricted to servicing this debt.

Total Loans

Revenue Bonds: 1995 Wastewater Revenue Bonds - Series A - Issued by the Shasta Lake Public Financing Authority to finance construction of the Wastewater Treatment Plant expansion. Principal

payments, ranging from $49,000 to $210,000, are due annually on September 2, and mature September 2, 2034. Interest payments at 4.50% are due semiannually.

-51-

$ 78 552

78 522

2,416,000


NOTE 7: LONG-TERM LIABILITIES (CONTINUED)

Governmental Activities (Continued) Revenue Bonds: (Continued)

1995 Wastewater Revenue Bonds - Series B - Issued by the Shasta Lake Public Financing Authority to finance construction of the Wastewater Treatment Plant expansion. Principal payments, ranging from $6,000 to $27,000, are due annually on September 2, and mature September 2, 2034. Interest payments at 4.50% are due semiannually.

Total Revenue Bonds

Special Assessment Bonds: Riddle Road Assessment Bonds- Transferred from Shasta Dam Area Public Utility District -voter approved 1989. $64,932 issue of bonds (Farmers' Home Administration) for the assessment district share of construction costs for the Riddle Road water system. Principal payments, ranging from $900 to $4,000, plus interest at 5%, are due annually on September 2. Final maturity of the issue is scheduled for 2029.

Total Special Assessment Bonds

Certificates of Participation 2018 Certificates of Participation issued February 15, 2018, in the amount of $2,500,000, payable in annual installments of $31,000 to $114,000, with an interest rate of 3.25% and maturity on January 1, 2058. The certificates were used to finance construction of certain improvements to the City Hall/Community Center Project. of June 30, 2018, the City unexpended proceeds of $1,322,202.

Total Certificates of Participation


Business-Type Activities Loans:

As

State of California Infrastructure Bank Water Loan - Loan payable to Infrastructure and Economic Development Bank for the Reservoir and Water System Improvement Project (Project). The original amount of the loan was $5,000,000. The loan is payable in annual principal payments ranging from $115,944 to $259,579 with interest payable semi-annually at an annual rate of 3.03%. The loan also consists of an annual fee ranging from $779 to $15,000. The loan is amortized over 30 years with the final payment due in 2034.

State of California Safe Drinking Water Act Loan - Transferred from Shasta Dam Area Public Utility District - an agreement with the State of California Department of Water Resources for the funding of the construction of a filtration plant to meet safe drinking water standards established pursuant to Chapter 7 of Part 1 of Division 5 of the Health and Safety code, resulted in the creating of a loan payable to the State of California in the original amount of $988,000. The loan is payable in semi-annual principal installments ranging from $8,450 to $28,340 with interest at 4.1439%. The note is amortized over 30 years with the final payment due in 2019.

Total Loans

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301 000

2 717 000

32 000

32 000

2 500 000

2 500 000

$ 5,327,522

$ 3,669,006

109 897

3 568 775



Special Assessment Bonds: Industrial Park Assessment Bonds - Transferred from Shasta Dam Area Public Utility District - approved 1991, $1,202,700 issue of bonds (Farmers' Home Administration) for the Assessment District's share of construction costs for the Shasta Gateway Industrial Park infrastructure. Principal payments ranging from $12,700 to $70,000 are due annually on September 2, and mature February 2, 2032. Interest payments at 5.25% are due semi -annually.

Total Special Assessment Bonds


750 000

750 000

$4318775

Fallowing is a schedule of debt payment requirements of governmental activities and business-type activities to maturity for long-term debt, excluding compensated absences that have indefinite maturities.


Loans Year Ended

June 30 Principal Interest Total

2019 $ 9,090 $ 1,873 $ 10,963 2020 9,318 1,644 10,962 2021 9,550 1,405 10,955 2022 9,789 1,165 10,954 2023 10,034 917 10,951

2024-2026 30 771 1 401 32 172

Total $ 78 552 $ 8 405 $ 86 957

Revenue Bonds Year Ended

June 30 Principal Interest Total

2019 $ 109,000 $ 119,903 $ 228,903 2020 114,000 114,885 228,885 2021 119,000 109,643 228,643 2022 126,000 104,130 230,130 2023 130,000 98,370 228,370

2024-2028 753,000 395,303 1,148,303 2029-2033 930,000 206,685 1,136,685 2034-2035 436 000 21 890 457 890

Total $ 2 717 000 $1170809 $ 3 887 809

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Governmental Activities (Continued)

Special Assessment Debt

Year Ended June 30

2019 2020

2021 2022 2023

2024-2028 2029-2030

Total

Year Ended June 30

2019 2020 2021 2022

2023 2024-2028 2029-2033 2034-2038 2039-2043

2044-2048 2049-2053 2054-2058

Total


Year Ended June 30

2019 2020 2021 2022 2023

2024-2028

2029-2033 2034-2035

Total

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Principal Interest Total

$ 2,000 $ 1,450 $ 3,450 2,000 1,350 3,350

2,000 1,250 3,250 2,000 1,150 3,150 2,000 1,050 3,050

15,000 3,025 18,025 7 000 75 7 075

$ 32 000 $ 9 350 $ 41 350

Certificates of Participation


$ 31,000 $ 40,628 $ 71,628 32,000 80,243 112,243 33,000 79,203 112,203 34,000 78,130 112,130

36,000 77,025 113,025

196,000 366,925 562,925 229,000 333,028 562,028 270,000 293,183 563,183 315,000 246,513 561,513

372,000 191,718 563,718 436,000 127,270 563,270

516 000 51 675 567 675

$ 2 500 000 $ 1 965 541 $ 4 465 541

Loans


$ 217,069 $ 105,659 $ 322,728 165,888 99,043 264,931 170,914 93,941 264,855 176,093 88,684 264,777 181,429 83,267 264,696 993,010 329,168 1,322,178

1,152,848 166,909 1,319,757 511 524 15 615 527 139

$ 3 568 775 $ 982 286 $ 4 551 061



Business-Type Activities (Continued)

Special Assessment Bonds

Year Ended June 30

2019 2020

2021 2022 2023

2024-2028 2029-2032

Total

NOTE 8: NET POSITION

Principal

$ 35,000 35,000

40,000 40,000 40,000

245,000 315 000

$ 750 000

Interest

$ 38,457 $ 36,619

34,650 32,550 30,450

116,159 43 183

$ 332 068 $

Total

73,457 71,619

74,650 72,550 70,450

361,159 358 183

1 082 068

The government-wide and proprietary fund financial statements utilize a net position presentation. Net position is categorized as net investment in capital assets, restricted and unrestricted.

Net investment in capital assets - consists of capital assets including restricted capital assets, net of accumulated depreciation and reduced by the outstanding balances of any bonds, mortgages, notes or other borrowings that are attributable to the acquisition, construction or improvement of those assets.

Restricted net position - consists of net position with constraints placed on the use either by (1) external groups such as creditors, grantors, contributors or laws or regulations of other governments; or (2) law through constitutional provisions or enabling legislation.

Unrestricted net position - all other net position that does not meet the definition of "restricted" or "net investment in capital assets".

Net Position Restricted by Enabling Legislation

The government-wide statement of net position reports $4,941,877 of restricted net position, of which $4,843,224 is restricted by enabling legislation.

Net Position Flow Assumption

When a government funds outlays for a particular purpose from both restricted and unrestricted resources, a flow assumption must be made about the order in which the resources are considered to be applied. When both restricted and unrestricted net position are available, it is considered that restricted resources are used first, followed by the unrestricted resources.

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NOTE 9: FUND BALANCES


As prescribed by GASB Statement No. 54, governmental funds report fund balance in classifications based primarily on the extent to which the City is bound to honor constraints on the specific purposes for which amounts in the funds can be spent. As of June 30, 2018, fund balance for governmental funds is made up of the following:

Nonspendable fund balance - amounts that cannot be spent because they are either (a) not in spendable form, or (b) legally or contractually required to be maintained intact. The "not in spendable form" criterion includes items that are not expected to be converted to cash, for example: inventories and prepaid amounts.

Restricted fund balance - amounts with constraints placed on their use that are either (a) externally imposed by creditors, grantors, contributors, or laws or regulations of other governments; or (b) imposed by law through constitutional provisions or enabling legislation. Restrictions may effectively be changed or lifted only with the consent of resource providers.

Committed fund balance - amounts that can only be used for the specific purposes determined by formal action of the City's highest level of decision-making authority. The City Council is the highest level of decision making authority for the City that can, by adoption of an ordinance commit fund balance. Once adopted, the limitation imposed remains in place until a similar action is taken to remove or revise the limitation. The underlying action that imposed the limitation needs to occur no later than the close of the reporting period.

Assigned fund balance - amounts that are constrained by the City's intent to be used for specific purposes. The intent can be established at either the highest level of decision-making, or by a body or an official designated for that purpose.

Unassigned fund balance - the residual classification for the City's General fund that includes all amounts not contained in the other classifications. In other funds, the unassigned classification is used only if expenditures incurred for specific purposes exceed the amounts restricted, committed, or assigned to those purposes.

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NOTE 9: FUND BALANCES (CONTINUED)

The fund balances for all major and nonmajor governmental funds as of June 30, 2018, were distributed as follows:

Other Wastewater Govern-

Treatment mental General HOME Debt Funds Total

Restricted For: Customer deposits $ 529, 121 $ - $ $ $ 529,121 General plan maintenance fee 2,346 2,346

Information technology 86,657 86,657 HOME 37,711 37,711 Wastewater treatment debt 596,683 596,683 Law enforcement COPS 240 240 Water P&FCC charges 1,827 1,827

State trafficway 2,094,224 2,094,224 Electric P&FCC charges 261,414 261,414 CDBG housing rehabilitation 43 43 Wastewater P&FCC charges 284,881 284,881 Parks P&FCC charges 181,662 181,662

Former RDA low/mod housing 629,804 629,804 Riddle Road water bond 7,418 7,418 Davis-Grunsky Act loan 85 784 85 784

Subtotal 618 124 37 711 596 683 3 547 297 4 799 815

Assigned For: CalPERS debt 446,117 446,117 Accounts payable 951,592 951,592 Payroll 63,931 63,931

Due to other governments 338,648 338,648 Unavailable revenues 13,926 13,926

Retiree health - EE Contr. 37,160 37,160 Accrued interest 5,404 5,404 Developer deposits 14 460 14 460

Subtotal 1 871 238 1 871 238

Unassigned 986 668 - ( 33,463) 953 205

Total $3476030 $ 37 711 $ 596 683 $ 3 513 834 $ 7 624 258

Fund Balance Flow Assumption

When a government funds outlays for a particular purpose from both restricted and unrestricted resources (the total of committed, assigned, and unassigned fund balance), a flow assumption must be made about the order in which the resources are considered to be applied. When both restricted and unrestricted fund balance are available, it is considered that restricted fund balance is depleted before using any of the components of unrestricted fund balance. Further, when the components of unrestricted fund balance can be used for the same purpose, committed fund balance is depleted first, followed by assigned fund balance. Unassigned fund balance is applied last.

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NOTE 9: FUND BALANCES (CONTINUED)

Fund Balance Policy

The City Council adopted the City of Shasta Lake Fund Balance Policy in 2011. The policy establishes procedures for reporting fund balance classifications, establishes prudent reserve requirements, and establishes a hierarchy of fund balance expenditures. The policy also provides for a measure of financial protection for the City against unforseen circumstances and to comply with GASB Statement No. 54.

NOTE 10: PENSION PLAN

A. General Information about the Pension Plan

Plan Description

All qualified permanent and probationary employees are eligible to participate in the City's Miscellaneous Employee Pension Plan, a cost-sharing multiple employer defined benefit pension plan administered by the California Public Employees' Retirement System (CalPERS). Benefit provisions under the Plan are established by State statute and City resolution. CalPERS issues publicly available reports that include a full description of the pension plan regarding benefit provisions, assumptions and membership information that can be found on the CalPERS website.

Effective January 1, 2013, the City added retirement tiers for new employees as required under the Public Employee Pension Reform Act (PEPRA). New employees hired on or after January 1, 2013 will be subject to new, lower pension formulas, caps on pensionable income levels and new definitions of pensionable income. In addition, new employees will be required to contribute half of the total normal cost of the pension benefit unless impaired by an existing Memorandum of Understanding. The cumulative effect of these PEPRA changes will ultimately reduce the City's retirement costs.

Summary of Rate Tiers and Eligible Participants

Open for New Enrollment Miscellaneous PEPRA

Closed to New Enrollment Miscellaneous - First Level Miscellaneous - Second Level

Benefits Provided

Miscellaneous members hired on or after January 1, 2013

Miscellaneous members hired before January 1, 2013 Miscellaneous members hired before January 1, 2013

CalPERS provides service retirement and disability benefits, annual cost of living adjustments and death benefits to plan members, who must be public employees and beneficiaries. Benefits are based on years of credited service, equal to one year of full time employment. Members with five years of total service are eligible to retire at age 50 with statutorily reduced benefits. Retirement benefits are paid monthly for life. All members are eligible for non-duty disability benefits after 10 years of service. The death benefit is one of the following: the Basic Death Benefit, the 1957 Survivor Benefit, or the Optional Settlement 2W Death Benefit. The cost of living adjustments for the plan are applied as specified by the Public Employees' Retirement Law.

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NOTE 10: PENSION PLAN (CONTINUED)

A. General Information about the Pension Plan (Continued)

Benefits Provided (Continued)

Each Rate Tier's specific provisions and benefits in effect at June 30, 2018, are summarized as follows:

Miscellaneous - First Level Miscellaneous - Second Level

Miscellaneous PEPRA

Contributions

Benefit Formula

3.0%@60 2.0%@60

2.0%@62

Retirement Monthly Benefits as a % Age of Eligible Compensation

50-60 2.0%to 3.0% 50-60 2.0% to 3.0%

50-62 2.0%

Section 20814(c) of the California Public Employees' Retirement Law requires that the employer contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective on the July 1 following notice of a change in the rate. Funding contributions for all Plans are determined annually on an actuarial basis as of June 30 by CalPERS. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The City is required to contribute the difference between the actuarially determined rate and the contribution rate of employees.

Employer Employee Employer Paid Contribution Contribution Member

Rates Rates Contribution Rates

Miscellaneous - First Level 12.698% 8.000% 0.000% Miscellaneous - Second Level 7.653% 7.000% 0.000% Miscellaneous PEPRA 6.533% 6.250% 0.000%

For the year ended June 30, 2018, the contributions recognized as part of pension expense were as follows:

Contributions-Employee Contributions-Employer ( Paid by Employer )

Miscellaneous $ 673,517 $

B. Pension Liabilities, Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions

As of June 30, 2018, the City reported net pension liabilities for its proportionate share of the net pension liability as follows:

Miscellaneous

Total Net Pension Liability

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$

$

Proportionate Share of Net

Pension Liability

7 588 576

7 588 576



B. Pension Liabilities, Pension Expenses and Def erred Outflows/Inflows of Resources Related to Pensions (Continued)

The City's net pension liability for the Plan is measured as the proportionate share of the net pension liability. The net pension liability of the Plan is measured as of June 30, 2017, and the total pension liability for the Plan used to calculate the net pension liability was determined by an actuarial valuation as of June 30, 2016 rolled forward to June 30, 2017 using standard update procedures. The City's proportion of the net pension liability was based on a projection of the City's long-term share of contributions to the pension plan relative to the projected contributions of all participating employers, actuarially determined.

The City's proportionate share of the net pension liability as of June 30, 2016 and 2017 was as follows:

Miscellaneous

Proportion June 30 2016

0.07495%

Proportion June 30 2017

0.07652%

Change -Increase (Decrease)

0.00157%

For the year ended June 30, 2018, the City recognized pension expense of $1,599,736. At June 30, 2018, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Pension contributions subsequent to measurement date Changes of assumptions Differences between expected and actual experience Differences between projected and actual earnings on

pension plan investments

Difference between City contributions and proportionate share of contributions

Adjustment due to differences in proportions

Total

Deferred Outflows of Resources

$

$

709,797 914,728

9,703

303,920

27 770

1 965 918

Deferred Inflows of Resources

$ ( (

($

91,812) 154,784)

361,528)

608 124)

$709, 797 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2019. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized as pension expense as follows:

Year Ended June 30

2019 2020 2021

2022 Thereafter

Total

$

$

-60-

11,628 489,566 301,041

154,23 8)

64 7 997




Actuarial Assumptions

The total pension liabilities in the June 30, 2016 actuarial valuations were determined using the following actuarial assumptions:

Valuation Date Measurement Date Actuarial Cost Method Actuarial Assumptions:

Discount Rate Inflation Projected Salary Increase Mortality Post Retirement Benefit Increase

June 30, 2016 June 30, 2017 Entry-Age Normal Cost Method

7 .15 percent 2.75 percent Varies by entry-age and service Derived using CalPERS membership data for all funds Contract COLA up to 2.75 percent until Purchasing

Power Protection Allowance Floor on Purchasing Power applies, 2. 7 5percent thereafter

The underlying mortality assumptions and all other actuarial assumptions used in the June 3 0, 2016 valuation were based on the results of an actuarial experience study for the period 1997 to 2011 including updates to salary increase, mortality and retirement rates. Further details of the Experience Study can be found on the CalPERS website.

Change of Assumptions

In fiscal year 2017-18, the financial reporting discount rate was lowered from 7.65 percent to 7.15 percent.

Discount Rate

The discount rate used to measure the total pension liability was 7.15 percent for the Plan. To determine whether the municipal bond rate should be used in the calculation of a discount rate for each plan, CalPERS stress tested plans that would most likely result in a discount rate that would be different from the actuarially assumed discount rate. Based on the testing, none of the tested plans run out of assets. Therefore, the current 7.15 percent discount rate is adequate and the use of the municipal bond rate calculation is not necessary. The long term expected discount rate of 7 .15 percent is applied to all plans in the Public Employees Retirement Fund (PERF). The stress test results are presented in a detailed report called "GASB Crossover Testing Report" that can be obtained at the CalPERS website under the GASB 68 section.

The long-term expected rate of return on pension plan investments was determined using a building-block method in which best-estimate ranges of expected future real rates of return ( expected returns, net of pension plan investment expense and inflation) are developed for each major asset class.

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Discount Rate (Continued)

In determining the long-term expected rate of return, CalPERS took into account both short-term and longterm market return expectations as well as the expected pension fund cash flows. Using historical returns of all the funds' asset classes, expected compound returns were calculated over the short-term (first IO years) and the long-term (11 years) using a building-block approach. Using the expected nominal returns for both short-term and long-term, the present value of benefits was calculated for each fund. The expected rate of return was set by calculating the single equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated using both short-term and long-term returns. The expected rate of return was then set equivalent to the single equivalent rate calculated above and rounded down to the nearest one quarter of one percent.

The table below reflects the long-term expected real rate of return by asset class. The rate of return was calculated using the capital market assumptions applied to determine the discount rate and asset allocation. These rates of return are net of administrative expenses.

Asset Class

Global Equity Fixed Income Inflation Assets Private Equity

Real Estate Infrastructure and Forestland Liquidity

Total

(a) An expected inflation of 2.5% used for this period

(b) An expected inflation of 3. 0% used for this period

New Strategic Allocation

47.0% 19.0% 6.0%

12.0%

11.0% 3.0% 2.0%

100.0%

Real Return Real Return Years 1 - lO(a) Years 11 +(Q)

4.90% 5.38% 0.80% 2.27% 0.60% 1.39% 6.60% 6.63%

2.80% 5.21% 3.90% 5.36%

-0.40% -0.90%

Sensitivity of the Proportionate Share of the Net Pension Liability to Changes in the Discount Rate

The following presents the City's proportionate share of the net pension liability as of the measurement date, calculated using the discount rate for the Plan, as well as what the City's proportionate share of the net pension liability would be if it were calculated using a discount rate that is I-percentage point lower or !percentage point higher than the current rate:

1% Discount 1% Decrease Rate Increase 6.15% 7.15% 8.15%

Miscellaneous $ 12,018,429 $ 7,588,576 $ 3,919,706

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Pension Plan Fiduciary Net Position

Detailed information about the pension plan's fiduciary net position is available in the separately issued CalPERS financial reports.

NOTE 11: OTHER POSTEMPLOYMENT BENEFITS (OPEB)

A. Plan Description

Plan Description

The City's defined benefit OPEB plan (Plan) provides OPEB for all permanent full-time employees of the City. The Plan is an agent multiple-employer defined benefit OPEB plan administered by the California Public Employees' Retirement System (CalPERS). The City Council has the authority to establish and amend the benefit terms of the Plan.

Benefits Provided

The Plan provides retiree medical, dental and vision benefits for retirees and their dependents. Benefits are provided through CalPERS as permitted under the Public Employees' Medical and Hospital Care Act (PEMHCA). This coverage requires the employee to satisfy the requirements for retirement under CalPERS, which requires attainment of age 50 (age 52, if a miscellaneous employee new to PERS on or after January 1, 2013) with 5 years of State or public agency service or approved disability retirement.

Unless covered by a PEMHCA Vesting resolution, the employee must begin his or her retirement warrant within 120 days of terminating employment with the City to be eligible to continue medical coverage through the City and be entitled to the employer subsidy described below.

If an eligible employee is not already enrolled in the medical plan, he or she may enroll within 60 days of retirement or during any future open enrollment period. Coverage may be continued at the retiree's option for his or her lifetime. A surviving spouse and other eligible dependents may also continue coverage.

Retirees eligible for medical coverage can also elect dental and vision coverage at their own expense.

Employees Covered By Benefit Terms

At the OPEB liability measurement date of June 30, 2017, the following employees were covered by the benefit terms:

Inactive employees or beneficiaries currently receiving benefit payments Inactive employees entitled to but not yet receiving benefit payments Active employees

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24


NOTE 11: OTHER POSTEMPLOYMENT BENEFITS (OPEB) (CONTINUED)

A. Plan Description (Continued)

Contributions

The City Council has the authority to establish and amend the contribution requirements of the Plan.

As a condition of participation in the CalPERS medical program, the City is obligated to contribute toward the cost of retiree medical coverage for the retiree's lifetime or until coverage is discontinued. A spouse and other eligible dependents may also continue coverage and receive the City contribution.

The City currently maintains two different types of resolutions with CalPERS defining the level of the City's contribution. The resolutions apply to those eligible for coverages, based on the employee's hire date and/or irrevocable election:

Retirees hired before June 1, 2010 are covered by 'unequal contribution' resolutions, initially adopted in 1994. For active employees, the City contributes 100 percent of the premium for the employee and his or her dependents, subject to a maximum monthly amount. The following chart shows the maximum monthly amounts ("City Non-Vesting Caps") for active employee medical costs for 2018:

City Non-Vesting Caps

Group Ee Only Ee +Sp Ee +Fam

Management $ 691.78 $ 1,383.56 $ 1,798.63

Teamsters $ 691.78 $ 1,383.56 $ 1,798.63

IBEW $ 691.78 $ 1,383.56 $ 1,798.63

The City's contribution for retirees covered by these unequal contribution resolutions is determined by multiplying: (a) 5 percent times (b) the number of years the employer has been contracted with PEMHCA times ( c) the contribution the employer makes towards active employee health benefits, as described above

The maximum increase in the dollar amount of the monthly retiree contribution for anyone fiscal year is $100. In no event will the City's total subsidy for retiree medical expenses exceed the retiree's actual premium.

Employees hired prior to June 1, 2010 were given the option to have their benefits calculated using the vesting resolution ( described below) if they so desired. All current active employees hired prior to June 1, 2010 have chose that option.

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Contributions (Continued)

Retirees hired on or after June 1, 2010 are covered by PEMHCA 'Vesting' resolutions. Under these resolutions, the City's contribution toward retiree medical benefits is determined as the lesser of:

100 percent of the medical plan premiums for the retiree and his or her eligible dependents; and

The" 100/90" formula maximum benefits (caps) multiplied by the vesting percent.

The cap amounts vary by coverage level and are adjusted annually. For 2018, the caps are $725 (employee), $1,377 (employee plus one) and $1,766 (employee plus family).

The vested percent is based on the retiree's years of CalPERS membership, as shown in the table below, though a minimum of 5 years of City service is required to be vested.

Employees who retire on approved disability retirement are 100 percent vested regardless of service.

Years of Years of

Qualifying Qualifying Vested Service Vested Percent Service Percent

Less than 10 0% 15 75% 10 50% 16 80% 11 55% 17 85%

12 60% 18 90% 13 65% 19 95% 14 70% 20 or more 100%

Note: Employees covered by the PEMHCA vesting resolution who complete at least 20 years of service with the City are entitled to these subsidized medical benefits from the City once they commence their CalPERS retirement warrant, even if they terminate employment prior to reaching age 50.

Current premium rates: The 2018 CalPERS monthly medical plan rates in the Other Northern California area rate group are shown in the table below, though other regional rates were also applied. The CalPERS administration fee is assumed to be expensed each year and has not been projected as an OPEB liability in this valuation.

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Contributions (Continued)

Other Northern California Counties 2018 Health Plan Rates

Actives and Pre-Med Retirees Medicare Eligible Retirees

Plan Ee Only Ee & 1 Ee&2+ Ee Only Ee & 1 Ee&2+

PERS Choice PPO $ 813.96 $ 1,627.92 $2,116.30 $ 345.97 $ 691.94 $ 1,180.32

PERS Select PPO $ 691.78 $ 1,383.56 $ 1,798.63 $ 345.97 $ 691.94 $ 1,107.01

PERS Care PPO $ 866.93 $ 1,733.86 $ 2,254.02 $ 382.30 $ 764.60 $ 1,284.76

B. Net OPEB Liability

The City's net OPEB liability was measured as of June 30, 2017, and the total OPEB liability used to calculate the net OPEB liability was determined by an actuarial valuation as of that date.

Actuarial Assumptions

The total OPEB liability in the June 30, 2017 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement, unless otherwise specified:

Valuation Date Funding Method Asset Valuation Method Long Term Return on Assets Discount Rates Participants Valued

Salary Increase

Assumed Wage Inflation General Inflation Rate Healthcare cost trend rates

Mortality rates

June 30, 2017 Entry Age Normal Cost, level of percent of pay Market value of assets 6.73 percent as of June 30, 2017 and June 30, 2016 6.73 percent as of June 30, 2017 and June 30, 2016 Only current active employees and retired participants and covered

dependents are valued. No future entrants are considered in this valuation.

3 .25 percent per year; since benefits do not depend on pay, this is used only to allocate the cost of benefits between service years

3. 0 percent per year; used as a component of assumed salary increases 2.75 percent per year 7.5 percent for 2019, decreasing 0.5 percent per year to an ultimate rate

of 5. 0 percent for 2025 and later years CalPERS published rates, adjusted to back out 20 years of Scale BB to

central year 2008, then projected

The demographic actuarial assumptions used in the June 30, 2017 valuation are based on the 2014 experience study of the California Public Employees Retirement System using data from 1997 to 2011, except for (a) point retirement dates used for 3 employees and (b) a different basis used to project future mortality improvements.

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B. Net OPEB Liability (Continued)

Discount Rate

The discount rate used to measure the total OPEB liability was 6. 73 percent. The projection of cash flows used to determine the discount rate assumed that City contributions will be made at rates equal to the actuarially determined contribution rates. Based on those assumptions, the OPEB plan's fiduciary net position was projected to be available to make all projected OPEB payments for current active and inactive employees. Therefore, the long-term expected rate of return on OPEB plan investments was applied to all periods of projected benefit payments to determine the total OPEB liability.

C. Changes in the Net OPEB Liability

The table below shows the changes in the total OPEB liability, the Plan Fiduciary Net Position (i.e. Fair value of the Plan assets), and the net OPEB liability during the measurement period ending on June 30, 2017 for the City's proportionate share.

Balances at June 30, 2017

Changes for the year: Service cost Interest Difference between expected and actual experience Change of assumptions Contributions - employer Net investment income Benefit payments Administrative expense

Net Changes

Balances at June 30, 2018

Total OPEB Liability

(a)

$ 8 283 687

291,008 566,870

1,046,313) 244,005

303,321)

247 751)

$ 8 035 936

Sensitivity of the Net OPEB Liability to Changes in the Discount Rate

Increases (Decreases) Plan

Fiduciary NetOPEB Net Position Liability

(b) (a) - (b)

$ 5 978 934 $ 2 304 753

291,008 566,870

1,046,313) 244,005

473,437 473,437) 435,349 435,349)

303,321) 3, 167) 3 167

602 298 850 049)

$6581232 $ 1454704

The following presents the net OPEB liability of the City, as well as what the City's net OPEB liability would be if it were calculated using a discount rate that is I-percentage-point lower or I-percentage-point higher than the current discount rate:

1% Discount 1% Decrease Rate Increase

(5.73%) (6.73%) (7.73%)

Net OPEB liability $ 2,532,180 $ 1,454,704 $ 571,221

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C. Changes in the Net OPEB Liability (Continued)

Sensitivity of the Net OPEB Liability to Changes in the Healthcare Cost Trend Rates

The following presents the net OPEB liability of the City, as well as what the City's net OPEB liability would be if it were calculated using healthcare cost trend rates that are I-percentage-point lower or !percentage-point higher than the current healthcare cost trend rates:

Net OPEB liability

OPEB Plan Fiduciary Net Position

1% Decrease

(6.5 % decreasing to 4.0%)

$ 479,654

Healthcare Cost Trend Rates (7.5%

decreasing to 5.0%)

$ 1,454,704

1% Increase

(8.5% decreasing to 6.0%)

$ 2,745,398

Detailed information about the OPEB plan's fiduciary net position is available in the separately issued CalPERS financial report.

D. OPEB Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB

For the year ended June 30, 2018, the City recognized OPEB expense of $319,819. At June 30, 2018, the City reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources:

Deferred Outflows Deferred Inflows

of Resources of Resources

Differences between expected and actual experience $ ($ 879,703) Changes of assumptions 205,151 Net differences between projected and actual earnings

on OPEB plan investments 21,879) Contributions made subsequent to the measurement date 472 498

Total $ 677 649 ($ 901,582)

Amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized in OPEB expense as follows:

Year Ending June 30 Amount

2019 ($ 133,226) 2020 ( 133,226) 2021 ( 133,226) 2022 ( 133,225) 2023 ( 127,756)

Thereafter ( 35,772)

Total ($ 696 431)

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D. OPEB Expense and Deferred Outflows of Resources and Def erred Inflows of Resources Related to OPEB (Continued)

Payable to the OPEB Plan

At June 30, 2018, the City reported a payable of $0 for the outstanding amount of contributions to the Plan required for the year ended June 30, 2018.

NOTE 12: RISK MANAGEMENT

The City is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; errors and omissions; injuries to employees; and natural disaster. The City maintains insurance coverage from a commercial carrier for its medical, short-term and long-term disability, and dental and vision plan. There is no claims liability to be reported based on the requirements of GASB Statement No. 10, which requires that a liability for claims be reported if information prior to the issuance of the financial statements indicates that it is probable that a liability has been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated.

There are no significant reductions in insurance coverage from prior years and there have been no settlements exceeding the insurance coverages for each of the past three fiscal years.

The City is a member of the Small Cities Organized Risk Effort joint powers authority (SCORE), which provides the City with liability coverage with limits of $40,000,000 for each occurrence, workers' compensation coverage with limits to $4,850,000 for each occurrence and property coverage for replacement. SCORE provides these limits and coverage by participating in the California Joint Powers Risk Management Authority (CJPRMA) for excess liability and Local City Workers' Compensation Excess Liability joint powers authority (LA WCX) for excess workers' compensation. Property coverage is obtained by a group purchase from insurance companies with the City's deductible being $10,000 each claim for vehicles and property.

NOTE 13: JOINT VENTURES

A.NCPA

Northern California Power Agency

The City is a member of Northern California Power Agency (NCP A), a joint powers agency which operates under a joint powers agreement among sixteen public agencies. NCPA Commission is the agency's governing board with each member appointing one Commission Representative. The purpose of NCPA is to provide its members cost effective wholesale power, energy-related services, and advocacy on behalf of public power consumers through joint action. NCPA provides services to its members through a set of programs, such as the Legislative & Regulatory Program and Power Management Program. NCP A owns generation projects and its Generation Services division operates and maintains these resources on behalf of participating members. Member are only obligated for agency costs related to programs and services expressly selected by members. Members are empowered to opt in to programs and projects and agree to fund a pro rata share allocation associated with selected programs and projects. As a member of NCP A, the City participates in the Legislative & Regulatory Affairs Program.

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NOTE 13: JOINT VENTURES (CONTINUED)

A. NCPA (Continued)

Northern California Power Agency (Continued)

NCP A's Legislative & Regulatory Affairs Program is primarily focused on advocacy efforts at Federal and State levels dealing with matters of legislation and regulation that affect electric ratepayers. NCP A engages in policy discussions in forums that include but are not limited to Congress, California State Legislature, Federal Energy Regulatory Commission, California Energy Commission, and California Air Resources Board. The Legislative & Regulatory Affairs Program allows NCP A members to interact with key policy makers with a single coordinated voice. The L&R team also assists NCPA members in addressing numerous energy and environmental reporting obligations and developing capabilities in marketing customer-oriented energy-savmg programs.

B. Balancing Authority of Northern California

The Balancing Authority of Northern California (BANC) is a joint powers agency consisting of the Sacramento Municipal Utility District (SMUD), Modesto Irrigation District (MID), City of Roseville, City of Redding (REU) and the City of Shasta Lake as its founding members. On June 26, 2013, BANC members voted to accept Trinity Public Utilities District (TPUD) as a new member. BANC assumed the balancing authority responsibilities from SMUD on May 1, 2011, and is responsible for the matching of generation to load and coordinating system operations with neighboring Balancing Authorities. The resources within the BANC footprint include but are not limited to the Central Valley project (CVP) generation, owned by the Bureau of Reclamation; the CVP transmission network, owned by the Western Area Power Administration (WAPA); and the 500-kV California Oregon Transmission Project (COTP), which is jointly owned by several parties including WAPA and the Transmission Agency of Northern California (TANC). BANC members contract for about 40 percent of the CVP hydroelectric resource.

BANC offers its members cost savings and greater influence through joint action. BANC is engaged in several external policy forums focused on balancing authority matters and allows its members to speak with a unified voice. BANC's structure provides flexibility to jointly develop and expand operational capabilities at significant cost savings relative to individual development costs. BANC is governed by its members and clarifies roles and responsibilities of the members regarding reliability standard compliance.

The members' rights and expense-sharing are based on the participation percentages in most BANC activities. BANC members' participation percentages are based on each member's retail sales, which are approximately 68.8 percent, 16.5 percent, 7.8 percent, 5.0 percent, 1.2 percent and 0.7 percent for SMUD, MID, Roseville, REU, Shasta Lake and TPUD respectively. These participation percentages can be updated as the need reqmres.

Complete separate financial statements for each of the joint ventures in which the City participates may be obtained from the City of Shasta Lake Finance Department, 4477 Main Street, Shasta Lake, California 96019.

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NOTE 14: OTHER INFORMATION

A. Commitments and Contingencies

The City is constructing a new city hall and community center. The total estimated cost to complete the construction is $6,896,396. At June 30, 2018, total payments on the contracts were $6, 725,832.

The City is constructing a facility upgrade for the Wastewater Treatment Facility. The total estimated cost to complete the construction is $21,000,000. At June 30, 2018, total payments on the contracts were $4,363,463.

The City is a defendant in various lawsuits. Management and Counsel believe the suits will not have a material adverse effect on the City's financial condition.

B. Successor Agency Trust for Assets of Former Redevelopment Agency

In accordance with Assembly Bill 1X26 and Assembly Bill 1434, all redevelopment agencies in the State of California were dissolved and ceased to operate as legal entities as of February 1, 2012. The activity of the Successor Agency Trust for Assets of Former Redevelopment Agency (Successor Agency) is recorded in a private purpose trust.

The following is a summary of changes in long-term liabilities for the year needed June 30, 2018:

Balance Additions/ Tnie of Indebtedness July 1, 2017 Adjustments Retirements

Tax Allocation Bonds $ 3 365 000 $ ($ 280,000)

Total $ 3 365 000 $ ($ 280,000)

Individual issues of debt payable outstanding at June 30, 2018, are as follows:

Tax Allocation Bonds: Tax Allocation Revenue Refunding Bonds, Series 2014, issued by the Shasta Lake Public Financing Authority in the amount of $3,900,000 and payable in annual installments of $265,000 to $400,000, with an interest rate of 2.00% to 5.00% and maturity on December 1, 2026. The bonds were used to refund the 2006 Tax Allocation Revenue Bonds.

Total Tax Allocation Bonds

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Balance June 30 2018

$ 3 085 000

$ 3 085 000

Amounts Due Within

One Year

$ 285 000

$ 285 000

$ 3 085 000

$ 3 085 000


NOTE 14: OTHER INFORMATION (CONTINUED)

B. Successor Agency Trust for Assets of Former Redevelopment Agency (Continued)

Following is a schedule of debt payment requirements to maturity for long-term debt:

Tax Allocation Bonds Year Ended

June 30 Principal Interest

2019 $ 285,000 $ 119,044 $ 2020 300,000 108,056 2021 310,000 95,856 2022 325,000 81,531 2023 345,000 64,781

2024-2027 1 520 000 105 484

Total $ 3 085 000 $ 574 752 $

c. Subsequent Events

Total

404,044 408,056 405,856 406,531 409,781

1 625 484

3 659 752

The City is financing the Wastewater Treatment Facility Upgrade Project through the State Water Resources Control Board from the sale of obligations in the amount of $15,000,000, with interest of 1.7 percent and payable over 30 years. A portion of the project is being funded by a $6,000,000 grant from the State Water Board.

On the evening of July 26, 2018, the Carr Fire advanced north across the Sacramento River and destroyed approximately 2 miles of the City of Shasta Lake's 115, 000-volt transmission power line that runs between Keswick and Knauf substations. Costs to repair the damaged line is estimated to be in the range of $1,060,000 and repairs are expected to be completed by mid-November. The City has filed claims with Federal and State emergency agencies and up to 93 percent of costs incurred in the repair of the Keswick transmission line are expected to be reimbursed. As such, the liability to Shasta Lake's electric utility is minimal.

Management has evaluated events subsequent to June 30, 2018 through December 10, 2018, the date on which the financial statements were available for issuance and has determined no other subsequent events requiring disclosure have occurred.

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Required Supplementary Information (Unaudited)

CITY OF SHASTA LAKE Required Supplementary Information

City Pension Plan Schedule of Proportionate Share of the Net Pension Liability

For the Year Ended June 30, 2018 Last 10 Years*

Measurement Date 2013/14 2014/15 2015/16 Miscellaneous Plan

Proportion of the net pension liability 0.07059% 0.06990% 0.07495% Proportionate share of the net pension liability $ 4,392,836 $ 4,798,851 $ 6,485,096 Covered employee payroll 3,288,389 3,191,503 3,310,634 Proportionate share of the net pension liability as a percentage

of covered employee payroll 133.59% 150.36% 195.89% Plan fiduciary net position as a percentage of the total pension

liability 83.80% 82.80% 78.07%

* The City implemented GASB 68 for fiscal year June 30, 2015, therefore only four years are shown.

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2016/17

0.07652% $ 7,588,576

3,655,228

207.61%

76.44%

Fiscal Year Miscellaneous Plan


City Pension Plan Schedule of Contributions

For the Year Ended June 30, 2018 Last 10 Years*

2014/15 2015/16

Contractually required contribution (actuarially determined) $ 539,884 $ 373,644 Contributions in relation to the actuarially determined

contributions (2,502,238) (604,944)

Contribution deficiency (excess) $ (1,962,354) $ (231,300)

Covered employee payroll $ 3,191,503 $ 3,3 I0,634 Contributions as a percentage of covered employee payroll 78.40% 18.27%

* The City implemented GASB 68 for fiscal year June 30, 2015, therefore only four years are shown.

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2016/17 2017/18

$ 405,356 $ 414,691

(670,799) (723,724)

$ (265,443) $ (309,033)

$ 3,655,228 $ 3,897,624 18.35% 18.57%


Notes to City Pension Plan For the Year Ended June 30, 2018

NOTE 1: SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION LIABILITY

Changes of assumptions: In 2017-18, the accounting discount rate was reduced from 7.65 percent to 7.15 percent. In 2016-17, there were no changes. In 2015-16, amounts reported reflect an adjustment of the discount rate from 7.5 percent (net of administrative expense) to 7.65 percent (without a reduction for pension plan administrative expense).

NOTE 2: SCHEDULE OF CONTRIBUTIONS

Methods and assumptions used to determine the contribution rates were as follows:

Valuation Date Actuarial cost method Amortization method/period Remaining amortization period Asset valuation method Inflation Salary increases Investment rate of return

Retirement age

June 30, 2015 Entry-Age Normal For details, see June 30, 2015 Funding Valuation Report 14 years Market value 2.75% compounded annually Varies by entry-age and service 7. 50%, net of pension plan investment expense and administrative

expenses, including inflation The probability of retirement are based on the 2014 CalPERS

Experience Study for the period of 1997 to 2011

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City OPEB Plan Schedule of Changes in the Net OPEB Liability and Related Ratios

For the Year Ended June 30, 2018 Last 10 Year Fiscal Years*

Total OPEB Liability Service cost Interest Differences between expected and actual experience Changes of assumptions Benefit payments

Net Change in Total OPEB Liability

Total OPEB Liability - Beginning

Total OPEB Liability - Ending (a)

Plan Fiduciary Net Position Contributions - employer Net investment income Benefit payments Administrative expenses

Net Change in Plan Fiduciary Net Position

Plan Fiduciary Net Position - Beginning

Plan Fiduciary Net Position - Ending (b)

Net OPEB Liability - Ending (a) - (b)

Plan fiduciary net position as a percentage of the total OPEB liability Covered employee payroll Net OPEB liability as a percentage of covered employee payroll

* The City implemented GASB 75 for fiscal year June 30, 2018, therefore only one year is shown.

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2017/18

$ 291,008 566,870

(1,046,313) 244,005

(303,321)

(247,751)

8 283 687

$ 8 035 936

$ 473,437 435,349

(303,321) (3,167)

602,298

5 978 934

$ 6,581,232

$ 1 454 704

81.90% $ 3,655,228

39.80%

Actuarially determined contribution


City OPEB Plan Schedule of Contributions

For the Year Ended June 30, 2018 Last 10 Fiscal Years*

Contributions in relation to the actuarially determined contribution

Contribution deficiency (excess)

Covered employee payroll Contributions as a percentage of covered employee payroll

* The City implemented GASB 75 for fiscal year June 30, 2018, therefore only one year is shown.

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2017/18

$ 505,772 (472,498)

$ 33 274

$ 3,897,624 12.12%


City OPEB Plan Notes to City OPEB Plan


NOTE 1: SCHEDULE OF CHANGES IN THE NET OPEB LIABILITY AND RELATED RATIOS

Changes of Assumptions

Mortality improvement

Healthcare trend

Future rates of mortality were projected to improve on a generational basis using MacLeod Watts Scale 2017, rather than Bickmore Scale 2014; this new scale generally results in somewhat lower improvement (i.e., shorter retiree life expectancy).

Medical plan premiums are assumed to increase at somewhat higher rates than assumed in the prior valuation, with the ultimate trend of 5.0 percent per year, rather than 4.5 percent per year assumed in the prior valuation.

Excise tax on high cost coverage We reflected the two-year delay in the effective date of the excise tax attributable to retirees for high cost healthcare plans under the Affordable Care Act. We also recognized a change in the law, reducing the effective tax rate to 40 percent for all plans.

NOTE 2: SCHEDULE OF CONTRIBUTIONS

The actuarially determined contribution (ADC) developed for the City's fiscal year ending June 30, 2018 was determined and presented in the June 30, 2017 Actuarial Valuation report.

Methods and Assumptions Used to Determine Contributions:

Actuarial cost method Amortization method

Amortization period Asset valuation method Inflation Healthcare cost trend rates

Salary increases

Investment rate of return

Retirement age

Mortality

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Entry Age Normal Cost Level percent of pay

Open 28-year period Market value of assets 2.75% per year 8.0% initial, then 0.5 percent decrease per year to 5.0%

in 2025 and later years. 3.25% per year; since benefits do not depend on pay,

this is used only to allocate the cost of benefits between

service years. 6.73%, net of plan investment expenses and inflation

Age 50 (age 52, if a miscellaneous employee new to PERS on or after January 1, 2013)

CalPERS 2014 study, adjusted to back out 20 years of Scale BB to central year 2008.

REVENUES Taxes and assessments Licenses and permits Fines and forfeitures Use of money and property Intergovernmental Charges for services Other revenues

Total Revenues


General government Public safety Public ways and facilities Planning Culture and recreation Community development

Debt service: Principal Interest

Capital outlay

Total Expenditures


Budgetary Comparison Schedule General Fund


Original Final Budget Budget

$ 2,463,205 $ 2,830,635 118,900 186,400 20,050 14,550 15,000 32,500

823,500 823,500 3,746,402 3,802,902

25 300 16 947

7 212 357 7 707 434

2,710,987 2,767,978 3,231,008 3,293,180

54,080 52,997 748,652 769,794 308,928 309,128

19,800

68,310 68,310 12,000 12,000

175 000 6 970 768

7 308 965 14 263 955

Excess of Revenues Over (Under) Expenditures (96,608) ( 6,556,521)

OTHER FINANCING SOURCES (USES) Proceeds from debt Transfers in Transfers out

Total Other Financing Sources (Uses)

Net Change in Fund Balances

Fund Balances - Beginning

Fund Balances - Ending

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2,500,000 36,000

(33,700) (46,200)

(33,700) 2 489 800

(130,308) (4,066,721)

6 ll2 501 6 ll2 501

$ 5,982,193 $ 2 045 780

Variance with Final Budget

Actual Positive Amounts (Negative)

$ 3,0ll,001 $ 180,366 188,582 2,182

8,779 (5,771) 6,873 (25,627)

871,379 47,879 3,781,525 (21,377)

10 788 (6,159)

7 878 927 171493

2,505,638 262,340 3,ll6,529 176,651

47,025 5,972 656,802 112,992 309,626 (498)

6,930 12,870

68,310 43,536 (31,536)

6 424 840 545 928

13 110 926 1 153 029

(5,231,999) 1,324,522

2,500,000 95,528 59,528

46 200

2 595 528 105 728

(2,636,471) 1,430,250

6 ll2 501

$ 3 476 030 $ 1,430,250

REVENUES Use of money and property Intergovernmental Other revenue

Total Revenues


Community development

Total Expenditures

CITY OF SHASTA LAKE Budgetary Comparison Schedule

HOME - Major Special Revenue Fund For the Year Ended June 30, 2018


$ $ 40,500 40,500 48 000 65 000

88 500 105,500

88 500 641 255

88 500 641 255

Net Change in Fund Balances (535,755)

Fund Balances - Beginning 4,441,069 4,441,069

Prior period adjustment (4,331,213) (4,331,213)

Fund Balances - Beginning, Restated 109 856 109 856

Fund Balances - Ending $ 109 856 $ (425,899)

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$ 7,040 $ 7,040 (40,500) (65,000)

7,040 (98,460)

79 185 562 070

79 185 562 070

(72,145) 463,610

4,441,069

(4,331,213)

10 9 856

$ 3 7 711 $ 463 610


Notes to Budgetary Comparison Schedules For the Year Ended June 30, 2018

NOTE 1: BUDGETARY BASIS OF ACCOUNTING

Formal budgetary integration is employed as a management control device during the year for the General fund, Special Revenue funds, and Debt Service funds and is controlled at the department level for the City. Budgets are adopted on a basis consistent with generally accepted accounting principles (GAAP). Accordingly, actual revenues and expenditures can be compared with related budgeted amounts without any significant adjustments.

The following procedures are performed by the City in establishing the budgetary data reflected in the financial statements:

(1) The two year operating budget of the City is adopted by the City of Shasta Lake City Council prior to July I on even numbered years, primarily on the cash basis.

(2) The City manager is authorized to transfer budget amounts between departments within any fund; however, any revisions that alter the total expenditures of any fund requires City Council resolution.

The City does not use encumbrance accounting under which purchase orders, contracts, and other commitments for the expenditure of monies are recorded in order to reserve that portion of the applicable appropriation.

NOTE 2: EXPENDITURES IN EXCESS OF APPROPRIATIONS

The following nonmajor special revenues funds had expenditures which exceeded appropriations as follows:

Electric P & FCC Charges CDBG Project Fund

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$ 24,416 8,517

Combining and Individual Fund Statements and Schedules

ASSETS

CITY OF SHASTA LAKE Combining Balance Sheet

Nonmajor Governmental Funds June 30, 2018

Special Revenue

Funds

Cash and investments $ 2,850,596 Receivables:

Taxes 46,083 Intergovernmental 37,514 Assessments

Loans receivable 837,682 Land held for resale 594 927

Total Assets $ 4 366 802

LIABILITIES Accounts payable $ 10,020 Interest payable Due to other governments 19,606 Due to other funds 31,000 U neamed revenues 10 347

Total Liabilities 70 973

DEFERRED INFLOWS OF RESOURCES Unavailable revenues 37,515 Deferred housing loan payments 837 682

Total Deferred Inflows of Resources 875 197

FUND BALANCES Restricted 3,454,095 Unassigned (33,463)

Total Fund Balances 3 420 632

Total Liabilities, Deferred Inflows of Resources and Fund Balances $ 4 366 802

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Debt Sencice Funds Totals

$ 93,864 $ 2,944,460

309 46,392 37,514

32,000 32,000 837,682

594 927

$ 126 173 $ 4 492 975

$ $ 10,020 971 971

19,606 31,000

10 347

971 71 944

32,000 69,515 837 682

32 000 907 197

93,202 3,547,297 (33,463)

93 202 3 513 834

$ 126 173 $ 4 492 975

CITY OF SHASTA LAKE Combining Statement of Revenues, Expenditures and

Changes in Fund Balances Nonmajor Governmental Funds


Special Revenue

Funds REVENUES

Taxes and assessments $ 298,144 Use of money and property 53,858 Intergovernmental 747,030 Charges for services 546 143

Total Revenues 1645175


General government 40,922 Public safety 100,000 Public ways and facilities 866,460 Community development 234,587

Debt service: Principal Interest Capital outlay 17 683

Total Expenditures 1 259 652

Excess of Revenues Over (Under) Expenditures 385 523

OTHER FINANCING SOURCES (USES) Transfers out (424,172)

Total Other Financing Sources (Uses) (424,172)

Net Change in Fund Balances (38,649)

Fund Balances - Beginning 4,023,562

Prior period adjustment (564,281)

Fund Balances - Beginning, Restated 3 459 281

Fund Balances - Ending $ 3 420 632

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Debt Service Funds Totals

$ 15,291 $ 313,435 1,175 55,033

22 747,052 546 143

16 488 1 661 663

40,922 100,000 866,460 234,587

11,099 11,099 4,729 4,729

17 683

15 828 1275480

660 386 183

(424,172)

(424,172)

660 (37,989)

92,542 4,116,104

(564,281)

92 542 3 551 823

$ 93 202 $ 3 513 834


• Special Revenue Funds

CITY OF SHASTA LAKE Nonmajor Special Revenue Funds

Special Revenue funds are used to account for and report the proceeds of specific revenues that are restricted or committed to expenditure for specific purposes other than debt service or capital projects. Nonmajor special revenue funds used by the City are listed below:

Law Enforcement Fund (COPS)

The Law Enforcement fund (COPS) accounts for the revenue and expenditures associated with the Community Oriented Policing Services funds received through the State of California.

Water P&FCC Charges

The Water P & FCC Charges fund accounts for the revenue and expenditures associated with plant and facility connections charges for capital replacement or improvements in the City's water utility.

State Trafficway

The State Trafficway fund is used to account for monies received through the Transportation Development Act (TDA) tax and Surface Transportation Program (STP) funding. The financing from State and Federal programs helps to build and maintain the City streets.

Electric P&FCC Charges

The Electric P & FCC Charges fund accounts for the revenue and expenditures associated with plant and facilities connections charges for capital replacement or improvements in the City's electric utility.

CDBG Project Fund

The CDBG Project fund accounts for the revenue and expenditures associated with the Community Development Block Grant program funded by the federal government and administered by the California Department of Housing and Community Development.

CDBG Housing Rehabilitation

The CDBG Housing Rehabilitation fund accounts for the revenue and expenditures associated with housing rehabilitation through the Community Development Block Grant program and Cal Home Program provided by the State and Federal government and administered by the California Department of Housing and Community Development.

Wastewater P&FCC Charges

The Wastewater P & FCC Charges fund accounts for the revenue and expenditures associated with plant and facility connections charges for capital replacement or improvements in the City's wastewater utility.

Parks P&FCC Charges

The Parks P & FCC Charges fund accounts for the revenue and expenditures associated with plant and facility connections charges for capital replacement or improvements in the City's parks system.

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Housing Authority

CITY OF SHASTA LAKE Nonmajor Special Revenue Funds

The Housing Authority accounts for the revenues and expenditures associated with administering housing programs.

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Nonmajor Special Revenue Funds June 30, 2018

Law Water Enforcement P&FCC Fund (COPS) Charges

ASSETS Cash and investments $ 27,254 $ 1,827 Receivables:

Taxes Intergovernmental

Loans receivable Land held for resale

Total Assets $ 27 254 $ 1 827

LIABILITIES Accounts payable $ $ Due to other governments 16,667 Due to other funds U neamed revenues 10 347


DEFERRED INFLOWS OF RESOURCES Unavailable revenues Deferred housing loan payments


FUND BALANCES (DEFICIT) Restricted 240 1,827 Unassigned

Total Fund Balances (Deficit) 240 1 827

Total Liabilities, Deferred Inflows of Resources and Fund Balances $ 27 254 $ 1 827

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Electric State P&FCC

Trafficway Charges

$ 2,057,927 $ 261,414

46,083 8,258

$ 2,112,268 $ 261 414

$ 9,786 $

9 786

8,258

8 258

2,094,224 261,414

2 094 224 261 414

$ 2,112,268 $ 261 414

CDBG CDBG Wastewater Parks Project Housing P&FCC P&FCC Housing Fund Rehabilitation Charges Charges Authority Totals

$ 711 $ 43 $ 284,881 $ 181,662 $ 34,877 $ 2,850,596

46,083 29,256 37,514

187,090 144,773 505,819 837,682 594 927 594 927

$ 217057 $ 144 816 $ 284 881 $ 181 662 $ 1,135,623 $ 4 366 802

$ 234 $ $ $ $ $ 10,020 2,939 19,606

31,000 31,000 10 347

34 173 70 973

29,257 37,515 187 090 144 773 505 819 837 682

216 347 144 773 505 819 875 197

43 284,881 181,662 629,804 3,454,095 (33,463) (33,463)

(33,463) 43 284 881 181 662 629 804 3 420 632

$ 217057 $ 144 816 $ 284 881 $ 181 662 $ 1,135,623 $ 4 366 802


Changes in Fund Balances Nonmajor Special Revenue Funds For the Year Ended June 30, 2018

REVENUES Taxes and assessments Use of money and property Intergovernmental Charges for services

Total Revenues


General government Public safety Public ways and facilities Community development Capital outlay

Total Expenditures

Excess of Revenues Over (Under) Expenditures

OTHER FINANCING SOURCES (USES) Transfers out

Total Other Financing Sources (Uses)


Fund Balances (Deficit) - Beginning

Prior period adjustment

Fund Balances (Deficit) - Beginning, Restated

Law Water Enforcement P&FCC Fund {COPS) Charges

$ $ 1,086

100,000 165 937

100 000 167 023

3,226 100,000

8,303

100 000 11 529

155 494

(160,000)

(160,000)

(4,506)

240 6,333

Electric State P&FCC

Trafficway Charges

$ 298,144 $ 26,090 3,378

535,873 43 148 36 392

903 255 39 770

25,091

849,854

17 683

867 537 25 091

35 718 14 679

35,718 14,679

2,058,506 246,735

Fund Balances (Deficit) - Ending $ 240 $ 1 827 $ 2 09 :!:..,ll1_ $ 261 414

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CDBG CDBG Wastewater Parks Project Housing P&FCC P&FCC Housing Fund Rehabilitation Charges Charges Authority Totals

$ $ $ $ $ $ 298,144 814 5,029 2,536 14,925 53,858

111,157 747,030 247 037 53 629 546 143

111 157 814 252 066 56 165 14 925 1645175

4,538 1,940 6,127 40,922 100,000

8,303 866,460 119,867 114,720 234,587

17 683

119 867 12 841 1 940 120 847 1259652

(8,710) 814 239 225 54 225 (105,922) 385 523

(1,800) (226,372) (36,000) (424,172)

(1,800) (226,372) (36,000) (424,172)

(8,710) (986) 12 853 18 225 (105,922) (38,649)

(24,753) 145,777 272,028 163,437 1,155,259 4,023,562

(144,748) (419,533) (564,281)

(24,753) 1 029 272 028 163 437 735 726 3 459 281

$ (33,463) $ 43 $ 284 881 $ 181 662 $ 629 804 $ 3,420,632


Law Enforcement Fund (COPS) - Nonmajor Special Revenue Fund For the Year Ended June 30, 2018

Original Final Actual Budget Budget Amounts

REVENUES Intergovernmental $ 100 000 $ 100 000 $ 100 000

Total Revenues 100 000 100 000 100 000


Public safety 100 000 100 000 100 000


Positive (Negative)

$

Total

Expenditures 100 000 100 000 100 000 - Net Change in

Fund Balances

Fund Balances - Beginning 240 240 240

Fund Balances - Ending $ 240 $ 240 $ 240 $

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Water P&FCC Charges - Nonmajor Special Revenue Fund For the Year Ended June 30, 2018


REVENUES Use of money and property $ 150 $ 150 $ 1,086 Charges for services 75 000 151 000 165 937

Total Revenues 75 150 151 150 167 023


General government 3,227 3,227 3,226 Public ways and facilities 22,266 8,303 Capital outlay 25 000

Total Expenditures 3 227 50 493 11 529

Excess of Revenues Over (Under) Expenditures 71 923 100 657 155 494

OTHER FINANCING SOURCES (USES) Transfers out (50,000) (100,000) (160,000)

Total Other Financing Sources (Uses) (50,000) (100,000) (160,000)

Net Change in Fund Balances 21,923 657 (4,506)

Fund Balances - Beginning 6 333 6 333 6 333

Fund Balances - Ending $ 28 256 $ 6 990 $ 1 827

-89-


Positive (Negative)

$ 936 14 937

15 873

13,963 25 000

38 964

54 837

(60,000)

(60,000)

(5,163)

$ (5,163)

REVENUES Taxes and assessments Use of money and property Intergovernmental Charges for services

Total Revenues


Public ways and facilities Capital outlay

Total Expenditures


State Trafficway - Nonmajor Special Revenue Fund For the Year Ended June 30, 2018


$ 393,965 $ 282,315 5,500 5,500

525,000 525,000 15 000 30 000

939 465 842 815

972,848 946,148 872 576

972 848 1 818 724

Net Change in Fund Balances (33,383) (975,909)


Fund Balances - Ending $ 2,025,123 $ 1 082 597

-90-



$ 298,144 $ 15,829 26,090 20,590

535,873 10,873 43 148 13 148

903 255 60 440

849,854 96,294 17 683 854 893

867 537 951 187

35,718 l,Oll,627

2 058 506

$ 2,094,224 $ 1 Oll 627


Electric P&FCC Charges - Nonmajor Special Revenue Fund For the Year Ended June 30, 2018



Total Revenues 10 500 10 500 39 770


General government 675 675 25 091

Total Expenditures 675 675 25 091

Net Change in Fund Balances 9,825 9,825 14,679



-91-


Positive (Negative)

$ 2,878 26 392

29 270

(24,416)

(24,416)

4,854

$ 4 854


CDBG Project Fund - Nonmajor Special Revenue Fund For the Year Ended June 30, 2018


REVENUES Intergovernmental $ 5 000 $ 111 350

Total Revenues 5 000 111 350


Community development 5 000 111,350

Total Expenditures 5 000 111,350


Fund Balances (Deficit) - Beginning (24,753) (24,753)

Fund Balances (Deficit) - Ending $ (24,753) $ (24,753) $

-92-



$ 111157 $ (193)

111157 (193)

119,867 (8,517)

119,867 (8,517)

(8,710) (8,710)

(24,753)

(33,463) $ (8,710)


Wastewater P&FCC Charges - Nonmajor Special Revenue Fund For the Year Ended June 30, 2018


REVENUES Use of money and property $ 1,500 $ 1,500 $ 5,029 Charges for services 69 000 199 000 247 037

Total Revenues 70 500 200 500 252 066


General government 4,537 4,537 4,538 Public ways and facilities 11 133 8 303



OTHER FINANCING SOURCES (USES) Transfers out (226,400) (226,372)

Total Other Financing Sources (Uses) (226,400) (226,372)

Net Change in Fund Balances 65,963 (41,570) 12,853



-93-


Positive (Negative)

$ 3,529 48 037

51 566

(1) 2 830

2 829

54 395

28

28

54,423

$ 54 423


Parks P&FCC Charges - Nonmajor Special Revenue Fund For the Year Ended June 30, 2018



Total Revenues 30 150 50 150 56 165


General government 1 940 1 940 1 940



OTHER FINANCING SOURCES (USES) Transfers out (36,000) (36,000)

Total Other Financing Sources (Uses) (36,000) (36,000)

Net Change in Fund Balances 28,210 12,210 18,225



-94-


Positive (Negative)

$ 2,386 3 629

6 015

6 015

6,015

$ 6 015


Housing Authority - Nonmajor Special Revenue Fund For the Year Ended June 30, 2018


REVENUES Use of money and property $ $ 100 000

Total Revenues 100 000


General government 1,500 8,000 Community development 46 000 165 154


Net Change in Fund Balances (47,500) (73,154)

Fund Balances - Beginning 1,155,259 1,155,259

Prior period adjustment (419,533) (419,533)

Fund Balances - Beginning, Restated 735 726 735 726

Fund Balances - Ending $ 688 226 $ 662 572

-95-



$ 14 925 $ (85,075)

14 925 (85,075)

6,127 1,873 114 720 50 434

120 847 52 307

(105,922) (32,768)

1,155,259

(419,533)

73 5 726

$ 629 804 $ (32,768)


• Debt Service Funds

CITY OF SHASTA LAKE Nonmajor Debt Service Funds

Debt Service funds are used to account for and report financial resources that are restricted, committed, or assigned to expenditures for principal and interest. Nonmajor debt service funds used by the City are listed below:

Rosamond Debt Service

This fund accounts for the revenue and expenditures associated with the retirement of assessments for roadway improvements.

Riddle Road Water Bond

This fund accounts for the revenue and expenditures associated with the retirement of assessments for the construction of water system improvements.

Davis Grunsky Loan Act

This fund accounts for the revenue and expenditures associated with the retirement voter approved tax override debt for the construction of water system improvements.

-96-

ASSETS


Nonmajor Debt Service Funds June 30, 2018

Riddle Road

Water Bond

Cash and investments $ 7,139 Receivables:

Taxes 279 Assessments 32 000

Total Assets $ 39 418

LIABILITIES Interest payable $

Total Liabilities

DEFERRED INFLOWS OF RESOURCES Unavailable revenues 32 000


FUND BALANCES Restricted 7 418

Total Fund Balances 7 418

Total Liabilities, Deferred Inflows of Resources and Fund Balances $ 39 418

-97-

Davis Grunsky Loan Act Totals

$ 86,725 $ 93,864

30 309 32 000

$ 86 755 $ 126 173

$ 971 $ 971

971 971

32 000

32 000

85 784 93 202

85 784 93 202

$ 86 755 $ 126 173

REVENUES Taxes and assessments Use of money and property Intergovernmental

Total Revenues

EXPENDITURES Debt service:

Principal Interest

Total Expenditures


Changes in Fund Balances Nonmajor Debt Service Funds


Riddle Road

Water Bond

$ 3,708 72

3 780

2,000 1 650

3 650

Net Change in Fund Balances 130

Fund Balances - Beginning 7 288

Fund Balances - Ending $ 7 418

-98-

Davis Grunsky Loan Act Totals

$ 11,583 $ 15,291 1,103 1,175

22 22

12 708 16 488

9,099 11,099 3 079 4 729

12 178 15 828

530 660

85 254 92 542

$ 85 784 $ 93 202


Wastewater Treatment Debt - Major Debt Service Fund For the Year Ended June 30, 2018


REVENUES Taxes and assessments $ 240,000 $ 249,000 $ Use of money and property 1 000 1 000



Community development 10,000 10,000 Debt service:

Principal 105,000 105,000 Interest 131 670 131 670


Net Change in Fund Balances (5,670) 3,330

Fund Balances - Beginning 575 411 575 411

Fund Balances - Ending $ 569 741 $ 578 741 $

-99-



250,905 $ 1,905 6 268 5 268

257 173 7 173

6,284 3,716

105,000 124617 7 053

235 901 10 769

21,272 17,942

575 411

596 683 $ 17 942


Riddle Road Water Bond - Nonmajor Debt Service Fund For the Year Ended June 30, 2018


REVENUES Taxes and assessments $ 3,000 $ 3,750 $ Use of money and property -------------------------------------------------------------------------------------





Net Change in Fund Balances (750)



-100-



3,708 $ (42) 72 72

3 780 30

2,000 1650 __lQQ_

3 650 100

130 130

7 288

7 418 $ 130


Davis-Grunsky Loan Act - Nonmajor Debt Service Fund For the Year Ended June 30, 2018


REVENUES Taxes and assessments $ 16,000 $ 16,000 $ Use of money and property 100 100 1,103 Intergovernmental------------------------------------------------------------------------------------------------

Total Revenues 16,100 16,100




Net Change in Fund Balances 3,731 2,501



-101-



11,583 $ (4,417) 1,003

22 22

12,708 (3,392)

9,099 3 079 1 421

12 178 1421

530 (1,971)

85 254

85 784 $ (1,971)

Internal Service Funds

CITY OF SHASTA LAKE Internal Service Funds

Internal Service funds are used to account for the financing of goods or services provided by one department or agency to other departments on a cost-reimbursement basis. Internal Service funds used at the City are listed below:

Motor Pool

The fund accounts for the management of a program to ensure that both current and future vehicle needs are met for all City departments.

Public Works

The fund accounts for the services related to providing City departments with service and support for water distribution, wastewater collection, and streets and drainage maintenance.

-102-

CITY OF SHASTA LAKE Combining Statement of Net Position

Internal Service Funds June 30, 2018

Motor Pool


Cash and investments $ 341,451 Receivables:

Accounts, net 2 329

Total Current Assets 343 780

Noncurrent Assets: Capital assets:

Depreciable, net 773 925

Total Noncurrent Assets 773 925

Total Assets 1117705

DEFERRED OUTFLOWS OF RESOURCES Deferred pension adjustments 39,008 Deferred OPEB adjustments 33 679

Total Deferred Outflows of Resources 72 687


Accounts payable 21,232 Salaries and benefits payable 3,055 Due to other govermnents 382 Compensated absences payable 12 793

Total Current Liabilities 37 462

Noncurrent Liabilities: Advances from other funds 20,355 Net pension liability 143,476 Net OPEB liability 72 299

Total Noncurrent Liabilities 236 130


DEFERRED INFLOWS OF RESOURCES Deferred pension adjustments 11,550 Deferred OPEB adjustments 44 808


NET POSITION Investment in capital assets 773,925 U mestricted 86 517

Total Net Position $ 860 442

-103-

Public Works Totals

$ 512,465 $ 853,916

13 437 15 766

525 902 869 682

198 465 972 390

198 465 972 390

724 367 1842072

341,522 380,530 210 478 244 157

552 000 624 687

4,762 25,994 31,648 34,703

2,815 3,197 52 408 65 201

91 633 129 095

238,995 259,350 1,349,357 1,492,833

451 831 524 130

2 040 183 2 276 313

2 131 816 2 405 408

103,746 115,296 280 032 324 840

383 778 440 136

198,465 972,390 (1,437,692} (1,351,175}

$ (1,239,227} $ (378,785}

CITY OF SHASTA LAKE Combining Statement of Revenues, Expenses and Changes in Net Position

Internal Service Funds For the Year Ended June 30, 2018

Motor Public Pool Works

OPERATING REVENUES Charges for services $ 668,114 $ 1,909,783 Other revenue 429

Total Operating Revenues 668 114 1 910 212

OPERATING EXPENSES Salaries and benefits 133,359 1,407,244 Administration 194,457 420,914 Insurance 3,996 691 Supplies 2,438 25,264 Repair and maintenance 150,967 11,296 Professional services 3,982 29,460 Depreciation 273 842 7 633

Total Operating Expenses 763 041 1 902 502

Operating Income (Loss) (94,927) 7,710

NON-OPERATING REVENUES (EXPENSES) Gain (loss) on sale of capital assets 45,117 Interest expense (418) (4,893)

Total Non-Operating Revenues (Expenses) 44,699 ( 4,893)

Income (Loss) Before Transfers (50,228) 2,817

Transfers in 4,950 Transfers out (1,813) (21,838)

Change in Net Position (52,041) (14,071)

Total Net Position - Beginning 1,191,191 (183,308)

Cumulative effect of a change in accounting principle (278,708) (1,041,848)

Total Net Position - Beginning, Restated 912,483 (1,225,156)

Total Net Position - Ending $ 860,442 $ (1,239,227)

-104-

Totals

$ 2,577,897 429

2,578,326

1,540,603 615,371

4,687 27,702

162,263 33,442

281 475

2 665 543

(87,217)

45,117 (5,311)

39,806

(47,411)

4,950 (23,651)

(66,112)

1,007,883

(1,320,556)

(312,673)

$ (378,785)

CITY OF SHASTA LAKE Combining Statement of Cash Flows

Internal Service Funds For the Year Ended June 30, 2018

Motor Pool

CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers $ 10,615 Receipts from interfund services 655,170 Payments to suppliers (313,185) Payments for interfund services (60,894) Payments to employees (119,355)

Net Cash Provided (Used) by Operating Activities 172 351

CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES Transfers from other funds Transfers to other funds (1,813) Interfund loans repaid (3,164)

Net Cash Provided (Used) by Non-Capital Financing Activities (4,977)

CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES

Acquisition of capital assets (100,709) Sale of capital assets 91,571 Interest paid on debt (418)

Net Cash Provided (Used) by Capital and Related Financing Activities (9,556)

Net Increase (Decrease) in Cash and Cash Equivalents 157,818

Balances - Beginning 183 633

Balances - Ending $ 341451

RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES

Operating income (loss) $ (94,927) Adjustments to reconcile operating income (loss) to net cash

provided (used) by operating activities: Depreciation 273,842 Decrease (increase) in:

Accounts receivable (2,329) Pension adjustment - deferred outflows (5,109) OPEB adjustment - deferred outflows (10,149)

Increase (decrease) in: Accounts payable (4,136) Salaries and benefits payable (260) Due to other govermnents (14,103) Compensated absences 2,338 Net pension liability 23,150 Net OPEB liability (42,247) Pension adjustment - deferred inflows 1,473 OPEB adjustment - deferred inflows 44 808

Net Cash Provided (Used) by Operating Activities $ 172 351

-105-

Public Works Totals

$ 429 $ 11,044 1,896,346 2,551,516 (103,833) (417,018) (382,689) (443,583)

(1,290,757) (1,410,112)

119 496 291 847

4,950 4,950 (21,838) (23,651) (37,143) (40,307)

(54,031) (59,008)

(100,709) 91,571

( 4,893) (5,311)

( 4,893) (14,449)

60,572 218,390

451 893 635 526

$ 512 465 $ 853 916

$ 7,710 $ (87,217)

7,633 281,475

(13,437) (15,766) (40,644) (45,753) (63,428) (73,577)

868 (3,268) 463 203 235 (13,868)

(13,330) (10,992) 205,618 228,768

(264,025) (306,272) 11,801 13,274 280 032 324 840

$ 119 496 $ 291 847

Fiduciary Funds

CITY OF SHASTA LAKE Fiduciary Funds

Fiduciary funds are used to report assets held in a trustee or agency capacity for others and therefore cannot be used to support the government's own programs.

Agency Fund

This fund is used to report resources held by the City in a purely custodial capacity. The agency fund maintained by the City is listed below:

• Community Facility Districts - The Community Facilities District was formed in 2000 to maintain designated open space and water retention facilities in the Windsor Estates and Hazelwood/Oakridge Estates subdivisions. It is used to account for revenue and expenses related to maintaining weed and sediment control, tree care, and storm water retention.

In 2007, Council established the Deer Creek Manor Landscaping and Lighting Maintenance District and the Deer Creek Manor Drainage Maintenance District for the Deer Creek Manor subdivision. The Landscape and Lighting Maintenance District provides maintenance of street lighting, medians, parkways, slopes, open spaces and drainage basins. The Drainage Maintenance District provides for the continued operation and maintenance of drainage and flood control facilities.

-106-


Taxes

Total Assets

LIABILITIES Accounts payable Agency obligations

Total Liabilities

CITY OF SHASTA LAKE Statement of Assets and Liabilities

Agency Fund June 30, 2018

-107-

Community Facility Districts Totals

$ 337,813 $ 337,813

218 218

$ 338 031 $ 338 031

$ 975 $ 975 337 056 337 056

$ 338 031 $ 338 031

CITY OF SHASTA LAKE Statement of Changes in Assets and Liabilities

Agency Fund For the Year Ended June 30, 2018

Balance June 302 20: Additions Deductions

COMMUNITY FACILITY DISTRICTS

ASSETS Cash and investments $ 323,803 $ 63,708 $ 49,698 Receivables:

Taxes 730 218 730

Total Assets $ 324 533 $ 63 926 $ 50 428

LIABILITIES Accounts payable $ 174 $ 975 $ 174 Agency obligations 324 359 62 951 50 254

Total Liabilities $ 324 533 $ 63 926 $ 50 428

-108-

Balance June 302 2018

$ 337,813

218

$ 338 031

$ 975 337 056

$ 338 031

STATISTICAL SECTION

CITY OF SHASTA LAKE Statistical Section

This part of the City's comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the City's overall financial health.

Financial Trends

These schedules contain trend information to help the reader understand how the City's financial performance and well-being have changed over time.

Revenue Capacity

These schedules contain information to help the reader assess the City's most significant local revenue source, property taxes.

Debt Capacity

These schedules present information to help the reader assess the affordability of the City's current levels of outstanding debt and the City's ability to issue additional debt in the future.

Demographic and Economic Information

These schedules offer demographic and economic indicators to help the reader understand the environment within which the City's financial activities take place and to help make comparisons overtime and with other governments.

Operating Information

These schedules contain service and infrastructure data to help the reader understand how the City's financial information relates to the services the City provides and the activities it performs.

Sources: Unless otherwise stated, the information in this section is derived from the comprehensive annual financial reports for the relevant year.

-109-

CITY OF SHASTA LAKE Net Position by Component

Last Ten Fiscal Years (full accrual basis of accounting)

Governmental Activities Net investment in capital assets Restricted U mestricted

Total governmental activities net position

Business-Type Activities Net investment in capital assets Restricted U mestricted

Total business-type activities net position

Primary Government Net investment in capital assets Restricted U mestricted

Total primary government net position

Fiscal Year 2008/2009 2009/2010 2010/2011 2011/2012

$ 44,251,610 $ 45,358,187 $ 49,643,294 $ 52,274,952 13,620,477 14,159,185 14,803,221 8,110,724

3,503,525 1,785,070 (1,103,484) 2313537

$ 61,375,612 $ 61,302,442 $ 63,34 3,031 $ 62,699,213

$ 35,670,069 $ 34,118,950 $ 32,604,718 $ 31,579,360 1,006,091 992,149 998,403 998,185 16 070 235 16 414 994 17001652 18 096 357

$ 52 746 395 $ 51 526 093 $ 50 60 4 773 $ 50 673 902

$ 79,921,679 14,626,568 19 573 760

$ 79,477,137 15,151,334

18 200 064

$ 82,248,012 15,801,624

15 898 168

$ 83,854,312 9,108,909 20 409 894

=$=1=1=4,=12=2=,0=0=7:::::$""":1:::::12=,8=2=8=,5=3=5 =$=11=-3-'-:::, 9=4~-----=7=8=04 $113 3 73 115

-110-

2012/2013 2013/2014 2014/2015 2015/2016 2016/2017 2017/2018

$ 52,295,145 $ 48,273,741 $ 47,105,807 $ 46,980,971 $ 46,478,920 $ 49,263,367 8,633,920 9,833,597 10,781,288 10,262,714 9,836,174 4,880,550 2 789 860 4 716 258 3 162 244 6 007 533 6 098 998 3 093 929

$ 63 718 925 $ 62,823,596 $ 61 049 339 $ 63,251,218 $ 62 414 092 $ 57 237 846

$ 37,184,118 $ 23,037,784 $ 23,395,913 $ 29,225,573 $ 30,035,922 $ 32,637,417 997,747 977,967 987,219 63,124 63,502 61,327

12 587 267 25 934 191 22 916 967 17 814 771 19 781 516 20 275 557

$ 50 769 132 $ 49 949 942 $ 47 300 099 $ 47 103 468 $ 49 880 940 $ 52 974 301

$ 89,479,263 $ 71,311,525 $ 70,501,720 $ 76,206,544 $ 76,514,842 $ 81,900,784 9,631,667 10,811,564 11,768,507 10,325,838 9,899,676 4,941,877 15 377 127 30 650 449 26 079 211 23 822 304 25 880 514 23 369 486

$114 488 057 $112 773 538 $108 349 438 $110 354 686 $112,295,032 $110,212,147

CITY OF SHASTA LAKE Changes in Net Position Last Ten Fiscal Years

(full accrual basis of accounting)

Fiscal Year

Expenses Governmental Activities:

General government Public safety Public ways and facilities Planning Culture and recreation Community development Interest on long-term debt

Total Governmental Activities Expenses

Business-Type Activities: Water Electric Wastewater Industrial park

Total Business-Type Activities Expenses

Total Primary Government Expenses

Program Revenues Governmental Activities:

Charges for services: General government Public safety Public ways and facilities Planning Culture and recreation Community development

Operating grants and contributions Capital grants and contributions

Total Governmental Activities Program Revenues

Business-Type Activities: Charges for services:

Water Electric Wastewater Industrial park

Operating grants and contributions Capital grants and contributions

Total Business-Type Activities Program Revenues

Total Primary Government Program Revenues

2008/2009 2009/2010 2010/2011 2011/2012

$ 3,067,756 $ 2,886,441 $ 2,902,975 $ 2,796,741 2,874,156 2,966,827 2,751,631 2,747,717

50,259 1,953,478 1,947,459 1,589,908 407,431 356,499 348,835 334,373 386,623 311,831 282,910 274,282

2,935,471 2,485,092 2,436,714 506,149

9 721 696 IO 960 168 IO 670 524 8249170

2,651,243 2,391,584 2,056,226 1,930,159 18,422,891 18,224,258 15,456,282 15,603,541 2,331,054 2,367,035 2,437,577 2,152,763

147 544 140 737 130 142 119 Oil

23,552,732 23 123 614 20 080 227 19 805 474

$ 33 274 428 $ 34 083 782 $ 30 75 0 751 $ 28 054 644

$ 2,864,793 $ 3,011,768 $ 2,743,366 $ 2,889,853 106,344 I00,917 73,335 69,222

11,895 70,186 1,766 6,068 22,095 34,113 30,328 37,272 16,172 8,030 3,461 3,263 15,270 21,695 22,083 41,205

4,213,084 1,819,835 2,542,442 1,424,029 594 325 535 921 1200951 618 903

7 843 978 5 602 465 6617732 5 089 815

1,843,969 1,901,864 1,965,585 2,143,515 17,830,444 17,303,120 14,469,256 14,921,718

l,7I0,520 2,080,443 2,226,744 2,178,308 6,152 44,948 45,732 49,451

IOI 290 56 634 61 943 53 730

21 492 375 21 387 009 18 769 260 19 346 722

$ 29,336,353 $ 26,989,474 $ 25,38 6,992 $ 24,436,537

-111-

2012/2013 2013/2014 2014/2015 2015/2016 2016/2017 2017/2018

$ 2,492,722 $ 2,636,610 $ 2,061,600 $ 2,056,476 $ 2,691,742 $ 2,764,877 2,848,143 2,761,952 2,802,199 2,889,166 3,001,951 3,250,179 1,883,790 2,041,296 1,949,843 1,963,018 2,214,871 2,219,740

371,593 514,828 668,710 547,822 660,982 774,366 254,399 298,171 302,959 295,177 263,040 389,627 117,714 389,440 328,401 240,983 140,777 326,986

169 850 159 790 147 472 142 430 169 725

7 968 361 8 812 147 8 273 502 8 140 114 9 115 793 9 895 500

2,255,672 2,748,608 2,459,582 2,952,972 2,785,859 2,981,721 17,526,105 20,114,409 19,374,664 18,664,440 18,798,738 19,216,691 2,524,844 2,735,434 2,141,935 2,448,732 2,493,080 2,538,654

147 052 132 300 142 459 83 632 70 939 68 472

22 453 673 25 730 751 24 118 640 24 149 776 24 148 616 24 805 538

$ 30,422,034 $ 34 542 898 $ 32,392,142 $ 32,289,890 $ 33 264 409 $ 34 701 038

$ 2,998,406 $ 2,944,400 $ 3,006,016 $ 2,941,279 $ 3,501,343 $ 3,609,505 71,291 98,883 108,154 96,573 128,344 177,120 72,064 274,347 329,996 361,363 506,969 735,227 15,661

3,966 5,432 7,000 1,505 2,597 3,177 11,678 12,303

2,459,906 1,847,156 1,749,838 1,571,797 1,814,397 1,003,351 217 806 333 623 304 440 254 623 256 889 387 688

5 850 778 5 503 841 5 517 747 5 227 140 6 210 539 5 916 068

2,447,152 2,518,565 2,454,424 2,475,734 2,867,046 3,408,888 17,038,476 19,271,837 19,027,126 20,153,868 19,555,082 20,815,974 2,368,044 2,584,526 2,651,905 2,790,033 2,865,235 3,004,412

51,300 68,472 27,229,274

417 370 51 087 151 046 49 265 47 952 3 196 706

22,322,342 24 426 015 24 284 501 25 468 900 52 633 061 30 425 980

$ 28,173,120 $ 29,929,856 $ 29,802,248 $ 30 696 040 $ 58 843 600 $ 36 342 048


Net (Expense)/Revenue1

Governmental Activities Business-Type Activities

CITY OF SHASTA LAKE Changes in Net Position Last Ten Fiscal Years

(full accrual basis of accounting)

Fiscal Year 2008/2009 2009/2010 2010/2011

$ (1,877,718) (2,060,357)

$ (5,357,703) (1,736,605)

$ (4,052,792) (1,310,967)

2011/2012

$ (3,159,355) (458,752)

Total Primary Government Net Expense $ (3,938,075) $ (7,094,308) $ (5,36 3,759) $ (3,618,107)

General Revenues and Other Changes in Net Position Governmental Activities:

Taxes: Property taxes Sales and use taxes Transient occupancy taxes Other taxes

Motor vehicle in-lieu Interest and investment earnings Miscellaneous Transfers Gain/loss on sale of asset Extraordinary gain


Business-Type Activities: Interest and investment earnings Miscellaneous Special item - loss on sale of property Transfers


Total Primary Government

Change in Net Position Governmental Activities Business-Type Activities

Total Primary Government

Note:

$ 4,121,837 $ 3,850,713 446,298 455,952

9,136 7,750 184,597 153,181 844,126 814,202 203,269 80,752

28,917 32,590 (1,839,508) (110,607)

3 998 672 5 284 533

475,770 304,857 36,088 100,839

1 839 508 llO 607

2 351 366 516 303

$ 6 350 038 $ 5 800 836 $ 6 48

$ 2,120,954 $ (73,170) 291 009 (1,220,302)

$ 2,411,963 $ (1,293,472) $ 1,11

$ 4,535,646 $ 2,472,818 510,472 414,712

8,300 5,280 153,855 153,522 839,556 757,878

85,919 62,835 23,855 85,742

(86,000) (196,739) 21,778

(705,676)

6 093 381 3 050 372

212,123 215,606 91,524 115,536

86 000 196 739

389 647 527 881

3,028 $ 3 578 253

$ 2,040,589 $ (108,983) (921,320) 69 129

9 269 $ (39,854)

1 Net expense is the difference between the expenses and program revenues of a function or program. It indicates the degree to which a function or program supports itself with its own fees and grants versus its reliance upon funding from taxes and general revenues. Numbers in parentheses are

net expenses, indicating that expenses were greater than program revenues and therefore general revenues were needed to finance that function or program.

-112-

2012/2013

$ (2,117,583) (131,331)

$ (2,248,914)

$ 1,543,442 390,461

4,900 152,940 732,158

24,682 329,902 (41,186)

3 137 299

150,238 35,132

41187

226 557

$ 3 363 856

$ 1,019,716 95 226

$ 1 114 942

2013/2014

$ (3,308,306) (1,304,736)

$ (4,613,042)

$ 911,458 480,926

7,215 189,712 733,665

35,232 164,769

(110,000)

2 412 977

157,207 408,876

110 000

676 083

$ 3 089 060

$ (895,329) (628,653)

$ (1,523,982)

2014/2015

$ (2,755,755) 165,861

$ (2,589,894)

$ 1,020,590 777,837

8,036 408,405 759,393

21,089 28,329

(65,000) 14,000

2 972 679

130,341 263,754

65 000

459 095

$3431774

$ 216,924 624 956

$ 841 880

2015/2016

$ (2,912,974) 1,319,124

$ (1,593,850)

$ 1,015,622 823,755

7,691 647,552 784,970

95,846 21,726

1,717,691

5 114 853

235,266 192,679

(226,009) (1,717,691)

(1,515,755)

$ 3 599 098

$ 2,201,879 (196,631)

$ 2,005,248

2016/2017

-

$ (2,905,254) 28,484,445

$ 25 579 191

$ 1,079,016 701,611

4,525 783,018 807,631

49,391 9,267

(1,366,331)

2 068 128

66,178 158,264

1366331

1 590 773

$ 3 658 901

$ (837,126) 30 075 218

$ 29,238,092

2017/2018

$ (3,979,432) 5 620 442

$ 1 641 010

$ 1,144,906 890,211

11,130 983,464 840,149

75,214 10,788

(347,345)

3 608 517

122,405 194,998

347 345

664 748

$ 4,273,265

$ (370,915) 6 285 190

$ 5 914 275


General Fund Reserved Unreserved

Restricted Assigned Unassigned

Total General Fund

All Other Governmental Funds Reserved Unreserved, reported in:

Special revenue funds

Restricted Unassigned

CITY OF SHASTA LAKE Fund Balances - Governmental Funds

Last Ten Fiscal Years (modified accrual basis of accounting)

Fiscal Year 2008/2009 2009/2010 2010/2011 2011/2012

$ 156,993 $ 72,503 $ $ 3,222,503 3,564,483

4,481,416 3,677,876

(1,413,127) (1,309,733)

$ 3 379 496 $ 3 636 986 $ 3 06 8,289 $ 2,368,143

$ 14,653,474 $ 12,745,664 $ $

4,523,970 5,037,755

15,851,076 8,206,752

Total All Other Governmental Funds =$::::::::::::19:::::::::::::17=7=4=4=4 ::::::$:---=-1-:::::::7 =78=3=4=1=9=$=1=5=8:---=-5 ___ ....:::l:::::0::::::7::::.6 $ 8,206,752

Note: The City implemented GASB 54 for fiscal year June 30, 2011 under which fund balances are reported as nonspendable, restricted, committed, assigned and unassigned as compared to reserved and unreserved.

-113-

2012/2013 2013/2014 2014/2015 2015/2016 2016/2017 2017/2018

$ $ $ $ $ $

3,322,038 641,692 630,748 596,191 598,175 618,124 1,046,606 1,154,764 4,693,366 4,497,103 1,871,238

(488,173) 719 127 1 205 470 300 948 1 017 223 986 668

$ 2,833,865 $ 2 407 425 $ 2,990,982 $ 5 590 505 $ 6,112,501 $ 3 476 030

$ $ $ $ $ $

8,727,876 9,061,761 9,974,045 9,586,435 9,157,337 4,181,691 (50,301) (94,981) (6,839) (24,753) (33,463)

$ 8 727 876 $ 9 011 460 $ 9 879 064 $ 9 579 596 $ 9 132 584 $ 4,148,228

CITY OF SHASTA LAKE Changes in Fund Balances - Governmental Funds

Last Ten Fiscal Years (modified accrual basis of accounting)

Fiscal Year 2008/2009 2009/2010 2010/2011

Revenues Taxes and assessments $ 5,362,411 $ 5,069,637 $ 5,808,266 Licenses and permits 103,845 115,615 87,440 Fines and forfeitures 26,761 14,361 11,710 Use of money 274,034 105,227 114,036 Intergovememtal 4,898,038 2,655,155 3,452,138 Charges for services 3,069,691 3,286,705 2,775,660 Other revenues 34 376 41 905 333 872

Total Revenues 13 769 156 11288605 12 583 122

Expenditures Current:

General government 2,554,374 2,289,272 2,469,149 Public safety 2,863,740 2,760,245 2,716,676 Public ways and facilities 523,949 661,154 558,748 Planning 403,488 352,557 344,893 Culture and recreation 337,806 309,232 615,465 Community development 4,441,991 3,532,795 2,376,820

Debt service Principal 333,904 543,082 308,461 Interest 479,645 458,786 437,365

Capital outlay 1 705 920 1427 517 5 200 585

Total Expenditures 13 644 817 12 334 640 15 028 162

Excess of Revenues Over (Under) Expenditures 124 339 (1,046,035) (2,445,040)

Other Financing Sources (Uses) Debt proceeds Transfers in 920,265 789,509 791,811 Transfers out (951,665) (880,009) (847,811)

Total Other Financing Sources (Uses) (31,400) (90,500) (56,000)

Extraordinary loss

Net Change in Fund Balances (Deficits) $ 92 939 $ (1,136,535) $ (2,50 1,040)

Debt Service as a Percentage of Noncapital Expenditures 6.81% 9.19% 7.59%

-114-

2011/2012

$ 3,672,060 100,801

8,959 85,263

1,959,472 3,008,184

94 841

8 929 580

2,399,456 2,740,964

262,238 330,431 291,405 353,125

103,647 423,254

4 109 715

11 014 235

(2,084,655)

686,192 (686,192)

(5,724,980)

$ (7,809,635)

7.63%

2012/2013 2013/2014 2014/2015 2015/2016 2016/2017 2017/2018

$ 2,749,373 $ 2,321,000 $ 2,869,231 $ 3,111,277 $ 3,034,827 $ 3,575,341 68,367 98,638 106,596 108,239 134,205 188,582 21,722 18,107 18,671 8,277 13,838 8,779 46,091 35,232 21,089 95,846 49,391 75,214

2,733,862 2,242,654 2,218,629 2,090,513 2,488,244 1,618,431 3,169,464 3,206,317 3,338,202 3,402,204 3,991,210 4,327,668

340 384 164 769 28 329 21 726 9 267 10 788

9 129 263 8 086 717 8 600 747 8 838 082 9 720 982 9 804 803

2,312,602 2,672,669 2,045,628 2,192,284 2,402,831 2,546,560 2,841,390 2,730,507 2,770,937 2,895,330 2,976,402 3,216,529

850,563 981,087 740,775 724,263 956,423 913,485 367,652 510,886 681,406 625,659 613,211 656,802 199,546 246,507 247,479 239,766 193,793 309,626 116,467 388,106 307,128 236,424 139,088 326,986

107,829 113,243 117,449 127,660 112,877 116,099 156,510 162,044 158,891 149,520 145,010 172,882

1 165 359 439 949 28 893 1 183 419 1,626,268 6 442 523

8 117 918 8 244 998 7 098 586 8 374 325 9 165 903 14 701 492

1 011 345 (158,281) 1 502 161 463 757 555 079 ( 4,896,689)

14,000 2,500,000 10,856 23,299 26,073 2,047,198 13,068 95,528

(35,356) (133,299) (91,073) (210,900) (493,163) (424,172)

(24,500) (110,000) (51,000) 1,836,298 (480,095) 2,171,356

$ 986 845 $ (268,281) $ 1 451 161 $ 2 300 055 $ 74 984 $ (2,725,333)

3.80% 3.53% 3.91% 3.85% 3.42% 3.50%

Fiscal Year

2008/2009

2009/2010

2010/2011

2011/2012

2012/2013

2013/2014

2014/2015

2015/2016

2016/2017

2017/2018

Note:

CITY OF SHASTA LAKE General Fund Balance Compared to Annual Appropriations

Last Ten Fiscal Years

U ndesignated Annual Fund Balance Appropriations

$ 3,222,503 $ 5,761,220

3,564,483 5,653,836

3,068,289 5,318,718

2,368,143 5,338,139

2,833,865 6,325,471

2,407,425 5,694,351

2,990,982 6,273,502

5,590,505 6,755,281

6,112,501 7,252,335

3,476,030 7,878,928

Balance as % of Appropriations

55.9%

63.0%

57.7%

44.4%

44.8%

42.3%

47.7%

82.8%

84.3%

44.1%

Due to Governmental Accounting Standards Board Statement 54 reporting requirements, Undesignated Fund Balance for 2011-2017 is Total Fund Balance

Source: City of Shasta Lake Financial Records

-115-

CITY OF SHASTA LAKE General Fund Revenues by Source


Licenses Fines and Use of lntergovern-Fiscal Year Taxes and Permits Forfeitures Money mental

2008/2009 $ 1,549,247 $ 103,845 $ 26,761 $ 74,157 $ 857,071

2009/2010 1,416,233 115,615 14,361 30,301 848,170

2010/2011 1,507,924 87,440 11,710 31,516 851,116

2011/2012 1,508,997 100,801 8,959 23,477 769,547

2012/2013 2,071,651 68,367 21,722 21,731 740,194

2013/2014 1,564,553 98,638 18,107 16,702 748,837

2014/2015 2,191,158 106,596 18,671 10,447 766,966

2015/2016 2,475,254 108,239 8,277 81,624 872,576

2016/2017 2,545,804 134,205 13,838 22,596 854,904

2017/2018 3,011,001 188,582 8,779 6,873 871,379

Note: The schedule above includes only those revenues recorded in the General fund.


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Charges for Services Miscellaneous

$ 2,900,501 $ 34,322

3,107,426 30,992

2,762,945 26,554

2,899,163 27,195

3,072,595 329,211

3,082,745 164,769

3,151,335 28,329

3,187,583 21,726

3,671,721 9,267

3,781,525 10,788

Total

$ 5,545,904

5,563,098

5,279,205

5,338,139

6,325,471

5,694,351

6,273,502

6,755,279

7,252,335

7,878,927

Fiscal Year

2008/2009

2009/2010

2010/2011

2011/2012

2012/2013

2013/2014

2014/2015

2015/2016

2016/2017

2017/2018

Notes:

CITY OF SHASTA LAKE General Fund Tax Revenues by Source


Transient General Sales and Occupancy

Property Tax* Use Tax Tax

$ 895,744 $ 446,298 $ 9,135

785,607 455,952 7,750

824,729 510,472 8,300

921,790 414,713 5,280

1,507,137 390,462 4,900

891,906 475,720 7,215

1,197,772 576,943 8,036

1,161,602 658,408 7,691

1,056,650 701,611 4,525

1,283,162 733,246 11,130

The schedule above includes only those revenues recorded in the General fund. * Includes tax revenue form the Educational Revenue Augmentation Fund (ERAF).


-117-

Property Franchise Transfer Tax Tax

$ 13,472 $ 184,597

13,743 153,181

10,557 153,865

13,693 153,522

16,212 152,940

19,317 170,395

20,213 199,752

25,665 204,991

26,144 185,455

34,620 217,982

General Fiscal Year Government

2008/2009 $ 2,554,374

2009/2010 2,289,272

2010/2011 2,469,149

2011/2012 2,399,456

2012/2013 2,312,602

2013/2014 2,672,669

2014/2015 2,045,628

2015/2016 2,192,284

2016/2017 2,402,831

2017/2018 2,546,560

Note:

CITY OF SHASTA LAKE Governmental Funds Expenditures by Function


Public Public Ways Culture and Safety and Facilities Planning Recreation

$ 2,863,740 $ 523,949 $ 403,488 $ 337,806

2,760,245 661,154 352,557 309,232

2,716,676 558,748 344,893 615,465

2,740,964 262,238 330,431 291,405

2,841,390 850,563 367,652 199,546

2,730,507 981,087 510,886 246,507

2,770,937 740,775 681,406 247,479

2,895,330 724,263 625,659 239,766

2,976,402 956,423 613,211 193,793

3,216,529 913,485 656,802 309,626

Community Development

$ 4,441,991

3,532,795

2,376,820

353,125

116,467

388,106

307,128

236,424

139,088

326,986

The schedule above includes only those expenditures recorded in the General fund, Special Revenue, Debt Service, and Capital Projects funds.


-118-

Debt Service

$ 813,549

1,001,868

745,826

526,901

264,338

275,287

276,340

277,180

257,887

288,981

Capital Outlay Total

$ 1,705,920 $13,644,817

1,427,517 12,334,640

5,200,585 15,028,162

4,109,715 ll,014,235

1,165,359 8,ll7,917

439,949 8,244,998

28,893 7,098,586

1,183,419 8,374,325

1,626,268 9,165,903

6,442,523 14,701,492

Fiscal Year

2008/2009

2009/2010

2010/2011

2011/2012

2012/2013

2013/2014

2014/2015

2015/2016

2016/2017

2017/2018

Notes:

CITY OF SHASTA LAKE Assessed Value and Estimated Actual Value of Taxable Property


Secured Roll Unsecured Roll Net Assessed Assessed Less Assessed

Value Value Exemptions Value % Change

$ 720,044,156 $ 14,260,646 $ (29,893,902) $ 704,410,900 4.107%

698,338,056 13,673,159 (29 ,830,360) 682,180,855 -3.156%

667,495,725 12,058,431 (30,486,666) 649,067,490 -4.854%

617,728,356 12,007,690 (30, 102,800) 599,633,246 -7.616%

623,470,665 11,560,623 (30,403,885) 604,627,403 0.833%

643,002,063 10,520,113 (30,569 ,761) 622,952,415 3.031%

666,135,128 9,971,155 (31,463,673) 644,642,610 3.482%

685,887,452 9,812,151 (32,243,707) 663,455,896 2.918%

709,474,932 12,750,395 (32,026,690) 690,198,637 4.031%

741,259,119 10,044,529 (31,656,372) 719,647,276 4.267%

Direct Rate

1.000%

1.000%

1.000%

1.000%

1.000%

1.000%

1.000%

1.000%

1.000%

1.000%

In 1978, the voters of the State of California passed Proposition 13 which limited property taxes to a maximum rate of 1 % based upon the assessed value of the property being taxed. Each year, the assessed value of property tax may be increased by an "inflation factor" (limited to a maximum increase of 2%). With few exceptions, property is only reassessed at the time that it is sold to a new owner. At that point, the new assessed value is reassessed at the purchase price of the property sold. The assessed valuation data shown above represents only data currently available with respect to the actual market value of the taxable property and is subject to the limitations described above.

Source: Shasta County Assessor's Annual Report

-119-

Fiscal Year

2009

2010

2011

2012

2013**

2014

2015

2016

2017

2018

Notes:

CITY OF SHASTA LAKE Property Tax - Rates (Direct and Overlapping Governments)


City of Shasta Lake Rates Overla1ming Rates Shasta

Gateway Gateway Tehama Basic Total Unified Unified Trinity

Countywide Direct School School Community Levy* City* Tax Rate* District 2002 District 2008 College

1.0000% 0.0000% 1.0000% 0.0343% 0.0000% 0.0091%

1.0000% 0.0000% 1.0000% 0.0397% 0.0101% 0.0101%

1.0000% 0.0000% 1.0000% 0.0442% 0.0062% 0.0162%

1.0000% 0.0000% 1.0000% 0.0604% 0.0188% 0.0095%

1.0000% 0.0000% 1.0000% 0.0621% 0.0141% 0.0054%

1.0000% 0.0000% 1.0000% 0.0194% 0.0138% 0.0880%

1.0000% 0.0000% 1.0000% 0.0680% 0.0291% 0.0107%

1.0000% 0.0000% 1.0000% 0.0463% 0.0265% 0.0051%

1.0000% 0.0000% 1.0000% 0.0045% 0.0278% 0.0057%

1.0000% 0.0000% 1.0000% 0.0047% 0.0320% 0.0267%

Shasta DamPUD

Davis Grun sky

0.0001%

0.0001%

0.0001%

0.0001%

0.0001%

0.0019%

0.0014%

0.0001%

0.0001%

0.0001%

*On June 6, 1978, California voters approved an amendment to Article XIIIA of the State Constitution. The amendment, commonly known as Proposition 13, limits the taxing power of California public agencies. The California Legislature enacted legislation to implement Article XIIIA (Statutes of 1978, Chapter 292, as amended) providing that local agencies may not levy any property tax, except to pay debt service on indebtedness approved by votors prior to July 1, 1978, and that each county will levy the maximum tax permitted of $1. 00 per $100 of full assessed value. **RDA pass through removed from AB8 factor. These numbers represent current secured and separate pass through.

Source: Shasta County Auditor/Controller's Office

-120-

Total Bella Vista Direct and

Water Overlapping (land only) Rates

0.3529% 1.3964%

0.3700% 1.4300%

0.3700% 1.4367%

0.3700% 1.4588%

0.3700% 1.4517%

0.3700% 1.4931%

0.3608% 1.4700%

0.3700% 1.4480%

0.3700% 1.4081%

0.3700% 1.4335%

Fiscal Year

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

Note:

CITY OF SHASTA LAKE Property Tax Levies and Collections


Collections within the Fiscal Year of the Levy

Taxes Levied Collections for the Percent in Subsequent

Fiscal Year Amount* of Lev Years**

$ 599,640 $ 571,735 95.35%

576,012 562,903 97.72%

576,156 551,352 95.69%

563,585 547,036 97.06%

579,301 562,886 97.17%

586,005 586,005 100.00%

729,181 708,774 97.20%

720,742 712,500 98.86%

769,088 761,560 99.02%

765,056 760,920 99.46%

Total Collections to Date

Percent Amount of Levy

$ 571,735 95.35%

562,903 97.72%

551,352 95.69%

547,036 97.06%

562,886 97.17%

586,005 100.00%

708,774 97.20%

712,500 98.86%

761,560 99.02%

760,920 99.46%

* Amounts affected by alternate method of apportioning. Participating agencies are paid 100% of the current levy adjusted by file maintenance. **Collections in subsequent years information was not available in City records prior to the 2016/2017 fiscal year.

Source: Shasta County Auditor/Controller's Office

-121-

Fiscal Year

2010

2011

2012

2013

2014

2015

2016

2017

2018

Notes:

CITY OF SHASTA LAKE Shasta Dam Redevelopment Project Area

Historic Tax Increment Revenues Last Nine Fiscal Years

Tax Increment Receipts

Less Tax Supplemental Supplemental

Levy Taxes Taxes

$ 3,711,419 $ 3,957,637 $ 10,678

3,561,818 3,655,637 15,680

3,428,012 1,517,744 (3,647)

3,443,330 3,374,384 (10,554)

3,557,793 3,379,879 30,089

3,562,625 3,612,643 32,668

3,715,273 3,789,732 41,327

3,828,888 3,877,997 51,841

4,163,467 4,105,726 59,588

( 1) Decrease in actual amount of levy received due to RD A's in California being dissolved.

Total Tax Increment Receipts

$ 3,968,315

3,671,317

1,514,097

3,363,830

3,409,968

3,645,311

3,831,059

3,929,838

4,165,314

Data pertaining to fiscal years 2007, 2008, and 2009 is not available, the latest prior year available is fiscal year 2010.

Source: Shasta County Assessor's Office

-122-

% of Levy Received (1)

107%

103%

44%

98%

96%

102%

103%

103%

100%

CITY OF SHASTA LAKE Principal Property Tax Payers

Current Year and Seven Years Ago

Fiscal Year 2017/2018

Taxpayer

Knauf Insulation LLC Humboldt Flakeboard Bobo Family Trust Tau WestLLC Twin Lake Community LP W &B Construction Management Services Lbees LLC Huli Investments LLC Central Valley Investment Group Lake Shasta MHP


Type of Business

Industrial Industrial Commercial Industrial Housing Housing Commercial Commercial Housing Housing


Taxpayer

Knauf Fiber Glass Humboldt Flakeboard ARC FRSHLCAOOl LLC Tara Hills Garden Investors Ridge Limited Partnership Shasta Community Health Center Bronze Court LLC SVB Resolution Holdings LLC Central Valley Investment Group Golden Arch Ltd. Partnership


Type of Business

Industrial Industrial Industrial Apartments Retail Medical Industrial Inv. Property Apartments Retail


Note:

2018 Assessed

Rank Value

$ 118,656,812 2 11,043,123 3 5,886,329 4 5,334,140 5 3,226,772 6 2,958,000 7 2,000,000 8 1,836,000 9 1,518,909

10 1 501 794

$ 153 961 879

Fiscal Year 2010/2011

2011 Assessed

Rank Value

$ 136,647,609 2 6,811,724 3 5,425,000 4 4,946,002 5 2,800,000 6 2,150,121 7 1,800,000 8 1,750,000 9 1,381,000

10 1 212 100

$ 164 923 556

Data pertaining to fiscal year 2007 /2008 is not available, the latest prior year available is fiscal year 2010/2011.


-123-

Percent of Total

Assessed Value

15.79% 1.47% 0.78% 0.71% 0.43% 0.39% 0.27% 0.24% 0.20% 0.20%

20.49%

$ 751 303 648

Percent of Total

Assessed Value

20.47% 1.02% 0.81% 0.74% 0.42% 0.32% 0.27% 0.26% 0.21% 0.18%

24.71%

$ 667 495 725

Taxpayer

Knauf Insulation LLC Humboldt Flakeboard Bobo Family Trust Tau WestLLC Lbees LLC Huli Investments LLC Central Valley Investment Group Golden Arch L TP Partnership Lahar Development LLC Tim and Mike Enterprises LLC

Total

Note:

CITY OF SHASTA LAKE Shasta Dam Redevelopment Project Area

Ten Largest Property Taxpayers Fiscal Year 2017 /2018

Type Secured Unsecured of Use Value Value

Industrial $ 118,656,812 $ Industrial ll,043,123 Commercial 5,886,329 Commercial 5,334,140 Commercial 2,000,000 Commercial 1,836,000 Commercial 1,518,909 Commercial 1,364,799 Residential 1,025,272 Commercial 765 463

$ 149 430 847 $

( 1) Based on ownership oflocally-assessed secured and unsecured property. (2) Based on Shasta Dam Redevelopment Project Area taxable value of $499,705,508 Data for the prior nine years is unavailable.


-124-

% of Total % of Total Taxable Incremental

Value (1) Value (2)

23.75% 28.50% 2.21% 2.65% 1.18% 1.41% 1.07% 1.28% 0.40% 0.48% 0.37% 0.44% 0.30% 0.36% 0.27% 0.33% 0.21% 0.25% 0.15% 0.18%

29.90% 35.89%

Fiscal Year

2008/2009

2009/2010

2010/2011

2011/2012

2012/2013

2013/2014

2014/2015

2015/2016

2016/2017

2017/2018

Notes:

CITY OF SHASTA LAKE Property Value and Construction


Commercial Construction Number

of Permits Value

5 $ 252,682

5 617,444

8 1,773,401

6 353,466

1,000

184,000

2 405,095

7 966,841

10,200

4 5,689,320

Residential and commercial construction reflects new additions to building activity only. New construction residential includes both single family and multi-family dwellings.

Source: City of Shasta Lake Development Services Department

-125-

Residential Construction Number

of Permits Value

36 $ 1,951,381

38 1,742,629

26 942,518

21 598,440

13 1,080,739

13 1,689,821

25 2,958,623

37 3,003,404

43 9,729,437

40 7,523,564

Special Assessment

and Revenue Fiscal Year Bonds

2008/2009 $ 145,000

2009/2010 3,576,000

2010/2011 3,490,000

2011/2012 3,394,000

2012/2013 3,294,000

2013/2014 3,188,000

2014/2015 3,079,000

2015/2016 2,960,000

2016/2017 2,856,000

2017/2018 2,749,000

Notes:

CITY OF SHASTA LAKE Ratio of Outstanding Debt by Type



Tax Allocation Certificates of

Bonds Loans Partici pation Total

$ 9,382,000 $ 191,684 $ $ 9,718,684

5,455,000 144,593 9,175,593

5,240,000 137,142 8,867,142

129,486 3,523,486

121,656 3,415,656

113,412 3,301,412

104,963 3,183,963

96,303 3,056,303

87,426 2,943,426

78,552 2,500,000 5,327,552

( 1) See Economic Information schedule for personal income data

Source: U.S. Census Bureau State of California, Department of Finance, Demographic Research Unit

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Business-Type Activities Special

Assessment and Revenue

Bonds Loans

$ 10,870,000 $ 5,234,096

10,415,000 5,072,252

9,940,000 4,905,056

9,445,000 4,732,358

8,930,000 4,553,880

8,395,000 4,369,516

7,840,000 4,179,037

810,000 3,982,253

780,000 3,778,903

750,000 3,568,775

Total Percentage Debt Financing Primary of Personal Per

Leases Total Government Income (1) Population Capita

$ $ 16,104,096 $ 25,822,780 7.77% 10,151 $ 2,544

15,487,252 24,662,845 7.24% 10,164 2,426

285,790 15,130,846 23,997,988 6.83% 10,098 2,377

238,117 14,415,475 17,938,961 4.99% 10,058 1,784

188,621 13,672,501 17,088,157 4.67% 10,064 1,698

137,232 12,901,748 16,203,160 4.26% 10,044 1,613

83,879 12,102,916 15,286,879 3.69% 10,541 1,450

28,486 4,820,739 7,877,042 1.80% 10,523 749

4,558,903 7,502,329 1.72% 10,386 722

4,318,775 9,646,327 2.05% 10,388 929

Fiscal Year

2008/2009

2009/2010

2010/2011

2011/2012

2012/2013

2013/2014

2014/2015

2015/2016

2016/2017

2017/2018

Source:

CITY OF SHASTA LAKE Ratio of Net Bonded Debt to Assessed Value and Net Bonded Debt per Capita


%of Debt Net Bonded

Gross Payable from Net Total Debt to Estimated Bonded Enterprise Bonded Assessed Assessed Po~ulation Debt Revenue Debt Valuation Value

10,151 $ 25,822,790 $ 16,104,096 $ 9,718,694 $ 704,410,900 1.38%

10,164 24,662,845 15,487,252 9,175,593 682,180,855 1.35%

10,098 23,997,979 14,845,056 9,152,923 649 ,067 ,490 1.41%

10,058 17,938,961 14,177,358 3,761,603 620,144,622 0.61%

10,064 17,088,157 13,483,880 3,604,277 635,031,288 0.57%

10,044 16,202,520 12,764,498 3,438,022 653,522,176 0.53%

10,541 15,286,879 12,019,037 3,267,842 676,106,283 0.48%

10,523 7,877,042 4,792,253 3,084,789 676, 106,283 0.46%

10,386 7,502,329 4,558,903 2,943,426 722,225,327 0.41%

10,388 9,646,327 4,318,775 5,327,552 751,303,648 0.71%

City of Shasta Lake Financial Records

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Net Bonded Debt per Ca~ita

957.41

902.75

906.41

373.99

358.14

342.30

310.01

293.15

283.40

512.86

CITY OF SHASTA LAKE Ratio of Annual Debt Service for Bonded Debt to Total General Expenditures


Net Total Total Bonded Debt General

Ratio of Debt Service to General

Fiscal Year Debt Service Expenditures* _ Expenditures

2008/2009 $ 9,718,684 $ 813,549 $ 13,644,817 5.96%

2009/2010 9,175,593 1,001,868 12,334,640 8.12%

2010/2011 9,152,923 745,826 15,028,162 4.96%

2011/2012 3,761,603 526,901 11,014,235 4.78%

2012/2013 3,604,277 264,338 8,117,917 3.26%

2013/2014 3,438,022 275,287 7,529,761 3.66%

2014/2015 3,267,842 276,340 6,793,353 4.07%

2015/2016 3,084,789 277,180 8,374,325 3.31%

2016/2017 2,943,426 257,887 9,165,903 2.81%

2017/2018 5,327,552 288,981 14,701,492 1.97%

Note: *Total Governmental fund expeditures including debt service and capital outlay.

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Net Assessed Value

Plus Exempt Property

Total Assessed Value

Debt Limit 15% of Total Assessed Value

CITY OF SHASTA LAKE Computation of Legal Bonded Debt Margin


Fiscal Year 2008/2009 2009/2010 2010/2011

$ 704,410,900 $ 682,180,855 $ 649,067,490

29 893 900 29 830 360 30 486 666

$ 734 304 800 $ 712,0ll,215 $ 679 554 156

$ ll0,145,720 $ 106,801,682 $ 101,933,123 Less Outstanding General Obligation Debt 9 718 684 9 175 593 9 152 923

Legal Debt Margin $ 100 427 036 $ 97 626 089 $ 92 780 200


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2011/2012

$ 599,633,246

30 102 800

$ 629 736 046

$ 94,460,407 3 761 603

$ 90 698 804

2012/2013 2013/2014 2014/2015 2015/2016 2016/2017 2017/2018

$ 604,627,403 $ 622,952,415 $ 644,642,610 $ 663,455,896 $ 690,198,637 $ 719,647,276

30403885 30569761 31463673 32243707 32026690 31656372

$ 635 031 288 $ 653,522,176 $ 676 106 283 $ 695 699 603 $ 722,225,327 $ 751 303 648

$ 95,254,693 $ 98,028,326 $ 101,415,942 $ 104,354,940 $ 108,333,799 $ 112,695,547 3 604 277 3 438 022 3 267 842 3 084 789 2 943 426 5 327 552

$ 91650416 $ 94 590 304 $ 98 148 100 $ 101270151 $ 105 390 373 $ 107 367 995

Calendar Year

2009

2010

2011

2012

2013

2014

2015

2016

2017

CITY OF SHASTA LAKE Economic Information

Last Ten Calendar Years

Population

10,151 $

10,164

10,098

10,058

10,064

10,044

10,541

10,523

10,386

Personal Income

Total Per Capit

332,384,344 $ 32,744

340,463,508 33,497

351,147,852 34,774

359,653,964 35,758

365,967,296 36,364

380,717,820 37,905

414,819,667 39,353

437,988,306 41,622

436,243,158 42,003

2018 10,190 $ 470,268,500 46,150

Note: ( 1) These are annual average rates

Source: California Employment Development Department U.S. Department of Commerce, Bureau of Economic Analysis

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Unemployment Rate (1)

19.7%

21.1%

20.0%

18.1%

14.9%

9.1%

6.0%

5.5%

5.0%

4.9%

CITY OF SHASTA LAKE Principal Employers

Current Year and Seven Years Ago

Fiscal Year 2017/2018 Fiscal Year 2010/2011

Percentage of Number of Total City Number of

Employer Employees Rank Employment Employees

Gateway Unified School District 210 5.5% 120

Sierra Pacific 155 2 4.1% 145

Knauf Insulation 154 3 4.1% 123

City of Shasta Lake 50 4 1.3% 43

McDonald's 42 5 1.1% 40

Farmers Market Place 37 6 1.0% 31

Premiere Brand Meats 28 7 0.7% 22

Fresinius Medical Care 20 8 0.5% 42

Lawrence & Associates 18 9 0.5%

530 Collective 13 10 0.3%

Trenchless Pipe Company 22

Rite Aid 10

Note: Data pertaining to fiscal year 2007 /2008 is not available, the latest prior year available is fiscal year 2010/2011. Total estimated employees in the City of Shasta Lake for 2010/2011 and 2017/2018 was 3,800.

Source: City Business License records California Employment Development Department

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Percentage of Total City

Rank Employment

3 3.2%

3.8%

2 3.2%

4 1.1%

6 1.1%

7 0.8%

9 0.6%

5 1.1%

8 0.6%

10 0.3%

CITY OF SHASTA LAKE Authorized Full-time Equivalent Employees (FTE) by Department


June 30, 2009 June 30, 2010 June 30, 2011

Water 3.00 3.00 3.00 Electric 11.00 11.00 10.00 Wastewater 3.00 3.00 3.00 City Manager, City Clerk, and Grant 6.60 7.10 6.50 Finance & Customer Service 10.30 10.10 8.90 Building Use & Planning 5.40 6.10 4.20 Public Works & Motor Pool & Other 16.20 16.40 12.60 Animal Control 1.90 1.90 1.90

Total Full-Time Equivalent Employees 57.40 58.60 50.10

Source: City of Shasta Lake Personnel Department

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June 30, 2012

2.00 9.00 3.00 4.00 7.45 4.00

11.75 2.00

43.20

June 30, 2013 June 30, 2014 June 30, 2015 June 30, 2016 June 30, 2017 June 30, 2018

3.00 3.00 3.00 3.00 3.00 3.00 10.00 10.00 10.00 10.00 10.00 10.00 3.00 3.00 3.00 3.00 3.00 3.00 4.00 4.37 4.00 4.00 4.00 4.00 8.95 8.00 7.00 7.00 7.00 7.00 4.50 5.00 5.00 5.00 5.00 5.00

11.80 12.50 13.50 13.50 13.00 13.00 1.75 2.63 2.63 2.88 2.88 3.50

47.00 48.50 48.13 48.38 47.88 48.50

CITY OF SHASTA LAKE Operating and Capital Indicators

Last Ten Calendar Years

2009 2010

Area in acres Street miles Park acreage

Environment and Utilities Water connections Electric connections Sewer connections

Police Calls for service

Notes: * Reported on calendar year excludes November 2014 to December 2014 ** Reported on calendar year excludes December 2015

Source: California Department of Finance City of Shasta Lake records

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6,950 6,950 64 64 45 45

3,700 3,679 4,450 4,419 3,331 3,322

11,005 11,651

2011 2012

6,950 6,950 64 64 45 45

3,655 3,646 4,407 4,385 3,295 3,283

10,517 10,842

2013 2014 2015 2016 2017 2018

6,950 6,950 6,950 6,950 6,950 6,950 64 64 65 65 65 65 45 45 45 45 45 45

3,665 3,672 3,700 3,748 3,746 3,796 4,401 4,406 4,434 4,414 4,451 4,533 3,300 3,314 3,336 3,362 3,360 3,404

11,829 * 12,138 **11,975 12,692 11,948 11,643

APPENDIX C FORM OF OPINION ON SPECIAL COUNSEL

Law O.iice of

ROBERT M. HAIGHT ,...,,_,..-=-~w..,.,.,..., """"'"'°"~~,,..,._~'"""~~•=-'"""""~''""""""'''"""'"''~=-""""'~"'""'"""'.,..._ov-,m,.-"''°"""'""'°"..,,._.,

ATTORNEY AT LAW 120 Jewell St,

Santa Cruz, California 95060 (831) 239-8068

October 8, 2019

The Honorable City Council of the City of Shasta Lake PO Box 777 Shasta Lake, California 96019

OPINION: $9,500,000, 2019 Taxable Certificates of Participation Evidencing Direct, Undivided Fractional Interests of the Owners Thereof in Lease Payments to be Made by the City of Shasta Lake (Shasta County, California), as the Rental for Certain Property Pursuant to a Lease Agreement with the Public Property Financing Corporation of California

Members of the Council:

We have acted as special counsel in connection with the delivery by the City of Shasta Lake (the "City"), of its $9,500,000 Taxable Certificates of Participation evidencing direct, undivided

fractional interests of the Owners thereof in lease payments to be made by the City pursuant to a

Lease Agreement, dated September 15, 2019, by and between the Public Property Financing

Corporation of California (the "Corporation") and the City (the "Lease Agreement"), and the Site Lease

Agreement, dated as of September 15, 2019, by and between the Corporation and the City (the "Site

Lease Agreement"). The Corporation has, pursuant to the Assignment Agreement, dated as of

September 15, 2019 (the "Assignment Agreement"), by and between the Corporation and the MUFG

Union Bank, NA as Trustee, (the "Trustee"), assigned certain of its rights under the Lease Agreement,

including its right to receive a portion of the lease payments made by the City thereunder (the "Lease Payments"), to the Trustee. Pursuant to the Trust Agreement, dated as of September 15, 2019, by

and among the Trustee, the Corporation and the City (the "Trust Agreement"), the Trustee has

executed and delivered $9,500,000 principal amount of 2019 Taxable Certificates of Participation

dated October 8, 2019 (the "Certificates") evidencing the direct, undivided fractional interests of the

owners thereof in lease payments to be made by the City under the Lease Agreement (the "Lease

Payments") which have been assigned by the Corporation to the Trustee under an Assignment

Agreement dated as of September 15, 2019, between the Corporation and the Trustee (the

"Assignment Agreement"). We have examined the law and such certified proceedings and other

papers as we deem necessary to render this opinion.

As to questions of fact material to our opinion, we have relied upon representations of the

City contained in the Lease Agreement and in the certified proceedings and certifications of public

officials and others furnished to us without undertaking to verify the same by independent

investigation.

a g e 11 120 Jewell St• Santa Cruz, California 95060 • (831) 239-8068

Email: [email protected]

mailto:[email protected]

Based upon our examination, we are of the opinion, under existing law, as follows:

1. The City is duly created and validly existing as a general law city and municipal corporation organized and existing under the laws of the State of California with the power to enter into the Lease Agreement, the Site Lease Agreement, and the Trust Agreement and to perform the agreements on its part contained therein.

2. The Site Lease Agreement and the Lease Agreement have been duly authorized, executed and

delivered by the City and is an obligation of the City valid, binding and enforceable against the

City in accordance with its terms.

3. The Trust Agreement and the Assignment Agreement are valid, binding and enforceable in

accordance with their terms.

4. Subject to the terms and provisions of the Lease Agreement, the Lease Payments to be made by

the City are payable from general funds of the City lawfully available therefore. By virtue of the Assignment Agreement, the owners of the Certificates are entitled to receive their fractional

share of the Lease Payments in accordance with the terms and provisions of the Trust Agreement.

5. The portion of the Lease Payments designated as and comprising interest and received by the owners of the Certificates is not excluded from gross income for federal income tax purposes.

6. The portion of the Lease 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.

Ownership of the Certificates may result in other tax consequences to certain taxpayers, and we

express no opinion regarding any such collatoral consequences arising with respect to the

Certificates.

The rights of the owners of the Certificates and the enforceablility of the Lease Agreement, the Trust Agreement and the Assignment 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 appropriate cases.

Our opinoin represents our legal judgement based upon such review of the law and the facts that we

deem relevantto render our opinion and is not a guarantee ofa result. This opinion is given as of the

date hereof and we assume no obligation to revise or supplement this opinion to reflect any facts or

circumstances that may hereafter come to our attention or any changes in law that may hereafter

occur.

Respectfully submitted,

ROBERT M. HAIGHT Attorney at Law

120 Jewell St• Santa Cruz, California 95060 • (831) 239-8068 Email: [email protected]

mailto:[email protected]

APPENDIX D

SUMMARY OF PRINCIPLE LEGAL DOCUMENTS

The follawing is a brief summary of certain provisions of the Site Lease Agreement, the Lease Agreement, the Assignment Agreement and the Trust Agreement prepared for Certificates. The following also includes definitions of certain terms used therein and in this Official Statement. Such summary is not intended to be definitive. Reference is directed to said documents for the complete text thereof Except as otherwise defined in this summary, the terms previously defined in this Official Statement have the respective meanings previously given. Copies of said documents are available from the City and from the Trustee.

DEFINITIONS

"Additional Payments" means the payments so designated and required to be paid by the City pursuant to the Lease Agreement.

"Assignment Agreement' means the Assignment Agreement, dated as of September 15, 2019, by and between the Corporation and the Trustee, together with any duly authorized and executed amendments thereto.

"Bond Counsel' means (a) Robert M. Haight, or (b) any other attorney or firm of attorneys appointed by or acceptable to the City of nationally-recognized experience in the issuance of obligations of public entities.

"Business Day" means a day which is not a Saturday, Sunday or legal holiday on which banking institutions in the state in which the Principal Corporate Trust Office is located or in the State are closed or are required to close or a day on which the New York Stock Exchange is closed.

"Certificates" means the certificates of participation to be executed and delivered pursuant to the Trust Agreement which evidence direct, undivided fractional Interests of the Owners thereof in Lease Payments.

"City'' means City of Shasta Lake, a municipal corporation and general law city, duly organized and existing under and by virtue of the laws of the State.

"City Representative" means the Mayor, the City Manager or the Finance Director, or the designee of any such official, or any other person authorized by resolution delivered to the Trustee to act on behalf of the City under or with respect to the Site Lease Agreement, the Lease Agreement and the Trust Agreement.

"Closing Date" means October 8, 2019, the date upon which there is a physical delivery of the Certificates in exchange for the amount representing the purchase price of the Certificates by the Original Purchaser.

"Continuing Disclosure Certificate" shall mean that certain Continuing Disclosure Certificate executed by the City and dated the date of execution and delivery of the Certificates, as it may be amended from time to time in accordance with the terms thereof.

"Corporation" means the Public Property Financing Corporation of California, a nonprofit, public benefit corporation organized and existing under and by virtue of the laws of the State.

"Corporation Representative" means the President, the Executive Director, the Treasurer and the Secretary of the Corporation, or the designee of any such official, or any other person authorized by resolution delivered to the Trustee to act on behalf of the Corporation under or with respect to the Site Lease Agreement, the Lease Agreement, the Assignment Agreement and the Trust Agreement.

"Defeasance Obligations" means (a) cash, (b) non-callable direct obligations of the United States of America ("Treasuries"), (c) evidences of ownership of proportionate interests in future interest and principal payments on Treasuries 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 obliger and the

D-1

underlying Treasuries are not available to any person claiming through the custodian or to whom the custodian may be obligated, (d) subject to the prior written consent of the Insurer, pre-refunded municipal obligations rated "AAA" and "Aaa" by S&P and Moody's, respectively, or (e) securities eligible for "AAA" defeasance under then existing criteria of S&P.

"Delivery Costs" means all items of expense directly or indirectly payable by or reimbursable to the City or the Corporation relating to the execution and delivery of the Site Lease Agreement, the Lease Agreement, the Trust Agreement and the Assignment Agreement or the execution, sale and delivery of the Certificates, including but not limited to filing and recording costs, settlement costs, printing costs, reproduction and binding costs, costs for statistical data, initial fees and charges of the Trustee (including the fees and expenses of its counsel), financing discounts, legal fees and charges, insurance fees and charges (including title insurance), financial and other professional consultant fees, costs of rating agencies for credit ratings, fees for execution, transportation and safekeeping of the Certificates, and charges and fees in connection with the foregoing.

"Delivery Costs Fund" means the fund by that name established and held by the Trustee pursuant to the Trust Agreement.

"Designated Corporate Trust Office" means the corporate trust office of the Trustee in San Francisco, Ca: provided, that for purposes of the registration, transfer, exchange, payment or surrender of the Certificates, the term "Designated Corporate Trust Office" means the corporate trust office of the Trustee in Los Angeles, Ca, or such other office designated by the trustee from time to time.

"Federal Securities" means (a) Cash (insured at all times by the Federal Deposit Insurance Corporation), and (b) obligations of, or obligations guaranteed as to principal and interest by, the United States or any agency or instrumentality thereof, when such obligations are backed by the full faith and credit of the United States including:

(i) United States treasury obligations, (ii) all direct or fully guaranteed obligations, (iii) Farmers Home Administration, (iv) General Services Administration, (v) Guaranteed Title XI financing, (vi) Government National Mortgage Association (GNMA), and (vii) State and Local Government Series.

"Fiscal Year' means the twelve-month period beginning on July 1 of any year and ending on June 30 of the next succeeding year, or any other twelve-month period selected by the City as its fiscal year.

"Independent Counsel' means an attorney duly admitted to the practice of law before the highest court of the state in which such attorney maintains an office and who is not an employee of the Corporation, the City or the Trustee.

"Information SeNices" means the Electronic Municipal Market Access System (referred to as "EMMA"), a facility of the Municipal Securities Rulemaking Board (at http://emma.msrb.org) or, in accordance with then current guidelines of the Securities and Exchange Commission, such other addresses and/or such other national information services providing information or disseminating notices of redemption of obligations similar to the Certificates.

"Insurance and Condemnation Fund'' means the fund by that name established and held by the Trustee pursuant to the Trust Agreement.

"Interest Payment Date" as to the City means the first (1st) day of July and January each year, commencing July 1, 2020, so long as any Certificates are Outstanding.

"Lease Agreement' means that certain agreement for the lease of the Property by the Corporation to the City, dated as of September 15, 2019, together with any duly authorized and executed amendments thereto.

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http://emma.msrb.org

"Lease Payment Date" as to the City means the first (1st) day of July and January in each year during the Term of the Lease Agreement, commencing July 1, 2020.

"Lease Payment Fund'' means the fund by that name established and held by the Trustee pursuant to the Trust Agreement.

"Lease Payments" means the total payments required to be paid by the City pursuant to the Lease Agreement, including any prepayment thereof pursuant to the Lease Agreement, which payments consist of an interest component and a principal component, as set forth in the Lease Agreement.

"Net Proceeds," when used with respect to insurance or condemnation proceeds, means any insurance proceeds or condemnation award paid with respect to the Property, to the extent remaining after payment therefrom of all expenses incurred in the collection thereof.

"Original Purchaser' means the first purchaser of the Certificates upon their delivery by the Trustee on the Closing Date.

"Outstanding," when used as of any particular time with respect to Certificates, means (subject to the provisions of the Trust Agreement) all Certificates theretofore executed and delivered by the Trustee under the Trust Agreement except:

(a) Certificates theretofore canceled by the Trustee or surrendered to the Trustee for cancellation;

(b) Certificates for the payment or redemption of which funds or Defeasance Obligations in the necessary amount shall have theretofore been deposited with the Trustee or an escrow holder (whether upon or prior to the maturity or redemption date of such Certificates), provided that, if such Certificates are to be redeemed prior to maturity, notice of such redemption shall have been given as provided in the Trust Agreement or provision satisfactory to the Trustee shall have been made for the giving of such notice; and

(c) Certificates in lieu of or in exchange for which other Certificates shall have been executed and delivered by the Trustee pursuant to the Trust Agreement.

(d) "Owner'' or "Certificate Owner'' or "Owner of a Certificate," or any similar term, when used with respect to a Certificate means the person in whose name such Certificate shall be registered on the Registration Books.

"Permitted Encumbrances" means, as of any particular time: liens for general ad valorem taxes and assessments, if any, not then delinquent, or which the City may, pursuant to provisions of the Lease Agreement, permit to remain unpaid; the Site Lease Agreement; the Lease Agreement; the Assignment Agreement; any right or claim of any mechanic, laborer, material man, supplier or vendor not filed or perfected in the manner prescribed by law; easements, rights-of-way, mineral rights, drilling rights and other rights, reservations, covenants, conditions or restrictions which exist of record as of the Closing Date and which the City certifies in writing will not materially impairthe use of the Property; and easements, rights of way, mineral rights, drilling rights and other rights, reservations, covenants, conditions or restrictions established following the date of recordation of the Lease Agreement and to which the Corporation and the City agree in writing do not reduce the value of the Property.

"Permitted Investments" means any of the following: Federal Securities; Federal Housing Administration debentures;

The following listed obligations government-sponsored agencies which are not backed by the full faith and credit of the United States of America:

(a) Federal Home Loan Mortgage Corporation (FHLMC) senior debt obligations and participation certificates (excluded are stripped mortgage securities which are purchased at prices exceeding their principal amounts),

D-3

(b) Farm Credit System (formerly Federal Land Banks, Federal Intermediate Credit Banks and Banks for Cooperatives) consolidated system-wide bonds and notes,

(c) Federal Home Loan Banks (FHL Banks) consolidated debt obligations,

(d) Federal National Mortgage Association (FNMA) senior debt obligations and mortgage-backed securities (excluded are stripped mortgage securities which are purchased at prices exceeding their principal amounts),

(e) Financing Corporation (FICO) debt obligations, and

(f) Resolution Funding Corporation (REFCORP) debt obligations;

(g) 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;

(h) 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;

(i) Commercial paper (having original maturities of not more than 30 days) rated "A-1 +" by S&P and "Prime-1" by Moody's;

U) Money market funds rated in the highest rating category by S&P and Moody's including such funds for which the Trustee or an affiliate provides investment advice or other services;

"State Obligations," which means:

(a) Direct general obligations of any state of the United States of America or any subdivision of 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 (i) above and rated "A-1+" by S&P and "MIG-1" by Moody's, and

(c) Special Revenue Bonds (as defined in the United States Bankruptcy Code) of any state or state agency described in (i) above and rated "AA" or better by S&P and "Aa" or better by Moody's;

(d) Pre-refunded municipal obligations rated "AAA" by S&P and "Aaa" by Moody's meeting the following requirements: (i) the municipal obligations are (A) not subject to redemption prior to maturity or (B) the trustee

for the municipal obligations has been given irrevocable instructions concerning their call and redemption and the issuer of the municipal obligations has covenanted not to redeem such municipal obligations other than as set forth in such instructions,

(ii) the municipal obligations are secured by cash or U.S. Treasury Obligations which may be applied only to payment of the principal of, interest and premium on such municipal obligations,

(iii) the principal of and interest on the U.S. 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"),

(iv) the cash or U.S. 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

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(v) no substitution of a U.S. Treasury Obligation shall be permitted except with another U.S. Treasury Obligation and upon delivery of a new Verification, and

(vi) the cash or U.S. Treasury Obligations are not available to satisfy any other claims, including those by or against the trustee or escrow agent;

(vii) Repurchase agreements with any domestic bank, or domestic branch of a foreign bank, the long-term debt of which is rated at least "AA" by S&P and Moody's, or

(viii) 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 "AA" by S&P and Moody's, which broker-dealer falls under the jurisdiction of the Securities Investors Protection Corporation, or

(ix) any other entity rated "AA" or better by S&P and Moody's.

The market value of the collateral is maintained at levels and upon such conditions as would be acceptable to S & P and Moody's to maintain an "A" rating in an "A" rated structured financing (with a market value approach),

The Trustee or a third party acting solely as agent therefor or for the City (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),

The repurchase agreement shall provide and an opinion of counsel shall be rendered 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),

All other requirements of S&P in respect of repurchase agreements shall be met, and

The repurchase agreement shall 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 City or the Trustee, within 10 days of receipt of such direction, repurchase all collateral and terminate the agreement, with no penalty or premium to the City or Trustee.

Notwithstanding the above, if a repurchase agreement has a term of 270 days or less (with no 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.

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 longterm debt is rated at least "AA" (stable) by S&P and "Aa" (stable) by Moody's, or, in the case of a monoline municipal bond insurance company, claims paying ability of the guarantor is rated at least "AAA" (stable) by S&P and "Aaa" (stable) 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) with respect to the Certificates;

(b) the invested funds are available for withdrawal without penalty or premium, at any time upon not more than seven days' prior notice; the City and the Trustee 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 shall state that is the unconditional and general obligation of, and is not subordinated to any other obligation of, the provider thereof or, if the provider is a bank, the

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agreement or the opinion of counsel shall state that the obligation of the provider to make payments thereunder ranks pari passu with the obligations of the provider to its other depositors and its other unsecured and unsubordinated creditors;

(d) the City or the Trustee receives the opinion of domestic counsel (which opinion shall be addressed to the City and that such investment agreement is legal, valid, binding and enforceable upon the provider in accordance with its terms and of foreign counsel (if applicable).

The investment agreement shall provide that if during its term:

(a) the provider's rating by either S&P or Moody's falls below "AA-" or "Aa3", respectively, the provider shall, at its option, within 10 days of receipt of publication of such downgrade, either (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 City, the Trustee or a third party acting solely as agent therefor (the "Holder of the Collateral") collateral free and clear of any third-party liens or claims the market value of which collateral is maintained at levels and upon such conditions as would be acceptable to S & P and

(b) Moody's to maintain an "A" rating in an "A" rated structured financing (with a market value approach); or (ii) repay the principal of and accrued but unpaid interest on the investment, and

(c) 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 City or the Trustee, within 10 days of receipt of such direction, repay the principal of and accrued but unpaid interest on the investment, in either case with no penalty or premium to the City or Trustee, and

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

The investment agreement must provide that if during its term:

(a) the provider shall default in its payment obligations, the provider's obligations under the investment agreement shall, at the direction of the City or the Trustee, be accelerated and amounts invested and accrued but unpaid interest thereon shall be repaid to the City or Trustee, as appropriate, and

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

(c) The Local Agency Investment Fund of the State, created pursuant to section 16429.1 of the California Government Code, to the extent the Trustee is authorized to register such investment in its name.

"PERS" means the California Public Employees' Retirement System.

"Proceeds," when used with reference to the Certificates, means the face amount of the Certificates, less original issue discount.

"Project' means the prepayment of a portion of the City's unfunded actuarial accrued liability with respect to its payment obligations to PERS.

"Property'' means the Site.

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"Rating Category" means, with respect to any Permitted Investment, one of the generic categories of rating by Moody's or S&P applicable to such Permitted Investment, without regard to any refinement or graduation of such rating category by a plus or minus sign or a numeral.

"Registration Books" means the records maintained by the Trustee pursuant to the Trust Agreement for registration of the ownership and transfer of ownership of the Certificates.

"Regular Record Date" means the close of business on the first (1 51) day of the month of each Interest Payment Date, whether or not such first (1 51) day is a Business Day.

"Rental Period" means each twelve-month period during the Term of the Lease Agreement commencing on July 15 in any year and ending on July 15 in the next succeeding year; provided, however, that the first Rental Period shall commence on the Closing Date and shall end on July 15, 2020.

"ReseNe Fund" means the fund by that name established and held by the Trustee pursuant to the Trust Agreement.

"ReseNe Requiremenf' means an amount equal to the maximum debt service, which amount shall be $670,465 on the closing date.

"S&P" means S&P Global Ratings, a Standard & Poor's Financial Services LLC business, New York, New York, or its successors.

"Securities Depositories" means The Depository Trust Company, 55 Water Street, 50th Floor, New York, NY 10041 Attention: Call Notification Department; or to such other addresses and/or such other registered securities depositories holding substantial amounts of obligations of types similar to the Certificates.

"Site" means that certain real property more particularly described in the Site Lease Agreement and in the Lease Agreement.

"Site Lease Agreement' means the Site Lease Agreement, dated as of September 15, 2019, by and between the City, as lessor, and the Corporation, as lessee, together with any duly authorized and executed amendments thereto.

"State" means the State of California.

"Term of the Lease Agreement' means the time during which the Lease Agreement is in effect, as provided in the Lease Agreement.

"Trust Agreement' means the Trust Agreement, dated as of September 15, 2019, by and among the City, the Corporation and the Trustee, together with any duly authorized amendments thereto.

"Trustee" means MUFG Union Bank N.A., or any successor thereto, acting as Trustee pursuant to the Trust Agreement.

SITE LEASE AGREEMENT

The Site Lease Agreement is entered into between the City and the Corporation. The City agrees to lease the Site to the Corporation for a term continuous with the term of the Lease Agreement. The City and the Corporation agree that the lease to the Corporation of the City's right, title and interest in the Site pursuant to the Site Lease Agreement serves the public purposes of the City by enabling the Corporation to lease the Site back to the City.

LEASE AGREEMENT

Deposit of Money

On the Closing Date, the Corporation shall cause to be deposited with the Trustee the net proceeds of

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sale of the Certificates. Amounts required to pay Delivery Costs shall be deposited in the Delivery Costs Fund. The amount required to refinance a portion of the City's unfunded actuarial accrued liability with respect to its payment obligations to PERS shall be transferred to PERS.

Payment of Delivery Costs

Payment of Delivery Costs shall be made from the moneys deposited in the Delivery Costs Fund, which moneys shall be disbursed for such purpose in accordance and upon compliance with the Trust Agreement.

Lease

The Corporation leases the Property to the City, and the City leases the Property from the Corporation, upon the terms and conditions set forth in the Lease Agreement. The leasing of the Property by the City to the Corporation pursuant to the Site Lease Agreement shall not affect or result in a merger of the City's leasehold estate pursuant to the Lease Agreement and its fee estate as lessor under the Site Lease Agreement.

Term of Agreement; Possession

The Term of the Lease Agreement shall commence on the Closing Date, and shall end on July 15, 2039, unless such term is extended. If, on July 15, 2039, the Trust Agreement shall not be discharged by its terms or if the Lease Payments payable under the Lease Agreement shall have been abated at any time and for any reason, then the Term of the Lease Agreement shall be extended without the need to execute any amendment to the Lease Agreement until there has been deposited with the Trustee an amount sufficient to pay all obligations due under the Lease Agreement, but in no event shall the Term of the Lease Agreement extend beyond July 15, 2049. If, prior to July 15, 2039, the Trust Agreement shall be discharged by its terms, the Term of the Lease Agreement shall thereupon end. The Trustee shall notify the Corporation of the termination of the Lease Agreement pursuant to the Trust Agreement.

The City agrees to accept and take possession of the Property on or prior to the date of recordation of the Lease Agreement. The first Lease Payment shall be due on July 1, 2020.

Lease Payments

Obligation to Pay. The City agrees to pay to the Corporation, its successors and assigns, as rental for the use and occupancy of the Property during each Rental Period, the Lease Payments (denominated into components of principal and interest) in the respective amounts specified in the Lease Agreement, to be due and payable on the respective Lease Payment Dates specified in the Lease Agreement. Any amount held in the Lease Payment Fund on any Lease Payment Date (other than amounts resulting from the prepayment of the Lease Payments in part but not in whole and other than amounts required for payment of Certificates not yet surrendered) shall be credited towards the Lease Payment then due and payable; and no Lease Payment need be made on any Lease Payment Date if the amounts then held in the Lease Payment Fund are at least equal to the Lease Payment then required to be paid. The Lease Payments for the Property payable in any Rental Period shall be for the use of the Property for such Rental Period.

Effect of Prepayment. In the event that the City prepays all remaining Lease Payments and all additional payments due under the Lease Agreement in full, the City's obligations under the Lease Agreement shall thereupon cease and terminate including, but not limited to, the City's obligation to pay Lease Payments under the Lease Agreement; subject however, to the provisions of the Lease Agreement in the case of prepayment by application of a security deposit. In the event that the City optionally prepays the Lease Payments in part but not in whole, such prepayment shall be credited entirely towards the prepayment of the Lease Payments as follows: (i) the principal components of each remaining such Lease Payments shall be reduced in such order as shall be selected by the City in integral multiples of $5,000; and (ii) the interest component of each remaining Lease Payment shall be reduced by the aggregate corresponding amount of interest which would otherwise be payable with respect to the Certificates redeemed pursuant to the Trust Agreement.

Rate on Overdue Payments. In the event the City should fail to make any of the payments required in the Lease Agreement, the payment in default shall continue as an obligation of the City until the amount in default

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shall have been fully paid and the City agrees to pay the same with interest thereon, to the extent permitted by law, from the date of default to the date of payment at the rate per annum payable with respect to the Certificates. Such interest, if received, shall be deposited in the Lease Payment Fund or in the Reserve Fund to replenish the Reserve Fund if withdrawals were made therefrom as a result of the default.

Fair Rental Value. The Lease Payments for each Rental Period shall constitute the total rental for the Property for each such Rental Period and shall be paid by the City in each Rental Period for and in consideration of the right of the use and occupancy and the continued quiet use and enjoyment of the Property during each Rental Period. The parties to the Lease Agreement have agreed and determined that the total Lease Payments represent the fair rental value of the Property as it applies to the 2018 Certificates of Participation and the 2019 Taxable Certificates of Participation. In making such determination, consideration has been given to the obligations of the parties under the Lease Agreement, the uses and purposes which may be served by the Property and the benefits therefrom which will accrue to the City and the general public.

Source of Payments; Budget and Appropriation. Lease Payments and Additional Payments shall be payable from any source of available funds of the City, subject to the provisions of the Lease Agreement.

The City covenants to take such action as may be necessary to include all Lease Payments and Additional Payments due under the Lease Agreement in each of its budgets during the Term of the Lease Agreement and to make the necessary annual appropriations for all such Lease Payments and for Additional Payments due thereunder. To that end, the Council shall direct budgetary staff to include in each annual budget proposal to the Council an appropriation sufficient to pay Lease Payments and Additional Payments. The City expresses its present intent to appropriate Lease Payments and Additional Payments due under the Lease Agreement during the Term of the Lease Agreement. The covenants on the part of the City shall be deemed to be and shall be construed to be duties imposed by law and it shall be the duty of each and every public official of the City to take such action and do such things as are required by law in the performance of the official duty of such officials to enable the City to carry out and perform the covenants and agreements in the Lease Agreement agreed to be carried out and performed by the City.

The request for inclusion in the final approved budget and appropriation shall be made in each Fiscal Year following any Abatement Period. Failure by the chief business official and other officers to request such inclusion and appropriation shall constitute an Event of Default under the Lease Agreement.

Assignment. The City understands and agrees that all Lease Payments have been assigned by the Corporation to the Trustee in trust, pursuant to the Assignment Agreement, for the benefit of the Owners of the Certificates, and the City assents to such assignment. The Corporation directs the City, and the City agrees to pay to the Trustee at the Principal Corporate Trust Office, all payments payable by the City pursuant to the Lease Agreement.

Additional Payments

In addition to the Lease Payments, the City shall pay when due the following additional payments:

Any fees and expenses incurred by the City in connection with or by reason of its leasehold estate in the Property as and when the same become due and payable;

Any amounts due to the Trustee pursuant to the Trust Agreement for all services rendered under the Trust Agreement and for all reasonable expenses, charges, costs, liabilities, legal fees and other disbursements incurred in and about the performance of its powers and duties under the Trust Agreement;

Any reasonable fees and expenses of such accountants, consultants, attorneys and other experts as may be engaged by the City, the Corporation or the Trustee to prepare audits, financial statements, reports, opinions or provide such other services required under the Lease Agreement or the Trust Agreement;

Any reasonable out-of-pocket expenses of the City in connection with the execution and delivery of the Lease Agreement or the Trust Agreement, or in connection with the execution and delivery of the Certificates,

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including any and all expenses incurred in connection with the authorization, execution, sale and delivery of the Certificates, or incurred by the Corporation in connection with any litigation which may at any time be instituted involving the Lease Agreement, the Trust Agreement, the Certificates or any of the other documents contemplated or thereby, or incurred by the Corporation in connection with the Continuing Disclosure Certificate, or otherwise incurred in connection with the administration thereof.

Title

During the Term of the Lease Agreement, the Corporation shall hold leasehold title to the Property and shall hold fee title to those portions of the Property which are newly acquired or constructed and any and all additions which comprise fixtures, repairs, replacements or modifications to the Property, except for those fixtures, repairs, replacements or modifications which are added to the Property by the City at its own expense and which may be removed without damaging the Property and except for any items added to the Property by the City pursuant to the Lease Agreement.

If the City prepays the Lease Payments in full or makes the security deposit permitted by the Lease Agreement or pays all Lease Payments during the Term of the Lease Agreement as the same become due and payable, all right, title and interest of the Corporation in and to the Property shall be terminated. The Corporation agrees to take any and all steps and execute and record any and all documents reasonably required by the City to consummate any such transfer of title.

Maintenance, Utilities, Taxes and Assessments

Throughout the Term of the Lease Agreement, as part of the consideration for the rental of the Property, all improvement, repair and maintenance of the Property shall be the responsibility of the City and the City shall pay, or otherwise arrange, for the payment of all utility services supplied to the Property which may include, without limitation, janitor service, security, power, gas, telephone, light, heating, water and all other utility services, and shall pay for or otherwise arrange for the payment of the cost of the repair and replacement of the Property resulting from ordinary wear and tear or want of care on the part of the City or any assignee or sublessee thereof. In exchange for the Lease Payments, the Corporation agrees to provide only the Property. The City waives the benefits of subsections 1 and 2 of section 1932 of the California Civil Code, but such waiver shall not limit any of the rights of the City under the terms of the Lease Agreement.

The City shall also pay or cause to be paid all taxes and assessments of any type or nature, if any, charged to the Corporation or the City affecting the Property or the respective interests or estates therein; provided that with respect to special assessments or other governmental charges that may lawfully be paid in installments over a period of years, the City shall be obligated to pay only such installments as are required to be paid during the Term of the Lease Agreement as and when the same become due.

The City may, at the City's expense and in its name, in good faith contest any such taxes, assessments, utility and other charges and, in the event of any such contest, may permit the taxes, assessments or other charges so contested to remain unpaid during the period of such contest and any appeal therefrom unless the Corporation, shall notify the City that, in the opinion of Independent Counsel, by nonpayment of any such items, the interest of the Corporation in the Property will be materially endangered or the Property or any part thereof will be subject to loss or forfeiture, in which event the City shall promptly pay such taxes, assessments or charges or provide the Corporation, with full security against any loss which may result from nonpayment, in form satisfactory to the Corporation. The City shall provide the Corporation with written notice of any such contest and shall provide such updates on the contest as the Corporation, may reasonably request.

Modification of Property

The City shall, at its own expense, have the right to remodel the Property or to make additions, modifications and improvements to the Property. All additions, modifications and improvements to the Property shall thereafter comprise part of the Property and be subject to the provisions of the Lease Agreement. Such additions, modifications and improvements shall not in any way damage the Property, substantially alter its nature, cause the interest component of Lease Payments to be subject to federal income taxes or cause the Property to be used for purposes other than those authorized under the provisions of State and federal law; and

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the Property, upon completion of any additions, modifications and improvements made thereto pursuant to the Lease Agreement, shall be of a value which is not substantially less than the value of the Property immediately prior to the making of such additions, modifications and improvements. The City will not permit any mechanic's or other lien to be established or remain against the Property for labor or materials furnished in connection with any remodeling, additions, modifications, improvements, repairs, renewals or replacements made by the City pursuant to the Lease Agreement; provided that if any such lien is established and the City shall first notify the Corporation of the City's intention to do so, the City may in good faith contest any lien filed or established against the Property, and in such event may permit the items so contested to remain undischarged and unsatisfied during the period of such contest and any appeal therefrom and shall provide the Corporation with full security against any loss or forfeiture which might arise from the nonpayment of any such item, in form satisfactory to the Corporation. The Corporation will cooperate fully in any such contest, upon the request and at the expense of the City.

Insurance

Public Liability and Property Damage Insurance. The City shall maintain or cause to be maintained, throughout the Term of the Lease Agreement, insurance policies, including a standard comprehensive general policy or policies in protection of the Corporation, the City, the Trustee and their respective members, officers, agents and employees. Such liability insurance may be maintained as part of or in conjunction with any other liability insurance coverage carried by the City and may be maintained through a joint exercise of powers authority created for such purpose or, with the prior written consent of the in the form of self-insurance by the City. Said policy or policies shall provide for indemnification of said parties against direct or consequential loss or liability for damages for bodily and personal injury, death or property damage occasioned by reason of the operation of the Property. Said policy or policies shall provide coverage in the minimum liability limits of $1,000,000 for personal injury or death of each person and $3,000,000 for personal injury or deaths of two or more persons in each accident or event, and in a minimum amount of $100,000 (subject to a deductible clause of not to exceed $5,000) for damage to property resulting from each accident or event. Such public liability and property damage insurance may, however, be in the form of a single limit policy in the amount of $3,000,000 covering all such risks. Such liability insurance may be maintained as part of or in conjunction with any other liability insurance coverage carried by the City and may be maintained in the form of insurance maintained through a joint exercise of powers authority created for such purpose or, with the prior written consent in the form of self-insurance by the City. The Net Proceeds of such liability insurance shall be applied toward extinguishment or satisfaction of the liability with respect to which the insurance proceeds shall have been paid.

Fire and Extended Coverage Insurance; No Earthquake Insurance. The City shall maintain or cause to be maintained throughout the Term of the Lease Agreement, insurance against loss or damage to any part of the Property constituting structures, if any, by fire and lightning, with extended coverage and vandalism and malicious mischief insurance; provided, however, that the City shall not be required to maintain earthquake insurance with respect to the Property. Said extended coverage insurance shall, as nearly as practicable, cover loss or damage by explosion, windstorm, riot, aircraft, vehicle damage, smoke and such other hazards as are normally covered by such insurance. Such insurance shall be in an amount equal to one hundred percent (100%) of the replacement cost of such portion of the Property, if any. Such insurance may be subject to deductible clauses of not to exceed $100,000 for any one loss. Such insurance may be maintained as part of or in conjunction with any other fire and extended coverage insurance carried by the City, may be maintained in whole or in part in the form of insurance maintained through a joint exercise of powers authority created for such purpose. The Net Proceeds of such insurance shall be applied as provided in the Lease Agreement.

Rental Interruption Insurance. The City shall maintain, or cause to be maintained, throughout the Term of the Lease Agreement rental interruption or use and occupancy insurance to cover loss, total or partial, of the use of any part of the Property during the Term of the Lease Agreement as a result of any of the hazards covered in the insurance required by the Lease Agreement, if any, in an amount at least equal to two times maximum annual Lease Payments. The Net Proceeds of such insurance shall be paid to the Trustee and deposited in the Lease Payment Fund and shall be credited towards the payment of the Lease Payments in the order in which such Lease Payments come due and payable. Such insurance may be maintained as part of or in conjunction with any other insurance carried by the City and may be maintained in whole or in part in the form of insurance maintained through a joint exercise of powers authority created for such purpose. The City may not satisfy the requirements of the Lease Agreement for rental interruption insurance with self-insurance.

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Title Insurance. The City shall provide, from moneys in the Delivery Costs Fund or at its own expense, on the Closing Date, an CL TA title insurance policy in the amount of not less than the principal amount of the Certificates, insuring the City's leasehold estate in the Property, subject only to Permitted Encumbrances.

Insurance Net Proceeds; Form of Policies Each policy or other evidence of insurance required by the Lease Agreement shall provide that all proceeds thereunder shall be payable to the Trustee as and to the extent required under the Lease Agreement, shall name the Trustee as additional insureds and shall be applied as provided in the Lease Agreement. Insurance must be provided by an insurer rated "A" or better by S&P or AM. Best Company. The City shall pay or cause to be paid when due the premiums for all insurance policies required by the Lease Agreement. All policies evidencing required insurance shall provide thirty (30) days' prior written notice to the Corporation, the City and the Trustee, of any cancellation, reduction in amount or material change in coverage. The Trustee shall not be responsible for the sufficiency of any insurance required in the Lease Agreement, including any forms of self- insurance and shall be fully protected in accepting payment on account of such insurance or any adjustment, compromise or settlement of any loss. The City shall cause to be delivered annually on or before each September 1 to the Trustee, a certification, signed by a City Representative, stating compliance with the provisions of the Lease Agreement. The Trustee shall be entitled to rely on such certification without independent investigation. The City shall have the adequacy of any insurance reserves maintained by the City or by a joint exercise of powers authority, if applicable, for purposes of the insurance required by the Lease Agreement reviewed at least annually, on or before each September 1, by an independent insurance consultant and shall maintain reserves in accordance with the recommendations of such consultant to the extent moneys are available for such purpose and not otherwise appropriated.

No Condemnation

The City covenants and agrees, to the extent it may lawfully do so, that so long as any of the Certificates remain outstanding and unpaid, the City will not exercise the power of condemnation with respect to the Property. The City further covenants and agrees, to the extent it may lawfully do so, that if for any reason the foregoing covenant is determined to be unenforceable or if the City should fall or refuse to abide by such covenant and condemns the Property, the appraised value of the Property shall not be less than the greater of (i) if the Certificates are then subject to redemption, the principal and interest components of the Certificates Outstanding through the date of their redemption, or (ii) if the Certificates are not then subject to redemption, the amount necessary to defease the Certificates to the first available redemption date in accordance with the Trust Agreement.

Eminent Domain

If all of the Property shall be taken permanently under the power of eminent domain or sold to a government threatening to exercise the power of eminent domain, the Term of the Lease Agreement shall cease as of the day possession shall be so taken. If less than all of the Property shall be taken permanently, or if all of the Property or any part thereof shall be taken temporarily under the power of eminent domain, (1) the Lease Agreement shall continue in full force and effect and shall not be terminated by virtue of such taking and the parties waive the benefit of any law to the contrary, and (2) there shall be a partial abatement of Lease Payments as a result of the application of the Net Proceeds of any eminent domain award to the prepayment of the Lease Payments, in an amount to be agreed upon by the City and the Corporation and communicated to the Trustee such that the resulting Lease Payments represent fair consideration for the use and occupancy of the remaining usable portion of the Property, except to the extent of special funds, such as amounts in the Reserve Fund available for the payment of Lease Payments.

Application of Net Proceeds

From Insurance Award. The Net Proceeds of any insurance award resulting from any damage to or destruction of any portion of the Property constituting structures, if any, by fire or other casualty shall be paid by the City to the Trustee, as assignee of the Corporation under the Assignment Agreement, deposited in the Insurance and Condemnation Fund held by the Trustee and applied as set forth in the Trust Agreement.

From Eminent Domain Award. The Net Proceeds of any eminent domain award shall be paid by the City to the Trustee, as assignee of the Corporation under the Assignment Agreement, deposited in the Insurance and

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Condemnation Fund and applied as set forth in the Trust Agreement.

From Title Insurance. The Net Proceeds of any title insurance award shall be paid to the Trustee, as assignee of the Corporation under the Assignment Agreement, deposited in the Insurance and Condemnation Fund and applied as set forth in the Trust Agreement.

Abatement of Lease Payments in the Event of Damage or Destruction

Lease Payments shall be abated during any period in which, by reason of damage or destruction, there is substantial interference with the use and occupancy by the City of the Property or any portion thereof to the extent to be agreed upon by the City and the Corporation and communicated by a City Representative to the Trustee. The parties agree that the amounts of the Lease Payments under such circumstances shall not be less than the amounts of the unpaid Lease Payments as are then set forth in the Lease Agreement, unless such unpaid amounts are determined to be greater than the fair rental value of the portions of the Property not damaged or destroyed, based upon the opinion of an MAI appraiser with expertise in valuing such properties, or other appropriate method of valuation, in which event the Lease Payments shall be abated such that they represent said fair rental value. Such abatement shall continue for the period commencing with such damage or destruction and ending with the substantial completion of the work of repair or reconstruction as communicated by a City Representative to the Trustee. In the event of any such damage or destruction, the Lease Agreement shall continue in full force and effect and the City waives any right to terminate the Lease Agreement by virtue of any such damage and destruction. Notwithstanding the foregoing, there shall be no abatement of Lease Payments to the extent that (a) the proceeds of rental interruption insurance or (b) amounts in the Reserve Fund, if cash funded, and/or the Insurance and Condemnation Fund and/or the Lease Payment Fund are available to pay Lease Payments which would otherwise be abated, it being declared that such proceeds and amounts constitute special funds for the payment of the Lease Payments.

Access to the Property

The City agrees that the Corporation and any City Representative, and the Corporation's successors or assigns, shall have the right at all reasonable times to enter upon and to examine and inspect the Property. The City further agrees that the Corporation, any City Representative, and the Corporation's successors or assigns, shall have such rights of access to the Property as may be reasonably necessary to cause the proper maintenance of the Property in the event of failure by the City to perform its obligations under the Lease Agreement.

Release and Indemnification Covenants

The City shall and agrees to indemnify and save the Corporation and the Trustee, and their officers, agents, directors, employees, successors and assigns harmless from and against all claims, losses and damages, including legal fees and expenses, arising out of (i) the use, maintenance, condition or management of, or from any work or thing done on the Property by the City, (ii) any breach or default on the part of the City in the performance of any of its obligations under the Lease Agreement or the Trust Agreement, (iii) any act or omission of the City or of any of its agents, contractors, servants, employees or licensees with respect to the Property, (iv) any act or omission of any sublessee of the City with respect to the Property, or (v) the authorization of payment of the Delivery Costs. Such indemnification shall include the costs and expenses of defending any claim or liability arising under the Lease Agreement or the Trust Agreement and the transactions contemplated thereby. No indemnification is made in the Lease Agreement for willful misconduct, negligence or breach of duty under the Lease Agreement by the Corporation, its officers, agents, directors, employees, successors or assigns.

Assignment by the Corporation

The Corporation's rights under the Lease Agreement, including the right to receive and enforce payment of the Lease Payments to be made by the City under the Lease Agreement, have been assigned to the Trustee pursuant to the Assignment Agreement.

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Assignment and Subleasing by the City

The Lease Agreement may not be assigned by the City. The City may sublease the Property or any portion thereof, but only with the written consent of the Corporation, and subject to, and delivery to, the Corporation of a certificate as to, all of the following conditions:

The Lease Agreement and the obligation of the City to make Lease Payments shall remain obligations of the City;

The City shall, within thirty (30) days after the delivery thereof, furnish or cause to be furnished to the Corporation and the Trustee, a true and complete copy of such sublease;

No such sublease by the City shall cause the Property to be used for a purpose other than as may be authorized under the provisions of the Constitution and laws of the State; and

The City shall furnish the Corporation and the Trustee, with a written opinion of Bond Counsel, which shall be an Independent Counsel, stating that such sublease does not cause the interest components of the Lease Payments to become subject to State personal income taxes.

Notwithstanding the foregoing the City may sublease the Property to the Corporation in connection with a future certificates of participation or lease revenue bond financing without the necessity to comply with any of the foregoing conditions, so long as the total of the unpaid principal component of the Lease Payments and the principal component of the lease payments to be paid with respect to such future certificates of participation or lease revenue bond financing does not exceed the value of the Property.

Amendment of Lease Agreement

(a) Substitution of Site or Facility. The City shall have, and is granted, the option at any time and from time to time during the Term of the Lease Agreement to substitute other land (a "Substitute Site") and/or a substitute facility (a "Substitute Facility") for the Site (the "Former Site"), or a portion thereof, and/or the Facility (the "Former Facility"), or a portion thereof, provided that the City shall satisfy all of the following requirements (to the extent applicable) which are declared to be conditions precedent to such substitution:

(i) If a substitution of the Site, the City shall file with the Corporation and the Trustee, an amendment to the Site Lease Agreement which adds thereto a description of such Substitute Site and deletes therefrom the description of the Former Site;

(ii) If a substitution of the Site, the City shall file with the Corporationand the Trustee, an amendment to the Lease Agreement which adds thereto a description of such Substitute Site and deletes therefrom the description of the Former Site;

(iii) If a substitution of the facility, the City shall file with the Corporation and the Trustee, an amendment to the Site Lease Agreement which adds thereto a description of such Substitute Facility and deletes therefrom the description of the Former Facility;

(iv) If a substitution of the facility, the City shall file with the Corporation and the Trustee, an amendment to the Lease Agreement which adds thereto a description of such Substitute Facility and deletes therefrom the description of the Former Facility;

(v) The City shall certify in writing to the Corporation and the Trustee, that such Substitute Site and/or Substitute Facility serve the purposes of the City, constitutes property that is unencumbered, subject to Permitted Encumbrances, and constitutes property which the City is permitted to lease under the laws of the State;

(vi) The City delivers to the Corporation and the Trustee, evidence (which may be insurance values or any other reasonable basis of valuation and need not require an appraisal) that the

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value of the Property following such substitution is equal to or greater than the Outstanding principal amount of the Certificates and confirms in writing to the Trustee that the indemnification provided pursuant to the Trust Agreement applies with respect to the Substitute Site and/or Substitute Facility;

(vii) The Substitute Site and/or Substitute Facility shall not cause the City to violate any of its covenants, representations and warranties made in the Lease Agreement and in the Trust Agreement;

(viii) The City shall obtain an amendment to the title insurance policy required pursuant to the Lease Agreement which adds thereto a description of the Substitute Site and deletes therefrom the description of the Former Site;

(ix) The City shall certify that the Substitute Site and/or the Substitute Facility is of the same or greater essentiality to the City as was the Former Site and/or the Former Facility;

(x) The City shall provide notice of the substitution to any rating agency then rating the Certificates which rating was provided at the request of the City or the Corporation.

(xi) The City shall furnish the Corporation and the Trustee, with a written opinion of Bond Counsel, which shall be an Independent Counsel, stating that such substitution does not cause the interest components of the Lease Payments to become subject to State personal income taxes; and

(b) Release of Site. The City shall have, and is granted, the option at any time and from time to time during the Term of the Lease Agreement to release any portion of the Site, provided that the City shall satisfy all of the following requirements which are declared to be conditions precedent to such release:

(i) The City shall file with the Corporation and the Trustee, an amendment to the Site Lease Agreement which describes the Site, as revised by such release;

(ii) The City delivers to the Corporation and the Trustee, evidence (which may be insurance values or any other reasonable basis of valuation and need not require an appraisal) that the value of the Site, as revised by such release, is equal to or greater than the Outstanding principal amount of the Certificates and confirms in writing to the Trustee and the Corporation that the indemnification provided pursuant to the Trust Agreement applies with respect to the Site, as revised by such release;

(iii) Such release shall not cause the City to violate any of its covenants, representations and warranties made in the Lease Agreement and in the Trust Agreement;

(iv) The City shall provide notice of the release to any rating agency then rating the Certificates which rating was provided at the request of the City or the Corporation; and

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(c) Generally. The Corporation and the City may at any time amend or modify any of the provisions of the Lease Agreement, but only (i) with the prior written consent of the Owners of a majority in aggregate principal amount of the Outstanding Certificates, or (ii) without the consent of any of the Owners but only if such amendment or modification is for any one or more of the following purposes:

(i) to add to the covenants and agreements of the City contained in the Lease Agreement, other covenants and agreements thereafter to be observed, or to limit or surrender any rights or power reserved to or conferred upon the City; or

(ii) to make such provisions for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective provision contained in the Lease Agreement, or in any other respect whatsoever as the Corporation and the City may deem necessary or desirable, provided that, in the opinion of Bond Counsel, such modifications or amendments will not materially adversely affect the interests of the Owners.

Events of Default and Remedies

Events of Default. The following shall be "events of default" under the Lease Agreement and the terms "Events of Default" and "Default" shall mean, whenever they are used in the Lease Agreement, any one or more of the following events:

(a) Failure by the City to pay any Lease Payment or other payment required to be paid at the time specified.

(b) Failure by the City to observe and perform any covenant, condition or agreement on its part to be observed or performed under the Lease Agreement or under the Trust Agreement, for a period of thirty (30) days after written notice specifying such failure and requesting that it be remedied has been given to the City by the Corporation, the Trustee or the Owners of not less than five percent (5%) in aggregate principal amount of Certificates then outstanding; provided, however, if the failure stated in the notice can be corrected, but not within the applicable period, the Corporation, the Trustee and such Owners shall not unreasonably withhold their consent to an extension of such time if corrective action is instituted by the City within the applicable period and diligently pursued until the default is corrected; provided further, however, that no grace period for a covenant default shall exceed 30 days nor be extended for more than 60 days.

(c) The filing by the City of a voluntary petition in bankruptcy, or failure by the City promptly to lift any execution, garnishment or attachment, or adjudication of the City as a bankrupt, or assignment by the City for the benefit of creditors, or the entry by the City into an agreement of composition with creditors, or the approval by a court of competent jurisdiction of a petition applicable to the City in any proceedings instituted under the provisions of the Federal Bankruptcy Act, as amended, or under any similar acts which may hereafter be enacted.

Remedies on Default. The Trustee shall have the right to re-enter and re-let the Property and to terminate the Lease Agreement.

Whenever any Event of Default shall have happened and be continuing, it shall be lawful for the Corporation to exercise any and all remedies available pursuant to law or granted pursuant to the Lease Agreement; provided, however, that notwithstanding anything in the Lease Agreement or in the Trust Agreement to the contrary, there shall be no right under any circumstances to accelerate the Lease Payments or otherwise declare any Lease Payments not then in default to be immediately due and payable. Each and every covenant in the Lease Agreement to be kept and performed by the City is expressly made a condition and upon the breach thereof, the Corporation may exercise any and all rights of entry and re-entry upon the Property, and also, at its option, with or without such entry, may terminate the Lease Agreement; provided, that no such termination shall be effected either by operation of law or acts of the parties to the Lease Agreement, except only in the manner expressly provided in the Lease Agreement. In the event of such default and notwithstanding any re-entry by the Corporation, the City shall, as expressly provided in the Lease Agreement, continue to

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remain liable for the payment of the Lease Payments and/or damages for breach of the Lease Agreement and the performance of all conditions therein contained and, in any event such rent and/or damages shall be payable to the Corporation at the time and in the manner as provided in the Lease Agreement, to wit:

In the event the Corporation does not elect to terminate the Lease Agreement in the manner provided for below, the City agrees to and shall remain liable for the payment of all Lease Payments and the performance of all conditions contained in the Lease Agreement and shall reimburse the Corporation for any deficiency arising out of the re-leasing of the Property, or, in the event the Corporation is unable to re-lease the Property, then for the full amount of all Lease Payments to the end of the Term of the Lease Agreement, but said Lease Payments and/or deficiency shall be payable only at the same time and in the same manner as hereinabove provided for the payment of Lease Payments, notwithstanding such entry or re-entry by the Corporation or any suit in unlawful detainer, or otherwise, brought by the Corporation for the purpose of effecting such re-entry or obtaining possession of the Property or the exercise of any other remedy by the Corporation. The City irrevocably appoints the Corporation as the agent and attorney-in-fact of the City to enter upon and re-lease the Property in the event of default by the City in the performance of any covenants contained in the Lease Agreement to be performed by the City and to remove all personal property whatsoever situated upon the Property, to place such property in storage or other suitable place within the City of Shasta Lake, for the account of and at the expense of the City, and the City exempts and agrees to save harmless the Corporation from any costs, loss or damage whatsoever arising or occasioned by any such entry upon and re-leasing of the Property and the removal and storage of such property by the Corporation or its duly authorized agents in accordance with the provisions contained in the Lease Agreement. The City waives any and all claims for damages caused or which may be caused by the Corporation in re-entering and taking possession of the Property as provided in the Lease Agreement and all claims for damages that may result from the destruction of or injury to the Property and all claims for damages to or loss of any property belonging to the City that may be in or upon the Property. The City agrees that the terms of the Lease Agreement constitute full and sufficient notice of the right of the Corporation to re-lease the Property in the event of such re-entry without effecting a surrender of the Lease Agreement, and further agrees that no acts of the Corporation in effecting such re-leasing shall constitute a surrender or termination of the Lease Agreement irrespective of the term for which such re-leasing is made or the terms and conditions of such re-leasing, or otherwise, but that, on the contrary, in the event of such default by the City the right to terminate the Lease Agreement shall vest in the Corporation to be effected in the sole and exclusive manner provided for in paragraph (b) below.

In an Event of Default, the Corporation, may terminate the Lease Agreement and re-lease all or any portion of the Property. In the event of the termination of the Lease Agreement by the Corporation at its option and in the manner provided in the Lease Agreement on account of default by the City (and notwithstanding any re-entry upon the Property by the Corporation in any manner whatsoever or the re-leasing of the Property), the City nevertheless agrees to pay to the Corporation all costs, loss or damages howsoever arising or occurring payable at the same time and in the same manner as is provided in the Lease Agreement in the case of payment of Lease Payments. Any surplus received by the Corporation from such re-leasing shall be credited towards the Lease Payments next coming due and payable. Neither notice to pay rent or to deliver up possession of the premises given pursuant to law nor any proceeding in unlawful detainer taken by the Corporation shall of itself operate to terminate the Lease Agreement, and no termination of the Lease Agreement on account of default by the City shall be or become effective by operation of law, or otherwise, unless and until the Corporation shall have given written notice to the City of the election on the part of the Corporation to terminate the Lease Agreement. The City covenants and agrees that no surrender of the Property and/or of the remainder of the Term of the Lease Agreement or any termination of the Lease Agreement shall be valid in any manner or for any purpose whatsoever unless stated or accepted by the Corporation by such written notice.

No Remedy Exclusive. No remedy is intended to be exclusive and every such remedy shall be cumulative and shall be in addition to every other remedy given under the Lease Agreement now or hereafter existing at law or in equity. No delay or omission to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient. In order to entitle the Corporation to exercise any remedy reserved to it in the Lease Agreement, it shall not be necessary to give any notice, other than such notice as may be required in the Lease Agreement or by law.

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Security Deposit

Notwithstanding any other provision of the Lease Agreement, the City may, on any date, secure the payment of all or a portion of the Lease Payments remaining due by an irrevocable deposit with the Trustee or an escrow holder under an escrow deposit and trust agreement as referenced in the Trust Agreement, of: (a) in the case of a security deposit relating to all Lease Payments, cash in an amount which, together with amounts on deposit in the Lease Payment Fund, the Insurance and Condemnation Fund and the Reserve Fund, is sufficient to pay all unpaid Lease Payments, including the principal and interest components thereof, in accordance with the Lease Payment schedule set forth in the Lease Agreement.

In the event of a deposit pursuant as to all Lease Payments and the payment of all fees, expenses and indemnifications owed to the Trustee, all obligations of the City under the Lease Agreement shall cease and terminate, excepting only the obligation of the City to make, or cause to be made, all payments from the deposit made by the City and the obligations of the City pursuant to the Lease Agreement and title to the Property shall vest in the City on the date of said deposit automatically and without further action by the City or the Corporation. Said deposit and interest earnings thereon shall be deemed to be and shall constitute a special fund for the payments and said obligation shall thereafter be deemed to be and shall constitute the installment purchase obligation of the City for the Property. Upon said deposit, the Corporation will execute or cause to be executed any and all documents as may be necessary to confirm title to the Property in accordance with the provisions of the Lease Agreement. In addition, the Corporation appoints the City as its agent to prepare, execute and file or record, in appropriate offices, such documents as may be necessary to place record title to the Property in the City.

Prepayment

Optional Prepayment. The Corporation grants an option to the City to prepay the principal component of the Lease Payments in full, by paying the aggregate unpaid principal components of the Lease Payments, or in part, in a prepayment amount equal to the principal amount of Lease Payments to be prepaid, together with accrued interest to the date fixed for prepayment, without premium.

Said option may be exercised with respect to Lease Payments due on and after July 15, 20_, in whole or in part on any Lease Payment Date, commencing July 15, 20_. Said option shall be exercised by the City by giving written notice to the Corporation and the Trustee of the exercise of such option at least forty-five (45) days prior to said prepayment date. In the event of prepayment in part, the partial prepayment shall be applied against Lease Payments in such order of payment date as shall be selected by the City. Lease Payments due after any such partial prepayment shall be in the amounts set forth in a revised Lease Payment schedule which shall be provided by, or caused to be provided by, the City to the Trustee and which shall represent an adjustment to the schedule set forth in the Lease Agreement taking into account said partial prepayment. The Trustee agrees to notify the Corporation in the event of any prepayment of Lease Payments, as provided in the Trust Agreement.

Mandatory Prepayment from Net Proceeds of Insurance, Title Insurance or Eminent Domain. The City shall be obligated to prepay the Lease Payments, in whole on any date or in part on any Lease Payment Date, from and to the extent of any Net Proceeds of an insurance, title insurance or condemnation award with respect to the Property theretofore deposited in the Lease Payment Fund for such purpose. The City and the Corporation agree that such Net Proceeds shall be applied first to the payment of any delinquent Lease Payments, and thereafter shall be credited towards the City's obligations under the Lease Agreement. Lease Payments due after any such partial prepayment shall be in the amounts set forth in a revised Lease Payment schedule which shall be provided by, or caused to be provided by, the City to the Trustee and which shall represent an adjustment to the schedule set forth in the Lease Agreement taking into account said partial prepayment.

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ASSIGNMENT AGREEMENT

The Assignment Agreement is entered into between the Corporation and the Trustee, pursuant to which the Corporation assigns and transfers to the Trustee, for the benefit of the Owners, certain of the rights of the Corporation under the Lease Agreement, including the right to receive Lease Payments under the Lease Agreement and the rights and remedies of the Corporation under the Lease Agreement to enforce payment of Lease Payments or otherwise to protect and enforce the Lease Agreement in the event of default by the City. Certain rights of the Corporation to payment of advances, indemnification and attorneys' fees and expenses are not assigned.

TRUST AGREEMENT

Delivery Costs Fund; Payment of Delivery Costs

There shall be deposited in the Delivery Costs Fund the proceeds of sale of the Certificates required to be deposited therein pursuant to the Trust Agreement and any other funds from time to time deposited with the Trustee for such purpose and identified in writing to the Trustee.

The moneys in the Delivery Costs Fund shall be disbursed by the Trustee to pay the Delivery Costs. Disbursements from the Delivery Costs Fund shall be made by the Trustee on receipt of a sequentially numbered requisition, signed by a City Representative.

The Trustee shall be responsible for the safekeeping and investment (in accordance with the Trust Agreement) of the moneys held in the Delivery Costs Fund and the payment thereof in accordance with the Trust Agreement, but the Trustee shall not be responsible for the truth or accuracy of such requisitions, may rely conclusively thereon and shall be under no duty to investigate or verify any statements made therein.

Upon written notice from a City Representative that all Delivery Costs have been paid, the Trustee shall transfer any moneys then remaining in the Delivery Costs Fund to the Lease Payment Fund and applied to pay the Lease Payments as the same become due and payable and the Delivery Costs Fund shall be closed.

Assignment of Rights in Lease Agreement

The Corporation has, in the Assignment Agreement, transferred, assigned and set over to the Trustee certain of its rights but none of its obligations set forth in the Lease Agreement, including but not limited to all of the Corporation's rights to receive and collect Lease Payments and all other amounts required to be deposited in the Lease Payment Fund pursuant to the Lease Agreement or pursuant to the Trust Agreement. All Lease Payments and such other amounts to which the Corporation may at any time be entitled shall be paid directly to the Trustee and, in the event of receipt or collection of Lease Payments collected by the Corporation, such payments shall be deemed to be held and to have been collected or received by the Corporation as the agent of the Trustee.

Lease Payment Fund

All moneys at any time deposited by the Trustee in the Lease Payment Fund shall be held by the Trustee in trust for the benefit of the Owners of the Certificates. So long as any Certificates are Outstanding, neither the City nor the Corporation shall have any beneficial right or interest in the Lease Payment Fund or the moneys deposited therein, except only as provided in the Trust Agreement.

There shall be deposited in the Lease Payment Fund all Lease Payments received by the Trustee, including any moneys received by the Trustee for deposit therein pursuant to the Trust Agreement or the Lease Agreement, and any other moneys required to be deposited therein pursuant to the Lease Agreement or the Trust Agreement.

All amounts in the Lease Payment Fund shall be used and withdrawn by the Trustee solely for the purpose of paying the principal and interest with respect to the Certificates as the same shall become due and payable in accordance with the provisions of the Trust Agreement.

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Any surplus remaining in the Lease Payment Fund after redemption and/or payment of all Certificates, including accrued interest (if any) and payment of any applicable fees and expenses to the Trustee, if any, or provision for such redemption or payment having been made to the satisfaction of the Trustee, shall be withdrawn by the Trustee and remitted to the City.

Reserve Fund

The Trustee shall, on or before each January 1 and July 1, value investments in the Reserve Fund at market value and transfer any moneys in the Reserve Fund then in excess of the Reserve Requirement; provided, however, that the Trustee shall not liquidate an investment to make such transfer of excess unless so directed in writing by a City Representative.

If, on any Interest Payment Date, the moneys available in the Lease Payment Fund do not equal the amount of the principal, interest and redemption premium (if any) with respect to the Certificates then coming due and payable, the Trustee shall apply the moneys available in the Reserve Fund to make delinquent Lease Payments by transferring the amount necessary for this purpose to the Lease Payment Fund to make delinquent Lease Payments by transferring the amount necessary for this purpose to the Lease Payment Fund.

Insurance and Condemnation Fund; Application of Net Proceeds of Insurance Award

Any Net Proceeds of insurance against damage to or destruction of any part of the Property collected by the City in the event of any such damage or destruction shall be paid to the Trustee by the City pursuant to the Lease Agreement and deposited by the Trustee promptly upon receipt thereof in a special fund designated as the "Insurance and Condemnation Fund" to be established by the Trustee when deposits are required to be made therein.

Application of Net Proceeds of Eminent Domain Award

If all or any part of the Property shall be taken by eminent domain (or sold to a government threatening to exercise the power of eminent domain) the Net Proceeds therefrom shall be transferred by the City to the Trustee for deposit in the Insurance and Condemnation Fund pursuant to the Lease Agreement and shall be applied and disbursed by the Trustee as follows:

(a) If the City determines that such eminent domain proceedings have not materially affected the operation of the Property, or the ability of the City to meet any of its obligations under the Lease Agreement, and if the City determines that such proceeds are: (i) not needed for repair, replacement or rehabilitation of the Property, upon receipt of a written certificate from the City, the Trustee shall transfer such proceeds to the Lease Payment Fund to be credited towards the prepayments required to be paid pursuant to Lease Agreement and applied to the prepayment of Certificates in the manner provided in Article IV hereof, or are (ii) needed for repair or rehabilitation of the Property, upon receipt of a written certificate from the City, the Trustee shall pay to the City, or to its order, from such proceeds such amounts as the City may expend for such repair or rehabilitation, upon the filing with the Trustee of a requisition of the City Representative, substantially in the form described in connection with the payment of Project Costs.

(b) If less than all of the Property shall have been taken in such eminent domain proceedings, and the City determines that such eminent domain proceedings have materially affected the operation of the Property or the ability of the City to meet any of its obligations under the Lease Agreement or (ii) all of the Property shall have been taken in such eminent domain proceedings, then upon receipt of written instruction from the City, the Trustee shall transfer such proceeds to the Lease Payment Fund to be credited toward the prepayment required to be paid pursuant to the Lease Agreement and applied to the prepayment of Certificates in the manner provided in the Trust Agreement.

Application of Net Proceeds of Title Insurance Award

The Net Proceeds from a title insurance award shall be deposited with the Trustee in the Insurance and Condemnation Fund pursuant to the Lease Agreement and shall be transferred to the Lease Payment Fund to

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be credited towards the prepayment of Lease Payments required to be paid pursuant to the Lease Agreement and applied to the redemption of Certificates in the manner provided in the Trust Agreement.

Moneys in Funds; Investment

The moneys and investments held by the Trustee under this Trust Agreement, except for those held in the Project Fund and the Delivery Cost Fund, are irrevocably held in trust for the benefit of the Owner(s) of the Certificates, and for the purposes herein specified, and such moneys, and any income or interest earned thereon, shall be expended only as provided in this Trust Agreement, and shall not be subject to levy or attachment or lien by or for the benefit of any creditor of either the Corporation, the Trustee or the City or any Owner of Certificates, or any of them until after the Certificates have been paid in full.

Moneys held by the Trustee hereunder shall, upon written order of a City Representative, be invested and reinvested by the Trustee, to the maximum extent practicable, in Permitted Investments. If a City Representative shall fail to so direct investments, the Trustee shall hold such moneys uninvested. A City Representative may, by written order filed with the Trustee, direct investment of moneys held by the Trustee in specific Permitted Investments. Investments purchased with moneys on deposit in the Reserve Fund shall have a term not greater than five years. Investments, if registrable, shall be registered in the name of and held by the Trustee or its nominee. The Trustee may purchase or sell to itself or any affiliate, as principal or agent, investments authorized by this Trust Agreement. Such investments and reinvestments shall be made giving full consideration to the time at which funds are required to be available. The Trustee may act as principal or agent in the making or disposing of any investment. The Trustee shall not be responsible or liable for any loss, fees, taxes or other charges suffered in connection with any investment of funds made by it in accordance with the Trust Agreement. The Trustee shall be entitled to rely conclusively upon the written instructions of a City Representative directing investments as to the fact that each investment is permitted by the laws of the State and constitutes a Permitted Investment hereunder, and the Trustee shall not be required to make further investigation with respect thereto. To the extent that any of the requirements concerning any Permitted Investment embodies a legal conclusion, the Trustee shall be entitled to conclusively rely upon a certificate from the appropriate party or an opinion of counsel to such party that such requirement has been met.

All interest or income received by the Trustee on investment of the Project Fund and Lease Payment Fund shall, as received, be retained in each respective fund. Amounts retained in the Lease Payment Fund pursuant to the Trust Agreement shall be applied as a credit against the Lease Payment due by the City pursuant to the Lease Agreement on the Lease Payment Date following the date of deposit. All interest or income received by the Trustee on investment of the Reserve Fund shall be retained in the Reserve Fund in the event that amounts on deposit in the Reserve Fund are less than the Reserve Requirement. In the event that amounts then on deposit in the Reserve Fund equal or exceed the Reserve Requirement, such excess shall, as received, be transferred, prior to the date of completion of the Project, to the Project Fund, and after the date of completion of the Project, shall be transferred to the Lease Payment Fund and shall be applied as a credit against the Lease Payment due by the City pursuant to the Lease Agreement on the Lease Payment Date following the date of deposit. Transfers to the Lease Payment Fund from the Reserve Fund shall be made by the Trustee on or prior to each Interest Payment Date. All interest or income in the Delivery Costs Fund shall be retained in the Delivery Costs Fund until the Delivery Costs Fund is closed.

Amendments

This Trust Agreement and the rights and obligations of the Owners of the Certificates and the Lease Agreement and the rights and obligations of the parties thereto, may be modified or amended at any time by a supplemental agreement which shall become effective when the written consent of the Owners of at least sixty percent (60%) in aggregate principal amount of the Certificates then Outstanding, exclusive of Certificates disqualified as provided in the Trust Agreement, shall have been filed with the Trustee . No such modification or amendment shall (1) extend or have the effect of extending the fixed maturity of any Certificate or reducing the interest rate with respect thereto or extending the time of payment of interest, or reducing the amount of principal thereof or reducing any premium payable upon the prepayment thereof, without the express consent of the Owner of such Certificate, or (2) reduce or have the effect of reducing the percentage of Certificates required for the affirmative vote or written consent to an amendment or modification of the Lease Agreement, or (3) modify any of the rights or obligations of the Trustee without its written assent thereto.

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This Trust Agreement and the rights and obligations of the Owners of the Certificates and the Lease Agreement and the rights and obligations of the parties thereto, may be modified or amended at any time by a supplemental agreement, without the consent of any such Owners, but only to the extent permitted by law and only (1) to cure, correct or supplement any ambiguous or defective provision contained herein or therein, or (2) in regard to questions arising hereunder or thereunder, as the parties hereto or thereto may deem necessary or desirable and which shall not, in the opinion of nationally recognized bond counsel, materially adversely affect the interest of the Owners of the Certificates, or (3) if and to the extent specified in an opinion of nationally recognized bond counsel filed with the City, the Corporation and the Trustee, to make such additions, deletions or modifications as may be necessary to assure compliance with the Tax Code or otherwise as may be necessary to assure exclusion from gross income for purposes of state income taxation of the interest component of Lease Payments. Any such supplemental agreement shall become effective upon its execution and delivery by the parties hereto or thereto as the case may be.

The Trustee shall receive an opinion of Independent Counsel that any amendment entered into hereunder complies with the provisions of this Article X and the Trustee may rely conclusively on such opinion.

Certain Covenants

Compliance with and Enforcement of Lease Agreement. The City and the Corporation covenant and agree with the Owners of the Certificates to perform all obligations and duties imposed on it under the Lease Agreement. The Corporation covenants and agrees with the Owners of the Certificates to perform all obligations and duties imposed on it under the Lease Agreement and the Trust Agreement.

The City will not do or permit anything to be done, or omit or refrain from doing anything, in any case where any such act done or permitted to be done, or any such omission of or refraining from action, would or might be a ground for cancellation or termination of their respective Lease Agreement by the Corporation thereunder. The Corporation and the City, immediately upon receiving or giving any notice, communication or other document in any way relating to or affecting their respective estates, or either of them, in the Property, which may or can in any manner affect such estate of the City or the Corporation, will deliver the same, or a copy thereof, to the Trustee.

ObseNance of Laws and Regulations. The City will well and truly 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, or of the State, or by any officer, board or commission having jurisdiction or control, as a condition of the continued enjoyment of any and every right, privilege or franchise now owned or hereafter acquired by the City, respectively, including its right to exist and carry on business as a public entity, to the end that such rights, privileges and franchises shall be maintained and preserved, and shall not become abandoned, forfeited or in any manner impaired.

Limitation of Liability

Limited Liability of City. Except for the payment of Lease Payments when due in accordance with the Lease Agreement and the performance of the other covenants and agreements of the City contained in the Lease Agreement and the Trust Agreement, the City shall have no pecuniary obligation or liability to any of the other parties or to the Owners of the Certificates with respect to the Trust Agreement or the terms, execution, delivery or transfer of the Certificates, or the distribution of Lease Payments to the Owners by the Trustee, except as expressly set forth in the Trust Agreement. by the City; or (x) any untrue statement or alleged untrue statement of any material fact or omission or alleged omission to state a material fact necessary to make the statements made, in the light of the circumstances under which they were made, not misleading, in any official statement or other offering document utilized in connection with the sale of the Certificates. Such indemnification shall include the costs and expenses of defending against No Liability of City or Corporation for Trustee Performance. Neither the City nor the Corporation shall have any obligation or liability to any of the other parties or to the Owners of the Certificates with respect to the performance by the Trustee of any duty imposed upon it under the Trust Agreement.

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Indemnification of Trustee. The City shall to the extent permitted by law indemnify and save the Trustee, its officers, employees, directors, affiliates, and agents harmless from and against all claims, losses, costs, expenses, taxes (other than taxes based upon, measured by or determined by the income of the Trustee), liability and damages, including legal fees and expenses, arising out of (i) the use, maintenance, condition or management of, or from any work or thing done on, the Project by the Corporation or the City, (ii) any breach or default on the part of the Corporation or the City in the performance of any of their respective obligations under the Lease Agreement, this Trust Agreement and any other agreement made and entered into for purposes of the Property, (iii) any act of the Corporation or the City or of any of their respective agents, contractors, servants, employees or licensees with respect to the Property, (iv) any act of any assignee of, or purchaser from the Corporation or the City or of any of its or their respective agents, contractors, servants, employees or licensees with respect to the Property, (v) the acquisition, construction, installation and equipping of the Property or the authorization of payment of Project Costs or Delivery Costs, (vi) the actions of any other party, including but not limited to the ownership, operation or use of the Property by the Corporation or the City, (vii) the Trustee exercise and performance of its powers and duties hereunder, (viii) arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the costs and expenses of defending itself against any claim (whether asserted by the Corporation, the City, or any Certificate Owner or any other Person) or liability in connection with the exercise or performance of any of its powers or duties hereunder, or in connection with enforcing the provisions hereof; (ix) the offering and sale of the Certificates. No indemnification will be made herein or elsewhere in this Trust Agreement for willful misconduct or negligence under this Trust Agreement by the Trustee, its officers or employees. The City's obligations hereunder shall remain valid and binding notwithstanding maturity and payment of the Certificates or resignation or removal of the Trustee.

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APPENDIX E

DTC'S BOOK-ENTRY ONLY SYSTEM

The information in this Appendix F, concerning The Depository Trust Company, New York, New York ("OTC"), and DTC's book-entry system, has been furnished by OTC for use in official statements and the City takes no responsibility for the completeness or accuracy thereof The City cannot and does not give any assurances that OTC, OTC Participants or Indirect Participants will distribute to the Beneficial Owners (a) payments of interest or principal with respect to the Certificates, (b) certificates representing ownership interest in or other confirmation of ownership interest in the Certificates, or (c) redemption or other notices sent to OTC or Cede & Co., its nominee, as the registered owner of the Certificates, or that they will so do on a timely basis, or that OTC, OTC Participants or OTC Indirect Participants will act in the manner described in this Appendix F The current "Rules" applicable to OTC are on file with the Securities and Exchange Commission and the current "Procedures" of OTC to be followed in dealing with OTC Participants are on file with OTC. Information Furnished by OTC Regarding its Book-Entry Only System

1. The Depository Trust Company ("OTC"), New York, NY, will act as securities depository for the Certificates (as used in this Appendix E, 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 OTC. One fully-registered Security certificate will be issued for each maturity of the Securities, in the aggregate principal amount of such issue, and will be deposited with OTC. 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. OTC, 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. OTC 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 OTC. OTC 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. OTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC is the holding company for OTC, 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 OTC 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"). OTC is rated AA+ by Standard & Poor's. The OTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about OTC can be found at www.dtcc.com and www.dtc.org.

3. Purchases of Securities under the OTC 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 OTC 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.

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http://www.dtcc.com

http://www.dtc.org

4. To facilitate subsequent transfers, all Securities deposited by Direct Participants with OTC 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 OTC. The deposit of Securities with OTC and their registration in the name of Cede & Co. or such other OTC nominee do not affect any change in beneficial ownership. OTC 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 OTC 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 the 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 OTC. 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.

7. Neither OTC nor Cede & Co. (nor any other OTC nominee) will consent or vote with respect to the Securities unless authorized by a Direct Participant in accordance with DTC's MMI Procedures. Under its usual procedures, OTC mails an Omnibus Proxy to the City as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the 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 OTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail information from the City or the paying agent or bond trustee, on payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of OTC nor its nominee, the paying agent or bond trustee, or the City, 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 OTC) is the responsibility of the City or the paying agent or bond trustee, disbursement of such payments to Direct Participants will be the responsibility of OTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

9. OTC may discontinue providing its services as depository with respect to the Securities at any time by giving reasonable notice to the City or the paying agent or bond trustee. Under such circumstances, in the event that a successor depository is not obtained, Security certificates are required to be printed and delivered.

10. The City may decide to discontinue use of the system of book-entry-only transfers through OTC (or a successor securities depository). In that event, Security certificates will be printed and delivered to OTC.

11. The information in this section concerning OTC and DTC's book-entry system has been obtained from sources that the City believes to be reliable, but the City takes no responsibility for the accuracy thereof.

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APPENDIX F

FORM OF CONTINUING DISCLOSURE CERTIFICATE

This CONTINUING DISCLOSURE CERTIFICATE (the "Disclosure Certificate") is executed and delivered by the CITY OF SHASTA LAKE (the "City") in connection with the execution and delivery of$9,500,000 City of Shasta Lake 2019 Taxable Certificates of Participation (2019 CalPERS Financing Project) (the "Certificates"). The Certificates are being executed and delivered pursuant to a Trust Agreement, dated as of September 15, 2019, by and among MUFG Union Bank N.A., as trustee (the "Trustee"), the City and the Public Property Financing Corporation of California (the "Trust Agreement"). The City covenants and agrees as follows:

Section 1. Definitions. In addition to the definitions set forth in the Trust Agreement, which apply to any capitalized term used in this Disclosure Certificate, unless otherwise defined in this Section 1, the following capitalized terms shall have the following meanings when used in this Disclosure Certificate:

"Annual Report'' shall mean any Annual Report provided by the City pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate.

"Beneficial Owner' shall mean any person who (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Certificates (including persons holding Certificates through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Certificates for federal income tax purposes.

"Dissemination Agenf' shall mean the designated City employee, or any successor Dissemination Agent designated in writing by the City and which has filed with the City a written acceptance of such designation. In the absence of such a designation, the City shall act as the Dissemination Agent.

"EMMA" or "Electronic Municipal Market Access" means the centralized on-line repository for documents to be filed with the MSRB, such as official statements and disclosure information relating to municipal bonds, notes and other securities as issued by state and local governments.

"Listed Events" shall mean any of the events listed in Section 5(a) or 5(b) of this Disclosure Certificate.

"MSRB" means the Municipal Securities Rulemaking Board, which has been designated by the Securities and Exchange Commission as the sole repository of disclosure information for purposes of the Rule, or any other repository of disclosure information which may be designated by the Securities and Exchange Commission as such for purposes of the Rule in the future.

"Participating Underwriter' shall mean any original underwriter of the Certificates required to comply with the Rule in connection with offering of the Certificates.

"Rule" shall mean Rule 15c2-12 adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time.

Section 2. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the City for the benefit of the owners and Beneficial Owners of the Certificates and in order to assist the Participating Underwriter in complying with Securities and Exchange Commission Rule 15c2-12(b)(5).

Section 3. Provision of Annual Reports.

(a) Delivery of Annual Report. The City shall, or shall cause the Dissemination Agent to, not later than nine months after the end of the City's fiscal year (which currently ends on June 30), commencing with the report for the 2019-20 Fiscal Year, which is due not later than March 31, 2020, file with EMMA, in a readable PDF or other electronic format as prescribed by the MSRB, an Annual Report

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that is consistent with the requirements of Section 4 of this Disclosure Certificate. The Annual Report may be submitted as a single document or as separate documents comprising a package and may cross-reference other information as provided in Section 4 of this Disclosure Certificate; provided that the audited financial statements of the City may be submitted separately from the balance of the Annual Report and later than the date required above for the filing of the Annual Report if they are not available by that date.

(b) Change of Fiscal Year. If the City's fiscal year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5(b), and subsequent Annual Report filings shall be made no later than nine months after the end of such new fiscal year end.

(c) Delivery of Annual Report to Dissemination Agent. Not later than fifteen (15) Business Days prior to the date specified in subsection (a) (or, if applicable, subsection (b)) of this Section 3 for providing the Annual Report to EMMA, the City shall provide the Annual Report to the Dissemination Agent (if other than the City). If by such date, the Dissemination Agent has not received a copy of the Annual Report, the Dissemination Agent shall notify the City.

(d) Report of Non-Compliance. If the City is the Dissemination Agent and is unable to file an Annual Report by the date required in subsection (a) (or, if applicable, subsection (b)) of this Section 3, the City shall send a notice, in a timely manner, to EMMA substantially in the form attached hereto as Exhibit A. If the City is not the Dissemination Agent and is unable to provide an Annual Report to the Dissemination Agent by the date required in subsection (c) of this Section 3, the Dissemination Agent shall send a notice to EMMA in substantially the form attached hereto as Exhibit A.

(e) Annual Compliance Certification. The Dissemination Agent shall, if the Dissemination Agent is other than the City, file a report with the City certifying that the Annual Report has been filed with EMMA pursuant to Section 3 of this Disclosure Certificate, stating the date it was so provided and filed.

Section 4. Content of Annual Reports. The Annual Report shall contain or incorporate by reference the following:

(a) Financial Statements. Audited financial statements of the City for the preceding fiscal year, prepared in accordance generally accepted accounting principles. If the City's audited financial statements are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain unaudited financial statements and the audited financial statements shall be filed in the same manner as the Annual Report when they become available.

(b) Other Annual Information. To the extent not included in the audited final statements of the City, the Annual Report shall also include financial and operating data with respect to the City for preceding fiscal year, similar to the data in the Official Statement in the following tables:

(i) Table 4-General Fund Tax Revenues by Source;

(ii) Table 5-Assessed Valuations;

(iii) Table 6-Largest Local Secured Property Tax Payers;

(iv) Table 8-Property Tax In-Lieu of VLF; and

(v) Table 9-0ther Revenue Sources.

(c) Cross References. Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the City or related public entities, which are available to the public on EMMA. The City shall clearly identify each such other document so included by reference.

If the document included by reference is a final official statement, it must be available from EMMA.

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(d) Further Information. In addition to any of the information expressly required to be provided under paragraph (b) of this Section 4, the City shall provide such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading.

Section 5. Reporting of Listed Events.

(a) Reportable Events. The City shall, or shall cause the Dissemination Agent (if not the City) to, give notice of the occurrence of any of the following events with respect to the Certificates:

(1) Principal and interest payment delinquencies.

(2) Unscheduled draws on debt service reserves reflecting financial difficulties.

(3) Unscheduled draws on credit enhancements reflecting financial difficulties.

(4) Substitution of credit or liquidity providers, or their failure to perform.

(5) Defeasances.

(6) Rating changes.

(7) Tender offers.

(8) Bankruptcy, insolvency, receivership or similar event of the obligated person.

(9) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the security, or other material events affecting the tax status of the security.

Note: For the purposes of the event identified in subparagraph (8), the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for an obligated person in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the obligated person, or if such jurisdiction has been assumed by leaving the existing governmental body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the obligated person.

(b) Material Reportable Events. The City shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Certificates, if material:

(1) Non-payment related defaults.

(2) Modifications to rights of security holders.

(3) Bond calls.

(4) The release, substitution, or sale of property securing repayment of the securities.

(5) The consummation of a merger, consolidation, or acquisition involving an obligated person or the sale of all or substantially all of the assets of the obligated person, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms.

(6) Appointment of a successor or additional trustee, or the change of name of a trustee.

(c) Time to Disclose. The City shall, or shall, cause the Dissemination Agent (if not the City) to, file a notice of such occurrence with EMMA, in an electronic format as prescribed by the MSRB, in a timely manner not in excess of 10 business days after the City obtains knowledge of any Listed Event. Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(5) and (b)(3)

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above need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to owners of affected Certificates under the Trust Agreement.

Section 6. Identifying Information for Filings with EMMA. All documents provided to EMMA under this Disclosure Certificate shall be accompanied by identifying information as prescribed by the MSRB.

Section 7. Termination of Reporting Obligation. The City's obligations under this Disclosure Certificate shall terminate upon the defeasance, prior redemption or payment in full of all of the Certificates. If such termination occurs prior to the final maturity of the Certificates, the City shall give notice of such termination in the same manner as for a Listed Event under Section 5(c).

Section 8. Dissemination Agent.

(a) Appointment of Dissemination Agent. The City may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate and may discharge any such agent, with or without appointing a successor Dissemination Agent. If the Dissemination Agent is not the City, the Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by the City pursuant to this Disclosure Certificate. It is understood and agreed that any information that the Dissemination Agent may be instructed to file with EMMA shall be prepared and provided to it by the City. The Dissemination Agent has undertaken no responsibility with respect to the content of any reports, notices or disclosures provided to it under this Disclosure Certificate and has no liability to any person, including any Certificate owner, with respect to any such reports, notices or disclosures. The fact that the Dissemination Agent or any affiliate thereof may have any fiduciary or banking relationship with the City shall not be construed to mean that the Dissemination Agent has actual knowledge of any event or condition, except as may be provided by written notice from the City.

(b) Compensation of Dissemination Agent. The Dissemination Agent shall be paid reasonable compensation by the City for its services provided hereunder in accordance with its schedule of fees as agreed to between the Dissemination Agent and the City from time to time and all reasonable expenses, legal fees and expenses and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. The Dissemination Agent shall not be deemed to be acting in any fiduciary capacity for the City, owners or Beneficial Owners, or any other party. The Dissemination Agent may rely and shall be protected in acting or refraining from acting, upon any direction from the City or an opinion of nationally recognized bond counsel. The Dissemination Agent may at any time resign by giving written notice of such resignation to the City. The Dissemination Agent shall not be liable hereunder except for its negligence or willful misconduct.

Section 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the City may amend this Disclosure Certificate (and the Dissemination Agent shall agree to any amendment so requested by the City that does not impose any greater duties or risk of liability on the Dissemination Agent), and any provision of this Disclosure Certificate may be waived, provided that all of the following conditions are satisfied:

(a) Change in Circumstances. If the amendment or waiver relates to the provisions of Sections 3(a), 4 or 5(a) or (b), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of an obligated person with respect to the Certificates, or the type of business conducted.

(b) Compliance as of Issue Date. The undertaking, as amended or taking into account such waiver, would, in the opinion of a nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the original issuance of the Certificates, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances.

(c) Consent of Holders; Non-impairment Opinion. The amendment or waiver either (i) is approved by

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the Certificate owners in the same manner as provided in the Trust Agreement for amendments to the Trust Agreement with the consent of Certificate owners, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the Certificate owners or Beneficial Owners.

If this Disclosure Certificate is amended or any provision of this Disclosure Certificate is waived, the City shall describe such amendment or waiver in the next following Annual Report and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the City. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements, (i) notice of such change shall be given in the same manner as for a Listed Event under Section 5(c), and (ii) the Annual Report for the year in which the change is made should present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles.

Section 10. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the City from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the City chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the City shall have no obligation under this Disclosure Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event.

Section 11. Default. In the event of a failure of the City to comply with any provision of this Disclosure Certificate, any Certificate owner or Beneficial Owner may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the City to comply with its obligations under this Disclosure Certificate. The sole remedy under this Disclosure Certificate in the event of any failure of the City to comply with this Disclosure Certificate shall be an action to compel performance.

Section 12. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and no implied covenants or obligations shall be read into this Disclosure Certificate against the Dissemination Agent, and the City agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the reasonable costs and expenses (including attorneys' fees and expenses) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent's negligence or willful misconduct. The Dissemination Agent shall have the same rights, privileges and immunities hereunder as are afforded to the Trustee under the Trust Agreement. The obligations of the City under this Section 12 shall survive resignation or removal of the Dissemination Agent and payment of the Certificates.

Section 13. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the City, the Dissemination Agent, the Participating Underwriter and the owners and Beneficial Owners from time to time of the Certificates and shall create no rights in any other person or entity.

Date: [Closing Date]

CITY OF SHASTA LAKE _____ , Dissemination Agent

By ____________ ~ By Authorized Officer Authorized Officer

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EXHIBIT A

NOTICE TO MSRB OF FAILURE TO FILE ANNUAL REPORT

Name of Issuer: City of Shasta Lake, California

Name of Issue: 2019 Taxable Certificates of Participation (2019 CalPERS Financing Project) Evidencing Direct, Undivided Fractional Interests of the Owners Thereof in Lease Payments to be Made by the City of Shasta Lake (Shasta County, California), As the Rental for Certain Property Pursuant to a Lease Agreement with the Public Property Financing Corporation of California

Date of Issuance: [Closing Date]

NOTICE IS HEREBY GIVEN that the Obliger has not provided an Annual Report with respect to the abovenamed Issue as required by the Continuing Disclosure Certificate, dated [Closing Date], furnished by the Obliger in connection with the Issue. The Obliger anticipates that the Annual Report will be filed by.

Date: _______ _ _ _______ , as Dissemination Agent

By _________ _

Authorized Officer

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