cdiacdocs.sto.ca.govcdiacdocs.sto.ca.gov/2009-1343.pdfNEW ISSUE – FULL BOOK ENTRY RATINGS: S&P: “A” (See “RATINGS” herein) In the opinion of Fulbright & Jaworski L.L.P.,

NEW ISSUE – FULL BOOK ENTRY RATINGS: S&P: “A”

(See “RATINGS” herein) In the opinion of Fulbright & Jaworski L.L.P., Bond Counsel, under existing law interest on the Bonds is exempt from personal income taxes of the

State of California and, assuming compliance with the covenants described herein, interest on the 2009 Series A Bonds is excluded pursuant to section 103(a) of the Internal Revenue Code of 1986 (the “Code”) from the gross income of the owners thereof for federal income tax purposes and is not included in the computation of alternative minimum taxable income of the owners thereof for federal income tax purposes. The Authority has taken no action to cause, and does not intend interest on the 2009 Series B Bonds to be excluded pursuant to section 103(a) of the Code from the gross income of the owners thereof for federal income tax purposes. See “TAX MATTERS” herein.

$4,615,000 EL CENTRO FINANCING AUTHORITY

LEASE REVENUE BONDS (TRANSPORTATION IMPROVEMENTS)

2009 SERIES A (Bank Qualified)

and



2009 SERIES B (Federally Taxable Build America Bonds)

Dated: Date of Delivery Due: As shown on the inside cover

The El Centro Financing Authority (the “Authority”) is issuing either or both of its Lease Revenue Bonds (Transportation Improvements), 2009 Series A (Bank Qualified) (the “2009 Series A Bonds”) and its Lease Revenue Bonds (Transportation Improvements), 2009 Series B (Federally Taxable Build America Bonds) (the “2009 Series B Bonds,” each of the 2009 Series A Bonds and 2009 Series B Bonds being a “Series” and, collectively, the “Bonds”) to provide funds for: (i) the acquisition, construction and installation of certain transportation-related improvements within the City of El Centro (the “City”), (ii) the funding of a Reserve Account for each Series in amounts equal to the Reserve Requirement for each Series, and (iii) the payment of costs of issuance related to each Series. See “PLAN OF FINANCE” herein.

THE AUTHORITY HAS RESERVED THE RIGHT TO ISSUE A TOTAL AGGREGATE PRINCIPAL AMOUNT OF BONDS NOT TO EXCEED $15,000,000; HOWEVER THE AUTHORITY HAS RESERVED THE ABILITY, EXERCISABLE AT ITS SOLE DISCRETION, TO ISSUE THIS AMOUNT (I) ENTIRELY AS 2009 SERIES A BONDS, WHICH WOULD BE TAX-EXEMPT BONDS DESCRIBED IN SECTION 103(A) OF THE CODE; (II) ENTIRELY AS 2009 SERIES B BONDS, WHICH WOULD BE TAXABLE BONDS NOT DESCRIBED IN SECTION 103(A) OF THE CODE; OR (III) ANY COMBINATION OF 2009 SERIES A BONDS AND 2009 SERIES B BONDS, IN AN AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED $15,000,000.

The Bonds are being issued as fully registered bonds and, when executed and delivered, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”). The 2009 Series A Bonds, if issued, will be issued in denominations of $5,000 or any integral multiple thereof. The 2009 Series B Bonds, if issued, will be issued in denominations of $1,000 or any integral multiple thereof.

DTC will act as securities depository of the Bonds. Individual purchases of Bonds will be made in book-entry form only. Payments of principal of and interest on the Bonds are to be made to purchasers by DTC through DTC Participants. Purchasers will not receive physical delivery of the Bonds purchased by them. See “APPENDIX F – BOOK-ENTRY SYSTEM.” Interest on the 2009 Series A Bonds is payable on April 1 and October 1 of each year, commencing April 1, 2010.

The Bonds are subject to optional, extraordinary and mandatory sinking fund redemption prior to their stated maturities as described herein.

The Bonds are payable from Revenues pledged to the Bonds under the Indenture, dated as of December 1, 2009 (the “Indenture”), by and between the Authority and U.S. Bank National Association, as Trustee. Such Revenues primarily consist of Base Rental Payments to be made by the City to the Authority under the Lease Agreement, as herein after described. Pursuant to the Lease Agreement the City will lease certain property therein described (the “Leased Property”) from the Authority. The City is required, under the Lease Agreement to make rental payments in each fiscal year in consideration for the use and possession of the Leased Property described in the Lease Agreement from any source of available funds in an amount sufficient to pay the annual principal and interest due on the Bonds, subject under certain circumstances to abatement, as described herein. The Bonds are secured solely by, and payable solely from, the Base Rental Payments to be made by the City under the Lease Agreement, and the funds and accounts pledged to the Bonds under the Indenture. The Bonds are also payable from certain funds and accounts held under the Indenture that are pledged to the Bonds as described further herein, and insurance or condemnation awards, if any, arising under the Lease Agreement. See “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS” and “RISK FACTORS” herein.

THE BONDS ARE PAYABLE EXCLUSIVELY FROM THE REVENUES AND OTHER FUNDS AS IN PROVIDED IN THE INDENTURE. THE GENERAL FUND OF THE AUTHORITY IS NOT LIABLE, AND THE CREDIT OF THE AUTHORITY IS NOT PLEDGED, FOR THE PAYMENT OF THE INTEREST AND PREMIUMS (IF ANY) ON OR PRINCIPAL OF THE BONDS. THE PRINCIPAL OF AND INTEREST ON THE BONDS, AND ANY PREMIUMS UPON THE REDEMPTION OF ANY THEREOF, SHALL NOT BE A LEGAL OR EQUITABLE PLEDGE, CHARGE, LIEN OR ENCUMBRANCE UPON ANY PROPERTY OF THE AUTHORITY OR UPON ANY OF ITS INCOME, RECEIPTS OR REVENUES EXCEPT THE REVENUES AND OTHER FUNDS PLEDGED TO THE PAYMENT THEREOF AS PROVIDED IN THIS INDENTURE. THE OBLIGATION OF THE CITY TO MAKE BASE RENTAL PAYMENTS OR ADDITIONAL RENTAL PAYMENTS 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 BONDS NOR THE OBLIGATION OF THE CITY TO MAKE BASE RENTAL PAYMENTS OR ADDITIONAL RENTAL PAYMENTS CONSTITUTES AN INDEBTEDNESS OF THE CITY, THE STATE OR ANY OF ITS POLITICAL SUBDIVISIONS WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION.

This cover page contains certain information for general reference only. It is not intended to be a summary of the security or terms of this issue. Investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision.

The Bonds are offered when, as and if delivered to and received by the Underwriter, subject to the approving opinion of Fulbright & Jaworski L.L.P., Los Angeles, California, Bond Counsel and Disclosure Counsel to the Authority. Certain legal matters will be passed upon for the City and the Authority by Luis F. Hernandez, Esq., as City Attorney and Authority Counsel. It is anticipated that the Bonds will be available for delivery through the facilities of DTC on or about December 16, 2009.

Estrada Hinojosa & Company, Inc.

December 10, 2009

MATURITY SCHEDULE (Base CUSIP† 28282R)

$4,615,000

2009 SERIES A BONDS

Maturity Date

Principal Amount

Interest Rate

Yield CUSIP†

4/01/2010 $795,000 2.000% 1.030% AA8 10/01/2010 320,000 2.000 1.280 AB6 10/01/2011 330,000 2.000 1.820 AC4 10/01/2012 335,000 2.500 2.330 AD2 10/01/2013 345,000 3.000 2.770 AE0 10/01/2014 355,000 3.500 3.210 AF7 10/01/2015 370,000 4.000 3.770 AG5 10/01/2016 385,000 4.000 4.140 AH3 10/01/2017 420,000 4.250 4.420 AJ9 10/01/2018 460,000 4.400 4.650 AK6 10/01/2019 500,000 4.625 4.750 AL4

$10,125,000

2009 SERIES B BONDS

$10,125,000 8.250% 2009 Series B Term Bond due October 1, 2031 Yield: 8.502% CUSIP†: AM2

† Copyright 2009, American Bankers Association. CUSIP data herein are provided by Standard & Poor’s CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc., for convenience of reference only. The City, the Authority and the Underwriter assume no responsibility for the accuracy of any CUSIP data set forth herein.

No dealer, broker, salesperson or other person has been authorized by the El Centro Financing Authority (the “Authority”), the City of El Centro (the “City”) or the Underwriter to give any information or to make any representations, other than as contained in this Official Statement, and if given or made, such information or representations must not be relied upon as having been authorized by the Authority, the City or the Underwriter. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of, the Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale.

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

The information set forth herein has been furnished by the Authority and the City and includes information from sources that are believed to be reliable. The information and expressions of opinion contained herein are subject to change without notice and neither the delivery of this Official Statement nor any sale made shall, under any circumstances, create any implication that there has been no change in the affairs of the Authority, the City, or other matters described herein since the date hereof.

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 THE OFFERING OF THE BONDS, THE UNDERWRITER MAY OVER ALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT LEVELS ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

Certain statements included or incorporated by reference in this Official Statement constitute “forward-looking statements.” Such statements are generally identifiable by the terminology used such as “plan,” “project,” “expect,” “anticipate,” “intend,” “believe,” “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 that may cause actual results, performance or achievements described to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The Authority does not plan to issue any updates or revisions to those forward-looking statements if or when its expectations or events, conditions or circumstances on which such statements are based occur.

EL CENTRO FINANCING AUTHORITY 1275 Main Street

El Centro, California 92243

MEMBERS OF THE AUTHORITY AND CITY COUNCIL

Cheryl Viegas-Walker, Mayor Efrain Silva, Mayor Pro Tem

Sedalia Sanders, Councilmember Benjamin J. Solomon, III, Councilmember

Jon A. Edney, Councilmember

CITY OFFICIALS AND AUTHORITY OFFICIALS

Ruben A. Duran, City Manager and Authority Executive Director Leticia Salcido, City Director of Finance

Albert Terrazas, City Treasurer and Authority Treasurer Luis F. Hernandez, City Attorney and Authority Counsel

Diane Caldwell, City Clerk and Authority Secretary

__________________

BOND COUNSEL AND DISCLOSURE COUNSEL

Fulbright & Jaworski L.L.P. Los Angeles, California

UNDERWRITER

Estrada Hinojosa & Company, Inc. San Diego, California

TRUSTEE

U.S. Bank National Association Los Angeles, California

TABLE OF CONTENTS

Page

i

INTRODUCTION .......................................................................................................................................1 Purpose of the Bonds ......................................................................................................................1 Security for the Bonds ....................................................................................................................2 Reserve Accounts ...........................................................................................................................2 Continuing Disclosure ....................................................................................................................3

THE CITY AND THE AUTHORITY.........................................................................................................3 DESCRIPTION OF THE BONDS ..............................................................................................................4

General ...........................................................................................................................................4 Redemption.....................................................................................................................................4 Selection of Bonds for Redemption................................................................................................7 Notice of Redemption .....................................................................................................................7

SECURITY AND SOURCES OF PAYMENT FOR THE BONDS ...........................................................7

General ...........................................................................................................................................7 Reserve Accounts ...........................................................................................................................8 Abatement of Base Rental Payments ............................................................................................10 Additional Obligations..................................................................................................................10 Maintenance, Utilities, Taxes and Assessments ...........................................................................10 Insurance Coverages .....................................................................................................................11 Substitution and Release of Property ............................................................................................11

PLAN OF FINANCE.................................................................................................................................11

General .........................................................................................................................................11 Measure D Tax Revenues and Transportation Improvements ......................................................11 Leased Property ............................................................................................................................12

ESTIMATED SOURCES AND USES OF FUNDS .................................................................................13 DEBT SERVICE REQUIREMENTS........................................................................................................14 STATE BUDGETS....................................................................................................................................16 RISK FACTORS .......................................................................................................................................19

Substitution of Property ................................................................................................................19 Bonds are Limited Obligations .....................................................................................................19 Abatement .....................................................................................................................................19 Risk of Uninsured Loss.................................................................................................................19 Geological and Seismic Risks.......................................................................................................20 Hazardous Substances...................................................................................................................20 Risks Related to Taxation in California........................................................................................21 Future Initiatives ...........................................................................................................................23 Limitations on Remedies ..............................................................................................................23 Remedies on Default.....................................................................................................................23 Loss of Tax Exemption.................................................................................................................24

RATINGS ..................................................................................................................................................24 UNDERWRITING ....................................................................................................................................24 BANK QUALIFICATION ........................................................................................................................24 CONTINUING DISCLOSURE.................................................................................................................25 TAX MATTERS........................................................................................................................................25

TABLE OF CONTENTS (continued)

Page

ii

2009 Series A Bonds.....................................................................................................................25 2009 Series B Bonds.....................................................................................................................28

LITIGATION.............................................................................................................................................31 FINANCIAL STATEMENTS ...................................................................................................................31 APPROVAL OF LEGAL PROCEEDINGS..............................................................................................31 EXECUTION AND DELIVERY ..............................................................................................................32 APPENDIX A - SELECTED DEMOGRAPHIC AND FINANCIAL INFORMATION

RELATING TO THE CITY OF EL CENTRO ........................................................ A-1 APPENDIX B - AUDITED FINANCIAL STATEMENTS OF THE CITY OF EL CENTRO

FOR THE FISCAL YEAR ENDED JUNE 30, 2008 ................................................B-1 APPENDIX C - SUMMARY OF CERTAIN PROVISIONS OF THE PRINCIPAL LEGAL

DOCUMENTS...........................................................................................................C-1 APPENDIX D - FORM OF CONTINUING DISCLOSURE AGREEMENT.................................... D-1 APPENDIX E - FORM OF OPINION OF BOND COUNSEL...........................................................E-1 APPENDIX F - BOOK-ENTRY SYSTEM......................................................................................... F-1

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OFFICIAL STATEMENT




and




INTRODUCTION

This Official Statement, which includes the cover page and attached appendices, provides certain information in connection with the sale and delivery of the $4,615,000 El Centro Financing Authority Lease Revenue Bonds (Transportation Improvements), 2009 Series A (Bank Qualified) (the “2009 Series A Bonds”) and $10,125,000 El Centro Financing Authority Lease Revenue Bonds (Transportation Improvements), 2009 Series B (Federally Taxable Build America Bonds) (the “2009 Series B Bonds” and, together with the 2009 Series A Bonds, the “Bonds”). The 2009 Series A Bonds and the 2009 Series B Bonds are sometimes referred to individually as a “Series” of Bonds. Capitalized terms not otherwise defined herein have the meanings given in the Indenture and the Lease Agreement (each as hereinafter defined) or in “APPENDIX C – SUMMARY OF CERTAIN PROVISIONS OF THE PRINCIPAL LEGAL DOCUMENTS.”


Purpose of the Bonds

The Bonds are being issued pursuant to an Indenture, dated as of December 1, 2009 (the “Indenture”), by and between the El Centro Financing Authority (the “Authority”) and U.S. Bank National Association, as trustee (the “Trustee”).

The Bonds are being issued to provide funds for (i) the acquisition, construction and installation of certain transportation-related improvements within the City of El Centro (the “City”), (ii) the funding of a Reserve Account for each Series in amounts equal to the Reserve Requirement for each Series, and (iii) the payment of costs of issuance related to each Series. See “ESTIMATED SOURCES AND USES OF FUNDS” and “PLAN OF FINANCE” herein.

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Security for the Bonds

The Bonds are payable from the specific Revenues (as defined in the Indenture) pledged to the Bonds under the Indenture. The Revenues primarily consist of (i) all Base Rental Payments to be made by the City to the Authority under the Lease Agreement, dated as of December 1, 2009 (the “Lease Agreement”), by and between the Authority and the City; (ii) any proceeds of Bonds originally deposited with the Trustee and all moneys on deposit in the funds and accounts (other than the Rebate Fund) established under the Indenture; (iii) investment income with respect to such moneys held by the Trustee and (iv) any insurance proceeds or condemnation awards received by or payable to the Trustee relating to the Base Rental Payments, including interest or profits. See “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS” herein.

The Authority expects that it will designate all or a portion of the 2009 Series B Bonds as “Build America Bonds” under section 54AA(d) of the Code, and as “qualified Build America Bonds” (Direct Subsidy) under section 54AA(g) of the Code, but it makes no undertaking to any owner of a 2009 Series B Bond that it will make such designation or, if made, that such 2009 Series B Bond will be or remain a qualified Build America Bond. Any cash subsidy received by the Authority pursuant to section 54AA(g) of the Code in respect of any 2009 Series B Bond will be immediately paid over to the City, to be applied to such purposes as the City may determine. The Authority has not undertaken or made any covenant for the benefit of the owners of the 2009 Series B Bonds to comply with any conditions to receive the cash subsidy or to maintain the Authority’s right to retain or receive future subsidy payments in respect of the 2009 Series B Bonds. The Authority is obligated to make all payments of principal of and interest on the 2009 Series B Bonds from the sources described herein whether or not it receives cash subsidy payments.

Under the Lease Agreement, in addition to Base Rental Payments, the City has agreed to pay Additional Rental payments in such amounts in each year as shall be required for the payment of all costs and expenses (not otherwise paid for or provided for out of the proceeds of sale of the Bonds) incurred by the Authority or the Trustee in connection with the execution, performance or enforcement of the Lease Agreement or the assignment thereof, the Indenture, or the Authority’s or the Trustee’s interest in the Leased Property, including, but not limited to, all fees, costs and expenses, all administrative costs of the Authority relating to the Leased Property (including, without limiting the generality of the foregoing, salaries and wages of employees, overhead, insurance premiums, taxes and assessments (if any), expenses, compensation and indemnification of the Trustee payable by the Authority under the Indenture), fees of auditors, accountants, attorneys or engineers, and all other reasonable and necessary administrative costs of the Authority or charges required to be paid by it to comply with the terms of the Bonds or of the Indenture.

Reserve Accounts

The Indenture will establish the 2009 Series A Reserve Account and the 2009 Series B Reserve Account (herein each a “Reserve Account”) as additional security for the holders of Bonds of the respective Series if and when that Series is issued. Under the Indenture, the Reserve Account of each Series must be funded at the respective Reserve Requirement for that Series. The “Reserve Requirement” for a Series is defined as an amount equal to, at any date of determination, the least of (i) ten percent (10%) of the sale proceeds (within the meaning of section 148 of the Code) of that Series, (ii) 125% of average annual debt service on that Series for that and every succeeding Bond Year, or (iii) Maximum Annual Debt Service for that Series in that or any succeeding Bond Year.

The 2009 Series A Reserve Account established for the 2009 Series A Bonds is not available to pay debt service on the 2009 Series B Bonds and the 2009 Series B Reserve Account established for the 2009 Series B Bonds is not available to pay debt service on the 2009 Series A Bonds.

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On or before each Interest Payment Date, the Trustee will deposit in each Reserve Account such amount as may be necessary to maintain a balance therein equal to the Reserve Requirement. No deposit will be made in the Reserve Account in respect of either Series so long as there is on deposit an amount no less than the respective Reserve Requirement. All moneys in a Reserve Account (or available to be drawn from a Qualified Reserve Account Credit Instrument) of a Series will be used and withdrawn by the Trustee solely for the purpose of replenishing the respective Interest Account or the respective Principal Account in such order, in the event of any deficiency at any time in either of such accounts, or for the purpose of paying the interest on or principal of or redemption premiums, if any, on the Bonds of that Series in the event that no other money of the Authority is lawfully available therefor, or for the retirement of all Bonds of that Series then Outstanding. See “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS – Reserve Account” herein.

All moneys in a Reserve Account of a Series are to be used and withdrawn by the Trustee solely for the purpose of replenishing the Interest Account or the Principal Account relating to that Series of Bonds.

Continuing Disclosure

The Authority has determined that no financial or operating data concerning the Authority is material to any decision to purchase, hold or sell the Bonds and the Authority will not provide any such information. The City will covenant for the benefit of the Owners and beneficial owners of the Bonds to provide certain financial information and operating data relating to the City and to provide notices of the occurrence of certain enumerated events if material. The City has not failed within the past five years to provide annual reports or notices of material events in connection with any continuing disclosure undertaking pursuant to Rule 15c2-12 (the “Rule”) of the U.S. Securities and Exchange Commission promulgated under the Securities Exchange Act of 1934, as amended. See “CONTINUING DISCLOSURE” and “APPENDIX D – FORM OF CONTINUING DISCLOSURE AGREEMENT.”

THE CITY AND THE AUTHORITY

The City is the seat of the County of Imperial (the “County”). The City is located approximately 120 miles east of the City of San Diego and approximately 60 miles west of Yuma, Arizona. On November 3, 2009 City voters approved Measure G which authorized the City to become a charter city. The City Council of the City certified the November 3, 2009 election results on December 1, 2009 and the City Mayor is expected to execute the City charter and file the same with the Secretary of State in the second week of December, 2009. The City is 7 miles north of the City of Mexicali which, with a population of approximately 1 million, is the capital of the State of Baja California, Mexico. Its strategic border location makes it a prime link between the interior of Mexico and the major markets along the West Coast of the United States. The City encompasses approximately 11 square miles and straddles the busy Interstate 8, the major interstate highway linking southern California to its eastern neighbors. As of January 1, 2009, the City had a population of approximately 44,259. Its summers are hot and dry, with the winters being mild and generally dry. S&P has assigned an underlaying rating to the City of “A+” and a rating on the Bonds of “A.” See “APPENDIX A – SELECTED DEMOGRAPHIC AND FINANCIAL INFORMATION RELATING TO THE CITY OF EL CENTRO.” A copy of the City’s audited financial statements for the fiscal year ended June 30, 2008 is attached hereto as APPENDIX B.

The Authority is a joint powers authority, organized under a Joint Exercise of Powers Agreement, dated July 1, 1996 (the “Joint Powers Agreement”), by and between the Redevelopment Agency of the City of El Centro and the City. The Joint Powers Agreement was entered into pursuant to the provisions of the Act. The Authority is governed by a five-member Board of Directors that comprises the members of the City Council.

4

DESCRIPTION OF THE BONDS

General

The Bonds will be dated their date of delivery and issued in the aggregate principal amount and bear interest at the rates per annum and mature on the dates set forth on the inside cover page of this Official Statement. Interest on the Bonds will be payable semiannually on April 1 and October 1 of each year (each an “Interest Payment Date”), commencing April 1, 2010. Interest on each Bond will accrue from the Interest Payment Date next preceding the date of authentication thereof unless (i) it is executed on an April 1 or October 1, in which event interest will accrue from the date of execution thereof, (ii) it is authenticated on or before March 15, 2010, in which event interest will accrue from the date of initial delivery of the Bonds or (iii) it is authenticated after the fifteenth calendar day of the month immediately preceding an Interest Payment Date, in which case interest will accrue from such Interest Payment Date. If, at the date of authentication of any Bond, interest thereon is in default, such Bond will bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment on such outstanding Bond, or if no interest has been paid, from the date of initial delivery of the Bonds. Interest on the Bonds will be computed on the basis of a 360-day year of twelve 30-day months.

The Bonds are being issued as fully registered bonds and, when executed and delivered, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”). The 2009 Series A Bonds will be issued in denominations of $5,000 or any integral multiple thereof. The 2009 Series B Bonds will be issued in denominations of $1,000 or any integral multiple thereof. DTC will act as securities depository of the Bonds. Individual purchases of Bonds will be made in book-entry form only. Payments of principal of and interest on the Bonds are to be made to purchasers by DTC through DTC Participants. Purchasers will not receive physical delivery of the Bonds purchased by them. See “APPENDIX F – BOOK-ENTRY SYSTEM.”

The registration of any Bond may be transferred upon the surrender of such Bond for cancellation at the Corporate Trust Office of the Trustee by the Owner thereof or by such Owner’s duly authorized attorney with a duly executed written instrument of transfer in a form satisfactory to such Trustee and upon payment by the Owner thereof of any charges the Trustee may make pursuant to the Indenture. The Bonds may be exchanged upon their surrender at the Corporate Trust Office of the Trustee upon payment by the Owner thereof of any charges the Trustee may make pursuant to the Indenture for an equal aggregate principal amount of Bonds of the same tenor of any other authorized denominations. The Trustee is not required to transfer or exchange Bonds during the 15-day period preceding the selection of Bonds for redemption or any Bond selected for redemption in whole or in part.


Redemption

2009 Series A Bonds Extraordinary Redemption. The 2009 Series A Bonds are subject to redemption prior to their respective maturity dates as a whole or in part on any date, from prepayments of Base Rental Payments made by the City pursuant to the Lease Agreement from funds received by the City

5

due to a taking of the Leased Property or any portion thereof under the power of eminent domain or from insurance proceeds received by the City due to damage to or destruction of the Leased Property or any portion thereof, under the circumstances and upon the conditions and terms prescribed in the Indenture and in the Lease Agreement.

Redemption of 2009 Series A Bonds pursuant to extraordinary redemption shall be made at a redemption price equal to the sum of the principal of the 2009 Series A Bonds to be redeemed plus accrued interest thereon to the date fixed for redemption, without premium.

2009 Series A Bonds Optional Redemption. The 2009 Series A Bonds maturing on or after October 1, 2020 shall be subject to redemption prior to their respective maturity dates as a whole or in part on any date, by such maturities as may be designated by the Authority to the Trustee at least forty-five (45) days prior to the date fixed for redemption, or, if the Authority fails to so designate, in inverse order of maturity, and by lot within a maturity, from prepayments of Base Rental Payments made at the option of the City pursuant to the Lease Agreement, on or after October 1, 2019, at a redemption price equal to the principal amount of the 2009 Series A Bonds to be redeemed, plus accrued but unpaid interest to the date fixed for redemption, without premium.

2009 Series B Bonds Extraordinary Redemption. The 2009 Series B Bonds are subject to redemption prior to their respective maturity dates as a whole or in part on any date, from prepayments of Base Rental Payments made by the City pursuant to the Lease Agreement from funds received by the City due to a taking of the Leased Property or any portion thereof under the power of eminent domain or from insurance proceeds received by the City due to damage to or destruction of the Leased Property or any portion thereof, under the circumstances and upon the conditions and terms prescribed in the Indenture and in the Lease Agreement.

Redemption of 2009 Series B Bonds pursuant to extraordinary redemption shall be made at a redemption price equal to the sum of the principal of the 2009 Series B Bonds to be redeemed plus accrued interest thereon to the date fixed for redemption, without premium.

2009 Series B Bonds Extraordinary Optional Redemption. The 2009 Series B Bonds are subject to redemption prior to their respective maturity dates, at the option of the Authority upon the occurrence of a Tax Law Change, from any source of available funds, at the redemption price equal to the greater of: (1) the principal amount of the 2009 Series B Bonds to be redeemed or (2) the sum of the present value of the remaining scheduled payments of principal and interest to the maturity date of the 2009 Series B Bonds to be redeemed, not including any portion of those payments of interest accrued and unpaid as of the date on which the 2009 Series B Bonds are to be redeemed, discounted to the date on which the 2009 Series B Bonds are to be redeemed on a semi-annual basis, assuming a 360-day year consisting of twelve 30-day months, at the Treasury Rate (defined below), plus 100 basis points, plus, in each case, accrued and unpaid interest on the 2009 Series B Bonds to be redeemed to the redemption date.

“Tax Law Change” means legislation that has been enacted by the Congress of the United States or passed by either House of the Congress, or a decision has been rendered by a court of the United States, or an order, ruling, regulation (final, temporary or proposed) or official statement has been made by or on behalf of the Treasury Department of the United States, the Internal Revenue Service or other governmental agency of appropriate jurisdiction, the effect of which, as reasonably determined by the Authority, would be to suspend, reduce or terminate the payments from the United States Treasury to the Authority with respect to the 2009 Series B Bonds, or to state or local government issuers generally with respect to obligations of the general character of the 2009 Series B Bonds, pursuant to sections 54AA(g) or 6431 of the Code of an amount equal to 35% of the interest due thereon on each interest payment date (the “Subsidy Payments”); provided, that such suspension, reduction or termination of the Subsidy

6

Payments is not due to failure by the Authority to comply with the requirements under the Code to receive such Subsidy Payments.

“Treasury Rate” means, with respect to any redemption date for a particular 2009 Series B Bond, the yield to maturity as of such redemption date of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15 (519) that has become publicly available at least two business days prior to the redemption date (excluding inflation indexed securities) (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the period from the redemption date to the maturity date of the 2009 Series B Bond to be redeemed; provided, however, that if the period from the redemption date to such maturity date is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year will be used.

At the request of the Trustee, the extraordinary optional redemption price of the 2009 Series B Bonds to be redeemed will be determined by an independent accounting firm, investment banking firm or financial advisor retained by the Authority, at the Authority’s expense, to calculate such redemption price. The Trustee and the Authority may conclusively rely on the determination of such redemption price by such independent accounting firm, investment banking firm or financial advisor and will not be liable for such reliance.

2009 Series B Bonds Optional Redemption. The 2009 Series B Bonds maturing on or after October 1, 2020 shall be subject to redemption prior to their respective maturity dates as a whole or in part on any date, by such maturities as may be designated by the Authority to the Trustee at least forty-five (45) days prior to the date fixed for redemption, or, if the Authority fails to so designate, in inverse order of maturity, and by lot within a maturity, from prepayments of Base Rental Payments made at the option of the City pursuant to the Lease Agreement, on or after October 1, 2019, at a redemption price equal to the principal amount of the 2009 Series B Bonds to be redeemed, plus accrued but unpaid interest to the date fixed for redemption, without premium.

2009 Series B Bonds Mandatory Redemption. The 2009 Series B Term Bonds maturing October 1, 2031 are subject to mandatory redemption, in part by lot, from sinking account payments set forth in the following schedule commencing October 1, 2020, and on October 1 in each year thereafter to and including October 1, 2031, at a redemption price equal to the principal amount thereof to be redeemed (without premium), together with interest accrued thereon to the date fixed for redemption.

Redemption Date (October 1)

Principal Amount To be Redeemed

2020 $ 550,000 2021 605,000 2022 650,000 2023 695,000 2024 745,000 2025 800,000 2026 855,000 2027 915,000 2028 975,000 2029 1,040,000 2030 1,110,000 2031* 1,185,000

___________________ *Maturity

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If some but not all of the 2009 Series B Term Bonds have been redeemed pursuant to mandatory or optional redemptions, the total amount of sinking account payments to be made subsequent to such redemption shall be reduced in an amount equal to the principal amount of the 2009 Series B Term Bonds so redeemed by reducing each such future sinking account payment on a pro rata basis (as nearly as practicable) in integral multiples of $1,000, as shall be designated pursuant to written notice filed by the Authority with the Trustee.

Selection of Bonds for Redemption

Whenever provision is made in the Indenture for the redemption (other than sinking account redemption) of less than all of the Bonds, the Trustee shall select the Bonds to be redeemed from all Bonds not previously called for redemption, in such maturities as the Authority shall designate (and by lot within any maturity). The Authority shall give the Trustee at least forty-five (45) days notice in writing (or such shorter number of days acceptable to the Trustee in the sole discretion of the Trustee) to exercise the Extraordinary Optional Redemption provisions of the Indenture. For purposes of such selection, all 2009 Series A Bonds shall be deemed to be comprised of separate $5,000 portions and such portions shall be treated as separate 2009 Series A Bonds, which may be separately redeemed. For purposes of such selection, all 2009 Series B Bonds shall be deemed to be comprised of separate $1,000 portions and such portions shall be treated as separate 2009 Series B Bonds, which may be separately redeemed.

Notice of Redemption

The Trustee on behalf and at the expense of the Authority shall mail (by first class mail) notice of any redemption to the respective Owners of any Bonds designated for redemption at their respective addresses appearing on the Registration Books, to the Securities Depositories and to one or more Information Services, at least 30 but not more than 60 days prior to the date fixed for redemption; provided, however, that neither failure to receive any such notice so mailed nor any defect therein shall affect the validity of the proceedings for the redemption of such Bonds or the cessation of the accrual of interest thereon. Such notice shall state the date of the notice, the redemption date, the redemption place and the redemption price and shall designate the CUSIP numbers, the Bond numbers and the maturity or maturities (in the event of redemption of all of the Bonds of such maturity or maturities in whole) of the Bonds to be redeemed, and shall require that such Bonds be then surrendered at the Trust Office of the Trustee for redemption at the redemption price, giving notice also that further interest on such Bonds will not accrue from and after the redemption date. Neither the Authority nor the Trustee shall have any responsibility for any defect in the CUSIP number that appears on any Bond or in any redemption notice with respect thereto, and any such redemption notice may contain a statement to the effect that CUSIP numbers have been assigned by an independent service for convenience of reference and that neither the Authority nor the Trustee shall be liable for any inaccuracy in such numbers.

SECURITY AND SOURCES OF PAYMENT FOR THE BONDS

General

The Bonds will be secured solely by a pledge of Revenues and such other moneys, funds and accounts pledged to the payment of the Bonds under the Indenture (other than the Rebate Fund). The Revenues consist of (i) all Base Rental Payments to be made by the City to the Authority under the Lease Agreement (ii) any proceeds of Bonds originally deposited with the Trustee and all moneys on deposit in the funds and accounts (other than the Rebate Fund) established under the Indenture; (iii) investment income with respect to such moneys held by the Trustee and (iv) any insurance proceeds or condemnation awards received by or payable to the Trustee relating to the Base Rental Payments, including interest or

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profits. The Base Rental Payments will be paid by the City in an amount sufficient to pay the principal of and interest on the Bonds on each Interest Payment Date.

Under the Lease Agreement, in addition to Base Rental Payments, the City has agreed to pay Additional Rental payments in such amounts in each year as shall be required for the payment of all costs and expenses (not otherwise paid for or provided for out of the proceeds of sale of the Bonds) incurred by the Authority or the Trustee in connection with the execution, performance or enforcement of the Lease Agreement or the assignment thereof, the Indenture, or the Authority’s or the Trustee’s interest in the Leased Property, including, but not limited to, all fees, costs and expenses, all administrative costs of the Authority relating to the Leased Property (including, without limiting the generality of the foregoing, salaries and wages of employees, overhead, insurance premiums, taxes and assessments (if any), expenses, compensation and indemnification of the Trustee payable by the Authority under the Indenture), fees of auditors, accountants, attorneys or engineers, and all other reasonable and necessary administrative costs of the Authority or charges required to be paid by it to comply with the terms of the Bonds or of the Indenture.

The City has agreed, in the Lease Agreement, to take such action as may be necessary to include all Base Rental Payments and Additional Rental due under the Lease Agreement in its annual budget and to make the necessary annual appropriations for all such Base Rental Payments and Additional Rental, subject only to abatement as provided in the Lease Agreement.

Pursuant to the Assignment Agreement, dated as of December 1, 2009 (the “Assignment Agreement”), by and between the Authority and the Trustee, the Authority will assign to the Trustee for the benefit of the Owners the Authority’s rights under the Lease Agreement, including the right to receive Base Rental Payments. On or before each March 15 and September 15 the City is required to pay to the Trustee the Base Rental Payments coming due on the next succeeding April 1 and October 1, respectively, from any available sources.

The Authority expects that it will designate all or a portion of the 2009 Series B Bonds as “Build America Bonds” under section 54AA(d) of the Code, and as “qualified Build America Bonds” (Direct Subsidy) under section 54AA(g) of the Code, but it makes no undertaking to any owner of a 2009 Series B Bond that it will make such designation or, if made, that such 2009 Series B Bond will be or remain a qualified Build America Bond. Any cash subsidy received by the Authority pursuant to section 54AA(g) of the Code in respect of any 2009 Series B Bond will be immediately paid over to the City, to be applied to such purposes as the City may determine. The Authority has not undertaken or made any covenant for the benefit of the owners of the 2009 Series B Bonds to comply with any conditions to receive the cash subsidy or to maintain the Authority’s right to retain or receive future subsidy payments in respect of the 2009 Series B Bonds. The Authority is obligated to make all payments of principal of and interest on the 2009 Series B Bonds from the sources described herein whether or not it receives cash subsidy payments.

Reserve Accounts

The Indenture will establish the 2009 Series A Reserve Account and the 2009 Series B Reserve Account (herein each a “Reserve Account”) as additional security for the holders of Bonds of the respective Series if and when that Series is issued. Under the Indenture, the Reserve Account of each Series must be funded at the respective Reserve Requirement for that Series. The “Reserve Requirement” for a Series is defined as an amount equal to, at any date of determination, the least of (i) ten percent (10%) of the sale proceeds (within the meaning of section 148 of the Code) of that Series, (ii) 125% of average annual debt service on that Series for that and every succeeding Bond Year, or (iii) Maximum Annual Debt Service for that Series in that or any succeeding Bond Year.

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The 2009 Series A Reserve Account established for the 2009 Series A Bonds is not available to pay debt service on the 2009 Series B Bonds and the 2009 Series B Reserve Account established for the 2009 Series B Bonds is not available to pay debt service on the 2009 Series A Bonds.

On or before each Interest Payment Date, the Trustee will deposit in each Reserve Account such amount as may be necessary to maintain a balance therein equal to the Reserve Requirement. No deposit shall be made in a Reserve Account so long as there is on deposit an amount equal to the Reserve Requirement. All moneys in a Reserve Account (or available to be drawn from a Qualified Reserve Account Credit Instrument held in that Reserve Account) are to be used and withdrawn by the Trustee solely for the purpose of replenishing the Interest Account or the Principal Account in respect of that Series, in such order, in the event of any deficiency at any time in either of such accounts, or for the purpose of paying the interest on or principal of or redemption premiums, if any, on the that Series in the event that no other money of the Authority is lawfully available therefor. All moneys in the 2009 Series A Reserve Account (or available to be drawn from a Qualified Reserve Account Credit Instrument held in the 2009 Series A Reserve Account Reserve Account) in excess of the Reserve Requirement may be applied to the retirement of all 2009 Series A Bonds then Outstanding. All moneys in the 2009 Series B Reserve Account (or available to be drawn from a Qualified Reserve Account Credit Instrument held in the 2009 Series B Reserve Account Reserve Account) in excess of the Reserve Requirement will be deposited into a segregated account of the 2009 Series B Construction Fund to be established by the Trustee, which monies will be applied at the written direction of the Authority to finance only capital expenditures, as defined in Treasury Regulation 1.150-1(b). All moneys in a Reserve Account shall be used and withdrawn by the Trustee solely for the purpose of replenishing the Interest Account or the Principal Account relating to that Series of Bonds.

The Reserve Requirement may be satisfied by crediting to a Reserve Account moneys or a Qualified Reserve Account Credit Instrument or any combination thereof, which in the aggregate make funds available in such Reserve Account in an amount equal to the Reserve Requirement. Upon the deposit with the Trustee of such Qualified Reserve Account Credit Instrument to satisfy the 2009 Series A Reserve Requirement, the Trustee shall transfer any excess amounts then on deposit in the 2009 Series A Reserve Account into a segregated account of the Lease Revenue Fund to be established by the Trustee, which monies shall be applied at the written direction of the Authority either (i) to the payment within one year of the date of transfer of capital expenditures of the Authority permitted by law, or (ii) to the redemption of 2009 Series A Bonds on the earliest succeeding date on which such redemption is permitted by the Indenture, and pending such application shall in accordance with written direction of the Authority be held either not invested in investment property (as defined in section 148(b) of the Code), or invested in such property to produce a yield that is not in excess of the yield on the 2009 Series A Bonds; provided, however, that the Authority may by written direction to the Trustee cause an alternative use of such amounts if the Authority shall first have obtained a written opinion of nationally recognized bond counsel substantially to the effect that such alternative use will not adversely affect the exclusion pursuant to section 103 of the Code of interest on the 2009 Series A Bonds from the gross income of the owners thereof for federal income tax purposes. Upon the deposit with the Trustee of such Qualified Reserve Account Credit Instrument to satisfy the 2009 Series B Reserve Requirement, the Trustee shall transfer any excess amounts then on deposit in the 2009 Series B Reserve Account into a segregated account of the 2009 Series B Construction Fund to be established by the Trustee, which monies shall be applied at the written direction of the Authority to finance only capital expenditures, as defined in Treasury Regulation 1.150-1(b).

In any case where a Reserve Account is funded with a combination of cash and a Qualified Reserve Account Credit Instrument, the Trustee must deplete all cash balances in that Reserve Account before drawing on that Qualified Reserve Account Credit Instrument. With regard to replenishment, any available moneys provided by the Authority or the City for that purpose are to be used first to reinstate the Qualified Reserve Account Credit Instrument and second, to replenish the cash in a Reserve Account. In

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the event the Qualified Reserve Account Credit Instrument is drawn upon, the Authority shall make payment of interest on amounts advanced under the Qualified Reserve Account Credit Instrument after making any payments pursuant to the Indenture.

Abatement of Base Rental Payments

The obligation of the City to pay Base Rental Payments and Additional Rental Payments will be abated during any period in which by reason of any damage, destruction or condemnation there is substantial interference with the use by the City of the Leased Property or any portion thereof. Such abatement will be in an amount such that the resulting Base Rental Payments in any year during which such interference continues does not exceed the fair rental value of the portions of the Leased Property as to which such damage, destruction or taking do not substantially interfere with the City’s use and right of possession, as evidenced by a Certificate of the City. Such abatement shall continue for the period commencing with the date of such interference and ending with the restoration of the Leased Property to tenantable condition. See “RISK FACTORS – Abatement.”

Additional Obligations

The Authority has agreed pursuant to the Indenture that no additional bonds, notes or indebtedness shall be issued or incurred that are payable out of the Revenues in whole or in part.

Maintenance, Utilities, Taxes and Assessments

During such time as the City or any assignee or sublessee thereof is in possession of the Leased Property, all maintenance and repair, ordinary or extraordinary, of the Leased Property shall be the responsibility of the City, and the City shall pay for or otherwise arrange for the payment of (a) all utility services supplied to the Leased Property, (b) the cost of operation of the Leased Property, and (c) the costs of maintenance of and repair to the Leased Property resulting from ordinary wear and tear or want of care on the part of the City. The City shall at the City’s sole cost and expense keep and maintain the Leased Property clean and in a safe and good condition and repair. The Authority has no obligation to alter, remodel, improve, repair, decorate, or paint the Leased Property or any part thereof.

The City shall comply with all statutes, ordinances, regulations, and other requirements of all governmental entities that pertain to the occupancy or use of the Leased Property. The Authority has no responsibility or obligation whatsoever to construct any improvements, modifications or alterations to the Leased Property.

The Authority and the City contemplate that the Leased Property will be used for public purposes by the City and, therefore, that the Leased Property will be exempt from all taxes presently assessed and levied with respect to real and personal property. In the event that the use, possession or acquisition by the Authority or the City of the Leased Property is found to be subject to taxation in any form, the City will pay during the term of the Lease Agreement, as the same respectively become due, all taxes and governmental charges of any kind whatsoever that may at any time be lawfully assessed or levied against or with respect to the Leased Property and any other property acquired by the City in substitution for, as a renewal or replacement of, or a modification, improvement or addition to the Leased Property; provided, that with respect to any governmental charges or taxes that may lawfully be paid in installments over a period of years, the City shall be obligated to pay only such installments as are accrued during such time as the Lease Agreement is in effect.

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Insurance Coverages

The Lease Agreement provides that each policy of insurance required thereby shall name the Trustee as loss payee, and the proceeds of such insurance shall be deposited with the Trustee for application pursuant to the Indenture, pro rata based on the principal amount of the Bonds Outstanding.

Substitution and Release of Property

Pursuant to the Lease Agreement, the City, shall have, so long as the Lease Agreement is in effect, the option at any time and from time to time, to substitute other real property for any portion of the Leased Property or release any identifiable real property and/or improvements constituting the Leased Property, provided that the City shall satisfy all of the requirements set forth in the Lease Agreement. See “APPENDIX C – SUMMARY OF CERTAIN PROVISIONS OF THE PRINCIPAL LEGAL DOCUMENTS – THE LEASE AGREEMENT – Substitution and Release of Property.”

PLAN OF FINANCE

General

Each series is being issued to provide funds for (i) the acquisition, construction and installation of certain transportation-related capital improvements within the City that qualify as local road repair/rehabilitation, congestion relief and safety improvements, or new construction of needed facilities (the “Transportation Improvements”) under Measure D, approved by residents of the County on November 4, 2008 (“Measure D”), (ii) the funding of a Reserve Account for that Series in amounts equal to the Reserve Requirement for that Series, and (iii) the payment of costs of issuance related to each Series. The City has a five-year strategic plan which outlines its capital facilities needs. The Transportation Improvements are part of the City’s five year strategic plan.

Measure D Tax Revenues and Transportation Improvements

The City anticipates using a portion of the Measure D Tax Revenues (as defined herein) for the payment of the principal of and interest on the Bonds. Measure D Tax Revenues; however, are not security for the payment of the principal of and interest on the Bonds. See “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS” herein.

Measure D was first enacted by County residents in 1989. Measure D authorized the Imperial County Local Transportation Authority (the “Imperial County LTA”) to impose a Retail Transaction and Use Tax of one-half of one percent (0.50%) (“Measure D Tax Revenues”) to fund certain transportation-related projects (“Measure D Projects”) in the County. Pursuant to the Imperial County LTA’s Ordinance No. 1-2008, which became effective upon the approval of the requisite percentage of voters on November 4, 2008, the existing Retail Transaction and Use Tax of one-half of one percent (0.50%) was extended for an additional 40 years. The 40-year extension of the existing Retail Transaction and Use Tax becomes effective on April 1, 2010.

Since 1990, the City has received approximately $30.6 million of Measure D Tax Revenues. The average receipt of Measure D Tax Revenues for the City has been approximately $2.1 million per year.

The following table shows Measure D Tax Revenues received, and projected to be received, by the City during the following Fiscal Years.

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City of El Centro Measure D Tax Revenues

Fiscal Years Ended June 30

Fiscal Year Ended June 30

Measure D Tax Revenues

Percent Increase/

(Decrease)

2006-07 $2,495,755 - 2007-08 2,455,125 (1.63)% 2008-09 2,277,453 (7.24) 2009-10(1) 2,250,000 (1.21) 2010-11(1) 2,295,000 2.00 2011-12(1) 2,340,900 2.00

_______________________ (1) Projected. Source: City of El Centro

The projected Measure D Tax Revenues may be subject to change by future actions of the Imperial County LTA. For example, if State or federal funds become available which would fund Measure D Projects, then the Retail Transaction and Use Tax may be reduced by the Imperial County LTA. Additionally, under Ordinance No. 1-2008, the Imperial County LTA is authorized to issue bonds payable from proceeds of the Retail Transaction and Use Tax to accelerate the construction of Measure D Projects. When allocating annual revenues to each local agency, which includes the City, the Imperial County LTA would be obligated to first meet all debt service requirements of any bonds issued by the Imperial County LTA prior to allocating funds for other projects.

Under Measure D, Transportation Improvements are limited to: (i) the repair and rehabilitation of existing roadways, reduction of congestion and safety improvements, and the construction of needed facilities; (ii) the improvement or rehabilitation of state highways; and (iii) the financing of transit projects and services within the County.

Leased Property

The City road system, which is composed of over 263 lane miles (the “City Road System”) will serve as the Leased Property under the Lease Agreement. The City Road System has an approximate average age of fifteen (15) years and as of June 30, 2008 was valued at $23,225,774.

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ESTIMATED SOURCES AND USES OF FUNDS

The estimated sources and uses of funds in connection with the issuance of the 2009 Series A Bonds are as follows:

SOURCES: Principal amount of 2009 Series A Bonds $4,615,000 Net Original Issue Discount (2,692) Total Sources $4,612,308 USES: Deposit to 2009 Series A Construction Fund $4,071,792 Deposit to 2009 Series A Reserve Account 428,932 2009 Series A Costs of Issuance(1) 111,584 Total Uses $4,612,308

____________________ (1) Costs of issuance include legal, Trustee, and rating agencies’ fees, printing costs, underwriter’s discount and

other costs incurred in connection with the issuance of the 2009 Series A Bonds.

The estimated sources and uses of funds in connection with the issuance of the 2009 Series B Bonds are as follows:

SOURCES: Principal amount of 2009 Series B Bonds $10,125,000 Issuer Contribution 100,000 Net Original Issue Discount (253,125) Total Sources $ 9,971,875 USES: Deposit to 2009 Series B Construction Fund $ 8,747,746 Deposit to 2009 Series B Reserve Account 941,049 2009 Series B Costs of Issuance(1) 283,080 Total Uses $ 9,971,875

____________________ (1) Costs of issuance include legal, Trustee, and rating agencies’ fees, printing costs, underwriter’s discount and

other costs incurred in connection with the issuance of the 2009 Series B Bonds.

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DEBT SERVICE REQUIREMENTS

The following table sets forth the debt service requirements for the 2009 Series A Bonds:

Interest Payment Date(1)

Principal

Interest

Total

Debt Service

4/01/2010 $ 795,000 $44,177.29 $839,177.29 10/01/2010 320,000 67,782.50 387,782.50 4/01/2011 64,582.50 64,582.50 10/01/2011 330,000 64,582.50 394,582.50 4/01/2012 61,282.50 61,282.50 10/01/2012 335,000 61,282.50 396,282.50 4/01/2013 57,095.00 57,095.00 10/01/2013 345,000 57,095.00 402,095.00 4/01/2014 51,920.00 51,920.00 10/01/2014 355,000 51,920.00 406,920.00 4/01/2015 45,707.50 45,707.50 10/01/2015 370,000 45,707.50 415,707.50 4/01/2016 38,307.50 38,307.50 10/01/2016 385,000 38,307.50 423,307.50 4/01/2017 30,607.50 30,607.50 10/01/2017 420,000 30,607.50 450,607.50 4/01/2018 21,682.50 21,682.50 10/01/2018 460,000 21,682.50 481,682.50 4/01/2019 11,562.50 11,562.50 10/01/2019 500,000 11,562.50 511,562.50

TOTAL $4,615,000 $5,492,454.79 $5,492,454.79 _____________________ (1) Base Rental Payments are made fifteen (15) days prior to each Interest Payment Date.

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The following table sets forth the debt service requirements for the 2009 Series B Bonds:

Interest Payment Date(1)

Principal

Interest

Total

Debt Service 04/01/2010 - $ 243,632.81 $ 243,632.81 10/01/2010 - 417,656.25 417,656.25 04/01/2011 - 417,656.25 417,656.25 10/01/2011 - 417,656.25 417,656.25 04/01/2012 - 417,656.25 417,656.25 10/01/2012 - 417,656.25 417,656.25 04/01/2013 - 417,656.25 417,656.25 10/01/2013 - 417,656.25 417,656.25 04/01/2014 - 417,656.25 417,656.25 10/01/2014 - 417,656.25 417,656.25 04/01/2015 - 417,656.25 417,656.25 10/01/2015 - 417,656.25 417,656.25 04/01/2016 - 417,656.25 417,656.25 10/01/2016 - 417,656.25 417,656.25 04/01/2017 - 417,656.25 417,656.25 10/01/2017 - 417,656.25 417,656.25 04/01/2018 - 417,656.25 417,656.25 10/01/2018 - 417,656.25 417,656.25 04/01/2019 - 417,656.25 417,656.25 10/01/2019 - 417,656.25 417,656.25 04/01/2020 - 417,656.25 417,656.25 10/01/2020 $ 550,000 417,656.25 967,656.25 04/01/2021 394,968.75 394,968.75 10/01/2021 605,000 394,968.75 999,968.75 04/01/2022 370,012.50 370,012.50 10/01/2022 650,000 370,012.50 1,020,012.50 04/01/2023 343,200.00 343,200.00 10/01/2023 695,000 343,200.00 1,038,200.00 04/01/2024 314,531.25 314,531.25 10/01/2024 745,000 314,531.25 1,059,531.25 04/01/2025 283,800.00 283,800.00 10/01/2025 800,000 283,800.00 1,083,800.00 04/01/2026 250,800.00 250,800.00 10/01/2026 855,000 250,800.00 1,105,800.00 04/01/2027 215,531.25 215,531.25 10/01/2027 915,000 215,531.25 1,130,531.25 04/01/2028 177,787.50 177,787.50 10/01/2028 975,000 177,787.50 1,152,787.50 04/01/2029 137,568.75 137,568.75 10/01/2029 1,040,000 137,568.75 1,177,568.75 04/01/2030 94,668.75 94,668.75 10/01/2030 1,110,000 94,668.75 1,204,668.75 04/01/2031 48,881.25 48,881.25 10/01/2031 1,185,000 48,881.25 1,233,881.25

TOTAL $10,125,000 $14,277,914.06 $24,402,914.06 _____________________ (1) Base Rental Payments are made fifteen (15) days prior to each Interest Payment Date.

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STATE BUDGETS

Information regarding the State budget is regularly available at various State-maintained websites. The Fiscal Year 2009-10 State Budget further described below may be found at the website of the Department of Finance, www.dof.ca.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.

Budget Reform and 2009 Budget Act. On November 6, 2008, the Governor called a special session of the State Legislature and announced a plan to address a projected revenue shortfall for fiscal year 2008-09, estimated as of December 10, 2008 to be approximately $14.8 billion, as well as substantial shortfalls in future fiscal years. This legislative special session ended without a resolution. Coinciding with the swearing-in of the new Legislature on December 1, 2008, the Governor declared a fiscal emergency for the State, allowing him to call several Proposition 58 legislative special sessions to address the shortfall. On February 19, 2009, the State Legislature passed a budget-balancing reform package signed by Governor Schwarzenegger on February 20, 2009 (the “2009 Budget Act”), intended to close the State’s projected $41.6 billion deficit through June of 2010. The 2009 Budget Act, enacted nearly five months ahead of the constitutional deadline, along with a number of accompanying measures, was designed to reduce the deficit forecasts and to achieve budget solutions for both the 2008-09 and 2009-10 fiscal years. The Department of Finance has reported that California’s chronic and cyclic budget crises are largely attributable to the use of higher than normal revenues to create permanent, ongoing spending commitments and tax cuts. The 2009 Budget Act and accompanying ballot measures were designed to end this cycle by preventing government from spending revenue above the long-term trend line and by creating a substantial “rainy day” fund of up to 12.5 percent of General Fund revenue for use only during times when revenue is insufficient to fund a moderate, population-and-inflation-based growth in spending. Certain of these reforms to be effective were required to be approved as constitutional amendments by qualified voters voting at an election on May 19, 2009. However, five of the six proposed Statewide ballot measures failed to pass thereby increasing the projected deficit by approximately $6 billion.

The 2009 State Budget Act projected a $42 billion deficit through fiscal year-end 2009-10, consisting of $15 billion in expenditure reductions, $11.4 billion in borrowing, $12.8 billion in taxes and $2 billion in federal funding. The 2009 Budget Act included the following major expenditure reductions:

• No COLAs. $1.2 billion in combined spending-related savings for fiscal years 2008-09 and 2009-10 by suspending COLAs for various programs, including Supplemental Security Income (“SSI”), State Supplementary Payment (“SSP”), California Work Opportunities and Responsibilities to Kids (“CalWORKs”) and Medi-Cal, as well as trial courts and the University of California and California State University systems.

• Fund Shifts. The 2009 Budget Act used approximately $1 billion in fund shifts to balance the State General Fund. The two largest shifts include $608 million from Proposition 10 child development programs and $227 million from Proposition 63 mental health funds. Both of these provisions were subject to voter approval at the May 19, 2009 state election.

• Deferred Spending. The 2009 Budget Act also deferred approximately $500 million in costs for expenses the State will face in future years, including approximately $200 million in tribal revenues to the General Fund that would otherwise have been used to pay off prior transportation loans. The 2009 Budget Act also deferred approximately $91 million in mandate reimbursements to local governments.

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• Health. $184 million in savings in fiscal year 2009-10 by eliminating certain optional Medi-Cal benefits and reducing reimbursements rates to public hospitals by 10%. This provision may be triggered off by the receipt of sufficient federal stimulus funds. The 2009 Budget Act also assumed $160 million in savings from reductions to reimbursement rates for developmental health service providers.

• Social Services. $74 million in savings in fiscal year 2009-10 for In-Home Supportive Service (“IHSS”) expenditures from the reduction of IHSS provider wages, as well as $4 million in savings by eliminating state assistance with Medi-Cal co-payments for new IHSS participants. The 2009 Budget Act also achieved $147 million in savings by reducing CalWORKs grants by 4% and $268 million in savings by reducing SSI/SSP grants by 2.3%. All of these Social Services reductions can be triggered off by the receipt of sufficient federal stimulus funds.

• Transportation. $460 million in combined savings in fiscal years 2008-09 and 2009-10 for transportation services expenditures by reducing state funding of the State Transit Assistance program in fiscal year 2008-09 and eliminating such funding in fiscal year 2009-10.

• Employee Compensation. $1.2 billion in combined savings for fiscal years 2008-09 and 2009-10, realized primarily from the continued implementation of monthly one and two-day furloughs for state employees.

• Higher Education Savings. $232 million in unallocated reductions for higher education funding, as well as an additional $100 million unallocated reduction for fiscal year 2009-10 that may be triggered off by the receipt of sufficient federal stimulus funds.

• Other Reductions. The 2009 Budget Act also included (i) a $171.4 million reduction in judiciary expenditures in fiscal year 2009-10 that may be triggered off by the receipt of sufficient federal stimulus funds, and (ii) $580 million in unspecified correctional services reductions.

The 2009 Budget Act assumed an additional $12.5 billion in revenues, including $1.5 billion in fiscal year 2008-09 and $11 billion in fiscal year 2009-10, through the enactment of the following major revenue and borrowing solutions:

• Sales Tax. $5.8 billion from a temporary one-cent increase in the state sales tax, including $1.2 billion of additional revenue for fiscal year 2008-09 and $4.6 billion of such revenues for fiscal year 2009-10. The increased tax becomes effective April 1, 2009 and is set to lapse on July 1, 2011.

• Vehicle License Fees. $2 billion from a temporary increase in vehicle license fees, including $346 million in additional revenues for fiscal year 2008-09 and $1.7 billion of such revenues in fiscal year 2009-10. This increase is set to lapse on July 1, 2011.

• Personal Income Tax. $1.8 billion from a temporary increase of 0.125% in each personal income tax rate. The 2009 Budget Act also provided for $1.8 billion from an additional personal income tax increase of 0.125% that may be triggered off if sufficient federal stimulus funds are received. This tax increase is set to lapse after tax year 2010.

• Reduction of Dependent Tax Credit. $1.4 billion from a temporary reduction in the value of dependent credit for income tax purposes. This reduction is set to lapse after tax year 2010.

Amendment of the 2009 State Budget Act. On July 23, 2009 through July 24, 2009, the State

Legislature voted on, and passed, a majority of the budget solutions amending the 2009 State Budget Act to address the combined $60 billion budget deficit over Fiscal Years 2008-09 and 2009-10. The amendments included spending cuts, borrowing, redirecting revenues from local governments, accounting maneuvers and a $921 million reserve. On July 28, 2009, the Governor signed an amendment to the 2009 State Budget Act (the “Amended 2009 State Budget Act”) to include an additional $24.2 billion in budget

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solutions to address the further deterioration of the fiscal situation of the State identified in the May Revision. Because the State Legislature did not adopt budget solutions that eliminated the entire projected deficit, the Governor used his veto power to eliminate an additional $489 million in spending, leaving the State with a $500 million reserve. The $60 billion Amended 2009-10 State Budget Act addressed the largest budget gap faced by the State, both in dollar amount and in the percent of General Fund revenues it represents. The largest contributor to the budget gap was the reduction in the baseline revenue forecast for fiscal years 2008-09 and 2009-10. This reduction was due in large part to the economic recession.

LAO Overview of Amended 2009 State Budget Act. The Legislative Analyst’s Office (the “LAO”) issued its Overview of the Amended 2009 State Budget Act on October 6, 2009. The LAO noted that the 2009-10 state spending plan includes total state budget expenditures of $110 billion from the General Fund and special funds. Spending from these funds in 2009-10 is expected to be $20 billion, 15 percent less than it was in fiscal year 2007–08. In addition, the LAO pointed out that the revised 2009-10 Budget assumed spending from bond funds of nearly $10 billion as the State continues to allocate moneys from the $43 billion bond package approved at the November 2006 election. The LAO also noted that while State expenditures will decline in fiscal year 2009–10, federal funds spending will increase dramatically. The LAO also noted that federal stimulus funding provided by the American Recovery and Reinvestment Act (“ARRA”) is largely responsible for the increase in spending from federal funds from $56 billion in 2007–08 to $77 billion in 2008–09 and an estimated $94 billion in 2009–10.

LAO Five Year Outlook. On November 18, 2009, the LAO released its five-year fiscal outlook for the State which states that the State’s budget problems will outlast the current recession and the State faces a $21 billion eighteen-month budget problem. According to the LAO, the shortfall is mostly attributable to overly optimistic revenue projections in the 2009 Budget Act; failed budget solutions, such as selling the State Comp Insurance Fund; higher than expected prison costs; expiration of temporary tax increases and implementation of new tax cuts; an increase in the Proposition 98 funding guarantee by $1 billion in 2009-10 and ‘sunsetting’ of state fiscal stabilization funds from the federal government. The LAO projects that fiscal year 2010-11 will be a “flat” revenue year for the State, although $5 billion in temporary taxes will sunset, and while 2011-12 should see an increase in revenues of $5.5 billion, $9 billion in temporary taxes will expire, causing a net reduction in state revenues. The reduction in revenues, combined with required repayments to local governments and workload increases, creates a sustained budget problem for California that, according to the LAO, will require the State to recover with significant further cuts or increased taxes.

Future State Budgets. Changes in the revenues received by the State can affect the amount of funding, if any, to be received from cities and counties in the State, including the City. The City cannot predict the extent of the budgetary problems the State will encounter in this or in any future fiscal year, 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 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 are being and will be affected by national and State economic conditions and other factors, including the current economic downturn, over which the City has no control.

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RISK FACTORS

Purchase of the Bonds will constitute an investment subject to certain risks, including the risk of nonpayment of principal and interest. Before purchasing any of the Bonds, prospective investors should carefully consider, among other things, the risk factors described below. However, the following is not meant to be an exhaustive listing of all the risks associated with the purchase of the Bonds. Moreover, the order of presentation of the risk factors does not necessarily reflect the order of their importance.

Substitution of Property

The Lease Agreement permits the City to substitute other property for the Leased Property or portions thereof, provided that the City obtains an opinion of Bond counsel to the effect that the substitution or release of the Leased Property is permitted under the Lease Agreement and will not impair the validity of enforceability of the Lease Agreement or impair the exclusion of interest on the Bonds payable from Base Rental Payments from the gross income of the owners thereof for federal income tax purposes, and provided certain other criteria are met. See “APPENDIX C – SUMMARY OF CERTAIN DOCUMENTS – LEASE AGREEMENT – Substitution and Release of Property.”

Bonds are Limited Obligations

The Bonds are special, limited obligations of the City. The Bonds do not constitute a debt or liability of the City, the State of California or of any political subdivision thereof within the meaning of any constitutional or statutory provision, or a pledge of the faith and credit of the City, the State of California or of any political subdivision thereof, but shall be payable, except to the extent of certain available moneys pledged therefore, solely from Revenues. Neither the faith and credit nor the taxing power of the City, the State of California or of any political subdivision thereof is pledged to the payment of the principal of, premium, if any, or the interest on the Bonds. The issuance of the Bonds shall not directly or indirectly or contingently obligate the City, the State of California or any political subdivision thereof to levy or to pledge any form of taxation whatsoever therefor or to make any appropriation for their payment.

Abatement

In the event of the loss of, damage to or destruction or condemnation of the Leased Property that causes the City not to have the use and possession of all or a substantial part of such Leased Property, the City’s obligation to make the Base Rental Payments due under the Lease Agreement will be abated and, notwithstanding: (i) the provisions of the Lease Agreement specifying the extent of such abatement and (ii) the funding of the Reserve Account for the Bonds, the resulting Base Rental Payments (and such other funds) may not be sufficient to pay all of the remaining principal and interest due with respect to the Bonds. See “APPENDIX C – SUMMARY OF CERTAIN PROVISIONS OF THE PRINCIPAL LEGAL DOCUMENTS – THE LEASE AGREEMENT – Abatement of Rental.”

Risk of Uninsured Loss

The City covenants under the Lease Agreement to maintain certain insurance policies on the Leased Property. These insurance policies do not cover all types of risk. For instance, the City does not covenant to maintain earthquake insurance. The Leased Property could be damaged or destroyed due to earthquake or other casualty for which the Leased Property is uninsured. Additionally, the Leased Property could be the subject of an eminent domain proceeding. Under these circumstances an abatement of Base Rental Payments could occur and could continue indefinitely. There can be no assurance that the providers of the City’s liability 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, there can be no assurances

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that amounts received as proceeds from insurance or from condemnation of the Leased Property will be sufficient to repair the Leased Property or to redeem the Bonds and any other obligations secured by Base Rental Payments.

Certain of the City’s insurance policies provide for deductibles up to $500,000. Should the City be required to meet such deductible expenses, the availability of General Fund revenues to make Base Rental Payments may be correspondingly affected.

Geological and Seismic Risks

The Leased Property is located within the Imperial Valley portion of the Salton Trough, the dominant landform within the County. The Salton Trough encompasses the Coachella, Imperial and Mexicali valleys and extends north from the Gulf of California. The geologic structure of the trough is a result of an evolving “rift” in the earth’s crustal plates. Nonmarine and alluvium sediments cover large portions of the area. The Imperial Valley is drained by an 8,360 square mile watershed, which eventually empties into the Salton Sea.

The State of California, including the Imperial Valley and the City, are located in seismically active regions and subject to seismic events with related concerns of ground shaking, liquefaction and landslides. Subsidence, a phenomenon associated with groundwater withdrawal, can occur in the Imperial Valley as a result of geothermal operations; however, the potential is considered low to moderate on the Imperial Valley floor under current hydrological conditions. The most noteworthy of the numerous active faults traversing the Salton Trough is the San Andreas Fault. The other two major northwest-trending fault zones bounding the Trough are the San Jacinto Fault on the northwest and the Elsinore Fault on the southwest.

The City is particularly susceptible to strong ground shaking and significant earthquake damage from liquefaction, land subsidence and ground lurching. Historically, the Imperial Valley is a seismically active area associated with numerous earthquakes occurring between 1938 and 2008 registering from point 4.3 and 6.6 on the Richter scale. There are no assurances, however, that a future earthquake will be limited to this range in the Richter scale. The Leased Property could also be subjected to moderate to severe ground shaking in the event of an earthquake on any of the faults in the southern California and northern Baja California area.

Should an earthquake occur that results in substantial interference with the use of the Leased Property, under the abatement provisions of the Lease, the City would not be obligated to make the Base Rental Payments. See “RISK FACTORS – Abatement” above.

The Leased Property may also be at risk from other events of force majeure, such as damaging storms, floods, fires and explosions, strikes, sabotage, riots and spills of hazardous substances, among other events. The City cannot predict what force majeure events may occur in the future.

Hazardous Substances

The public works activities of the City may, from time to time, result in the use of hazardous substances on the facilities owned and operated by the City, including, but not limited, to the Leased Property. Accordingly, it is possible that spills, discharges or other adverse environmental consequences of such use in the future could cause an adverse effect on the fair rental value of the Leased Property and lead, in an extreme case, to abatement, in whole or in part, of Base Rental payments. See “RISK FACTORS – Abatement” above.

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Risks Related to Taxation in California

Constitutional Amendments Affecting Tax Revenues. Article XIIIA of the California Constitution limits the amounts of ad valorem tax on real property to 1% of “full cash value” as determined by the county assessor. Article XIIIA defines “full cash value” to mean “the City 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 has occurred after the 1975 assessment period.” Furthermore, all real property valuation may be increased to reflect the inflation rate, as shown by the consumer price index, not to exceed 2% per year, or may be reduced in the event of declining property values caused by damage, destruction or other factors.

Article XIIIA exempts from the 1% tax limitation any taxes to repay indebtedness approved by the voters prior to July 1, 1978, and any bonded indebtedness for the acquisition or improvement of real property approved on or after July 1, 1978 by two-thirds of the voters voting on the proposition approving such bonds, and requires a vote of two-thirds of the qualified electorate to impose special taxes, while totally precluding the imposition of any additional ad valorem, sales or transaction tax on real property. In addition, Article XIIIA requires the approval of two-thirds of all members of the State legislature to change any State tax law resulting in increased tax revenues.

Article XIIIB of the California Constitution limits the annual appropriations from the proceeds of taxes of the State and any city, county, school district, authority or other political subdivision of the State to the level of appropriations for the prior fiscal year, as adjusted for changes in the cost of living, population and services rendered by the governmental entity. Article XIIIB includes a requirement that if an entity’s revenues in any year exceed the amount permitted to be spent, the excess would have to be returned by revising tax or fee schedules over the subsequent two years.

On November 5, 1996, California voters approved an initiative to amend the California Constitution known as the Right to Vote on Taxes Act (“Proposition 218”), which added Article XIIIC and XIIID to the California Constitution. Among other provisions, Proposition 218 requires majority voter approval for the imposition, extension or increase of general taxes and two-thirds voter approval for the imposition, extension or increase of special taxes by a local government, which is defined in Proposition 218 to include cities. Proposition 218 also provides that any general tax imposed, extended or increased without voter approval by any local government on or after January 1, 1995 and prior to November 6, 1996 will continue to be imposed only if approved by a majority vote in an election held within two years of November 6, 1996. Proposition 218 also provides that the initiative power shall not be prohibited or otherwise limited in matters of reducing or repealing any local tax, assessment, fee or charge. This extension of the initiative power is not limited by the terms of Proposition 218 to impositions after November 6, 1996 and absent other legal authority, could result in retroactive reduction in any existing taxes, assessments, fees and charges. In addition, Proposition 218 limits the application of assessments, fees and charges and requires certain existing, new and increased assessments, fees and charges to be submitted to property owners for approval or rejection, after notice and public hearing. The City does not expect Proposition 218 to have any immediate material effect on the revenues from which Base Rental Payments are expected to be appropriated.

Implementing Legislation. Legislation enacted by the California Legislature to implement Article XIIIA (Statutes of 1978, Chapter 292, as amended) provides that, notwithstanding any other law, local agencies may not levy any property tax, except to pay debt service on indebtedness approved by the voters prior to July 1, 1978, and that each county will levy the maximum tax permitted by Article XIIIA of $4.00 per $100 assessed valuation (based on the traditional practice of using 25% of full cash value as the assessed value for tax purposes). The legislation further provided that, for Fiscal Year 1978-79 only, the tax levied by each county was to be appropriated among all taxing agencies within the county in proportion to their average share of taxes levied in certain previous years.

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Future assessed valuation growth allowed under Article XIIIA (i.e., new construction, change of ownership, and 2% annual value growth) will be allocated on the basis of “situs” among the jurisdictions that serve the tax rate area within which the growth occurs. Local agencies and schools will share the growth of “base” revenue from the tax rate area. Each year’s growth allocation becomes part of each agency’s allocation in the following year. The Authority is unable to predict the nature or magnitude of future revenue sources that may be provided by the State to replace lost property tax revenues. Article XIIIA effectively prohibits the levying of any other ad valorem property tax above those described above, even with the approval of the affected voters.

Constitutional Challenges to Property Tax System. There have been many challenges to Article XIIIA of the California Constitution. The United States Supreme Court heard the appeal in Nordlinger v. Hahn, a challenge relating to residential property. Based upon the facts presented in Nordlinger, the United States Supreme Court held that the method of property tax assessment under Article XIIIA did not violate the federal Constitution. The Authority cannot predict whether there will be any future challenges to California’s present system of property tax assessment and cannot evaluate the ultimate effect on the Agency’s receipt of tax increment revenues should a future decision hold unconstitutional the method of assessing property.

Statutory Revenue Limitations -- Proposition 62. Proposition 62 is a statewide statutory initiative adopted by the voters at the November 4, 1986 general election. It added Sections 53720 to 53730 to the Government Code to require that all new local taxes be approved by the voters. The statute provides that all local taxes are either general taxes or special taxes. General taxes are imposed for general governmental purposes. Special taxes are imposed for specific purposes only. General taxes may not be imposed by local government unless approved by a two-thirds vote of the entire legislative body and a majority of the voters voting on the proposed general tax. Special taxes may not be imposed by local government unless approved by a majority of the entire legislative body and by two-thirds of the voters voting on the special tax. Soon after Proposition 62 was adopted by the voters, legal challenges to taxes adopted contrary to its provisions were filed. In 1991, in the most significant case, City of Woodlake v. Logan, the California Court of Appeal held that the statutory voter approval requirement for general taxes was unconstitutional. The California Supreme Court refused to review Woodlake.

On September 28, 1995, the California Supreme Court, on a 5-2 vote, in a decision entitled Santa Clara County Local Transportation Authority v. Guardino (Case No. S036269), “disapproved” Woodlake and held that the voter approval requirements of Proposition 62 are valid. On December 14, 1995, the Supreme Court made minor nonsubstantive changes to its written opinion and denied the petition for rehearing. The decision provides that the voter approval requirements of Proposition 62 for both general and special taxes are valid. The Guardino case fails to say (1) whether the decision is retroactively applicable to general taxes adopted prior to the decision; (2) whether taxpayers have any remedies for refund of taxes paid under a tax ordinance that was not voter approved; (3) what statute of limitations applies to taxes adopted without voter approval prior to Guardino; (4) whether Proposition 62 applies only to new taxes or to tax increases as well.

The Court of Appeals in a December 15, 1997 decision entitled McBearty v. City of Brawley (Case No. D027877) addressed some of these issues. In Brawley, a taxpayer challenged the city’s utility tax that was passed by the city council in 1991 without a vote of the electorate. The Court of Appeals held that (i) a three year statute of limitations applies to challenges to a tax ordinance subject to Proposition 62; and (ii) the statute of limitations did not begin to run until September 1995 when the Guardino case determined that Proposition 62 was constitutional. The effect of the holding in Brawley is that any tax ordinances passed between November 1986 and December 1995 that were not approved by the electorate would be subject to a challenge until December 1998. The court ordered the city to either cease collecting the tax or seek voter approval to continue levying the tax. However, in Howard Jarvis Taxpayers Association v. City of La Habra, decided on June 4, 2001, the California Supreme Court

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overruled part of McBearty, finding that the three year statute of limitations applicable to such taxes does not run from the date of the Guardino decision, but rather the continued imposition and collection of such tax is an ongoing violation, upon which the limitations period begins with each new collection.

Several questions raised by the Guardino decision remain unresolved. Proposition 62 provides that if a jurisdiction imposes a tax in violation of Proposition 62, the portion of the one percent general ad valorem tax levy allocated to that jurisdiction is reduced by $1 for every $1 in revenue attributable to the improperly imposed tax for each year that such tax is collected. The practical applicability of this provision has not been fully determined. Potential future litigation and legislation may resolve some or all of the issues raised by the Guardino decision.

The Authority cannot predict the outcome of any pending or future litigation concerning the validity of Proposition 62, nor can it predict the scope of the Guardino or Brawley decisions discussed above. Proposition 62 could affect the ability of the City to continue the imposition of, or to retain, certain taxes, and restrict the City’s ability to raise revenue.

Future Initiatives

Article XIII A (Limitation on Ad Valorem Tax), Article XIII B (Government Spending Limitation), Article XIII C (Voter Approval for Local Tax Levies) and Article XIII D (Assessment and Property Related Fee Reform) of the Constitution of the State of California were each adopted as measures that qualified for the ballot pursuant to California’s initiative process. From time to time, other initiative measures may be adopted, which may affect the City’s revenues and its ability to expend said revenues. The above-mentioned measures and any future measures could restrict the City’s ability to raise additional funds for its General Fund.

Limitations on Remedies

The enforceability of the rights and remedies of the owners of the Bonds and the Trustee, and the obligations incurred by the City, may be subject to the following, among others: the limitations on legal remedies against cities in California; the federal bankruptcy code and applicable bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting the enforcement of creditors’ rights generally, now or hereafter in effect; principles of equity that may limit the specific enforcement under State law of certain remedies; the exercise by the United States of America of the powers delegated to it by the U.S. Constitution; and the reasonable and necessary exercise, in certain exceptional situations, of the police power inherent in the sovereignty of the State and its governmental bodies in the interest of serving a significant and legitimate public purpose. Bankruptcy proceedings, or the exercise of powers by the federal or State government, if initiated, could subject the owners of the Bonds to judicial discretion and interpretation of their rights in bankruptcy or otherwise, and consequently may entail risks of delay, limitations or modification of their rights.

Remedies on Default

If the City defaults in the observance or performance of any agreement, condition, covenant or term contained in the Lease Agreement required to be observed or performed by it (including without limitation the payment of any Base Rental Payments or Additional Rental due under the Lease Agreement), the Authority cannot exercise any rights of reentry upon or repossession of the Leased Property. IN THE EVENT OF SUCH DEFAULT, THE AUTHORITY MUST THEREAFTER MAINTAIN THIS LEASE IN FULL FORCE AND EFFECT AND MAY ONLY RECOVER RENT AND OTHER MONETARY CHARGES AS THEY BECOME DUE, ALL WITHOUT TERMINATING THE CITY’S RIGHT TO POSSESSION OF THE LEASED PROPERTY.

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Loss of Tax Exemption

As discussed under the caption “TAX MATTERS,” interest on the 2009 Series A Bonds could fail to be excluded pursuant to section 103(a) of the Code from the gross income of the owners thereof for purposes of federal income taxation, in some cases retroactive to the date of execution and delivery of the 2009 Series A Bonds, as a result of future acts or omissions of the Authority or the City in violation of certain covenants contained in the Indenture or the Lease Agreement, respectively. Should such an event of taxability occur, the 2009 Series A Bonds are not subject to special redemption or any increase in interest rate and will remain outstanding until maturity or until redeemed pursuant to the Indenture.

RATINGS

Standard & Poor’s, A Division of McGraw-Hill Companies (“S&P) assigned its underlying municipal bond rating of “A” to the Bonds. Such ratings reflect only the view of S&P. Any explanation of the significance of such rating may only be obtained from S&P at the following website addresses: www.standardandpoors.com. The information set forth on such website is not incorporated by reference herein. Generally, a rating agency bases its rating on the information and materials furnished to it and on investigations, studies and assumptions of its own. There is no assurance that such rating will continue for any given period of time or that any of them will not be revised downward or withdrawn entirely by the rating agency, if in the judgment of the rating agency circumstances so warrant. Any such downward revision or withdrawal of such rating may have an adverse effect on the market price of the Bonds.

UNDERWRITING

The Bonds are being purchased for reoffering by Estrada Hinojosa & Company, Inc. (the “Underwriter”). The Underwriter has agreed to purchase all of the 2009 Series A Bonds at a purchase price of $4,553,512.80 (consisting of the $4,615,000.00 aggregate principal amount of the 2009 Series A Bonds minus $2,692.10 of net original issue discount and less $58,795.10 of Underwriter’s discount). The Underwriter has agreed to purchase all of the 2009 Series B Bonds at a purchase price of $9,704,610.00 (consisting of the $10,125,000.00 aggregate principal amount of the 2009 Series B Bonds minus $253,125.00 of net original issue discount and less $167,265.00 of Underwriter’s discount). The Underwriter may offer and sell the Bonds to certain dealers at prices lower than the initial public offering prices, and the initial public offering prices may be changed from time to time by the Underwriter.

BANK QUALIFICATION

Section 265 of the Code provides, in general, that interest expense to acquire or carry tax-exempt obligations is not deductible from the gross income of the owner of such obligations. In addition, section 265 of the Code generally disallows 100% of any deduction for interest expense that is incurred by “financial institutions” described in such section and is allocable, as computed in such section, to tax-exempt interest on obligations acquired after August 7, 1986. Section 265(b) of the Code provides two exceptions to this interest disallowance rule for financial institutions. First, the disallowance does not apply to interest expense allocable to tax-exempt obligations issued in 2009 or 2010 (other than to refund, directly or in a series of refundings, a bond originally issued before 2009) to the extent the amount of such obligations (other than “qualified tax-exempt obligations,” described below) owned by a financial institution does not exceed 2% of the average adjusted bases for all its assets. Second, the disallowance does not apply to interest expense allocable to tax-exempt obligations (other than private activity bonds that are not qualified 501(c)(3) bonds) that are designated by an issuer as “qualified tax-exempt obligations.” An issuer may designate obligations as “qualified tax-exempt obligations” only if the amount of the issue of which they are a part, when added to the amount of all other tax-exempt obligations (other than private activity bonds that are not qualified 501(c)(3) obligations and other than

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certain refunding bonds) issued or reasonably anticipated to be issued by the issuer during the same calendar year, does not exceed $10,000,000 ($30,000,000 for obligations issued in 2009 or 2010).

The Authority has designated the 2009 Series A Bonds as “qualified tax-exempt obligations” and has certified its expectation that the above-described $30,000,000 ceiling will not be exceeded. Accordingly, it is anticipated that financial institutions that purchase the 2009 Series A Bonds will not be subject to the 100% disallowance of interest expense allocable to interest on the 2009 Series A Bonds under section 265(b) of the Code. However, the deduction for interest expense incurred by a financial institution that is allocable to the interest on the 2009 Series A Bonds will be reduced by 20% pursuant to section 291 of the Code.

CONTINUING DISCLOSURE

The Authority has determined that no financial or operating data concerning the Authority is material to any decision to purchase, hold or sell the Bonds and the Authority will not provide any such information. The City will covenant for the benefit of the Owners and beneficial owners of the Bonds to provide certain financial information and operating data relating to the City and to provide notices of the occurrence of certain enumerated events if material.

Pursuant to a Continuing Disclosure Agreement, dated as of December 1, 2009 (the “Continuing Disclosure Agreement”), by and between the City and the Trustee, the City has covenanted for the benefit of the holders and beneficial owners of the Bonds to provide certain financial information and operating data relating to the City no later than eight (8) months after the end of the City’s fiscal year (the “Annual Report”), commencing with the report for Fiscal Year 2008-09, and to provide notices of the occurrence of certain enumerated events, if material. The Annual Report will be filed by the City or its dissemination agent with the Municipal Securities Rulemaking Board. The notices of material events will be filed by the City or its dissemination agent with the Municipal Securities Rulemaking Board. The specific nature of the information to be contained in the Annual Report and the notice of material events is set forth in “APPENDIX D – FORM OF CONTINUING DISCLOSURE AGREEMENT” herein.

The City has not failed within the past five years to provide annual reports or notices of material events in connection with any continuing disclosure undertaking pursuant to the Rule.

TAX MATTERS

2009 Series A Bonds

The Internal Revenue Code of 1986 (the “Code”) imposes certain requirements that must be met subsequent to the issuance and delivery of the 2009 Series A Bonds for interest thereon to be and remain excluded pursuant to section 103(a) of the Code from the gross income of the owners thereof for federal income tax purposes. Noncompliance with such requirements could cause the interest on the 2009 Series A Bonds to be included in the gross income of the owners thereof for federal income tax purposes retroactive to the date of issuance of the 2009 Series A Bonds. Each of the Authority, in the Indenture, and the City, in the Lease Agreement, has covenanted to maintain the exclusion of the interest on the 2009 Series A Bonds from the gross income of the owners thereof for federal income tax purposes.

In the opinion of Fulbright & Jaworski L.L.P., Bond Counsel to the Authority, under existing law interest on the 2009 Series A Bonds is exempt from personal income taxes of the State of California and, assuming compliance with the aforementioned covenant, interest on the 2009 Series A Bonds is excluded pursuant to section 103(a) of the Code from the gross income of the owners thereof for federal income tax purposes and is not included in the computation of the alternative minimum taxable income of the owners thereof for federal income tax purposes.

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To the extent that a purchaser of a 2009 Series A Bond acquires that 2009 Series A Bond at a price that exceeds the aggregate amount of payments (other than payments of qualified stated interest within the meaning of section 1.1273-1 of the Treasury Regulations) to be made on the 2009 Series A Bond (determined, in the case of a callable 2009 Series A Bond, under the assumption described below), such excess will constitute “bond premium” under the Code. Section 171 of the Code, and the Treasury Regulations promulgated thereunder, provide generally that bond premium on a tax-exempt obligation must be amortized on a constant yield, economic accrual, basis; the amount of premium so amortized will reduce the owner’s basis in such obligation for federal income tax purposes, but such amortized premium will not be deductible for federal income tax purposes. In the case of a purchase of a 2009 Series A Bond that is callable, the determination whether there is amortizable bond premium, and the computation of the accrual of that premium, must be made under the assumption that the 2009 Series A Bond will be called on the redemption date that would minimize the purchaser’s yield on the 2009 Series A Bond (or that the 2009 Series A Bond will not be called prior to maturity if that would minimize the purchaser’s yield). The rate and timing of the amortization of the bond premium and the corresponding basis reduction may result in an owner realizing a taxable gain when a 2009 Series A Bond owned by such owner is sold or disposed of for an amount equal to or in some circumstances even less than the original cost of the 2009 Series A Bond to the owner.

The excess, if any, of the stated redemption price at maturity of 2009 Series A Bonds of a maturity over the initial offering price to the public of the 2009 Series A Bonds of that maturity set forth on the inside cover of this Official Statement is “original issue discount.” Such original issue discount accruing on a 2009 Series A Bond is treated as interest excluded from the gross income of the owner thereof for federal income tax purposes and exempt from California personal income tax to the same extent as would be the stated interest on the 2009 Series A Bonds. Original issue discount on any 2009 Series A Bond purchased at such initial offering price and pursuant to such initial offering will accrue on a semiannual basis over the term of the 2009 Series A Bond on the basis of a constant yield method and, within each semiannual period, will accrue on a ratable daily basis. The amount of original issue discount on such a 2009 Series A Bond accruing during each period is added to the adjusted basis of such 2009 Series A Bond to determine taxable gain upon disposition (including sale, redemption or payment on maturity) of such 2009 Series A Bond. The Code includes certain provisions relating to the treatment of accrued original issue discount in the case of purchasers of 2009 Series A Bonds who purchase such 2009 Series A Bonds other than at the initial offering price and pursuant to the initial offering: these provisions are not addressed herein and are not within the scope of the opinion of Bond Counsel.

Any person considering purchasing a 2009 Series A Bond at a price that includes bond premium should consult his or her own tax advisors with respect to the amortization and treatment of such bond premium, including, but not limited to, the calculation of gain or loss upon the sale, redemption or other disposition of the 2009 Series A Bond. Any person considering purchasing a 2009 Series A Bond of a maturity having original issue discount should consult his or her own tax advisors with respect to the tax consequences of ownership of 2009 Series A Bonds with original issue discount, including the treatment of purchasers who do not purchase in the original offering and at the original offering price, the allowance of a deduction for any loss on a sale or other disposition, and the treatment of accrued original issue discount on such 2009 Series A Bonds under federal individual and corporate alternative minimum taxes.

Bond Counsel has not undertaken to advise in the future whether any events after the date of issuance of the 2009 Series A Bonds may affect the tax status of interest on the 2009 Series A Bonds or the tax consequences of the ownership of the 2009 Series A Bonds. No assurance can be given that pending or future legislation, or amendments to the Code, if enacted into law, or any proposed legislation or amendments to the Code, will not contain provisions that could directly or indirectly reduce the benefit of the exemption of interest on the 2009 Series A Bonds from personal income taxation by the State of California or of the exclusion of the interest on the 2009 Series A Bonds from the gross income of the owners thereof for federal income tax purposes. Furthermore, Bond Counsel expresses no opinion as to

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any federal, state or local tax law consequences with respect to the 2009 Series A Bonds, or the interest thereon, if any action is taken with respect to the 2009 Series A Bonds or the proceeds thereof predicated or permitted upon the advice or approval of bond counsel if such advice or approval is given by counsel other than Bond Counsel.

Although Bond Counsel is of the opinion that interest on the 2009 Series A Bonds is exempt from personal income tax by the State of California and interest on the 2009 Series A Bonds is excluded from the gross income of the owners thereof for federal income tax purposes, an owner’s federal, state or local tax liability may be otherwise affected by the ownership or disposition of the 2009 Series A Bonds. The nature and extent of these other tax consequences will depend upon the owner’s other items of income or deduction. Without limiting the generality of the foregoing, prospective purchasers of the 2009 Series A Bonds should be aware that (i) section 265 of the Code denies a deduction for interest on indebtedness incurred or continued to purchase or carry the 2009 Series A Bonds and the Code contains additional limitations on interest deductions applicable to financial institutions that own tax-exempt obligations (such as the 2009 Series A Bonds), (ii) with respect to insurance companies subject to the tax imposed by section 831 of the Code, section 832(b)(5)(B)(i) reduces the deduction for loss reserves by 15% of the sum of certain items, including interest on the 2009 Series A Bonds, (iii) interest on the 2009 Series A Bonds earned by certain foreign corporations doing business in the United States could be subject to a branch profits tax imposed by section 884 of the Code, (iv) passive investment income, including interest on the 2009 Series A Bonds, may be subject to federal income taxation under section 1375 of the Code for Subchapter S corporations that have Subchapter C earnings and profits at the close of the taxable year if greater than 25% of the gross receipts of such Subchapter S corporation is passive investment income, (v) section 86 of the Code requires recipients of certain Social Security and certain Railroad Retirement benefits to take into account, in determining the taxability of such benefits, receipts or accruals of interest on the 2009 Series A Bonds, and (vi) under section 32(i) of the Code, receipt of investment income, including interest on the 2009 Series A Bonds, may disqualify the recipient thereof from obtaining the earned income credit. Bond Counsel has expressed no opinion regarding any such other tax consequences.

Bond Counsel’s opinion is not a guarantee of a result, but represents its legal judgment based upon its review of existing statutes, regulations, published rulings and court decisions and the representations and covenants of the City and the Authority described above. No ruling has been sought from the Internal Revenue Service (the “Service”) with respect to the matters addressed in the opinion of Bond Counsel, and Bond Counsel’s opinion is not binding on the Service. The Service has an ongoing program of auditing the tax-exempt status of the interest on municipal obligations. If an audit of the 2009 Series A Bonds is commenced, under current procedures the Service is likely to treat the Authority as the “taxpayer,” and the owners would have no right to participate in the audit process. In responding to or defending an audit of the tax-exempt status of the interest on the 2009 Series A Bonds, the Authority may have different or conflicting interests from the owners of the 2009 Series A Bonds. Further, the disclosure of the initiation of an audit of the 2009 Series A Bonds may adversely affect the market price and liquidity of the 2009 Series A Bonds regardless of the final disposition of the audit.

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2009 Series B Bonds

State Tax Exemption. In the opinion of Fulbright & Jaworski L.L.P., Bond Counsel, under existing law interest on the 2009 Series B Bonds is exempt from personal income taxes of the State of California.

Federal Income Tax Considerations. The following is a general summary of certain United States federal income tax consequences of the purchase and ownership of the 2009 Series B Bonds. The discussion is based upon laws, Treasury Regulations, rulings and decisions now in effect, all of which are subject to change (possibly, with retroactive effect) or possibly differing interpretations. No assurances can be given that future changes in the law will not alter the conclusions reached herein. Neither the City nor the Authority makes any representation or covenant for the benefit of the Owners of the 2009 Series B Bonds as to the present or future qualification of the 2009 Series B Bonds as “Build America Bonds” within the meaning of Section 54AA of the Code.

The discussion below does not purport to deal with United States federal income tax consequences applicable to all categories of investors. Further, this summary does not discuss all aspects of United States federal income taxation that may be relevant to a particular investor in the 2009 Series B Bonds in light of the investor’s particular personal investment circumstances or to certain types of investors subject to special treatment under United States federal income tax laws (including insurance companies, tax exempt organizations, financial institutions, broker-dealers, and persons who have hedged the risk of owning the 2009 Series B Bonds). The summary is therefore limited to certain issues relating to initial investors who will hold the 2009 Series B Bonds as “capital assets” within the meaning of section 1221 of the Code, and acquire such 2009 Series B Bonds for investment and not as a dealer or for resale. This summary addresses certain federal income tax consequences applicable to beneficial owners of the 2009 Series B Bonds who are United States persons within the meaning of section 7701(a)(30) of the Code (“United States persons”) and, except as discussed below, does not address any consequences to persons other than United States persons.

Prospective investors should note that no rulings have been or will be sought from the IRS with respect to any of the United States federal income tax consequences discussed below, and no assurance can be given that the IRS will not take contrary positions.

INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISORS IN DETERMINING THE FEDERAL, STATE, LOCAL, FOREIGN AND ANY OTHER TAX CONSEQUENCES TO THEM FROM THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE 2009 SERIES B BONDS.

Internal Revenue Service Circular 230 Notice.

Investors should be aware that:

(i) the discussion with respect to United States federal tax matters in this Official Statement was not intended or written to be used, and cannot be used, by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer;

(ii) such discussion was written to support the promotion or marketing (within the meaning of IRS Circular 230) of the transactions or matters addressed by such discussion; and

(iii) each taxpayer should seek advice based on his or her particular circumstances from an independent tax advisor.

This notice is to ensure compliance with IRS Circular 230.

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Interest on the 2009 Series B Bonds. Bond Counsel has rendered no opinion regarding the exclusion pursuant to section 103(a) of the Code of interest on the 2009 Series B Bonds from gross income. However, the Authority has taken no action to cause, and does not intend, interest on the 2009 Series B Bonds to be excluded pursuant to section 103(a) of the Code from the gross income of the owners thereof for federal income tax purposes. Further, to the extent that the Authority designates a 2009 Series B Bond as a Build America Bond, section 54AA(f)(1) of the Code provides that interest on such 2009 Series B Bond shall be included in gross income. The Authority intends to treat the 2009 Series B Bonds as debt instruments for all federal income tax purposes, including any applicable reporting requirements under the Code. THE AUTHORITY EXPECTS THAT THE INTEREST PAID ON A 2009 SERIES B BOND GENERALLY WILL BE INCLUDED IN THE GROSS INCOME OF THE OWNER THEREOF FOR FEDERAL INCOME TAX PURPOSES WHEN RECEIVED OR ACCRUED, DEPENDING UPON THE TAX ACCOUNTING METHOD OF THAT OWNER.

Original Issue Discount. If a substantial amount of the 2009 Series B Bonds of any stated maturity is purchased at original issuance for a purchase price (the “Issue Price”) that is less than their face amount by more than one quarter of one percent times the number of complete years to maturity, the 2009 Series B Bonds of any stated maturity will be treated as being issued with “original issue discount.” The amount of the original issue discount will equal the excess of the principal amount payable on such 2009 Series B Bonds at maturity over their Issue Price, and the amount of the original issue discount on such 2009 Series B Bonds will be amortized over the life of 2009 Series B Bonds using the “constant yield method” provided in the Treasury Regulations. As the original issue discount accrues under the constant yield method, the beneficial owners of such 2009 Series B Bonds, regardless of their regular method of accounting, will be required to include such accrued amount in their gross income as interest. This can result in taxable income to the beneficial owners of the 2009 Series B Bonds that exceeds actual cash distributions to the beneficial owners in a taxable year.

The amount of any original issue discount that accrues on the 2009 Series B Bonds each year will be reported annually to the IRS and to the beneficial owners. The portion of the original issue discount included in each beneficial owner’s gross income while the beneficial owner holds the 2009 Series B Bonds will increase the adjusted tax basis of the 2009 Series B Bonds in the hands of such beneficial owner.

Disposition of 2009 Series B Bonds and Market Discount. A beneficial owner of 2009 Series B Bonds will generally recognize gain or loss on the redemption, sale or exchange of the 2009 Series B Bonds equal to the difference between the redemption or sales price (exclusive of the amount paid for accrued interest) and the beneficial owner’s adjusted tax basis in the 2009 Series B Bonds. Generally, the beneficial owner’s adjusted tax basis in the 2009 Series B Bonds will be the beneficial owner’s initial cost, increased by any original issue discount previously included in the beneficial owner’s income to the date of disposition. Any gain or loss generally will be capital gain or loss and will be long-term or short-term, depending on the beneficial owner’s holding period for the 2009 Series B Bonds.

Under current law, a purchaser of 2009 Series B Bonds who did not purchase the 2009 Series B Bonds in the initial public offering (a “subsequent purchaser”) generally will be required, on the disposition of the 2009 Series B Bonds, to recognize as ordinary income a portion of the gain, if any, to the extent of the accrued “market discount.” In general, market discount is the amount by which the price paid for the 2009 Series B Bonds by a subsequent purchaser is less than the principal amount payable at maturity (or, in the case of 2009 Series B Bonds issued with original issue discount, the sum of the Issue Price and the amount of original issue discount previously accrued on the 2009 Series B Bonds), except that market discount is considered to be zero if it is less than one quarter of one percent of the principal amount times the number of complete remaining years to maturity. The Code also limits the deductibility of interest incurred by a subsequent purchaser on funds borrowed to acquire 2009 Series B Bonds with market discount. As an alternative to the inclusion of market discount in income upon disposition, a

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subsequent purchaser may elect to include market discount in income currently as it accrues on all market discount instruments acquired by the subsequent purchaser in that taxable year or thereafter, in which case the interest deferral rule will not apply. The recharacterization of gain as ordinary income on a subsequent disposition of 2009 Series B Bonds could have a material effect on the market value of the 2009 Series B Bonds.

Defeasance. Persons considering the purchase of a 2009 Series B Bond should be aware that the bond documents permit the Authority under certain circumstances to deposit of monies or securities with the Trustee, resulting in the release of the security interests created under the Indenture (a “defeasance”). Such a defeasance could result in the realization of gain or loss by the owner of the 2009 Series B Bond for federal income tax purposes, without any corresponding receipts of monies by the owner. Such gain or loss generally would be subject to recognition, as in the case of a sale or exchange described above. In addition, for federal income tax purposes, the character and time of receipt of payments on the 2009 Series B Bonds subsequent to any such defeasance could also be affected. Holders are advised to consult their own tax advisers with respect to the tax consequences resulting from such events.

Backup Withholding. Under section 3406 of the Code, a beneficial owner of the 2009 Series B Bonds who is a United States person, as defined in section 7701(a)(30) of the Code, may, under certain circumstances, be subject to “backup withholding” of current or accrued interest on the 2009 Series B Bonds or with respect to proceeds received from a disposition of the 2009 Series B Bonds. This withholding applies if such beneficial owner of 2009 Series B Bonds: (i) fails to furnish to the payor such beneficial owner’s social security number or other taxpayer identification number (“TIN”); (ii) furnishes the payor an incorrect TIN; (iii) fails to report properly interest, dividends, or other “reportable payments” as defined in the Code; or (iv) under certain circumstances, fails to provide the payor with a certified statement, signed under penalty of perjury, that the TIN provided to the payor is correct and that such beneficial owner is not subject to backup withholding.

Backup withholding will not apply, however, with respect to payments made to certain beneficial owners of the 2009 Series B Bonds. Beneficial owners of the 2009 Series B Bonds should consult their own tax advisors regarding their qualification for exemption from backup withholding and the procedures for obtaining such exemption.

Withholding on Payments to Nonresident Alien Individuals and Foreign Corporations. Under sections 1441 and 1442 of the Code, nonresident alien individuals and foreign corporations are generally subject to withholding at the current rate of 30% (subject to change) on periodic income items arising from sources within the United States, provided such income is not effectively connected with the conduct of a United States trade or business. Assuming the interest income of such a beneficial owner of the 2009 Series B Bonds is not treated as effectively connected income within the meaning of section 864 of the Code, such interest will be subject to 30% withholding, or any lower rate specified in an income tax treaty, unless such income is treated as portfolio interest. Interest will be treated as portfolio interest if: (i) the beneficial owner provides a statement to the payor certifying, under penalties of perjury, that such beneficial owner is not a United States person and providing the name and address of such beneficial owner; (ii) such interest is treated as not effectively connected with the beneficial owner’s United States trade or business; (iii) interest payments are not made to a person within a foreign country that the IRS has included on a list of countries having provisions inadequate to prevent United States tax evasion; (iv) interest payable with respect to the 2009 Series B Bonds is not deemed contingent interest within the meaning of the portfolio debt provision; (v) such beneficial owner is not a controlled foreign corporation, within the meaning of section 957 of the Code; and (vi) such beneficial owner is not a bank receiving interest on the 2009 Series B Bonds pursuant to a loan agreement entered into in the ordinary course of the bank’s trade or business.

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Assuming payments on the 2009 Series B Bonds are treated as portfolio interest within the meaning of sections 871 and 881 of the Code, then no withholding under section 1441 and 1442 of the Code and no backup withholding under section 3406 of the Code is required with respect to beneficial owners or intermediaries who have furnished Form W-8 BEN, Form W-8 EXP or Form W-8 IMY, as applicable, provided the payor does not have actual knowledge or reason to know that such person is a United States person.

Reporting of Interest Payments. Subject to certain exceptions, interest payments made to beneficial owners with respect to the 2009 Series B Bonds will be reported to the IRS. Such information will be filed each year with the IRS on Form 1099 which will reflect the name, address, and TIN of the beneficial owner. A copy of Form 1099 will be sent to each beneficial owner of a 2009 Series B Bond for United States federal income tax purposes.

LITIGATION

There is no controversy of any nature now pending against the City or the Authority or, to the knowledge of their respective officers, threatened, seeking to restrain or enjoin the issuance, sale, execution or delivery of the Bonds or in any way contesting or affecting the validity of the Bonds or any proceedings of the City or the Authority taken with respect to the issuance or sale thereof or the pledge or application of any moneys or security provided for the payment of the Bonds or the use of the Bond proceeds. There are no pending lawsuits that in the opinion of the City Attorney challenge the validity of the Bonds, the corporate existence of the City or the Authority, or the title of the officers thereof to their respective offices.

FINANCIAL STATEMENTS

Included as APPENDIX B to this Official Statement are the audited financial statements of the City for the Fiscal Year ended June 30, 2008. The City’s financial statements for the Fiscal Year ended June 30, 2008, included in APPENDIX B hereto, have been audited by Moss, Levy & Hartzheim LLP, certified public accountants. Moss, Levy & Hartzheim LLP was not requested to consent to the inclusion of its report in APPENDIX B and it has not undertaken to update its report or to take any action intended or likely to elicit information concerning the accuracy, completeness or fairness of the statements made in the Official Statement, and no opinion is expressed by Moss, Levy & Hartzheim LLP with respect to any event subsequent to the date of its report.

APPROVAL OF LEGAL PROCEEDINGS

The issuance of the Bonds is subject to the approving opinion of Fulbright & Jaworski L.L.P., Los Angeles, California, Bond Counsel to the Authority, to be delivered in substantially the form set forth in APPENDIX E herein. Fulbright & Jaworski L.L.P. in its role as Bond Counsel has undertaken no responsibility to the owners of the Bonds for the accuracy, completeness or fairness of this Official Statement or any other offering material related to the Bonds, and expresses no opinion to the Owners with respect thereto. Certain legal matters also will be passed upon for the City and the Authority by the City Attorney and the Authority Counsel, respectively, and for the Authority by Fulbright & Jaworski L.L.P., Los Angeles, California, Disclosure Counsel to the Authority.

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EXECUTION AND DELIVERY

The execution and delivery of this Official Statement has been authorized by the Authority.

EL CENTRO FINANCING AUTHORITY /s/ Ruben A. Duran

Executive Director CITY OF EL CENTRO, CALIFORNIA /s/ Ruben A. Duran

City Manager

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APPENDIX A

SELECTED DEMOGRAPHIC AND FINANCIAL INFORMATION RELATING TO THE CITY OF EL CENTRO

The following information relating to the City is provided for informational purposes only. The Bonds (as defined in the front part of this Official Statement) are payable solely as described in this Official Statement and are not payable or secured by a pledge of the faith and credit or taxing power of the City.

General

The City of El Centro (the “City”) is the seat of the County of Imperial (the “County”), California. The City is located approximately 120 miles east of the City of San Diego and approximately 60 miles west of Yuma, Arizona. The City lies 7 miles north of the City of Mexicali with a population of approximately 1 million, the capital of the State of Baja California, Mexico, and its strategic border location makes it a prime link between the interior of Mexico and the major markets along the West Coast of the United States. The City encompasses approximately 11 square miles and straddles the busy Interstate 8, the major interstate highway linking southern California to its eastern neighbors. As of January 1, 2009, the City had a population of approximately 44,259. Its summers are hot and dry, with the winters being mild and generally dry. The average rainfall is 2.6 inches.

City Government

The City was incorporated in 1908 and currently operates as a general law city as provided by the State of California (the “State”). On November 3, 2009 City voters approved Measure G which authorized the City to become a charter city. The City Council of the City certified the November 3, 2009 election results on December 1, 2009 and the City Mayor is expected to execute the City charter and file the same with the Secretary of State in the second week of December 2009. The Mayor, City Council members, the City Treasurer and the City Clerk are all elected officials. Terms are staggered so that two council members are elected every four years. The City Council elects a Mayor and Mayor Pro Tem from among its members every year. Council elections are held on odd numbered years.

The City operates on a Council/Manager system of government. Among the City Council’s responsibilities are the appointment of the City Manager and City Attorney; approval of the City budget; and policy guidance and conflict resolution over civic matters as required. The Council also appoints numerous advisory commissions and boards to assist in specific matters. Among the City Manager’s duties are responsibility for police and fire protection, public works, utilities, administrative services and operation of the City Library. The City also owns El Centro Community Hospital, doing business as El Centro Regional Medical Center.

Transportation and Economy

The City is served by California State Highways 98 and 111, with direct connection to Interstate 8 which divides the City. The City’s location just north of the U.S.-Mexican border provides overnight trucking access to regional transportation hubs and the ports of San Diego, Long Beach, and Los Angeles California and Ensenada, Mexico. There are eighteen common carriers for intrastate and interstate truck service to the City. Rail service is provided by Union Pacific Railroad, and connects the City with the main line to Portland, Oregon, Rock Island, Illinois; Tucumcari, New Mexico; St. Louis, Missouri; and New Orleans, Louisiana. The City is served by Imperial County Airport (Boley Field), three miles north of El Centro, which provides scheduled passenger and air freight service to Los Angeles and Phoenix. In

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addition Calexico International Airport, which is the U.S. Customs and Border Protection check-point for private passenger and air-cargo flights entering the U.S. from Mexico, is approximately 13 miles from the City.

Each year, more than 30 million vehicles and pedestrians cross into the U.S. through the two nearby ports-of-entry in Calexico. Mexicali, which is just across the border from Calexico, is a major business center, with large manufacturing and agricultural industries, and a busy rail line into California. The economic growth in Mexicali relies on numerous assembly plants, mainly for products to be exported to the United States, including facilities operated by corporations that presently include: Sony, Daewoo, Mitsubishi, Honeywell, Paccar, Vitro, Skyworks Solutions, Cardinal Health, and Bosch.

General Fund

The following table sets forth the City’s General Fund balance sheet for the past five fiscal years.

City of El Centro General Fund Balance Sheet

For Fiscal Years Ended June 30, 2004 Through June 30, 2008

2004 2005 2006 2007 2008 Assets Cash and investments $4,051,826 $6,236,046 $8,236,097 $11,265,771 $11,684,017Receivables:

Accounts 48,250 102,498 885,292 38,970 50,511Taxes 565,053 1,118,274 1,408,537 1,278,544 1,236,417Interest 20,684 36,999 80,698 102,069 53,534Grants - - - 311,482 70,528Other 253,277 299,401 168,889 482,977 396,364

Due from other funds - - - 476,209 1,015,399Interfund Advances Receivable - - - 950,000 1,300,000

Total Assets $4,939,090 $7,793,218 $10,779,513 $14,906,022 $15,806,770 Liabilities and Fund Balances Accounts payable $ 270,862 $ 301,086 $ 467,520 $ 995,179 $ 1,096,634Salaries/Benefits Payable 363,331 450,483 689,014 615,812 965,563Taxes 44,834 86,893 67,194 - -Deferred Revenue - - 36,216 - -Deposits 283,109 558,134 642,625 744,295 751,115

Total Liabilities $ 962,136 $1,396,686 $1,902,569 $ 2,355,286 $ 2,813,310 Fund Balances

Reserved $ 5,000 - - $ 5,000 $ 1,305,150Unreserved $3,971,954 $6,396,532 $8,876,944 12,545,736 11,688,308

Total Fund Balances $3,976,954 $5,781,391 $8,145,224 $12,550,736 $12,993,458Total Liabilities and Fund Balances $4,939,090 $7,793,218 $10,779,513 $14,906,022 $15,806,770

____________________ Source: City of El Centro Audited Financial Statements.

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The following table sets forth the City’s General Fund revenues, expenditures and changes in fund balances for the past five fiscal years.

City of El Centro General Fund Statement of Revenues, Expenditures, and Changes in Fund Balance

For Fiscal Years Ended June 30, 2004 Through June 30, 2008

2004 2005 2006 2007 2008 Revenues

Taxes $10,839,181 $10,592,636 $11,892,901 $13,294,225 $13,380,580 Licenses and permits 637,015 1,127,931 627,032 356,737 481,803 Intergovernmental 2,608,771 5,226,217 6,669,172 7,647,854 7,214,948 Charges for services 1,396,768 1,958,357 1,823,019 2,066,271 1,700,879 Fines and forfeitures 101,186 98,483 308,777 245,420 219,396 Interest 71,429 77,693 238,019 675,082 480,572 Other 912,208 697,184 1,054,640 1,200,675 1,024,623

TOTAL REVENUES $16,566,558 $19,778,501 $22,613,560 $25,486,264 $24,502,801 Expenditures(2)

Current: General government $ 1,543,311 $1,537,030(4) $2,380,509 $ 3,300,016 $ 3,609,132 Public safety 10,749,349 11,850,565(4) 12,945,543 13,515,395 15,582,217 Public works 1,146,209 1,089,559(4) 1,452,063 1,727,962 1,780,433 Parks, recreation and culture 1,595,346 1,681,774(4) 1,984,981 2,192,987 2,459,363 Community Development 1,189,409 2,074,204(4) 2,660,225 2,454,747 2,347,671

TOTAL EXPENDITURES $16,223,624 $18,233,132(4) $21,423,321 $23,191,107 $25,778,816

Excess (deficiency) of revenues over (under) expenditures $ 342,934 $ 1,545,369 $ 1,190,239 $ 2,295,157

$ (1,276,015)

OTHER FINANCING SOURCES (USES):

Transfers in $ 969,900 $1,005,500 $1,406,884 $ 1,633,367 $ 1,856,463 Transfers out (142,352) (131,291) (116,711) (254,732) (137,726)

TOTAL OTHER FINANCING SOURCES (USES)

$ 827,548

$ 874,209

$1,290,173

$ 1,378,635

$ 1,718,737

NET CHANGE IN FUND BALANCES $ 1,170,482 $2,419,578 $2,480,412 $ 3,673,792

$ 442,722

FUND BALANCES AT BEGINNING OF YEAR

$ 2,806,472

$3,976,954

$6,396,532

$ 8,876,944

$12,550,736

FUND BALANCES AT END OF YEAR $ 3,976,954 $6,396,532 $8,876,944(3) $12,550,736(1) $12,993,458(1)

____________________

(1) The fund balance totals for Fiscal Years 2006-07 and Fiscal Year 2007-08, include amounts reserved for (but not irrevocably set aside for) OPEB obligations, in the amounts of $1,600,000 and $3,171,355, respectively. The City has cumulatively reserved (but has not irrevocably set aside) the amount of $5,170,000 for OPEB obligations. In Fiscal Year 2008-09, the City’s auditors will specifically identify the amount reserved by the City for (but not irrevocably set aside for) OPEB obligations. (2) Beginning Fiscal Year 2007-08, a change was made to show a separate line-item for Capital Outlay. For comparison purposes, Expenditures for Fiscal Year 2007-08 were adjusted. (3) Includes an adjustment, in Fiscal Year 2006-07, of $731,720 that corrects an understatement of a accounts receivable and salaries/benefits payable in Fiscal Year 2005-06. (4) A prior period adjustment in Fiscal Year 2006-07 corrected an overstatement of expenses in Fiscal Year 2004-05. The removal of such overstatement is reflected in each line-item under Expenditures. Source: City of El Centro Audited Financial Statements.

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Budgetary Process and Administration

The City uses the following procedures when establishing the budgetary data reflected in its financial statements:

The fiscal year of the City begins on the first day of July of each year and ends on the thirtieth day of June the following year. In June, the City Manager submits to the City Council the proposed budget during a public hearing. At the conclusion of the public hearing, the City Council reviews and considers the proposed budget and makes any revisions thereof that it deems advisable and on or before June 30 it adopts the budget with revisions, if any, by the affirmative vote of at least a majority of the total members of the City Council during a public meeting. At any public meeting after the adoption of the budget, the City Council may amend or supplement the budget by motion adopted by the affirmative vote of at least a majority of the total members of the City Council. The City Council must approve any amendments or supplements to the budget in excess of $50,000.

The City Council employs, at the beginning of each fiscal year, an independent certified public accounting firm which, at such time or times as specified by the City Council, at least annually, at such other times as such firm shall determine, examines the books, records, inventories and reports of all officers and employees who receive, control, handle or disburse public funds and of all such other officers, employees or departments as the City Council may direct. As soon as practicable after the end of the fiscal year, a report is submitted by such firm to the City Council and a copy of the financial statements as of the close of the fiscal year is published.

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The following table sets forth the City’s budgeted and actual (unaudited) General Fund revenues, expenditures and changes in fund balance for the Fiscal Year ended June 30, 2009.

City of El Centro General Fund Statement of Revenues, Expenditures and Changes in Fund Balance

For Fiscal Year Ended June 30, 2009

Original Budget

Revised Budget

Estimated Actual

(Unaudited) 2008-09

Revenues Taxes $13,497,000 $13,497,000 $12,299,779 Licenses and permits 364,200 364,200 167,591 Intergovernmental 7,915,100 7,915,100 7,797,876 Charges for services 1,236,200 1,027,725 870,423 Fines and forfeitures 174,000 174,000 222,405 Interest 300,000 300,000 205,661 Other 792,300 792,300 813,288

TOTAL REVENUES $24,278,800 $24,070,325 $22,377,023 Expenditures

Current: General government $3,017,967 3,397,467 2,892,035 Public safety 16,014,481 16,122,980 15,497,200 Public works 3,050,838 3,076,338 2,721,788 Parks, recreation and culture 3,143,944 3,155,844 2,727,116 Community Development 1,306,622 1,306,622 718,256

Capital Outlay: 702,000 710,300 526,964 TOTAL EXPENDITURES $27,235,852 $27,769,551 $25,083,359 Excess (deficiency) of revenues over

(under) expenditures ($2,957,052) ($3,699,226) ($2,706,336)OTHER FINANCING SOURCES (USES):

Transfers in $1,727,366 $1,727,366 $1,727,366 Transfers out (80,667) (80,667) (169,448)

TOTAL OTHER FINANCING SOURCES (USES)

$1,646,699 $1,646,699 $1,557,918

NET CHANGE IN FUND BALANCES ($1,310,353) ($2,052,527) ($1,148,418)

FUND BALANCES AT BEGINNING OF YEAR $11,921,333 $12,993,458 $12,993,458 FUND BALANCES AT END OF YEAR $10,610,980 $10,940,931 $11,845,040

____________________

Source: City of El Centro.

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Assessed Valuation

The table below presents the assessed valuations in the City from 2005 to 2009.

City of El Centro Assessed Valuation of Taxable Property

Last Five Fiscal Years Fiscal Years Ending June 30

Fiscal Years

(Ending) Assessed

Value 2005 1,659,657,727 2006 1,975,300,675 2007 2,318,419,841 2008 2,719,192,480 2009 2,986,345,876 2010 2,361,991,431

____________________ Source: County of Imperial Assessor’s Office.

As shown in the table above, assessed valuations in the City have increased each year since 2005. Economic and other factors beyond the City’s control, such as economic recession, deflation or land values, or the complete or partial destruction of taxable property caused by, among other eventualities, earthquake, flood or other natural disaster could cause a deduction in the assessed value of taxable property in the City.

City of El Centro Property Tax Levies and Collections

Last Five Fiscal Years Fiscal Years Ending June 30

Fiscal Year

(Ending) Total Tax

Levy

Current Tax

Collections

Percent of Levy

Collected

Delinquent Tax

Collections Total Tax

Collections

Total Collections as Percent of Current

Levy 2005 $5,379,487 $5,284,655 98.24% - $5,284,655 98.24% 2006 6,177,326 6,127,471 99.19 - 6,127,471 99.19 2007 7,758,177 8,631,946 111.26 - 8,631,946 111.26 2008 8,375,246 9,107,247 108.74 - 9,107,247 108.74 2009 9,588,273 10,262,937 107.04 - 10,262,937 107.04

_____________________________________ The amounts presented include City property taxes and Redevelopment Agency tax increment. Source: City of El Centro.

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A list of the ten largest taxpayers in the City for the most recent fiscal year is included in the following table.

City of El Centro Principal Taxpayers

June 30, 2009

Taxpayer

2009 Assessed

Valuation

Percentage of Total Assessed

Valuation Imperial Valley Mall LLP $ 99,066.72 2.50% Wal Mart Stores 45,910.26 1.16 Dillard Store Services 45,448.53 1.15 Macy’s California Inc. 41,850.88 1.06 Sears Roebuck and Company 34,388.01 0.87 PV PG LLC 26,931.59 0.68 IV Plaza LLC 26,820.13 0.68 Costco Wholesale Corporation 25,498.92 0.64 JC Penney Properties 23,639.22 0.60 River Ranch Fresh Foods 19,349.56 0.49 Total $3,960,255.01 9.82%

________________________________________ Source: County of Imperial Assessor’s Office.

Tax Levies and Delinquencies

The City uses the facilities of Imperial County for the assessment and collection of taxes. City taxes are collected at the same time and on the same tax rolls as County, District and Special District taxes. Taxes on the secured roll are payable in two installments on November 1 and February 1 of each fiscal year, and become delinquent after December 10 and April 10, respectively. Taxes on unsecured property are assessed and payable March 1 and become delinquent the following August 31. A 10% penalty attaches to delinquent taxes that have been levied on property on the secured roll. Such property may thereafter be redeemed by payment of the delinquent taxes and the delinquency penalty, plus a redemption penalty of ½% per month to the time of redemption. If taxes are unpaid for a period of five years or more, the property is deeded to the State and is subject to sale by the County Tax Collector.

Insurance

The City currently maintains property coverage insurance through the California Joint Powers Insurance Authority (“California JPIA”) for a maximum all risk policy amount of up to $500,000,000 per occurrence. In addition the California JPIA policy also includes $10,000,000 annual aggregate flood coverage. The California JPIA insurance program also provides an optional earthquake and flood insurance of up to $150,000,000 per occurrence.

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Population

The City’s population increased approximately 16% between 2000 and 2009. The following table shows the population of the City of El Centro as of January 1 of each year.

City Demographic Data

Year Population

2000 38,025 2001 38,433 2002 28,696 2003 39,333 2004 39,829 2005 40,715 2006 41,739 2007 41,614 2008 43,152 2009 44,259

________________________________ Source: U.S. Department of the Census and the California State Department of Finance.

Utilities

Southern California Gas Company and the Imperial Irrigation District supply natural gas and electric service to the City. Pacific Bell and AT&T provide telephone service. The City provides water service and wastewater service to city customers.

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Employment and Industry

Total wage and salary employment in the County was estimated by the State Employment Development Department to be 55,200 in September 2009.

The following table sets forth the annual average employment by industry within the County for the fiscal years 2005 through 2009.

IMPERIAL COUNTY ANNUAL AVERAGE EMPLOYMENT BY INDUSTRY

(In Thousands) 2005 through 2009

2005 2006 2007 2008 2009

Agriculture 10,600 11,500 10,100 11,500 10,500 Non-Agriculture 42,500 44,700 45,900 46,700 44,600

Construction and Mining 1,900 2,000 1,900 1,600 1,100 Transportation Warehousing and Utilities

1,800 1,800 1,800 1,800 1,600

Manufacturing 2,300 2,600 2,600 2,600 2,500 Retail Trade 7,300 7,700 7,500 7,500 7,400 Finance, Insurance and Real Estate 1,300 1,400 1,400 1,300 1,200 Services(1) 5,000 5,500 5,600 6,500 6,400 Government 16,800 17,400 18,100 18,500 19,300

Total All Industries 53,000 56,200 56,000 58,100 55,200 ____________________ (1) Services is a broad category that may incorporate employment in other listed categories. Totals may not add up due to rounding. Source: State of California Employment Development Department.

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Major Employers

There are a number of manufacturing and distribution facilities located in the City. Principal employers within the City are listed in the table below.

City of El Centro Civilian Labor Force

For 2008

Name of Company Employees Type of Business County of Imperial(1) 1,800 Governmental Centinela State Prison 1,285 Prison El Centro School System(1) 1,209 Education Calipatria State Prison 1,205 Prison Imperial Irrigation District 1,200 Water and Power Naval Air Facility 1,000 Military Homeland Security/U.S. Border Patrol(1) 991 Government El Centro Regional Medical Center(1) 812 Hospital Imperial Valley College 520 Education Wal Mart1 504 Retail

_____________________________ (1) Employers within or near the geographical boundaries of the City of El Centro. Source: City of El Centro. Building Activity

The following table presents building permit valuations for the City from 2004 through 2008.

City of El Centro Building Permit Valuations

(In Thousands)

2004 2005 2006 2007 2008

Type of Permit: Residential $51,350,427 $130,333,180 $47,358,435 $16,510,363 $31,561,282

Other Additions, Alterations

727,155 1,117,462 3,762,040 3,589,125 2,372,199

Commercial & Office 78,785,477 48,624,137 26,717,271 34,921,521 39,305,493

Total $130,863,059 $180,074,779 $77,837,746 $55,021,009 $73,238,974

Total Permits: 763 1,432 787 698 701

____________________ Source: City of El Centro.

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Commercial Activity

In March 2005, the Imperial Valley Mall (the “Mall”) opened in the City. The Mall consists of 766,333 square feet of rentable retail space currently occupied by 78 retail, dining and entertainment establishments. The Mall is anchored by Dillard’s, J.C. Penney, Macy’s, Sears and Ultrastar Cinemas. The Mall also provides 3,934 parking spaces. The Mall draws customers from the City, surrounding cities and the Mexican City of Mexicali.

The following table provides a summary of taxable transactions in the City since 2004.

Taxable Transactions (In Thousands)

2004

2005

2006

2007

2008(1)

(2 Quarters Only) Apparel stores $ 10,817 $ 37,746 $ 44,035 $ 51,670 $ 24,511 General merchandise stores 210,117 252,860 278,614 282,496 125,338 Food stores 30,705 31,459 31,872 32,923 17,044 Eating and drinking places 53,732 66,083 73,403 75,918 40,717 Home furnishings and appliances 5,546 7,192 6,857 5,451 4,205 Building material and farm Implements

69,361 105,315

112,637

83,485

36,965

Auto dealers and auto supplies 118,222 131,727 121,907 106,791 49,233 Service stations 29,667 34,083 44,865 60,418 37,880 Other retail stores 43,683 54,810 60,262 60,450 35,669 Retail Stores Totals $571,850 $721,275 $774,452 $759,602 $371,562 All Other Outlets 109,588 120,530 129,751 132,082 66,874 Total All Outlets $681,438 $841,805 $904,203 $891,964 $438,436

____________________ (1) As of the second quarter. Source: California State Board of Equalization Statistical Research and Consulting Division. Defined Benefit Pension Plan

The City contributes to the California Public Employees Retirement System (“PERS”), an agent multiple-employer public employee defined benefit pension plan. PERS provides retirement and disability benefits, annual cost-of-living adjustments and death benefits to plan members and beneficiaries. PERS acts as a common investment and administrative agent for participating public entities within the State of California. Benefit provisions and all other requirements are established by state statute. Copies of PERS’ annual financial report may be obtained from their executive office: 400 P Street, Sacramento, California 95814.

Participants are required to contribute 7% of their annual covered salary. The City contributes the required employee contribution on their behalf and for their account. The City is required to contribute at an actuarially determined rate; the rate for fiscal year 2007-2008, was 6.9676% for non-safety employees of annual covered payroll. The contribution requirements of plan members and the City are established and may be amended by PERS.

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For 2008, the City’s annual pension cost of $3,015,047 for PERS was equal to the City’s required and actual contributions. For additional information, see “APPENDIX B – AUDITED FINANCIAL STATEMENTS OF THE CITY OF EL CENTRO FOR THE FISCAL YEAR ENDED JUNE 30, 2008 to the Official Statement, Note 15.”

Other Post-Employment Benefits

The City provides post-employment health and dental care benefits to eligible employees as provided in various collective bargaining agreements. The City contributes the required premium for health and dental coverage for qualified management employees until age 65 and a portion of the premium required for qualifying non-management employees. Retirees are not allowed to convert the benefit plan into an in-lieu payment to secure covered under independent plans.

As of June 30, 2008, thirteen retired management employees and nineteen retired non-management received such benefits. For the fiscal year ended June 20, 2008, the City recognized $167,131 of incurred expenditures under the plan.

In 2004, the Governmental Accounting Standards Board (“GASB”) issued Statement 45 “Accounting and Financial Reporting by Employers for Post-Employment Benefits Other Than Pensions” (“GASB 45”). GASB 45 requires state and local government employers, including the City, to measure, recognize and report costs and obligations for health and other benefits of current and future retired employees. Other post employment benefits (“OPEB”) include medical, dental, vision, hearing, life insurance, long-term care and long-term disability. The City provides medical, dental, vision and life insurance to retirees.

The City was required to implement GASB 45 requirements by June 30, 2009. The City has performed an actuarial valuation, dated July 17, 2009, of its OPEB obligations which demonstrated an unfunded accrued liability of $8.2 million and an annual required contribution of $987,000. The City has set aside certain amounts in connection with its OPEB obligations. See footnote 1 to the table entitled “City of El Centro, Statement of Revenues, Expenditures, and Changes in Fund Balance” herein. The City’s budget for fiscal year 2009-10 allocates the total amount of the required annual contribution for such fiscal year.

City Investment Policy and Portfolio

The City maintains an Investment Policy, which was last approved by the City Council on September 4, 2002 (the “Investment Policy”). The primary goals of the Investment Policy are to (1) ensure the safety of principal, (2) maintain a sufficiently liquid investment portfolio to ensure that the City has adequate cash to meet reasonably anticipated operating requirements, and (3) earn a reasonable yield consistent with the objectives of safety and liquidity.

Authorized Investments. Under the City’s Investment Policy and in accordance with the Government Code, the City may invest in the following types of investments:

• State of California Local Agency Investment Fund (LAIF) • Instruments issued by a federal agency or United States government-sponsored enterprise • Bankers acceptances (with maturity of 180 days or less) • Prime commercial paper • Negotiable certificates of deposit • Repurchase agreements

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• Medium-term notes of domestic corporations or depositary institution • Shares in diversified management companies investing in permitted securities

Estimated investments as of October 31, 2009 in all funds of the City were comprised of the following:

Principal % of Type Amount Total LAIF $39,927,000 95.31% Federal or U.S. Government Agencies 1,250,000 2.98 Corporate Notes 103,503 1.46 Desert Commercial Bank 610,000 0.25 $41,890,503 100.00%

_____________________ Source: City of El Centro Education and Community Services

Current enrollment in the City’s schools is approximately 9,692. Advanced education is available at two colleges: Imperial Valley Community College (two-year) and San Diego State University – Imperial Valley Center at Calexico.

The nearby City of Mexicali offers many educational opportunities that contribute to the skilled work force in the region, including the Universidad Autónoma de Baja California, CETYS Universidad, Instituto Teconológico de Mexicali, UNIVER Mexicali, Universidad Xochicalco Campus Mexicali, Universidad del Valle de Mexico Campus Mexicali, Teconológico de Baja California, Benemerita Escuela Normal Urbana federal Fronteriza, Instituto Salvatierra and CECyTE.

El Centro has one general hospital. Cultural facilities in the City and surrounding area include 44 churches or synagogues and 14 theaters. The City operates a public library.

The El Centro area has nine radio stations, four TV channels and one cable TV system. Local newspaper coverage is provided by the Imperial Valley Press which is published seven times a week. Financial institutions located in the City include six banks, three credit unions and eleven mortgage, thrift or loan institutions.

The Parks and Recreation Department of the City maintains nine parks and six playgrounds. Other recreational facilities include 17 lighted baseball diamonds, two golf courses, racquetball and tennis courts, boating and water sports facilities at the Salton Sea (within a one-hour drive) and at two man-made lakes – Sunbeam Lake and Weist Lake.

The City operates its own police force and fire department. The police force has 58 sworn officers. The fire department operates out of two fire stations and consists of 40 sworn firefighters.

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APPENDIX B

AUDITED FINANCIAL STATEMENTS OF THE CITY OF EL CENTRO FOR THE FISCAL YEAR ENDED JUNE 30, 2008


City of El Centro

For The Year Ended June 30, 2008

Comprehensive AnnualFinancial Report

CITY OF EL CENTRO COMPREHENSIVE ANNUAL FINANCIAL REPORT

Fiscal Year Ended June 30,2008

TABLE OF CONTENTS

I. INTRODUCTORY SECTION

Letter of Transmittal. ...................................................................................................................... I Certificate of Achievement for Excellence in Financial Reporting ............................................... 6 Organization Chart ......................................................................................................................... 7 Principal Officials .......................................................................................................................... 8

II. FINANCIAL SECTION

A. Independent Auditor's Report ................................................................................................ 9 B. Management's Discussion and Analysis .............................................................................. 11 C. Basic Financial Statements:

Government-wide Financial Statements: Statement of Net Assets ............................................................................................... 23 Statement of Activities ................................................................................................. 24

Fund Financial Statements: Governmental Funds:

Balance Sheet ........................................................................................................ 25 Reconciliation of the Balance Sheet of Governmental Funds

to the Statement of Net Assets ............................................................................ 26 Statement of Revenues, Expenditures, and Changes in Fund Balances ................ 2 7 Reconciliation of the Statement of Revenues, Expenditures, and

Changes in Fund Balances of Governmental Funds to the Statement of Activities ........................................................................................................ 28

Proprietary Funds: Statement of Net Assets ......................................................................................... 29 Statement of Revenues, Expenses, and Changes in Net Assets ............................ 30 Statement of Cash Flows ...................................................................................... 31

Fiduciary Funds: Statement of Fiduciary Net Assets ........................................................................ 32 Statement of Changes in Fiduciary Net Assets ..................................................... 33

Notes to Basic Financial Statements ................................................................................. 34

D. Required Supplementary Information: General Fund - Schedule of Revenues, Expenditures, and Changes in

Fund Balance - Budget and Actual .................................................................... 71


Fiscal Year Ended June 30, 2008

TABLE OF CONTENTS

II. FINANCIAL SECTION (Continued)

E. Other Supplemental Information

Schedule of Revenues, Expenditures, and Changes in Fund Balance-Budget and Actual- Major Governmental Fund ......................................................... 74

Redevelopment Agency Capital Projects Fund ........................................................ 75

Nonmajor Governmental Funds ............................................................................................. 76

Combining Balance Sheet ............................................................................................ 8I Combining Statement of Revenues, Expenditures, and Changes

in Fund Balances ....................................................................................................... 87 Schedules of Revenues, Expenditures, and Changes in Fund Balances -

Budget and Actual. .................................................................................................... 93 Gas Tax Special Revenue Fund ............................................................................. 94 Transportation Art 8 Special Revenue Fund ......................................................... 95 CDBG Special Revenue Fund ............................................................................... 96 Library Assistance Special Revenue Fund ............................................................ 97 Bus Shelter Special Revenue Fund ........................................................................ 98 Transportation Art 3 Special Revenue Fund ......................................................... 99 Home Program Special Revenue Fund ................................................................ IOO Rental Rehab-HUD Special Revenue Fund ......................................................... 10 I Traffic Safety Special Revenue Fund .................................................................. I02 Wake Ave Extension Special Revenue Fund ....................................................... 103 Traffic Congestion Relief Special Revenue Fund ............................................... I 04 Recreation Projects Special Revenue Fund ......................................................... I 05 Asset Forfeiture Special Revenue Fund .............................................................. 106 Local Transportation Authority Special Revenue Fund ...................................... 107 Home Grants Special Revenue Fund ................................................................... 108 OTS Grant Special Revenue Fund ...................................................................... 109 State COPS SLESF Special Revenue Fund ......................................................... 110 Annexation Fees Special Revenue Fund .............................................................. Ill HUD Entitlement Special Revenue Fund ............................................................ I12 CDBG Program Income Special Revenue Fund ................................................. 113 Housing Enabled Special Revenue Fund ............................................................ 114 CALHOME Program Special Revenue Fund ...................................................... 115 Development Impact Fee Special Revenue Fund ................................................ 116 Simplot Special Revenue Fund ........................................................................... 117 FHW A Grants Special Revenue Fund ................................................................. 118 Soft Drink Franchise Special Revenue Fund ....................................................... 1 I 9

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TABLE OF CONTENTS


E. Other Supplemental Information (Continued)

Nonmajor Governmental Funds (Continued)

Schedules of Revenues, Expenditures, and Changes in Fund Balances -Budget and Actual:

Integrated Waste Management Special Revenue Fund ....................................... 120 Used Oil Grant Special Revenue Fund ................................................................ 121 Per Capita Parks Grant Special Revenue Fund ................................................... 122 Department of Conservation Special Revenue Fund ........................................... 123 Tire Clean-Up Grant Special Revenue Fund ....................................................... 124 Household Hazardous Waste Special Revenue Fund .......................................... 125 1-8 Imperial Ave Overpass Special Revenue Fund ................. , ........................... 126 Public Education and Amnesty Grant Special Revenue Fund ............................. 127 Used Oil Opportunity Grant 7 Special Revenue Fund ........................................ 128 EDA Revolving Fund Special Revenue Fund ..................................................... 129 Police & Fire Operational Fund Special Revenue Fund ...................................... 130 Rural Business Enterprise Grant Special Revenue Fund ..................................... 131 Legacy Ranch CFD Special Revenue Fund ........................................................ 132 Legacy Ranch Lighting and Landscaping District Special Revenue Fund ......... 133 IV Commons Special Revenue Fund .................................................................. 134 Fire Mitigation Special Revenue Fund ................................................................ 135 2002 Resource Bond Act Special Revenue Fund ................................................ 136 RDA Housing Special Revenue Fund ................................................................. 137 Orange Ave Regional Lift Capital Projects Fund ................................................ 138 Park Development Capital Projects Fund ............................................................ 139 Drainage Facility Capital Projects Fund .............................................................. 140 Post Office Grant Capital Projects Fund ............................................................. 141 Lotus Parallel Capital Projects Fund ................................................................... 142 IID Facility Crossing Capital Projects Fund ....................................................... 143 8'h Street Overpass Bridge Capital Projects Fund ............................................... 144 Bridge/Road Improvement Capital Projects Fund ............................................... 145 Federal Highway Administration Capital Projects Fund ..................................... 146 Proposition lB Capital Projects Fund ................................................................. 14 7 La Brucherie Green Belt Capital Projects Fund .................................................. 148 Colonia - El Dorado Street Capital Projects Fund .............................................. 149 Buena Vista Landscaping and Lighting District Capital Projects Fund .............. 150 Redevelopment Agency Debt Service Fund ........................................................ 151 Lease Purchase Debt Service Fund ..................................................................... 152

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TABLE OF CONTENTS


E. Other Supplemental Information (Continued)

Nonmajor Governmental Funds (Continued)

Nonmajor Proprietary Funds ............................................................................................... 153

Combining Statement of Net Assets .......................................................................... I 54 Combining Statement of Revenues, Expenses, and Changes in Net Assets .............. 155 Combining Statement of Cash Flows ......................................................................... 156

Internal Service Funds ......................................................................................................... 15 7

Combining Statement ofNet Assets .......................................................................... 158 Combining Statement ofRevenues, Expenses, and Changes in Net Assets .............. 159 Combining Statement of Cash Flows ......................................................................... 160

F. Additional Reports

Independent Auditor's Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards ............................................................................ 161

Report on Compliance With Article XIIIB -Appropriations Limit .................................... 163

Ill. STATISTICAL SECTION

Financial Trends Information Net Assets by Component- 6 Years ................................................................................... 165 Changes in Net Assets- 6 Years ......................................................................................... 166 Fund Balances of Governmental Funds - 10 Years ............................................................. 168 Changes in Fund Balances of Governmental Funds- I 0 Years .......................................... 169

Revenue Capacity Information Property Ad Valorem Tax Assessed Values - I 0 Years ...................................................... 170

Debt Capacity Information Direct and Overlapping Property Tax Rates- I 0 Years ...................................................... 171 Principal Property Taxpayers ............................................................................................... 172

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/ (

CITY OF EL CENTRO COMPREHENSNE ANNUAL FINANCIAL REPORT

Fiscal Year Ended June 30,2008

TABLE OF CONTENTS

III. STATISTICAL SECTION (Continued)

Debt Capacity Information (Continued)

Property Tax Levies and Collections - lO Years ................................................................. 1 73 Ratios of Outstanding Debt by Type - 1 0 Years ................................................................. 1 7 4 Ratios of General Bonded Debt Outstanding- 10 Years .................................................... 175 Statement of Direct and Overlapping Debt- Current Year ................................................. 176 Computation of Legal Debt Margin - 1 0 Years .................................................................. 1 77 Pledged-Revenue Coverage- 10 Years ............................................................................... 178

Demographic and Economic Information Population and Unemployment Rate- 10 Years ................................................................. 179 Principal Employers ............................................................................................................. 180 Employees by Function (Full Time Equivalents)- 10 Years .............................................. 181 Construction Activity ........................................................................................................... 182

Operating Information Capital Assets Statistics by Function - 10 Years ................................................................ 183 Demands for City Services- 10 Years ................................................................................ 184

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INTRODUCTORY SECTION

To the Honorable Mayor, Members of the Governing Council, and Citizens ofthe City ofEl Centro:

State law requires that all general-purpose local governments publish within six months of the close of each fiscal year a complete set of financial statements presented in conformity with accounting principles generally accepted in the United States of America and audited in accordance with auditing standards generally accepted in the United States of America by licensed certified public accountants. Pursuant to that requirement, we hereby issue the Comprehensive Annual Financial Report of the City ofEl Centro for the fiscal year ended June 30, 2008.

This report consists of management's representations concerning the finances of the City of El Centro. Consequently, management assumes full responsibility for the completeness and reliability of all of the information presented in this report. To provide reasonable basis for making these representations, management of the City of El Centro has established a comprehensive internal control framework that is designed both to protect the government's assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of the City of El Centro's financial statements in conformity with accounting principles generally accepted in the United States of America. Because the cost of internal controls should not outweigh their benefits, the City of El Centro's comprehensive framework of internal controls has been designed to provide reasonable rather than absolute assurance that the financial statements will be free from material misstatement. As management, we assert that, to the best of our knowledge and belief, this financial report is complete and reliable in all material respects.

The City of El Centro's financial statements have been audited by Moss, Levy & Hartzheim, LLP, a firm of licensed certified public accountants. The goal of the independent audit was to provide reasonable assurance that the financial statements of the City of El Centro for the fiscal year ended June 30, 2008, are free of material misstatement. The independent audit involved examining on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditor concluded, based upon the audit, that there was a reasonable basis for rendering an unqualified opinion that the City ofEl Centro's financial statements for the fiscal year ended June 30, 2008, are fairly presented in conformity with U.S - GAAP. The independent auditor's report is presented as the first component of the financial section of this report.

Finance Department

1275 Main Street, El Centro, CA 92~43 (760) 337-4573 Fax (760) 337-4564

The independent audit of the financial statements of the City of El Centro was part of a broader, federally mandated "Single Audit" designed to meet the special needs of federal grantor agencies. The standards governing Single Audit engagements require the independent auditor to report not only on the fair presentation of the financial statements, but also on the audited government's internal controls and compliance with legal requirements, with special emphasis on internal controls and legal requirements involving the administration of federal awards. These reports are available in the City of El Centro's separately issued Single Audit Report.

U.S - GAAP requires that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management's Discussion and Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. The City of El Centro's MD&A can be found immediately following the report of the independent auditors.

Profile of the Government

The City of El Centro was incorporated under the Laws of the State of California in 1908 and is governed by an elected Five-Member Council. The City is located in the southern part ofthe State, which is considered to be one of the fastest growth areas in the State. The City of El Centro currently occupies a land area of approximately 10 square miles and serves a population of approximately 43,316. The City of El Centro is empowered by the State to extend its corporate limits by annexation, which occurs periodically when deemed appropriate by the governing Council.

The City of El Centro operates under the Council-Manager form of government. Policymaking and legislative authority are vested in a governing council consisting of the Mayor and four Council members.

The Council is responsible, among other things, for passing ordinances, adopting the budget, appointing committees, and hiring the City Manager, City Attorney, and the Secretary to the Council. The City Manager is responsible for carrying out the policies and ordinances of the governing council, for overseeing the day-to-day operations of the government, and for appointing the heads of the various departments. The Council is elected on an at large non-partisan basis. Council members serve four-year staggered terms, with elections held every two years. The Mayor is appointed by the Council to serve a one-year term.

The City of El Centro provides a full range of services, including police and fire protection; the construction and maintenance of streets and other infrastructure; and recreational activities; and water and sewer services. Solid Waste collection and disposal is contracted out. The City of El Centro also is financially accountable for the El Centro Regional Medical Center (Hospital), which is reported within the Proprietary Fund of the City's financial statements. Additional information on the Hospital can be found in Note 1 and other various notes (Note 3, Note 7, Note 8, and Note 12) in the Notes to the Financial Statements.

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The Annual Budget serves as the foundation for the City of El Centro Financial Planning and Control. Prior to June 30 of each year the City Manager submits to the City Council a proposed operating budget for the Fiscal Year commencing the following July 1. The operating budget includes proposed expenditures and the means of financing them. Public hearings are conducted and prior to June 30, the budget is adopted by motion of the City Council. The appropriated budget is prepared by Fund, Function (e.g. Public Safety) and Department (e.g. Police). Department Heads may request transfers of appropriations within their departmental budgets. Transfers of appropriations between departments, however require the authorization of the City Manager. Any revision that increases the total appropriations of any fund must be approved by the City Council. Budget-to-actual comparisons are provided in this report for each individual governmental fund, for which an appropriated annual budget has been adopted. For the general fund, this comparison is presented on Page 71 as part of the basic financial statements for the governmental funds.

Factors Affecting Financial Condition

The information presented in the financial statements is perhaps best understood when it is considered from the broader perspective of the specific environment within which the City of El Centro operates.

Local Economy

The City of El Centro, as a whole continued to experience an increase in commercial development however, the growth in residential development was modest. Revenues, for the general fund, exceeded expenditures by $442,722. The increase in revenues produced fund balance at June 30, 2008 in the amount of$12,993,458. This amount represents approximately fifty (50) percent of current year general fund expenditures.

The increase in general fund balance will continue to be used to address the significant issues related to deferred maintenance projects and the need for increased service levels which are being demanded by the City's expanding population.

The following factors contribute to the outlook for long term financial stability: • Both local and regional economic growth continues to exceed the state

average. • The new regional mall and increased commercial development. • The updating of various fees such as the Park and Recreation impact fees and

the creation of special districts.

However, because of the economic downturn being experienced by the state, it is imperative that the City continue its efforts to improve the financial condition.

The County of Imperial consists of seven cities and an unincorporated area with a countywide population of approximately 150,000. The City of El Centro is the largest City in the County, with a population of approximately 43,316 (per Department of Finance). Among the many attributes that makes Imperial County

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attractive to both commercial and residential development is the abundance of inexpensive water, energy, and land. Additionally, the County serves as the Gateway to the United States for the City of Mexicali, Mexico, the capital of Baja California. Mexicali has a population in excess of 1,000,000 and a significant number of maquiladoras. These factors and others have resulted in a discernable trend towards significant growth in both residential and commercial growth.

Intermediate Plan

The City's short to intermediate goals, in fiscal year 2008, are to continue to provide the infrastructure needed to support the commercial growth in and around the regional mall, as well as the various residential projects being purposed.

The City has approved additional revenue sources in the form of Landscape/Lighting Districts, Community Facilities Districts and Service Districts. The City has updated various fees, such as development impact fees, to aid in financing the additional services that the City is required to provide. In order to continue to provide a high level of water and wastewater services to existing residents, businesses, and new residences the City has also reviewed rates and capacity fees. The City obtained necessary debt financing for updating and expanding facilities, delivery and collection systems by issuing 64 million in water and wastewater revenue bonds.

Cash Management Policies and Practices

The Council recognizes that the City's invested assets are essential to the City's financial strength, and its ability to pay claims; therefore, the City adopted a fiscally responsible investment policy, which promotes the wise investment of City funds. The primary investment needs of the City are the preservation of capital, maintaining appropriate levels of liquidity and yield on invested assets. As a matter of policy no more than 65 percent of the City's funds may be invested in securities with maturities longer than two years from the date of purchase. Securities with maturities longer than five years must be U.S. Treasury Notes or Bonds, Federal National Mortgage Association Bonds or Federal Home Loan Bank Bonds. Additionally, the City is a voluntary participant in the Local Agency Investment Fund (LAIF), which is used for short-term investments. LAIF is regulated by California Code Section 16430 and 16480 under the oversight of the Treasurer of the State of California. On an average 10 percent ofthe City's funds are invested in Corporate Notes, with the remaining 90 percent on deposit with LAIF or the Bank used to process the City's daily transactions.

Risk Management

The City is a member of the California Joint Powers Insurance Authority. The Authority is composed of approximately 119 California Public Entities and is organized under a Joint Powers Agreement, pursuant to California Government Code 6500. The purpose of the Authority is to arrange and administer programs for the pooling of self-insured losses, to purchase excess insurance or reinsurance, and to arrange for group-purchased insurance for property and other coverage. Each

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member government has an elected official as its representative on the Board of Directors. The Board operates through a nine member Executive Committee.

A part of the City's Risk Management Program, is employee accident prevention training and return to work program. Additional information on the City of El Centro's Risk Management activity can be found in note 9 of the notes to the Financial Statements.

Pension and other Post Employment Benefits

The City of El Centro is a member of the California Public Employees Retirement System (CalPers). The City offers two defined benefit pension plans, Miscellaneous and Public Safety, which provides retirement and disability benefits and death benefits to plan members and beneficiaries. Active plan members are required to contribute a fixed percentage of their annual covered salary. The City of El Centro is required to contribute the actuarially determined remaining amounts necessary to fund the benefits for its members. The actuarial methods and assumptions used are those adopted by the CalPers Board of Administration. The contribution requirements of the plan members are established by State Status and the employer contribution is established and may be amended by CalPers.

The City of El Centro also provides post retirement health and dental care benefits, as provided for in various collective bargaining agreements for retirees that meet certain criteria. The City finances the plan on a pay-as-you-go basis.

Additional information on the City of El Centro pension arrangements and post employment benefits can be found in notes 14 to 15 in the notes to the financial statements.

Acknowledgements

The preparation of this report would not have been possible without the efficient and dedicated services of the entire staff of the Finance and Administration Department. Credit also must be given to the Mayor and the City Council for their support and direction in maintaining the highest standards of professionalism in the management of the City ofEl Centro Finances.

Respectfully submitted,

Leticia Salcido Director of Finance

5

Certificate of Achievement for Excellence

in Financial Reporting

Presented to

City of El Centro

California For its Comprehensive Annual

Financial Report

for the Fiscal Year Ended

June 30,2007

A Certificate of Achievement for Excellence in Financial Reporting is presented by the Government Finance Officers

Association of the United States and Canada to government units and public employee retirement systems whose comprehensive annual financial

reports (CAFRs) achieve the highest standards in government accounting

and tmancial reporting.

~' '······.· l ··~ "'* President

Executive Director

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Cheryl V. Walker Council Member

Sedalia Sanders Council Member

Diane Caldwell City Clerk

Roland Banks Terry Hagen Harold Carter Chris Petree Marcela Piedra Martin Pinon Norma Villacana

Richard Romero Finance Manager

CITY OF EL CENTRO

Jon Edney Mayor

Ben Solomon Council Member

Efrain Silva Council Member

Albert Terrazas City Treasurer

Ruben A. Duran City Manager

Luis Hernandez City Attorney

Prepared By:

Library Director Director of Public Works/City Engineer

Interim Police Chief Fire Chief

Redevelopment Manager Director of Human resources

Director of Planning

Leticia Salcido - Director of Finance

8

Yvonne Obeso Financial Specialist

FINANCIAL SECTION

PARTNERS: RONALD A. LEVY. C.P.A. CRAIG A. HARTZHBM. C.P.A. HADLEY Y. HUI, C.P.A.

MOSS, LEVY & HARTZHEIM LLP CERTIFIED PUBLIC ACCOUNTANTS

Independent Auditor's Report

The Members of the City Council of the City of El Centro

El Centro, California

9107 WILSHIRE BLVD. STE 400 BEVERLY HILLS, CA 90210 PHONE: (310J 273-27-45 FAX: (310) 273-1689 EMAIL: [email protected]

We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of El Centro, California (City) as of and for the fiscal year ended June 30, 2008, which collectively comprise the City's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the City's management. Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of the hospital fund. Those financial statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for the hospital fund, is based on the report of the other auditors.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions.

In our opinion, based on our audit and the report of other auditors, 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 of El Centro, California, as of June 30, 2008, and the respective changes in financial position and cash flows, where applicable thereof, for the fiscal year then ended in conformity with accounting principles generally accepted in the United States of America.

As discussed in note I of the notes to the basic financial statements, effective July I, 2007, the City adopted Governmental Accounting Standards Board (GASB) Statement No. 48, Sales and Pledges of Receivables and Future Revenues and Intra-Entity Transfer of Assets and Future Revenues and Governmental Accounting Standards Board Statement No. 50, Pension Disclosures -an Amemdment ofGASB Statement No. 25 and No. 27.

9 OFFICES: BEVERLY HILLS • SANTA MARIA

In accordance with Government Auditing Standards, we have also issued a report dated December 15, 2008, on our consideration of the City's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contacts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.

The Management's Discussion and Analysis on pages 11 through 22 and the Schedule of Revenues Expenditures, and Changes in Fund Balance- Budget to Actual- General Fund are not required parts of the basic financial statements but is supplementary information required by the Governmental Accounting Standards Board. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it.

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 nonmajor fund financial statements, major capital projec.ts budgetary comparison schedules, nonmajor funds budgetary comparison schedules, combining nonmajor proprietary fund financial statements, combining internal servic.e fund financial statements, and the statistic.al section are presented for purposes of additional analysis and are not required parts of the basic financial statements. The combining nonmajor fund financial statements, major capital projects budgetary comparison schedules, nonmajor funds budgetary comparison schedules, combining nonmajor proprietary fund financial statements, and combining internal service fund financial statements have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. The introductory section and statistical section have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on them.

Moss, Levy & Hartzheim, LLP Beverly Hills, California December 15, 2008

10

Management's Discussion and Analysis

As management of the City of El Centro, we offer readers of the City of El Centro's financial statements this narrative overview and analysis of the financial activities of the City of El Centro for the fiscal year ended June 30, 2008. 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 1-6 of this report. All amounts, unless otherwise indicated, are expressed in thousands of dollars.

Financial Highlights

I. Statement of Net Assets and Statement of Activities • The assets of the City of El Centro exceeded its liabilities at the close of the most

recent fiscal year by $203,489. Of this amount, $34,968 may be used to meet the government's ongoing obligations to citizens and creditors.

• The government's total net assets increased by $28,871. Governmental activities increased the City's net assets by $17,266. Business-type activities net asset increased by $11,605.

II. Balance Sheet-Governmental Funds • As of the close of the current fiscal year, the City of El Centro's governmental funds

reported combined ending fund balances of $72,530. Approximately 28% or $20,543 is available for spending (Unreserved Fund Balance). See additional discussion in Financial Analysis of the City's Funds on Pages 23 to 33.

• At the end of the current fiscal year, unreserved fund balance for the general fund was $11,688, or approximately 45 percent oftotal general fund expenditures.

Overview of the Financial Statements

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

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

The statement of net assets presents information on all of the City ofEl Centro's assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether financial position of the City ofEl Centro is improving or deteriorating.

The statement of activities presents information showing how the government's net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave).

11

Both the government-wide financial statements distinguish functions of the City of El Centro 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 of El Centro include general government, public safety, community development, public works, and parks and recreation. The businesstype activities of the City of El Centro include water, sewer (wastewater), solid waste, transit and a community hospital.

The government-wide financial statements, not only include the City of El Centro itself (known as the primary government), but also a legally separate redevelopment agency for which the City ofEl Centro is financially accountable.

The government-wide financial statements can be found on pages 23-24 ofthis report.

Fund financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City of El Centro, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City ofEl Centro 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 that are 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 governmentwide 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.

The City of El Centro maintains 61 individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the general fund and the redevelopment agency capital projects fund, both of which are considered to be major funds. Data from the other 59 governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these nonmajor governmental funds is provided in the form of combining statements elsewhere in this report.

The City of El Centro adopts an annual appropriated budget for its general fund. A budgetary comparison statement had been provided for the general fund to demonstrate compliance with this budget.

The basic governmental fund financial statements can be found on pages 25-28 of this report.

12

Proprietary Funds. The City of El Centro maintains two different 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 of El Centro uses enterprise funds to account for its water, wastewater, solid waste, and transit operations as well as the community hospital, El Centro Regional Medical Center. Internal service funds are used to account for the financing of goods or services provided by one department or agency to other departments or agencies of the City of El Centro on a cost reimbursement basis. The City of El Centro uses internal service funds to account for its fleet of vehicles, workers compensation program, group health insurance, and post employment benefits. Because these services predominantly benefit governmental rather than business-type functions, they have been included within governmental activities, in the government-wide financial statements. Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The proprietary fund financial statements provide separate information for the water, wastewater, and hospital operations, all of which are considered to be Major Funds of the City of El Centro. Conversely, Internal service funds are combined into a single aggregated presentation, in proprietary fund financial statements. Individual fund data for the internal service funds is provided in the form of combining statements elsewhere in this report.

The basic proprietary fund financial statements can be found on pages 29-31 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 statement because the resources of those funds are not available to support the City of El Centro's own programs. The accounting used for fiduciary funds is much like that used for proprietary funds.

The basic fiduciary fund financial statements can be found on pages 32-33 of this report.

Notes to the Financial Statements. The notes provide additional information that is essential to the 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 34-69 of this report.

Other Information. In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the City of El Centro's Schedule of Revenues, Expenditures, and Changes in Fund Balance (Final Budget, Original Budget, and Actual Amount) for the General Fund. Required supplementary information can be found on pages 70-71 of this report.

The combining statements referred to earlier in connection with non-major governmental funds and internal service funds are presented immediately following the required supplementary information on pensions. Combining and individual fund statements and schedules can be found on pages 73-160 of this report.

Government-wide Financial Analysis

As noted earlier, net assets may serve over time as a useful indicator of a government's financial position. In the case of the City of El Centro, assets exceeded liabilities by $203,489 (see table 1, page 15) at the close ofthe most recent fiscal year.

13

The City of El Centro's net assets in the amount of $102,686 (approximately 50 percent) reflects its 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 of El Centro uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City of El Centro's investment in its capital assets is reported net of related debt, it should be noted that the resources to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities.

An additional portion of the City of El Centro's net assets in the amount of $65,835 (approximately 32 percent) represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net assets, $34,968, may be used to meet the government's ongoing obligations to citizens and creditors.

At the end of the current fiscal year, the City of El Centro is able to report positive balances in all three categories of net assets, both for the government as a whole, as well as for its separate governmental and business-type activities.

Current Assets and Other

Table 1- City ofEl Centro Net Assets June 30, 2008 (Thousands)

Governmental Business-type

Activities Activities

2008 2007 2008

Total

2007 2008 2007

Assets 103,557 91,361 133,548 126,026 237,105 217,387

Capital Assets 66,500 55,528 81,925 72,094 148,425 127,622

Total Assets 170,057 146,889 215,473 198,120 385,530 345,009

Current and Other Liabilities 12,171 6,463 20,543 13,938 32,714 20,401

Long-term Liabilities 33,813 33,749 115,514 116,957 149,327 150,706

Total Liabilities 45,984 40,212 136,057 130,895 182,041 171,107

Net Assets:

Invested in Capital Assets,

Net of related debt 57,567 45,474 45,119 20,472 102,686 65,946

Restricted 58,138 52,414 7,697 7,716 65,835 60,130

Unrestricted 8,368 8,789 26,600 39,037 34,968 47,826

Total Net Assets 124,073 106,677 79,416 67,225 203,489 173,902

14

As shown in Table 2 (below), the City of El Centro's Net Assets increased by $28,871. Governmental Activities Net Assets increased by $17,266, thereby accounting for 60 percent of the total increase in Net Assets.

Table 2- City ofEl Centro's Changes in Net Assets For the Year Ended June 30, 2008(Thousands)

Governmental Business-type

Activities Activities Total

2008 2007 2008 2007 2008 2007

Revenues:

Program Revenues:

Charges for Service 3,284 5,290 102,157 92,388 105,441 97,628

Operating Grants & Contributions 7,615 4,936 624 415 8,239 5,351

Capital Grants & Contributions 9,952 3,111 1,882 2,891 11,834 6,002

General Revenues:

Property Tax 9,220 8,632 9,220 8,632

Sales Tax 10,200 7,508 10,200 7,508

Motor Vehicle in Lieu of Taxes 3,833 3,392 3,833 3,392

Investment Earnings 3,575 2,688 7,128 1,742 10,703 4,430

Investments in Joint Venture

Other 3,547 14,433 24 3,571 14,433

Total Revenue 51,226 49,990 111,815 97,348 163,041 147,376

Expenses:

Government Activities 3,106 2,976 3,106 2,976

Public Protection 15,709 13,951 15,709 13,951

Community Development 3,745 5,703 3,745 5,703

Public Works 6,402 5,318 6,402 5,318

Parks and Recreation 3,028 2,628 3,028 2,628

Interest on Long-Term Liabilities 1,970 1,454 1,970 1,454

Water 7,123 7,186 7,123 7,186

Wastewater 7,221 7,099 7,221 7,099

Hospital 81,948 75,338 81,948 75,338

Other 3,918 3,868 3,918 3,868

Total Expenses 33,960 32,030 100,210 93,491 134,170 125,521

Increase (Decrease) in Net Assets 17,266 17,960 11,605 3,895 28,871 21,855

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Governmental Activities The change in Net Assets for Governmental Activities increased by $17,266 for the year ended June 30, 2008. The following were the key elements in the change in net assets:

• Total revenues were $51,226 and expenditures totaled $33,960. This was an increase of2.41 percent and 5.68 respectively.

• The increase in revenues from the previous year was primarily due to the following reasons: !.Creation of two new funds: Fire Mitigation Fund was created for collection of

fees for a commercial project-$546; Proposition lB Fund was created for money received from the State of California for a major street renovation project -$678

2.1ncreases in the following funds: RDA Housing Fund increased by $442 due to additional monies received for low income housing; RDA Capital Projects Fund increased by $1,105 due to an increase in interest income generated by cash with fiscal agent and an increase in loan payments by $927 and $178 respectively.

3.Capital contributions by developers in the amount of$7,290 4.Decreases in the following funds: Colonia El Dorado Street Fund and Federal

Highway Administration Fund decreased by ($2,319) and ($1, 121 ), respectively, because a major portion of a street improvement project was completed in the 06/07 fiscal year; Police and Fire Operational Fund decreased by ($664) because there were a one time fee paid by a developer in the 06/07 fiscal year; CalHome Program Fund decreased by ($388) because a grant was completed in the 06/07 fiscal year; HUD Entitlement Program Fund decreased by ($361) because matching funds were reduced in the 07/08 fiscal year; CDBG Fund decreased by ($329) because program loan payoffs were reduced in the 07/08 fiscal year; Traffic Congestion Relief Fund decreased by ($307) because the State eliminated certain funding for the 07/08 fiscal year; Transportation Article 8 Fund decreased by ($285) because funding from the County was reduced in the 07/08 fiscal year; Used Oil Grant Fund decreased by ($257) because the related grants were completed in the 06/07 fiscal year; and the General Fund decreased by ($983) because the Triple Flop payment decreased and the plan check fees decreased in the 07/08 fiscal year.

5.The Statement of Activities consolidated the net income of the internal service fund back to the respective functions in the 07/08 fiscal year, but the net income of the internal service fund was consolidated as charges for services in the 06/07 fiscal year ($1,973)

• The increase in expenditures from the previous year was primarily due to the following reasons: 1.1ncreases in the following funds: General Fund increased by $2,588 because there

was an increase in public safety personnel and the purchase of public safety equipment; RDA Capital Projects Fund increased by $742 because capital outlay (for the addition of capital assets) increased by $350 and there was an increase in business loans and contributions in the amount of $392; Asset Forfeiture Fund increased by $786 because of the purchase of police vehicles and other safety equipment; Home Grants Fund increased by $352 because unused matching funds were returned; Housing Enabled by Local Partnership Fund increased by $442 because payments were made to the State for loans collected; RDA Housing Fund increased by $2,010 because there was land acquisition for a low income housing project.

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� Total revenues were $51,226 and expenditures totaled $33,960. This was an increase of 2.41 percent and 5.68 respectively.

� The increase in revenues from the previous year was primarily due to the following increases: Property taxes increased due to increase in commercial and residential growth. Investment earning increased due to bond proceeds await expenditure for their intended purpose and better performance than expected. Fire Mitigation ($546) due to fees collected for a commercial project, Proposition 1B ($676) received from the State of California for one major street renovation project, Bridge/Road Improvements ($173) due to fees collected from developers for bridge and road improvements and RDA Housing ($442) due to additional monies received for low income housing.

� The increase in expenditures was in the following funds (amounts): General Fund ($2,500) due to increased public safety personnel and purchase of public safety equipment, Asset Forfeiture ($786) due to purchase of police vehicles and other safety equipment, LTA ($222) due to increase in street projects, HUD Entitlement ($155) due to sidewalk improvement project and RDA ($2.0 mil) for land acquisition for low income housing project.

Expenses and Programs Revenues-Governmental Activities (Amounts expressed in Thousands)

$-$5

$10$15$20$25$30$35$40

GeneralGovernment

Public Safety Public Works Park &Recreation

CommunityDevelopment

Thou

sand

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RevenueExpenses

Revenues by Source – Governmental Activities

Revenues by Source-Governmental Activities

6%

15%

19%

18%

21%

14%

7%

Charges for ServicesOperating Grants and ContributionsCapital Grants and ContributionsProperty TaxesSales TaxesRevenue from other AgenciesOther

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Business-type activities Business-type activities net assets increased by $11,522. In fiscal year 2008 revenues increased by 15 percent and expenditures increased by 7%. ________________________________________________________________________

Expenses and Program Revenues - Business-type Activities (Amounts expressed in Thousands)

0

10000

20000

30000

40000

50000

60000

70000

80000

90000

Water Wastewater Hospital Other

RevenuesExpenses

______________________________________________________________________________________________________________________________________________

Revenues by Sources - Business-type Activities

1% Operating Grants and

Contributions6% Unrestricted Investment Earnings

91% Charges for Service

2% Capital Grants & Contributions

Financial Analysis of the Government's Funds

As noted earlier, the City of El Centro uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements.

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

As of the end of the current fiscal year, the City of El Centro's governmental funds reported combined ending fund balances of $72,530, an increase of $4,122 in comparison with the prior year. Approximately 28% of this total amount or $20,543 constitutes unreserved fund balance, which is available for spending at the government's discretion. The remainder of the fund balance is restricted and not available for a variety of restricted purposes.

The general fund is the chief operating fund of the City of El Centro. At the end of the current fiscal year, unreserved fund balance of the general fund was $11,688, while total fund balance totaled $12,993. As a measure of the general fund's liquidity, it may be useful to compare both unreserved fund balance and total fund balance to total fund expenditures. Unreserved fund balance represents 45 percent of total general fund expenditures, while total fund balance represents 50 percent of the total general fund expenditures.

The fund balance, for the General Fund, increased by $443 during the current fiscal year. Significant factors related to the revenue and expenditures of the general fund for the current fiscal year are as follows:

• Revenues for the general fund totaled $24,503, which was a decrease of $983 or approximately 4 percent over the prior fiscal year. Licenses and Permits increased by 26 percent, Taxes increased by 1%, and Fines and Forfeitures decreased by 11%. Revenue from Other Agencies (Intergovernmental) decreased by 6 percent due to decrease in sales tax triple flip payment. Charges for services decreased by 18% due to a decrease in plan check fees.

• Expenditures for the general fund totaled $25,779. This is an increase of $2,588 or approximately 10 percent over the prior fiscal year. Public Safety increased by 1 0% due to an increase in personnel hired and the purchase of public safety equipment; Parks and Recreation increased by 11% due to additional programs offered.

The Redevelopment Agency Capital Projects Fund ended the current fiscal year with reserved fund balance in the amount of $20,695, with the fund balance increasing by $435. Significant factors related to the revenues and expenditures of the RDA Capital Projects Fund for the current fiscal year are as follows:

• Revenues totaled $1,314 which was an increase of $1,105 or approximately 526 percent over the prior fiscal year. Interest revenues increased by $928

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generated by interest earnings with fiscal agent. Other revenues increased by $1 77 or approximately 157 percent generated by loan payments.

• Expenditures totaled $1,829. This was an increase of $742 or approximately 68 percent, with Capital Outlay increasing by 351 due to remodeling work on a project and Community Development expenses increasing by $392 for business loans and other contributions.

Proprietary Funds

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

Net assets of the proprietary (enterprise) funds at the end of the year amounted to $79,416. The total growth in net assets for all enterprise funds was $11,60 5. Other factors concerning the finances of these funds have already been addressed in the discussion of the City ofEl Centro's business-type activities.

General Fund, Redevelopment Capital Projects Fund, and Special Revenue Funds Budgetary Highlights

The City made revisions to the original appropriations approved by the City Council. General Fund increased by $115 or approximately .43 percent with increases in parks and recreation and consultant fees. There was no change in the original appropriations approved by the City Council for the Redevelopment Agency Capital Projects Fund. The Special Revenue Funds increased by $592 or approximately 4.2 percent due to new state grants.

Capital Asset and Debt Administration

As of June 30, 2008 the City's investment in capital assets for its governmental and business-type activities amounted to $148,425 (net of accumulated depreciation). The investments in capital assets are comprised of land, building and improvements, infrastructure, vehicles, furniture and equipment, and construction in progress. The City, according to GASB 34 guidelines has elected retroactively to include all infrastructure assets dating back to 1980.

Major capital assets changes during the current fiscal year included the following: • Land acquisition for low income housing of $1 ,560 • Vehicle acquisition of $1,559 with 88 percent for public safety • Street improvements of$6,513, including $3,329 in developer contributions • Water and Wastewater system infrastructure improvements totaling $10,198

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Table 3- City ofEl Centro's Capital Assets (Net of Accumulated Depreciation)

June 30, 2008 {Thousands)

Business-Governmental Type Activities Activities Total

Land 6,148 1,444 7,592 Building and Improvements 20,777 68,755 89,532 Infrastructure 23,226 23,226 Vehicles 2,404 211 2,615 Furniture and Equipment 2,344 8,510 10,854 Construction in Progress 11,601 3,005 14,606 Other

Total 66,500 81,925 148,425

Additional information on the City of El Centro's capital assets can be found in Note 6 on pages 53-54 ofthis report.

Long-Term Debt

At the end of the current fiscal year, the city had total long-term debt outstanding of $149,513. The composition oflong-term debt is outlined in Table-4 below.

Tax Allocation Bonds Bonds Payable Capital Leases Compensated Balances Total

Table 4 - The City's Outstanding Debt June 30, 2008 {Thousands)

Governmental Business-T~e Activities Activities

$ 31,195 $ 112,233

49 3,074 2,569 393

$ 33,813 $115,700

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Totals

$ 31,195 112,233

3,123 2,962

$ 149,513

The majority of the long-term debt is comprised as follows: • Tax Allocation Bonds in the amount of $31,195. The Redevelopment

Agency of the City of El Centro issued $9,240 in tax allocation bonds in 1996 and $31 million in 2007. The proceeds were used to redeem an earlier bond issue, with the balance to finance public improvements as allowed by Redevelopment regulations.

• Insured Hospital Revenue Bonds in the amount of $33,634. El Centro Regional Medical Center issued $39,300 in Insured Hospital Revenue Bonds in 2001. The proceeds are being used to finance the construction and equipping of the Medical Center's expansion project.

Additional information on the City of El Centro's long-term debt can be found in note 8, on pages 55 to 62 of this report.

Economic Factors

As noted in the letter of transmittal the City of El Centro's continued growth in property and sales tax revenue as well as cost control measures have allowed the City's financial position to improve over the past three years.

The regional mall, which was opened in 2005, continues to increase the city's sales tax base and served as a stimulus for compatible commercial growth in and around the mall area. A new commercial development was built across from the mall and one of the stores, "Best Buy", opened during the fiscal year. The following stores will be opening at this development: Ross, Marshalls, Burlington Coat Factory, Staples, and Bed Bath & Beyond.

While the State and the rest of the Country are experiencing an economic slowdown of great magnitude the City has experienced a slowdown only in its commercial and residential development. The majority of the sales tax base for the City is comprised of individuals from out of the country (Mexicali, Mexico) which has allowed The City's sales tax revenue to continue to increase.

The City continues to proactively position itself for the possible challenges that can be associated with an economic slowdown. The City continues to fund reserves, designations and has developed revenue enhancement and cost containment measures.

Requests for Information

This financial report is designed to provide a general overview of the City of El Centro's finances for all those with an interest in the government's finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Office of the Director of Finance, 1275 Main Street, City ofEl Centro, California, 92243.

22

CITY OF EL CENTRO Statement of Net Assets

June 30, 2008

Governmental Business-Type Activities Activities Total

Assets: Cash and Investments $ 62,308,445 $ 22,612,099 $ 84,920,544 Restricted Assets: Cash and Investments with Fiscal Agent 23,625,393 81,258,127 I 04,883,520

Receivables (net of allowances for uncollectables) Accounts 69,433 19,931,585 20,001,018 Taxes 1,237,978 1,237,978 Interest 273,132 67,271 340,403 Grants 2,070,149 2,070,149 Notes 10,354,829 10,354,829 Other 1,688,706 2,206,794 3,895,500

Inventories 1,557,187 1,557,187 Deferred Charges, Net of Accumulated Amortization 1,452,337 1,856,780 3,309,117 Deferred Loss on Refunding 413,351 413,351 Net Pension Obligation - Overfunded 800,400 800,400

Prepaid Items 988,435 988,435

Investment in Joint Venture 2,269,638 2,269,638

Land Held for Resale 63,589 63,589 Capital Assets Not Being Depreciated 17,748,107 4,448,935 22,197,042 Capital Assets, Net of Accumulated Depreciation 48,751,405 77,476,056 126,227,461

Total Assets 170,056,854 215,473,307 385,530,161

Liabilities: Accounts Payable 2,570,561 8,789,194 11,359,755

Salaries/Benefits Payable 1,002,897 4,536,335 5,539,232

Interest Payable 233,890 934,396 1,168,286

Deposits 8,363,535 1,711,768 10,075,303

Due to Third Party Payers 4,570,924 4,570,924

Non-Current Liabilities: Due Within One Year 1,321,670 3,775,435 5,097,105

Due in More Than One Year 32,491,744 111,739,006 144,230,750

Total Liabilities 45,984,297 136,057,058 182,041,355

Net Assets: Invested in Capital Assets, Net of Related Debt 57,566,767 45,118,649 102,685,416

Restricted for: Housing and Economic Development 33,628,691 33,628,691

Public Improvements 9,703,674 9,703,674

Street Improvements 9,791,116 9,791,116

Public Protection 1,830,542 1,830,542

Parks and Recreation 651,783 651,783

Debt Service 2,532,065 7,697,555 10,229,620

Unrestricted 8,367,919 26,600,045 34,967,964 Total Net Assets $ 124,072,557 $ 79,416,249 $ 203,488,806

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

23

tv +:-

Functions

Primary Government: Governmental Activities:

General Government Public Protection Community Development Public Works Parks and Recreation Interest on Long-Term Liabilities

Total Governmental Activities

Business Activities Water Wastewater Hospital Transit Solid Waste

Total Business Type Activities Total Primary Government

CITY OF EL CENTRO Statement of Activities

For the Fiscal Year Ended June 30,2008

Program Revenues Operating Capital

Charges for Grants and Grants and Expenses Services Contributions Contributions

$ 3,105,885 $ 323,057 $ 74,331 $ -15,709,050 1,337,987 679;727 3,745,060 1,432,847 1,040,071 1,499,773 6,401,722 87,305 5,715,273 8,093,193 3,027,847 103,138 105,088 359,150 1,970,229

33,959,793 3,284,3~ 7,614,490 9,952,116

7,123,415 7,045,506 1,076,901 7,220,805 7,003,379 805,203

81,947,795 84,339,214 462,189 227,407 31,911 161,320

3,690,879 3,737,471 100,210,301 102,157,481 623,509 1,882,104

$ 134,170,094 $ 105,441,815 $ 8,237,999 $ 11,834,220

General Revenues: Property Tax Sales Tax Other Taxes Revenue from Other Agencies Investment Earnings Miscellaneous Revenue

Total General Revenues

Change in Net Assets

Net Assets- Beginning of Fiscal Year

Prior Period Adjustments

Net Assets- Beginning of Fiscal Year (restated)

Net Assets- End of Fiscal Year

Net (Expenses) Revenues and Changes in Net Assets

Governmental Activities

$ (2, 708,497) ( 13,691,336)

227,631 7,494,049

(2,460,471)

~1.970,2292 (13,108,853)

(13,108,853)

9,220,182 10,199,467 6,100,198

997,746 3,575,397

281,781 30,374,771

17,265,918

106,677,995

128,644

I 06,806,639

$ 124,072,557 $

BusinessType

Activities

$ -

998,992 587,777

2,853,608 (34,176) 46,592

4,452,793 4,452,793

7,128,138 23,653

7,151,791

11,604,584

67,224,367

587,298

67,811,665

79,416,249

Total

$ (2,708,497) (13,691,336)

227,631 7,494,049

(2,460,471) ~I ,970,229)

(13, I 08,853)

998,992 587,777

2,853,608 (34,176) 46,592

4,452,793 (8,656,060)

9,220,182 10,199,467 6,100,198

997,746 10,703,535

305,434 37,526,562

28,870,502

173,902,362

715,942

174,618,304

$ 203,488,806


CITY OF EL CENTRO Balance Sheet

Governmental Funds June 30, 2008

Redevelopment Non major Total Agency Governmental Governmental

General Ca(!ital ProJects Funds Funds Assets:

Cash and Investments $ I 1,684,017 $ 1,232,403 $ 42,872,637 $ 55,789,057 Receivables (Net of Allowances for Uncollectibles):

Accounts 50,511 18,922 69,433 Taxes 1,236,417 1,561 1,237,978 Interest 53,534 2,708 188,980 245,222 Grants 70,528 1,999,621 2,070,149 Notes 137,176 10,217,653 10,354,829 Other 396,364 823,560 1,219,924

Due from Other Funds 1,015,399 1,015,399 lnterfund Advances Receivable 1,300,000 1,300,000 Restricted Assets:

Investments with Fiscal Agent 20,828,984 2,796,409 23,625,393 Other Assets:

Land Held for Resale 63,589 63,589 Total Assets $ 15,806,770 $ 22,220,193 $ 58,964,010 $ 96,990,973

Liabilities and Fund Balances: Liabilities:

Accounts Payable $ 1,096,634 $ 74,884 $ 1,260,791 $ 2,432,309

Salaries/Benefits Payable 965,563 12,967 16,579 995,109

Deferred Revenue 137,176 10,217,653 10,354,829

Deposits 751,115 7,612,420 8,363,535

Due to Other Funds 1,015,399 1,015,399

1nterfund Advances Payable 1,300,000 1,300,000

Total Liabilities 2,813,312 1,525,027 20,122,842 24,461,181

Fund Balances: Reserved for:

Petty Cash 5,150 5,150

Housing and Economic Development 20,695,166 2,578,696 23,273,862

Advances 1,300,000 1,300,000

Public Improvements 9,703,674 9,703,674

Street Improvements 9,791,116 9,791,116

Public Protection 1,830,542 1,830,542


Debt Service 2,765,955 2,765,955 Low and Moderate Income Housing 2,601,059 2,601,059

Land Held for Resale 63,589 63,589

Unreserved, Reported in: General Fund 11,688,308 11,688,308 Capital projects fund 8,854,754 8,854,754

Total Fund Balances 12,993,458 20,695,166 38,841,168 72,529,792

Total Liabilities and Fund Balances $ 15,806,770 $ 22,220,193 $ 58,964,010 $ 96,990,973


25

CITY OF EL CENTRO Reconciliation of the Govern menta] Funds BaJa nee Sheet

to the Statement of Net Assets June 30, 2008

Total fund balances- governmental funds

In governmental funds, only current assets are reported. In the statement of net assets, all assets are reported, including capital assets and accumulated depreciation.

Capital assets at historical cost : Accumulated depreciation:

$ 125,951,604 (59,452,092)

In governmental funds, debt issuance costs and deferred losses on refunding are recognized as expenditures in the period they are incurred. In the government-wide stntements, debt issuance cost~ and deferred losses on refundings arc capitalized and amortized over the life of the debt

Deferred Charges, net Deferred Loss on Refunding, net

$ 1,452,337 413,351

In governmental funds, certain notes receivable are not available to pay for current period expenditures and, therefore. nrc offset by deferred revenue.

In governmental funds, only current liabilities arc reported. In the statement of net assets, all liabilities, including long-term liabilities, are reported. Long-term liabilities relating to governmental activities consist of':

Ta.x allocation bonds payable Capital leases payable Compensated absences payable

Accrued interest payable from the current portion of interest due on long-term debt has not been reported in the governmental funds.

Internal service funds arc used by management to charge the costs of certain activities, such as self-insurance, to individual funds. The nssets and liabilities of the internal service fund must be added to the statement ofnei assets.

Total net assets - governmental activities

31,195,000 49,520

2,568,894

The notes to the financial state me~~ ore an integral part of this statement.

$ 72,529,792

66,499,512

1,865,688

10,354,829

{33,813,414)

(233,890)

6,870,040

$ 124,072,557

CITY OF EL CENTRO Statement of Revenues, Expenditures, and Changes in Fund Balance

Governmental Funds For the Fiscal Year Ended June 30, 2008

Redevelopment Nonmajor Total Agency Governmental Governmental

General Capital Projects Funds Funds Revenues

Taxes $ 13,380,580 $ $ 5,634,630 $ 19,015,210 Licenses and Permits 481,803 481,803 Intergovernmental 7,214,948 7,642,146 14,857,094

Charges for Services 1,700,879 1,377,034 3,077,913 Fines and Forfeitures 219,396 219,396

Interest 480,572 1,025,774 I ,839,945 3,346,291

Other 1,024,623 288,678 1,888,769 3,202,070

Total Revenues 24,502,801 1,314,452 18,382,524 44,199,777

Expenditures Current

General Government 2,977,024 2,977,024

Public Safety 14,960,060 528,402 15,488,462

Public Works 1,728,249 2,074,604 3,802,853

Parks and Recreation 2,338,896 571,628 2,910,524

Community Development 2,318,929 1,448,380 1,954,287 5,721,596

Capital Outlay 1,455,658 380,803 5,310,996 7,147,457

Debt Service Principal 152,846 152,846

Interest and fiscal charges 1,876,983 1,876,983

Total Expenditures 25,778,816 1,829,183 12,469,746 40,077,745

Excess (Deficiency) of Revenues over (under) Expenditures ( 1,276,0 15) (514,731) 5,912,778 4,122,032

Other Financing Sources (Uses): Transfers In 1,856,463 950,000 483,321 3,289,784

Transfers Out (137,726) (3, 152,058) (3,289,784)

Total Other Financing Sources (Uses) 1,718,737 950,000 (2,668,737)

Net Change in Fund Balances 442,722 435,269 3,244,041 4,122,032

Fund Balances- July l, 2007 12,550,736 20,259,897 35,597,127 68,407,760

Fund Balances- June 30, 2008 $ 12,993,458 $ 20,695,166 $ 38,841,168 $ 72,529,792


27

CITY OF EL CENTRO Reconciliation of the Statement of Revenues, Expenditures, and Changes in

Fund Balances of Governmental Funds to tbe Statement of Activities For the Fiscal Year Ended June 30, 2008

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

Net change in fund balance-total governmental funds

Governmental funds report capital outlays as expenditures. However, in the statement of activities, the costs of those capital assets nrc allocated over their estimated oseful lives us depreciation expense. This is the amount by which cnpitnl outlays exceed depreciation in the current period.

Cnpital outlay Depreciation expense

$ 8,084,238

Revenue in the Statement of Activities that do not provide current financial resources are not reported as revenues in the Governmental Funds.

Capital contributions of developer infrastructure

Certain notes reccivuble nrc reported in the governmental funds as expenditures and then offset by a deferred revenue as they nrc not available to pay current expenditure.~. Likewise when the note is collected it is reflected in revenue. This is the net change between notes receivable collected and issued. (Collected $492,701) (Issued $842,700)

The issuance oi'Jong-tcrm debt provides current financial resources to governmental funds, while repayment of the principal of long-term debt consumes the current financial resources of the governmental funds. Issuance of bond principal is nn other financing source and repayment of bond principal is un expenditure in governmental funds, bul the issUiiilce incrca.~es long-term liabilities and the repayment reduces long-term liabilities in the statement of net assets.

Compensated absence expenditures reported in the statement of activities do not require the usc of current financial resources and therefore, are not reported ns expenditures in a governmental fund. This is the net change in compensated absences for the current period.

Debt issuance costs and deferred losses on refunding are expenditures in the govcmmentul funds, but these costs are capitalized on the statement of net assets. This is the amount of amortization in the current period.

Deferred issuance costs Deferred loss on refunding

$

Accrued interest is interest due on long-term debt payable. This is the net change in accrued interest for the current period.

Internal service funds are used by management to charge the costs of ccrtoin activities, such ns self-insurance, to individual funds. The net revenues (expenses) of the internal service funds is reported with govemmentnl activities.

Cbangc in net assets of governmental activities

The notes to the financial statements nrc an integral part of this statement. 28

( 4,095,500)

(51,259) (22,496)

$ 4,122,032

3,988,738

7,289,529

349,999

152,846

(217, 147)

(73, 755)

(19,491)

1,673,167

$ 17,265,918

CITY OF EL CENTRO Statement of Net Assets

Proprietary Funds June 30, 2008

Governmental Business-~ Activities-Ente!Erise Funds Activities

Non major Internal Water Wastewater Hospital Enterprise Service Fund Fund Fund Funds Total Funds

Assets

Current Assets: Cash and Investments $ 7,319,243 $ 7,848,594 $ 7,241,522 $ 202,740 $ 22,612,099 $ 6,519,388 Receivables (Net of Allowances for Uncollectibles):

Accounts 1,262,438 1,147,904 17,049,464 471,779 19,931,585 Other 43,861 2,162,933 2,206,794 468,782 Interest 31,376 34,319 1,576 67,271 27,910

Inventories 1,557,187 1,557,187 Unamortized Bond Costs 788,903 1,067,877 1,856,780 Net Pension Obligation - overfunded 800,400 800,400 Prepaid Expenses 988,435 988,435 Investment in Joint Venture 2,269,638 2,269,638

Total Current Assets 9,445,821 10,098,694 32,069,579 676,095 52,290,189 7,016,080

Noncurrent Assets: Restricted Assets: Investments with Fiscal Agents 32,861,094 34,605,796 13,791,237 81,258,127

Capital Assets: Land 181,547 78,560 1,183,775 1,443,882

Buildings 920,335 835,015 52,220,043 53,975,393

Improvements other than Buildings 37,830,808 43,644,424 81,475,232

Machinery and Equipment 3,008,433 1,116,117 36,460,436 40,584,986

Furniture and Fixtures 34,477 46,515 80,992

Vehicles 1,058,140 660,477 1,718,617

Construction in Progress 3,005,053 3,005,053

Less: Accumulated Depreciation (28,295,950~ (29,066,249~ ( 42,996,965~ ~100,359,164~

Total Noncurrent Assets 47,598,884 51,920,655 63,663,579 163,183,118

Total Assets 57,044,705 62,019,349 95,733,158 676,095 215,473,307 7,016,080

Liabilities Current Liabilities:

Accounts Payable 2,135,509 346,579 5,901,700 405,406 8,789,194 138,252

Salaries/Benefits Payable 171,943 163,911 4,200,481 4,536,335 7,788

Interest Payable 399,661 534,735 934,396

Customer Deposits 639,768 1,000,000 72,000 1,711,768

Due to Third-Party Payors 4,570,924 4,570,924

Current Portion of Long-term Obligations 648,263 840,781 2,286,391 3,775,435

Total Current Liabilities 3,995,144 2,886,006 16,959,496 477,406 24,318,052 146,040

Noncurrent Liabilities: Compensated Absences 105,944 101,890 207,834

Capital Lease Obligation 1,987,344 1,987,344

Long-term Debt 33,873,103 43,236,540 32,434,185 109,543,828

Total Noncurrent Liabilities 33,979,047 43,338,430 34,421,529 Ill ,739,006

Total Liabilities 37,974,191 46,224,436 51,381,025 477,406 136,057,058 146,040

Net Assets Invested in Capital Assets, Net of Related Debt 11,579,072 6,583,918 26,955,659 45,118,649

Restricted For : Debt Service 1,887,688 1,792,558 4,017,309 7,697,555

Unrestricted 5,603,754 7,418,437 13,379,165 198,689 26,600,045 6,870,040 Total Net Assets $ 19,070,514 $ 15,794,913 $ 44,352,133 $ 198,689 $ 79,416,249 $ 6,870,040


29

CITY OF EL CENTRO Statement of Revenues, Expenses, and Changes in Net Assets

Proprietary Funds For the Fiscal Year Ended June 30, 2008

Governmental Business·!l::l!e Activities- Enterl!rise funds Activities

Nonmajor Internal Water Wastewater Hospital Enterprise Service Fund Fund Fund Funds Total Funds

Operating Revenues: Charges for Services $ 7,045,466 $ 7,003,369 $ 83,364,734 $ 3,769,382 $ 101,182,951 $ 6,728,876 Other Revenues 40 10 974,480 974,530

Total Operating Revenues 7,045,506 7,003,379 84,339,214 3,769,382 I 02,157,481 6,728,876

Operating Expenses: Personal Services 1,749,447 1,853,320 45,435,770 49,038,537 194,687 Contractual Services 210,723 210,723

Supplies and Services 1,946,107 1,451,638 31,085,918 3,670,725 38,154,388 5,090,128 General and Administrative 1,077,185 986,347 36,838 2,100,370

Depreciation and Amortization 725,614 851,706 3,488,864 5,066,184

Total Operating Expenses 5,498,353 5,143,011 80,010,552 3,918,286 94,570,202 5,284,815

Operating Income (loss) 1,547,153 1,860,368 4,328,662 (148,904) 1,581).19 1,444,061

Non-operating Revenues (Expenses): Interest Revenue 3,213,309 3,108,062 799,956 6,811 7,128,138 229,106

Interest Expense (I ,625,062) (2,077,794) (1,937,243) (5,640,099)

Other Non-Operating Revenue 23,653 23,653

Total Non-Operating Revenue (Expenses) 1,588,247 1,030,268 (1,113,634) 6,811 1,511,692 229,106

Income (Loss) before contributions 3,135,400 2,890,636 3,215,028 (142,093) 9,098,971 1,673,167

Grants and Contributions 1,076,901 805,203 462,189 161,320 2,505,613

Change in Net Assets 4,212,301 3,695,839 3,677,217 19,227 11,604,584 1,673,167

Net Assets- Beginning of fiscal Year 12,450,478 14,636,511 39,957,916 179,462 67,224,367 5,196,873

Prior Period Adjustments 2,407,735 (2,537,437) 717,000 587,298

Net Assets- Beginning of the Fiscal Year, Restated 14,858,213 12,099,074 40,674,916 179,462 67,811,665 5,196,873

Net Assets- End of fiscal Year $ 19,070,514 $ 15,794,913 $ 44,352,133 $ 198,689 $ 79,416,249 $ 6,870,040


30

CITY OF EL CENTRO STATEMENT OF CASH FLOWS

PROPRIETARY FUNDS For the Fiscal Year Ended June 30, 2008

Business-~ Activities- Ente~rise Funds Governmental Nonmajor Activities Enterprise Internal Service

Water Wastewater Hoseital Funds Totals Funds

CASH FLOWS FROM OPERATING ACTIVITIES:

Cash Received from Patients and Third Parties on Behalf of Patients 81,882,944 81,882,944 Cash Received from Operations, other than Patient Services 2,185,432 2,185,432 Cash Received from Users 7,404,300 7,874,185 3,974,850 19,253,335 6,714,961 Cash Payments to Suppliers and Contractors (161,057) (1,344,703) (30, 793,841) (4,071,793) (36,371,394) (5,110,093) Cash Payments for General and Administrative Expenses (1,077,185) (986,347) (36,838) (2, 100,370) Cash Payments for Employees and Benefit Programs (1,722,361) (1,789,255) (44,896,908) (48,408,524) (193,088) Cash Payments for miscellaneous expenses (154,318) (154 318)

Net Cash Provided (Used) By Operating Activities 4 443,697 3 753 880 8,223,309 {133.781) 16,287 105 I 411,780

CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: Grants 640,160 161,320 801 480

NET CASH PROVIDED BY NONCAPITAL FINANCING ACTIVITIES 640,160 161,320 801,480

CASH FLOWS FROM INVESTING ACTIV!TIES Interest Received 3,241,493 3,150,864 799,956 5,667 7,197,980 239,835 Change in Assets limited as to Use (1,147,318) {1,147,318)

Net Cash Provided (Used) in Investing Activities 3 241 493 3,150,864 {347,362) 5,667 6 050 662 239 835

CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES:

Proceeds from Debt Borrowmgs 2,022,323 2,022,323

Principal Payments on Debt Borrowings (176,275) (705,515) (2,608,286) (3,490,076)

Capital Contribution 1,076,901 805,203 1,882,104

Interest Paid (1,596,646) (2.034,249) (1,937,243) (5,568,138)

Acquisition of Property, Plant and Equipment {6,346,539) {3.365,389) (5,058,187) !'4.770,115)

Net Cash Provided (Used) In Capital and Related Financing Activities (7,042,559) (5,299.950) {7,581,393) {19 923,902)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 642,631 1,604,794 934,714 33,206 3,215,345 1,651,615

CASH AND CASH EQUIVALENTS, BEGINNING OF FISCAL YEAR 39 537,706 40,849 596 6,306,808 169 534 86,863,644 4,867,773

CASH AND CASH EQUIVALENTS, END OF FISCAL YEAR 40,180,337 42,454,390 7,241,522 202,740 90,078,989 6,519 388

Reconciliation to Statement of Net Assets: Cash and Investments 7,319,243 7,848,594 7,241,522 202,740 22,612,099 6,519,388 Restricted Cash and Investments with Fiscal Agents 32,861,094 34,605,796 13,791,237 81,258,127 Less invesunents not meeting definition of cash equivalents (13,791 237) {13 791,237)

40 180,337 42,454,390 7,241,522 202,740 90 078,989 6,519,388

CASH FLOWS FROM OPERATING ACTIVITIES: Operating Income (Loss) 1,547153 I 860 368 4,328,662 (148,904) 7 587,279 1,444,061

AdJustment to Reconcile Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities:

Depreciation and Amortization 725,614 851,706 3,488,864 5,066,184 Changes in Assets and liabi1ities: (Increase) Decrease in Accounts Receivable (139,421) (129,194) (4,013,498) 133,468 (4,148,645)

(Jncrease) Decrease in Other Receivables (43,861) 957,952 914,091 (13,915) Increase (Decrease) in Accounts Payable and Accrued Liabilities 1,828,911 106,935 78,314 (190,345) 1,823,815 (18,366) Increase (Decrease) in Salary/Benefits Payable 25.3g5 40,219 622,262 687,866 (lncrerase) Decrease in Nel Pension Obligation· Overfunded (83,400) (83,400)

(Increase) Decrease in Inventories 160,224 160,224 (Jncrease) Decrease in Prepaid Items 53,539 53,539 (Increase) Decrease Short-Tenn Investments 253,000 253,000 Increase (Decrease) in Estimated Third Party Payor Settlements 2,531,708 2,531,708

Increase (Decrease) in Deposlt Payable 498,215 1,000,000 72,000 1,570,215 Increase (Decrease) in Other Payables (154,318) (154,318) Increase (Decrease) in Long-Tenn Compensated Absences 1,701 23,846 25,547

Total Adjustments 2,896,544 1,893,512 3,894,647 15 123 8,699 826 {32,281)

Net Cash Provided (Used) By Operating Activities 4 443,697 $ 3,753 880 $ 8,223 309 {133,781) 16 287 lOS I 411,780

The notes to the fanancial statements are an integral pan of this statement.

31

Assets: Cash and Investments:

Stocks Mutual Funds Money Market Funds

Contributions Receivable Interest Receivable

Total Assets

Liabilities: Pension Obligation Payable

Total Liabilities

Net Assets-

CITY OF EL CENTRO Statement of Fiduciary Net Assets

Fiduciary Funds June 30, 2008

Hospital Employees Pension Trust Fund

$ 12,513,187 14,456,392

1,616,856 245,984

50,708 28,883,127

Held in Trust for Pension Benefits $ 28,883,127


32

CITY OF EL CENTRO Statement of Changes in Fiduciary Net Assets

Fiduciary Funds For the Fiscal Year Ended June 30, 2008

Additions:

Employee/Employer Contributions

Fee Reimbursements

Other

Interest and Investment Income

Total Additions

Deductions:

Payments to Beneficiaries

Change in Investment Value Administrative Expenses

Total Deductions


Net Assets - Beginning of Fiscal Year


Hospital Employees

Pension Trust Fund

$

$

2,971,185

115,663

6,258

692,242

3,785,348

1,559,572

2,164,155 148,684

3,872,41 I

(87,063)

28,970,190

28,883,127


33

NOTES TO

BASIC FINANCIAL STATEMENTS

34

CITY OF EL CENTRO NOTES TO BASIC FINANCIAL STATEMENTS

June 30, 2008

NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. Reporting Entity

The City of El Centro was incorporated under the laws of the State of California in 1908 and is governed by an elected five-member council. As required by accounting principles generally accepted in the United States of America, these financial statements present the City and its component unit, an entity for which the City is considered to be financially accountable. TheEl Centro Regional Medical Center (Hospital) is an operating department of the City and is reported within the proprietary fund type.

Blended component units, although legally separate entities are, in substance, part of the City's operations, and so data from these units are combined with data of the City. The City and its component unit have a June 30 year-end.

Blended Component Unit. The Redevelopment Agency of the City ofEI Centro (Agency) serves the citizens of the City and is a blended component unit of the City since it is governed by a board comprised of the City Council. The Agency is reported in the special revenue, debt service and capital projects funds.

Complete financial statements for each of the individual component units may be obtained at the entity's administrative offices.

City ofEI Centro Redevelopment Agency 1275 Main Street El Centro, California 92243

B. Basis of Presentation

Government-wide Financial Statements

The statement of net assets and statement of activities display information about the primary government (the City) and its 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. These statements distinguish between the governmental and business-type activities of the City and between the City and its blended component unit. Governmental activities, which normally are supported by taxes and inter-governmental 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 segment of the business-type activities of the City and for each function of the City's governmental activities. Direct expenses are those that are specifically associated with a program or function and; therefore, are clearly identifiable to a particular function. Program revenues include 1) charges paid by the recipients of goods or services offered by the programs and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented instead as general revenues.

35


June 30, 2008

NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

B. Basis of Presentation (Continued)

When both restricted and unrestricted net assets are available, restricted resources are used only after the unrestricted resources are depleted.

Fund Financial Statements

The fund financial statements provide information about the City's funds, including fiduciary funds and blended component units. Separate statements for each fund category-governmental, proprietary and fiduciary- are presented. The emphasis of fund financial statements is on major governmental and enterprise funds; each displayed in a separate column. All remaining governmental and enterprise funds are separately aggregated and reported as nonmajor funds.

Proprietary funds distinguish operating revenues, such as charges for services, and result from exchange transactions associated with the principal activity of the fund. Exchange transactions are those in which each party receives and gives up essentially equal values. Nonoperating revenues, such as subsidies and investment earnings, result from nonexchange transactions or ancillary activities.

The City reports two 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 activities as public protection, public works and facilities, parks and recreation, and community development.

• The Redevelopment Agency Capital Projects Fund is used to account for revitalization and redevelopment through the acquisition and development of real property within the Redevelopment Project Area.

The City reports the following major enterprise funds:

• The Hospital Fund accounts for the operations of the El Centro Regional Medical Center which provides health care services to the community and surrounding area.

• The Water Fund accounts for revenues and expenses associated with the treatment and distribution of potable water.

• The Wastewater Fund accounts for revenues and expenses associated with the collection and treatment of wastewater.

36


June 30, 2008

NOTE l- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

B. Basis of Presentation (Continued)

The City reports the following additional fund types:

Internal Service Funds account for operations that provide services to other departments or agencies of the City, or to other governments, on a cost-reimbursement basis, such as motor vehicle maintenance, worker's compensation, post employment benefits, and group health insurance.

The Hospital Employees Pension Trust Fund accumulates contributions from the Hospital and its employees. Disbursements are made from the fund for retirement and death benefits (based on a defined benefit formula) and administrative expenses.

C. Basis of Accounting and Measurement Focus

The government-wide, proprietary, and fiduciary 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 the I iabi lities are incurred, regard less of when the related cash flows take place. Nonexchange transactions, in which the City gives (or receives) value without directly receiving (or giving) equal value in exchange, include property and sales taxes, grants, entitlements and donations. On an 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 eligible 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 susceptible to accrual (i.e., when they are "measurable and available"). "Measurable" means the amount of the transaction can be determined and "available" means collectible within the current period or soon enough thereafter to pay liabilities of the current period. The City considers all revenues available if they are collected within 60 days after fiscal year-end. Expenditures are recorded when the related fund liability is incurred, except for debt service expenditures which are recognized when due, and certain compensated absences and claims and judgments which are recognized when the obligations are expected to be liquidated with expendable available financial resources. General capital assets acquisitions are reported as expenditures in governmental funds. Proceeds of long-term debt and capital leases are reported as other financing sources.

Property taxes, transient occupancy taxes, and interest are susceptible to accrual. Sales taxes collected and held by the state at fiscal year-end on behalf of the City are also recognized as revenue. Other receipts and taxes become measurable and available when cash is received by the City and are recognized as revenue at that time.

Entitlements and shared revenues are recorded at the time of receipt or earlier if the susceptible to accrual criteria are met. Expenditure-driven grants are recognized as revenue when the qualifying expenditures have been incurred and all other grant requirements have been met.

For its business-type activities and enterprise funds, the City has elected under GASB Statement No. 20, Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities That Use Proprietary Fund Accounting, to apply all applicable GASB pronouncements as well as any

37


June 30, 2008


C. Basis of Accounting and Measurement Focus (Continued)

applicable pronouncements of the Financial Accounting Standards Board, the Accounting Principles Board or any Accounting Research Bulletins issued on or before November 30, 1989, unless those pronouncements conflict with or contradict GASB pronouncements. The GASB periodically updates its codification of existing Governmental Accounting and Financial Reporting Standards which, along with subsequent GASB pronouncements (Statements and Interpretations), constitutes (GAAP) for governments units. The Hospital has elected to apply all F ASB Statements and Interpretations, APB Opinions and ARBs issued after November 30, 1989, except for those that conflict with or contradict GASB pronouncements.

D. Assets, Liabilities, and Equity

1. Deposits and Investments

In order to maximize the flexibility of its investment program and to aid in cash budgeting, the City pools the cash of alI funds, except for monies deposited with fiscal agents in accordance with related bond indentures. The cash and investments balance in each fund represents that fund's equity share of the City's cash and investment pool. As the City places no restrictions on the deposit or withdrawal of a particular fund's equity in the pool, the pool operates like a demand deposit account for the participating funds.

Interest income earned on pooled cash and investments is allocated monthly to the various funds based on month-end balances and is adjusted at fiscal year-end. Interest income on restricted cash and investments with fiscal agents is credited directly to the related fund.

In accordance with the State of California Government Code, the City adopts an investment policy annually that, among other things, authorizes types and concentrations of investments and maximum investment terms.

The City's investments are carried at fair value. The fair value of equity and debt securities is determined based on sales prices or bid-and-asked quotations from SEC-registered securities exchanges or NASDAQ dealers. LAIF determines the fair value of its portfolio quarterly and reports a factor to the City; the City applies that factor to convert its share ofLAIF from amortized cost to fair value. Changes in fair value are allocated to each participating fund.

For purposes of the statement of cash flows, the City has defined cash and cash equivalents to be change and petty cash funds, equity in the City's cash and investment pool, and restricted non-pooled investments with initial maturities of three months or less.

Investments are stated at fair value in accordance with GASB 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Short-term investments are reported at cost, which approximates fair value. The fair values are based on quoted market prices, if available, or estimated using quoted market prices for similar securities. Securities traded on national or international exchanges are valued at the last reported sales price at current exchange rates. Interest, dividends, and realized and unrealized gains and losses, based on the specific identification method, are included in interest revenues when earned.

38


June 30, 2008


D. Assets, Liabilities, and Equity (Continued)

2. Receivables and Payables

Transactions between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as "due to/from other funds." Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as "internal balances". Advances between funds, as reported in the fund financial statements, are offset by a fund balance reserve account in applicable governmental funds to indicate that they are not available for appropriation and are not expendable available financial resources.

Trade receivables, including those for the Hospital, are shown net of an allowance for uncollectible accounts.

For each fiscal year beginning July I, taxes are levied on taxable real (secured) and personal (unsecured) property located within the City as of the preceding January I. Secured property taxes are payable in two installments on November I, and February 1 of each fiscal year, and become delinquent after December 10 and April 10, respectively. Taxes on unsecured property are payable March 1 and become delinquent the following August 31. A 10 percent penalty attaches to delinquent taxes, which have been levied on property on the secured roll. Such property may thereafter be redeemed by payment of the delinquent taxes and the delinquency penalty, plus a redemption penalty of 1 \12 percent per month to the time of redemption. If taxes are unpaid for a period of five years or more, the property is deeded to the State and is subject to sale by the County Tax Collector.

The only concentrated group of credit risks is Hospital receivables from government agencies. Hospital management does not believe that there is a significant credit risk associated with these government agencies. Management continuously monitors and adjusts reserves and allowances associated with these receivables.

3. Inventories and Prepaid Items

Inventories are valued at cost using the first-in/first-out (FIFO) method. The costs of governmental fund-type inventories are recorded as expenditures when consumed rather than when purchased.

Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items.

4. Restricted Assets

Certain assets of special revenue grant funds are classified as restricted assets because their use is restricted by grant agreements.

Certain resources of the Redevelopment Capital Projects Fund are set aside for the capital projects and are classified as restricted assets because their use is restricted by applicable bond covenants.

Certain resources of the Redevelopment Agency Debt Service Fund and the Water and Wastewater funds are set aside for the repayment of bonds and certificates of participation and are classified as restricted assets on the balance sheet/statement of net assets because their use is limited by applicable bond covenants.

39


June 30,2008



4. Restricted Assets (Continued)

Certain resources of the Group Health Insurance internal service fund is classified as restricted because its use is limited by the provisions of plan documents.

Certain resources of the Hospital set aside for the repayment of bonds are classified as restricted assets on the balance sheet because their use is limited by applicable bond covenants.

Certain Hospital assets limited as to use primarily include assets held by trustees under indenture agreements and designated assets set aside by the Hospital Board of Trustees for future capital improvements over which the Board retains control and may, at its discretion, subsequently use for other purposes.

Other restricted resources consist of funds limited as to use by donors. Restricted gifts, bequests, and grants are reported as restricted funds until expenditures are made for the donor's intended purpose.

The government-wide statement of net assets reports $65,835,426 of restricted net assets.

5. Capital Assets

Capital assets, including infrastructure, are recorded at historical cost or at estimated historical cost if actual historical cost is not available. Contributed fixed assets are valued at their estimated fair value on the date contributed. Capital assets include public domain (infrastructure) general fixed assets which consist of certain improvements including roads, bridges, pavements in progress, and right of way. The City defines capital assets as assets with initial, individual costs of more than $3,000 and an estimated useful life in excess of one year. The Hospital defines capital assets as assets with initial, individual costs of more than $500 and an estimated useful life of at least three years. Capital assets used in operations are depreciated or amortized (assets under capital leases) using the straight-line method over the lesser of the capital lease period or their estimated useful lives in the governmentwide statements and proprietary funds.

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 fixed 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.

Property, plant, and equipment in the proprietary funds of the City and Hospital are recorded at cost. Property, plant, and equipment donated to these proprietary fund type operations are recorded at their estimated fair value at the date of donation.

Major outlays for capital assets and improvements are capitalized in proprietary funds as projects are constructed. Net interest cost during construction is capitalized when the effects of capitalization materially impact lht: financial statements.

40

CITY OF EL CENTRO NOTES TO BASIC F1NANCIAL STATEMENTS

June 30, 2008



5. Capital Assets (Continued)

Property, plant, and equipment are depreciated using the straight-line method over the following estimated useful lives:

Buildings Building Improvements Equipment Office Furniture Vehicles Infrastructure

6. Compensated Absences

Q!y 5-70 5-30 3-20

5 3-15

20-50

Hospital 5-50 5-50 3-20

5 3-20

Not Applicable

It is the City's policy to permit employees to accumulate earned but unused vacation and sick pay benefits. Vacation and sick pay is accrued when incurred in proprietary funds and reported as a fund liability. The City accrues for compensated absences in the government-wide and proprietary fund financial statement for which they are liable to make a payment directly.

Depending on their bargaining group agreement, the City's employees are given 15 vacation days and 12 days of sick leave or 22 days of annual leave. Leave is provided to be utilized as sick leave, to attend medical appointments, vacation, etc. Sick leave payoff is available for accumulated sick leave hours over 288 hours.

Compensated absences in governmental activities have been liquidated in the past fiscal year in the general fund, redevelopment agency, and enterprise funds.

7. Long-term Obligations

In the government-wide financial statements, and proprietary fund types in the fund financial statements, long-term debt, and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type statement of net assets. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond discount in the Hospital Fund. Bond issuance costs are reported as deferred charges and amortized over the term of the related debt.

In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources whiled iscounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures.

41


June 30, 2008



8. Net Assets and Fund Equity

In the Government-wide financial statements and proprietary fund financial statements, net assets are reported in three categories: net assets invested in capital assets, net of related debt; restricted net assets, and unrestricted net assets. Restricted net assets represent net assets restricted by parties outside of the City (such as creditors, grantors, contributors, laws, and regulations of other governments) and include unspent proceeds of bonds issued to acquire or construct capital assets. The City's other restricted net assets are temporarily restricted (ultimately expendable assets). All other net assets are considered unrestricted.

In the fund financial statements, governmental funds report reservations of fund balance for amounts that are not available for appropriation or are legally restricted by outside parties for use for a specific purpose. Designations of fund balance represent tentative management plans that are subject to change.

9. Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements. Estimates also affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

10. New Accounting Pronouncements

Governmental Accounting Standards Board Statement No. 48

For the fiscal year ended June 30, 2008, the City implemented Governmental Accounting Standards Board (GASB) Statement No. 48, "Sales and Pledges of Receivables and Future Revenues and IntraEntity Transfers of Assets and Future Revenues". The Statement is effective for periods beginning after December 15, 2006. This Statement establishes accounting and financial reporting standards for transactions in which a government receives, or is entitled to, resources in exchange for future cash flows generated by collecting specific receivables or specific future revenues. It also contains provisions that apply to certain situations in which a government does not receive resourt:es but, nevertheless, pledges or commits future cash flows generated by collecting specific future revenues. In addition, this statement establishes accounting and financial reporting standards that apply to all intra-entity transfers of assets and future revenues. Implementation ofGASB Statement No. 48 did not have an impact on the City's basic financial statements for the fiscal year ended June 30, 2008.

Governmental Accounting Standards Board Statement No. 50

For the fiscal year ended June 30, 2008, the City implemented GASB Statement No. SO, "Pension Disclosure- an Amendment of GASB Statements No. 25 and No. 27". The Statement is effective for periods beginning after June 15, 2007. This Statement establishes and modifies requirements related to fmancial reporting by pension plans and by employers that provide defmed benefit and defined contribution pensions.

42


June 30, 2008



11. Net Patient Service Revenue

Hospital net patient service revenue is reported at estimated net realizable amounts from patients, third-party payors, and others for services rendered, including estimated retroactive adjustments under reimbursement agreements with federal and state government programs and other third-party payors. In some cases, reimbursement is based on formulas, which cannot be determined until after cost reports are filed and audited or otherwise settled by the various programs. Estimation differences between final settlements and amounts accrued in previous years are reflected in net patient service revenue.

12. Investment in Joint Venture

The Hospital has a 50 percent interest in Imperial Valley Health Resources Authority (IVHRA) which is accounted for under the equity method.

13. Land held for resale or exchange

Cost of project land and improvements held for resale or exchange are recorded in the Redevelopment Agency Special Revenue Fund as inventory at the lower of acquisition cost or net realizable value. The fund balance is reserved in an amount equal to the carrying value of land held for resale or exchange because such assets are not available to finance the Agency's current operations.

NOTE 2- STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY

A. Budgetary Information

Budgets are adopted on a basis consistent with accounting principles generally accepted in the United States of America for all governmental funds. Budgets are adopted annually and all annual appropriations lapse at the fiscal year end.

The City utilizes the following procedures when establishing the budgetary data reflected in the financial statements:

Prior to June 30 of each fiscal year, the City Manager submits to the City Council a proposed operating budget for the fiscal year commencing the following July I. The operating budget includes proposed expenditures and the means of financing them.

Public hearings are conducted at City Hall to obtain citizen input. Prior to July I, the budget is adopted by motion of the City Council.

The City Manager is authorized to transfer budgeted amounts between departments within any fund. However, any revision that increases the total appropriations of any fund must be approved by the City Council. The appropriated budget is prepared by fund, function, and department.

43


June 30,2008

NOTE 2- STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY (CONTINUED)

A. Budgetary Information (Continued)

Formal budgetary integration is employed as a management control device during the year for all funds.

Encumbrance accounting is employed in governmental funds. Encumbrances (e.g., purchase orders and contracts) outstanding at fiscal year-end are reported as reservations of fund balances and do not constitute expenditures or liabilities because the commitments will be re-appropriated and honored during the subsequent year.

There were no budgets prepared for the CDBG Special Revenue Fund, HOME Grants Special Revenue Fund, Annexation Fees Special Revenue Fund, Housing Enabled by Local Partnership Special Revenue Fund, FHW A Grants Special Revenue Fund, Per Capita Parks Grant Special Revenue Fund, Household Hazardous Waste Special Revenue Fund, Public Education & Amnesty Grant Special Revenue Fund, Used Oil Opportunity Grant 7 Special Revenue Fund, Rural Business Enterprise Grant Special Revenue Fund, Legacy Ranch CFD Special Revenue Fund, Legacy Ranch Lighting & Landscaping District Special Revenue Fund, IV Commons Special Revenue Fund, 2002 Resource Bond Act Special Revenue Bond, liD Facility Crossing Capital Projects Fund, Bridge/Road Improvement Capital Projects Fund, Proposition I B Capital Projects Fund, and La Bruch erie Green Belt Capital Projects Fund.

B. Budget/GAAP Reconciliation

No funds adopted project-length budgets and, therefore, no schedule reconciling the amounts on the Combined Statement of Revenues, Expenditures and Changes in Fund Balance-Budget to Actual to the amounts on the Combined Statement of Revenues, Expenditures and Changes in Fund Balances has been prepared.

44


June 30, 2008

NOTE 2- STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY (Continued)

C. Excess of Expenditures over Appropriations

For the fiscal year ended June 30, 2008, expenditures exceeded appropriations in the following funds:

Nonmajor Funds: CDBG Library Assistance Bus Shelter HOME Program Traffic Safety Recreation Projects Asset Forfeiture HOME Grants Annexation Fees CDBG Program Income

Fund

Housing Enabled By Local Partnership CalHome Program Development Impact FHWA Grants Soft Drink Franchise Integrated Waste Management Department of Conservation Household Hazardous Waste EDA Revolving Rural Business Enterprise Grant Legacy Ranch CFD Legacy Ranch Lighting and Landscaping District IV Commons 2002 Resource Bond Act Federal Highway Administration Redevelopment Agency

D. Deficit Fund Equity

Final Appropriation

$ 20,700

6,640 98,000 46,505 89,300

1,175,407

800 189,100 42,000

2,000

100,000 1,649,666

At June 30, 2008, the following funds had an accumulated deficit:

Post Office Grant Federal Highway Administration Transit

45

Expenditures

$ 116,501 26,427 9,250

218,493 69,006

113,979 850,629 351,935

20,030 18,821

442,067 2,629

1,204,977 19,987 1,018

221,881 50,195 3,778

50,516 37,531 24,333

4,118 13,160 19,699

575,151 1,871,039

Amount $63,363

10,017 31,054

Excess

$ 116,501 5,727 2,610

120,493 22,501 24,679

850,629 351,935

20,030 18,821

442,067 2,629

29,570 19,987

218 32,781

8,195 3,778

48,516 37,531 24,333

4,118 13,160 19,699

475,151 221,373


June 30,2008

NOTE 3- CASH AND INVESTMENTS

Cash and investments as of June 3 0, 2008 are classified in the accompanying financial statements as follows:

Statement of net assets: Cash and investments

Restricted cash and investments with fiscal agents Fiduciary funds:

Cash and investments

Total cash and investments

$

$

Cash and investments as of June 30, 2008 consist of the following:

Cash on hand Deposits with financial institutions Investments

Total cash and investments

$

$

84,920,544 104,883,520

28,586,435

218,390,499

5,150 2,570,701

215,814,648

218,390,499

A. Investments Authorized by the California Government Code and the City's Investment Policy

The table below identifies the investment types that are authorized for the City ofEJ Centro (City) by the California Government Code (or the City's investment policy, where more restrictive). The table also identifies certain provisions ofthe California Government Code (or the City's investment policy, where more restrictive) that address interest rate risk, credit risk, and concentration of credit risk. This table does not address investments of debt proceeds held by bond trustee that are governed by the provisions of debt agreements of the City rather than the general provisions of the California government Code or the City's investment policy.

Authorized Investment Tvoe Local Agency Bonds U.S. Treasury Obligations U.S. Government Agency Issues Bankers Acceptances Commercial Paper Certificates of Deposit Repurchase Agreements Medium-Term Notes Mutual Funds Money Market Mutual Funds Time Deposits Local Agency Investment Fund (LAIF)

Maximum Maturity 10 years 10 years 10 years 180 days 270 days 5 years I year

5 years N/A N/A

5 years N/A

Maximum Percentage of Portfolio

None None None 40% 25% 30% None 30% None None None None

Maximum Investment

in One Issuer None None None None None None None None None None None None

The investment policy allows for the above investments which have equal safety and liquidity as all other allowed investments. Maturity depends on the cash needs of the City.

46


June 30, 2008

NOTE 3- CASH AND INVESTMENTS (Continued)

B. Investments Authorized by Debt Agreements

Investment of debt proceeds held by bond trustees are governed by provisions of the debt agreements rather than the general provisions of the California Government Code or the City's investment policy. The table below identifies the Investment types that are authorized for investments held by bond trustee. The table also identifies certain provisions of these debt agreements that address interest rate risk, credit risk, and concentration of credit risk.

Authorized Investment Tvoe Local Agency Bonds U.S. Treasury Obligations State Obligations U.S. Government Agency Issues Money Market Mutual Fund Bankers Acceptances Commercial Paper Certificates of Deposit Repurchase Agreements Investment Agreements Local Agency Investment Fund (LAIF)

Maximum Maturity

N/A N/A N/A NIA N/A N/A

270 days NIA N/A N/A N/A

Maximum Percentage of Portfolio

None None None None None None None None None None None

Maximum Investment

in One Issuer None None None None None None None None None None None

The investment policy allows for the above investments which have equal safety and liquidity as all other allowed investments. Maturity depends on the cash needs of the City.

C. Disclosures Relating to Interest Rate Risk

Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. One of the ways that the City manages its exposure to interest rate risk is by purchasing a combination of shorter term and longer term investments and by timing cash flows from maturities so that a portion of the portfolio is maturing or coming close to maturity evenly over time as necessary to provide the cash flow and liquidity needed for operations.

Information about the sensitivity of the fair values of the City's investments (including investments held by bond trustee) and the Pension Fund to market interest rate fluctuations is provided by the following table that shows the distribution of the City's investments by maturity:

47


June 30, 2008

NOTE 3- CASH AND INVESTMENTS (Continued)

C. Disclosures Relating to Interest Rate Risk (Continued)

Remaining maturitl {in Months} 12 Months 13 to 24 25-60 More Than 60

Investment TY.Qe Totals or Less Months Months Months

State Investment Pool (LAIF) $ 41,751,283 $ 41,751,283 $ $ $ Money Market Funds 36,316,854 36,316,854 Federal Agency Securities 2,198,919 1,073,633. 623,721 501,565 Medium Term Notes 5,349,536 4,487,913 602,143 259,480 Certificates of Deposit 2,057,235 2,057,235 Commercial Paper 940,580 940,580 Municipal Bonds I ,395,215 1,095,215 300,000 Repurchase Agreement 2,109,000 2,109,000 Held by Pension Trustee:

Stocks 12,513,187 12,513,187 Mutual Funds 14,456,392 14,456,392 Money Market Funds 1,616,856 1,616,856

Held by Bond Trustees: Money Market Funds 63,500,923 63,500,923 Investment Agreements 31,608,668 19,839,902 11,768,766

$ 21518141648 $ 201 27582973 $ 122251864 $ 7612045 $ 1210681766

D. Investments with Fair Values Highly Sensitive to Interest Rate Fluctuations

The City has no investments (including investments held by bond trustees) that are highly sensitive to interest rate fluctuations (to a greater degree than already indicated in the information provided above).

E. Disclosures Relating to Credit Risk

Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented below is the minimum rating required by (where applicable) the California Government Code, the City's investment policy, or debt agreements, and the actual rating as of fiscal year end for each investment type.

48


June 30, 2008

NOTE 3 -CASH AND INVESTMENTS (Continued)

E. Disclosures Relating to Credit Risk (Continued)

Rating as of Fiscal Year End Minimum Exempt

Legal From Not Investment T~lle Amount Rating Disclosure AAA AA A Rated

State Investment Pool $ 41,751,283 N/A $ $ $ $ 41,751,283 Money Market Funds 36,316,854 N/A 36,316,854 Federal Agency Securities 2,198,919 N/A 2,198,919 Medium Term Notes 5,349,536 A 1,872,768 2,989,268 487,500 Certificates of Deposit 2,057,235 N/A 2,057,235 Commercial Paper 940,580 N/A 940,580 Municipal Bonds 1,395,215 NIA 1,395,215 Repurchase Agreement 2,109,000 N/A 2,109,000 Held by Pension Trustee: Stocks 12,513,187 N/A 12,513,187 Mutual Funds 14,456,392 N/A 14,456,392 Money Market Funds 1,616,856 N/A 1,616,856 Held by Bond Trustee:

Money Market Funds 63,500,923 A am 62,464,274 I ,036,649 Investment Agreements 31,608,668 AA 3t ,608,668

Total 215,814,648 $ $ 100,980,047 $ 34,5 18,085 $ 2,989,268 $ 77,327,248

F. Concentration of Credit Risk

The investment policy of the City 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) that represent 5% or more of total City investments are as follows:

Issuer

Citigroup Financial Products, Inc.

Investment T e

Investment Agreement

Reported Amount

$ 22,605,640

Investments in any one issuer that represent 5% or more of total investments (other than U.S. Treasury Securities, Mutual Funds, and extend investment pools) by reporting unit (primary government, governmental activities, business type activities, fiduciary funds, major funds, nonmajor funds in the aggregate, etc.) are as follows:

Cash and investments (including amounts held by bond trustees) reported in the Governmental Activities Statement ofNet Assets holds investment agreements in the amount of$22,605,640 from Citigroup Financial Products, Inc.

The Redevelopment Agency Capital Projects Fund (Major Fund) holds investments (including amounts held by bond trustees) in the amount of $19,839,902, which is an investment agreement from Citigroup Financial Products, Inc.

49


June 30,2008

NOTE 3 -CASH AND INVESTMENTS (Continued)

G. Custodial Credit Risk

Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty (e.g. broker-dealer) to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The California Government Code and the City's investment policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits or investments, other than the following provision for deposits: The California Government Code requires that a financial institution secure deposits made by state or local governmental units by pledging securities in an undivided collateral pool held by a depository regulated under state law (unless so waived by the government unit). The fair value of the pledged securities in the collateral pool must equal at least II 0% of the total amount deposited by the public agencies. California law also allows financial institutions to secure City deposits by pledging first trust deed mortgage notes having a value of 150% of the secured public deposits.

As of June 30, 2008, $2,442,555 of the City's deposits with financial institutions in excess of federal depository insurance limits was held in collateralized accounts. As ofJune 30,2008, City investments in the following investment types were held by the same broker-dealer ( counterparty) that was used by the City to buy the securities:

Investment Type

Medium Tenn Notes Federal agency securities Money market funds Investment Agreements

H. Investment in State Investment Pool

Reported Amount

$ 5,349,536 1,029,548

63,500,923 31,608,668

The City is a voluntary participant in the Local Agency Investment Fund (LAIF) that is regulated by the California Government Code under the oversight of the Treasurer of the State of California. The fair value of the City's investment in this pool is reported in the accompanying financial statements at amounts based upon the City's pro-rata share of the fair value provided by LAIF for the entire LAIF portfolio (in relation to the amortized cost of that portfolio}. The balance available for withdrawal is based on the accounting records maintained by LAIF, which are recorded on an amortized cost basis.

50

CITY OF EL CENTRO NOTES TO BASIC FJNANCIAL STATEMENTS

June 30, 2008

NOTE 4- RECEIVABLES

A. Receivables

Accounts, taxes, interest, grants, and other receivable balances of the General, Special Revenue, Capital Projects, Debt Service, Proprietary, and Fiduciary Funds are stated net of allowances for uncollectible accounts. The following is a schedule of receivables applicable to each individual fund at June 30, 2008:

Receivable Allowance Net Governmental Activities-

Accounts $ 69,433 $ $ 69,433 Taxes 1,237,978 1,237,978 Interest 273,132 273,132 Grants 2,070,149 2,070,149 Others 1,688,706 1,688,706

$ 5,339,398 $ $ 5,339,398

Business-type Activities-Accounts $ 84,787,081 $ 64,855,496 $ 19,931,585 Interest 67,271 67,271 Others 2,206,794 2,206,794

$ 87,061,146 $ 64,855,496 $ 22,205,650

Fiduciary Funds Accounts $ 245,984 $ 245,984 Interest 50,708 50,708

$ 296,692 $ $ 296,692

B. Notes Receivable

The City administers a residential rehabilitation program, a commercial micro-enterprise program, and a First Time Home Buyer Program. A committee approves the loans, and the funds are disbursed to the contractor awarded the bid upon review of the building inspector, the administrating City, the homeowner and the City. The programs are designed to encourage construction or improvement in low-to-moderate income housing or other projects. Under these programs, loans are provided under favorable terms to homeowners or developers who agree to spend these funds in accordance with the City's terms. The balance of the loans receivable arising from these programs was $10,354,829.

51


June 30, 2008

NOTE 5- INTERFUND TRANSACTIONS

A. Interfund Receivables and Payables

During the course of normal operations, numerous transactions occur between individual funds that may result in amounts owed between funds. Those related to goods and services type transactions are classified as "due to and from other funds." The following presents a summary of current interfund balances at June 30, 2008.

Receivable Fund Ml\iorFund:

General

Totals

Amount Payable Fund Nonrnajor Funds:

$ 1,015,399 Gas Tax Used Oil Grant

$ 1,015,399 Tire Clean-Up Grant

2002 Resource Bond Act Post Office Grant Federal Highway Administration Colonia-EI Dorado Street

Totals

B. Long-term Interfund Advances

Amount

$ 110,361 19,678

166,808

19,699 63,363

619,938 15,552

$ 1,015,]99

At June 30,2008, the funds below have made/received advances that were not expected to be repaid within one year.

Receivable Fund Amount Pa}able Fund Amount Major Fund: Ml\iorFund:

General $ 1,300,000 Redevelopment Agency Capital Projects $ 1,300,000

C. Transfers between Funds

Transfers are indicative of funding for capital projects, lease payments or debt service, subsidies of various City operations, re-allocations of special revenues, and debt service transfers to pay principal and interest payments on pension obligation bonds. All inter-fund transfers between individual government funds have been eliminated on the government-wide statements.

The following schedule briefly summarizes the City's transfer activity for the fiscal year ended June 30,2008:

Fund Transfers-in Transfers-out Major Funds:

General $ 1,856,463 $ 137,726 Redevelopment Agency Capital Projects 950,000

Nonmajor Funds: Gas Tax 760,000 Transportation Article 8 750,000 Traffic Congestion Relief 163,837 Recreation Projects 30,792 Development Impact Fee 51,857 Police and Fire Operational 293,739 Fire Mitigation 293,739 182,625 Redevelopment Agency Debt Service 950,000 Lease Purchase 158,790

Totals $ 3,289,784 $ 3,289,784

52


June 30, 2008

NOTE 6- CAPITAL ASSETS

Capital Assets activity for the fiscal year ended June 30, 2008 was as follows:

Balance at Prior Period Balance at July I, 2007 Additions Deletions Transfers Adjustments June 30, 2008

Governmental activities: Capital assets, not being depreciated:

Land $ 4,587,414 $ 1,560,211 $ $ $ $ 6,147,625 Construction in progress 9,775,659 3,960,085 (2, 135,262) 11,600,482 Total capital assets, not being depreciated 14,363,073 5,520,296 (2, 135,262) 17,748,107

Capital assets, being depreciated: Infrastructure 52,434,204 3,329,444 2,135,262 57,898,910

Structures and Improvements 30,806,002 3,907,888 (723,847) 33,990,043

Vehicles 5,022,284 1,559,262 6,581,546 Furniture, Equipment, and Books 8,629,890 1,056,877 46,231 9,732,998

Total capital assets being depreciated 96,892,380 9,853,471 2,135,262 (677,616) 108,203,497

Less accumulated depreciation for: Infrastructure (32,610,111) (2,063,025) (34,673, 136)

Structures and Improvements (11,947,204) (1,172,136) (93,291) (13,212,631)

Vehicles (4,057,859) (374,344) 255,155 (4, 177,048) Furniture, Equipment, and Books (7, 1 II ,831) (485,995) 208,549 (7,389,277)

Total accumulated depreciation (55,727,005) (4,095,500~ 370,413 (59,452,092)

Total capital assets, being depreciated, net 41,165,375 5,757,971 2,135,262 (307,203) 48,751,405

Total capital assets, net $ 55,528,448 $ 11,278,267 $ $ $ (307,203) $ 66,499,512

Business-type activities: Capital assets, not being depreciated: Land and land improvements $ 1,243,882 $ 200,000 $ $ $ $ 1,443,882 Construction in progress 1,505,724 1,499,329 3,005,053 Total capital assets, not being depreciated 2,749,606 1,699,329 4,448,935

Capital assets, being depreciated: Structures and Improvements 125,252,243 10,198,382 135,450,625

Vehicles 1,704,353 14,264 1,718,617

Equipment 37,848,242 2,817,736 40,665,978 Total capital assets, being depreciated 164,804,838 13,030,382 177,835,220

Less accumulated depreciation for: Structures and Improvements (63,809,893) (2,885,901) (66,695,794)

Vehicles (1,449,888) (57,659) (1,507,547)

Equipment (30,200,873) (1,954,950) (32, 155,823)

Total accumulated depreciation (95,460,654) ( 4,898,51 0) (100,359,164)

Total capital assets, being depreciated, net 69,344,184 8,131,872 77,476,056

Business-type activities capital assets, net $ 72,093,790 $ 9,831,201 $ $ $ $ 81,924,991


June 30, 2008

NOTE 6- CAPITAL ASSETS {Continued)

Depreciation

Depreciation expense was charged to governmental functions as follows:

General Government Public Safety Public Works Parks and Recreation Community Development

Total depreciation expense- governmental functions

Depreciation expense was charged to business-type functions as follows:

Hospital Water Wastewater

Total depreciation expense- business-type functions

NOTE7-COMmnTMENTS

A. Construction Contracts

$ 200,527 509,400

2,887,681 406,135 91.757

$4 095 500

$3,361,588 705,364 831.558

$4898510

As of June 30, 2008, the Medical Center had recorded $3,005,053 as construction in progress representing cost capitalized for various remodeling, major repair, and expansion projects on the Medical Center's premises. The remaining commitments of the Medical Center for future payments on these projects total approximately $2,027,000 at June 30, 2008.

The City did not have any outstanding commitments as of June 30, 2008.

B. Operating Leases

The Hospital leases equipment and certain facilities under various noncancelable operating lease arrangements. The leases expire on various dates from 2008 to 2015. Lease expense, consisting mainly of building rent and equipment leases, amounted to approximately $1,706,000 in 2008.

Future minimum payments, by fiscal year and in the aggregate, required under noncancelable operating lease obligations consist of the following:

2009 2010 2011 2012 2013 2014-2015

Fiscal Year ending June 30,

Total minimum lease payments

54

Amount $ 1,119,258

985,439 766,674 642,599 283,750

1.424.779 $5 222 499


June 30, 2008

NOTE 8- LONG-TERM LIABILITIES

The following is a schedule of long-tenn liabilities for Governmental Activities and Business-type Activities for the fiscal year ended June 30, 2008:

Balance at Prior Period Balance at Jul~ 1, 2007 Additions ReEa~ments Adjustments June 30,2008

Governmental Activities: Capital leases payable $ 202,366 $ $ (152,846) $ $ 49,520 Compensated absences 2,351,747 217,147 2,568,894 Tax allocation bonds payable 31,195,000 31,195,000

Total $ 33,749,113 $ 217,147 $ {152,846} $ $ 33,813,414

Business-type Activities: Water Fund:

Compensated absences $ 104,243 $ 100,089 $ $ $ 204,332 Revenue bonds payable (1997) 2,727,000 (110,000) (2,382,000) 235,000 Revenue bonds payable (2006) 33,120,000 33,120,000 Installment sale payable 1,232,641 (66,275) 1,166,366

Sewer Fund: Compensated absences 78,044 110,594 188,638 Revenue bonds payable ( 1997) 6,363,000 (245,000) 2,382,000 8,500,000 Revenue bonds payable (2006) 32,500,000 (285,000) 32,215,000 Installment sale payable 3,537,836 (175,515) 3,362,321

Hospital Fund: Capital leases payable 2,530,211 2,022,323 (1,478,799) 3,073,735 Hospital revenue bonds payable 34,763,672 ~1,129,487~ 33,634,185

Total $ 116,956,64 7 $ 2,233,006 $ (3,490,076) $ $ 115,699,577

1. Governmental Activities - Tax Allocation Bonds Payable

Tax Allocation Bonds. On May 16,2007, the RedevelopmentAgencyoftheCityofEI Centro issued its $25,790,000 Tax Allocation Bonds, Series 2007 A and $5,405,000 Tax Allocation Bonds, Series 2007B. A portion of these Series 2007A and Series B Bonds was used to redeem all of the $7,810,000 Series 1996 bonds outstanding at June 30,2007. The balance of the bond funds finance public improvements, which constitute redevelopment activity within the Project Area, finance low and moderate income housing projects of the Agency within the Project Area. The bonds have a stated interest rate from 4.00% to 5.75% and are payable over a period of thirty years maturing in 2036. The principal balance outstanding at June 30, 2008 is $31,195,000.

The City advance refunded the 1996 Tax Allocation Refunding Bonds to reduce its total debt service over the next thirty years by $1,860,029 and to obtain an economic gain (difference between the present values of the debt service payments on the old and new debt) of $418,368.

The 1996 Tax Allocation Refunding Bonds were defeased by placing a portion of proceeds from 2007 Tax Allocation Bonds in an irrevocable trust to provide for all future debt service payments on the defeased bonds. Accordingly, the trust account and the defeased bonds are not included in the financial statements. As of June 30, 2008, the unpaid principal balance for the defeased bonds was $0.

55

Due Within One Year

$ 49,520 992,150 280,000

$ 1,321,670

$ 115,000 465,000

68,263

255,000 405,000 180,781

1,086,391 1,200,000

$ 3,775,435


June 30, 2008

NOTE 8- LONG-TERM LIABILITIES (Continued)

2. Governmental Activities - Capital Leases

The City has entered into lease agreements as lessee for financing the purchase of various vehicles and heavy equipment and the acquisition of, and improvements to, other real property. These lease agreements qualify as capital leases for accounting purposes and, therefore, have been recorded at the present value of the future minimum lease payments as of the inception date.

The assets acquired through capital leases are as follows:

Assets Improvements other than buildings Vehicles Other Assets

Totals

$ 67,372 1,692,216

119.918 $1 879 506

The future minimum lease obligations and the net present value of these minimum lease payments as of June 30, 2008 are as follows:

Fiscal Year Ending June 30.

2009 Total minimum lease payments Less: amount representing interest Present value of minimum lease payments

56

$ 50.667 50,667

I 147 $ 49 520


June 30, 2008


3. Long-Term Debt Amortization- Government Activities

The annual requirements to amortize long-term debt outstanding at June 30, 2008 (other than compensated absences) are as follows:

Fiscal Year 2007 Series A Tax Allocation Bonds Ended June 30, Principal Interest Total

2009 $ 260,000 $ 1,089,738 $ 1,349,738 2010 325,000 1,078,037 1,403,037 2011 375,000 1,064,037 1,439,037 2012 410,000 1,048,337 1,458,337 2013 465,000 1,030,837 1,495,837

2014-2018 3,015,000 4,824,788 7,839,788 2019-2023 4,340,000 4,093,269 8,433,269 2024-2028 7,170,000 2,913,450 10,083,450 2029-2033 5,795,000 1,323,800 7,118,800 2034-2037 3,635,000 339,188 3,974,188

$ 25,790,000 $ 18,805,481 $ 44,595,481

Fiscal Year 2007 Series B Tax Allocation Bonds Ended June 30, Princi~al Interest Total

2009 $ 20,000 $ 307,843 $ 327,843 2010 35,000 306,302 341,302 2011 45,000 304,062 349,062 2012 55,000 301,262 356,262 2013 65,000 297,902 362,902

2014-2018 510,000 1,415,453 1,925,453 2019-2023 860,000 1,226,453 2,086,453 2024-2028 1,675,000 873,281 2,548,281 2029-2033 1,350,000 372,600 1,722,600 2034-2037 790,000 95,163 885,163

$ 5,405,000 $ 5,500,321 $ 10,905,321

Fiscal Year Caeital Leases Payable Ended June 30, Princieal Interest Total

2009 $ 49,520 $ 1,147 $ 50,667

$ 49,520 $ 1,147 $ 50,667

Fiscal Year Total Governmental Activities Ended June 30, Principal Interest Total

2009 $ 329,520 $ 1,398,728 $ 1,728,248 2010 360,000 1,384,339 1,744,339 2011 420,000 1,368,099 1,788,099 2012 465,000 1,349,599 1,814,599 2013 530,000 1,328,739 1,858,739

2014-2018 3,525,000 6,240,241 9,765,241 2019-2023 5,200,000 5,319,722 10,519,722 2024-2028 8,845,000 3,786,731 12,631,731 2029-2033 7,145,000 1,696,400 8,841,400 2034-2037 4,425,000 434,351 4,859,351

$ 31,244,520 $ 24,306,949 $ 55,551,469

57


June 30, 2008


4. Business -type Activities - Revenue Bonds

1997 Series A Water and Wastewater Revenue Bonds. On October 22, 1997, the City issued its $11,195,000 (par value) Water and Wastewater Revenue Bonds, 1997 Series A, dated October I, 1997.

A portion of the proceeds of the bonds, together with other available funds, have been applied to refund all of the outstanding $4,150,000 original principal amount of the 1989 Water and Wastewater Certificates of Participation which had interest rates of 6.3% to 6.8%. The 1989 Certificates matured on June I, 2004 and were callable on December 1, 1997. Additionally, the Revenue Bonds were issued to advance refund the 1994 Wastewater Certificates of Participation which have interest rates of 4.50% to 6.70% and an original par value of $4,460,000. The 1994 Certificates were to mature between June 1, 2014 and June 1, 2019, and were callable on June I, 2002. The 1989 Certificates were outstanding in the amount of $3,095,000 and the 1994 Certificates were outstanding in the amount of$4,405,000 at October 22, 1997. The balance of the proceeds from the Bonds is being used for additional Wastewater System improvements. The Revenue Bonds were issued at 96.83% of par and after paying issuance costs of$530, Ill, the net proceeds were $10,664,889.

The portion of the net proceeds from the issuance of the Revenue Bonds relating to the advance refunding were used to purchase U.S. government securities and those securities were placed in an irrevocable trust with an escrow agent to provide debt service payments until the 1994 Certificates were called on June 1, 2002. The original issue discount on these bonds is being amortized using the effective interest method over the I ife of the bonds and is included with long-term debt on the balance sheet. The unamortized amount of the original issue discount is $171,128 as of fiscal year-end.

The City has covenanted and agreed to fix, prescribe, and collect rates, fees and charges for the Water Service and the Wastewater Service so that net revenues are at least 1.15 times the installment purchase payments of the 1997 certificates and all parity of obligations due and payable in the Certificate Year following the date of such calculation.

The bonds have a stated interest rate from 4.00% to 5.125% and are payable over a period of thirty years maturing in 2028. The 1997 Series A Water and Wastewater Revenue Bonds maturing on or after October I, 2008, are subject to redemption prior to maturity. The principal balance outstanding at June 30,2008 is $8,735,000.

2006 Series A Water and Wastewater Revenue Bonds. On June 21, 2006, the City issued its $33,120,000 (par value) Water Revenue Bonds, 2006 Series A and $32,500,000 (par value) Wastewater Revenue Bonds, 2006 Series A.

The proceeds of the sale of the Water and Wastewater Bonds will be used to finance the design, engineering, acquisition, and construction of certain repairs, renovations, extension, betterments and improvements to the City's municipal water and wastewater system.

The City has covenanted and agreed to fix, prescribe, and collect rates and charges for the Water Service and the Wastewater Service so that net revenues are at least 1.15 times the installment purchase payments of the 2006 certificates and all parity of obligations due and payable in the Certificate Year following the date of such calculation.

58


June 30, 2008


4. Business-type Activities- Revenue Bonds (Continued)

2006 Series A Water and Wastewater Revenue Bonds (Continued)

The bonds have a stated interest from 4.00% to 5.25% and are payable over a period of 30 years maturing in 2036. The 2006 Series Bonds maturing on or before October 1, 2016 are not subject optional redemption prior to their maturities. The Bonds maturing on or after October 1, 2017 shall be subject to redemption prior to their respective maturities. The principal balance outstanding at June 30, 2008 is $65,335,000.

5. Business-type Activities- Installment Sale Payable

2003 Enterprise Fund Installment Sale. On December 17, 2002, the City entered into an agreement with the California Infrastructure and Economic Development Bank to sell water and wastewater bonds, the bonds were issued on March 18, 2004.

The proceeds from the issuance of these bonds, $5,880,100, will be used to fund the Alder water/sewer project.

The City has covenanted and agreed to fix, prescribe, and collect rates, fees and charges for the Water Service and the Wastewater Service so that net revenues are at least 1.10 times the installment purchase payments of the 2003 bonds and all Debt Service obligations due and payable in the fiscal year.

The bonds have a stated interest rate of3.00% and are payable over a period of twenty years maturing in 2022. The 2003 Enterprise bonds maturing on or after October I, 2014, are subject to redemption prior to maturity. The principal balance outstanding at June 30, 2008 is $4,528,687.

6. Business-type Activities- Hospital Long Term Debt

El Centro Financing Authority Insured Hospital Revenue Bonds, Series 2001. On April 26, 2001, the Hospital issued $39,300,000 in revenue bonds. The proceeds ofthe Bonds were used to finance the construction and equipping the Hospital's 66,000 square foot expansion.

The bonds have a stated interest rate from 4.25% to 5.375% and are payable over a period of thirty years maturing in 2026. The principal balance outstanding at June 30, 2008 is $34,000,000.

7. Business-type Activities - Capital Leases Payable

Capital Leases. The Hospital has entered into certain capital lease agreements under which the related equipment will become the property of the Hospital when all terms of the lease agreements are met. These Capital leases are reflected in the statement of net assets and are being amortized over the life of the leases. Capitalized lease interest rates range from 3.83% to 8.25%.

At June 30, 2008, assets held under capital leases amounted to $8,966,000. Lease commitments on these leases including interest are as follows:

Fiscal Year Ending June 30,

2009 2010 2011 2012 2013

59

Principal $ 1,086,391

714,187 655,372 506,968 110.817

$3 073 735

Principal and Interest $1,167,333

768,308 686,399 520,586 111.543

$3 254.169


June 30, 2008


8. Long-Term Debt Amortization - Business-type Activities

The annual requirements to amortize long-term debt outstanding at June 30, 2008 (other than compensated absences) are as follows:

Fiscal Year 1997 Revenue Bonds - Water Ended June 30, PrinciEal Interest Total

2009 $ 115,000 $ 8,463 $ 123,463 2010 120,000 2,880 122,880

$ 235,000 $ II ,343 $ 246,343

Fiscal Year 1997 Revenue Bonds- Wastewater Ended June 30, PrinciEal Interest Total

2009 $ 255,000 $ 426,161 $ 681,161 2010 265,000 413,808 678,808 2011 280,000 400,658 680,658 2012 295,000 386,493 681,493 2013 310,000 371,368 681,368

2014-2018 1,795,000 1,597,078 3,392,078 2019-2023 2,310,000 1,074,202 3,384,202 2024-2028 2,990,000 398,725 3,388,725

$ 8,500,000 $ 5,068,493 $ 13,568,493

Fiscal Year 2003 Installment Sale Paxable - Water Ended June 30, PrinciEal Interest Total

2009 $ 68,263 $ 34,991 $ 103,254 2010 70,311 32,943 103,254 2011 72,420 30,834 103,254 2012 74,593 28,661 103,254 2013 76,831 26,423 103,254

2014-2018 420,142 96,129 516,271 2019-2023 383,806 29,211 413,017

$ 1,166,366 $ 279,192 $ 1,445,558

Fiscal Year 2003 Installment Sale Pa~able- Wastewater Ended June 30, PrinciEal Interest Total

2009 $ 180,781 $ 98,158 $ 278,939 2010 186,204 92,653 278,857 2011 191,790 86,983 278,773 2012 197,544 81,143 278,687 2013 203,469 75,128 278,597

2014-2018 1,112,658 278,903 1,391,561 2019-2023 1,289,875 99,028 1,388,903

$ 3,362,321 $ 81 1,996 $ 4,174,317

60


June 30, 2008

NOTE 8- LONG~ TERM LIABILITIES (Continued)

8. Long-Term Debt Amortization- Business-type Activities (Continued)

Fiscal Year 2006 Series A Water Revenue Bonds Ended June 30, Princi~al Interest Total

2009 $ 465,000 $ 1,566,519 $ 2,031,519 2010 470,000 1,547,819 2,017,819 2011 615,000 1,526,119 2, 141,119 2012 640,000 1,501,019 2,141,019 2013 665,000 1,474,919 2,139,919

2014-2018 3,765,000 6,941,303 10,706,303 2019-2023 4,825,000 5,025,613 9,850,613 2024-2028 6,765,000 4,608,737 11,373,737 2029-2033 8,600,000 2,759,337 11,359,337 2034-2036 6,310,000 508,462 6,818,462

$ 33,120,000 $ 27,459,847 $ 60,579,847

Fiscal Year 2006 Series A Wastewater Revenue Bonds Ended June 30, Princi2al Interest Total

2009 $ 405,000 $ 1,530,562 $ 1,935,562 2010 520,000 1,512,062 2,032,062 2011 540,000 1,490,863 2,030,863 2012 565,000 1,468,763 2,033,763 2013 585,000 1,445,763 2,030,763

2014-2018 3,350,000 6,844,688 10,194,688 2019-2023 4,185,000 6,031,725 10,216,725 2024-2028 6,900,000 4,688,144 11,588,144 2029-2033 8,750,000 2,806,450 11,556,450 2034-2036 6,415,000 516,730 6,931,730

$ 32,215,000 $ 28,335,750 $ 60,550,750

Fiscal Year Hos2ital Revenue Bonds, Series 200 1 Ended June 30, Princi2al Interest Total

2009 $ 1,200,000 $ 1,779,410 $ 2,979,410 2010 1,250,000 1,726,610 2,976,610 2011 1,310,000 1,670,360 2,980,360 2012 1,369,000 1,610,100 2,979,100 2013 1,439,000 1,537,460 2,976,460

2014-2018 8,445,000 6,453,850 14,898,850 2019-2023 10,925,000 4,071,578 14,996,578 2024-2026 8,062,000 876,121 8,938,121

34,000,000 19,725,489 53,725,489 Less bond discount (365,815} {365,815)

$ 33,634,185 $ 19,725,489 $ 53,359,674

61


June 30, 2008


8. Long-Term Debt Amortization- Business-type Activities (Continued)

Fiscal Year Ended June 30,

2009 $ 2010 2011 2012 20l3

$

Fiscal Year Ended June 30,

2009 $ 2010 2011 2012 2013

2014-2018 2019-2023 2024-2028 2029-2033 2034-2036

Less bond discount

$

NOTE 9- RISK MANAGEMENT

Princi~al

1,086,391 714,187 655,372 506,968 110,817

3,073,735

PrinciEal

3,775,435 3,595,702 3,664,582 3,648,105 3,390,117

18,887,800 23,918,681 24,717,000 17,350,000 12,725,000

115,672,422 (365,815)

115,306,607

Capital Leases Payable Interest

$ 80,942 54,121 31,027 13,618

726

$ 180,434

Total Business-type Activities Interest

$ 5,525,206 5,382,896 5,236,844 5,089,797 4,931,787

22,211,951 16,331,357 10,571,727 5,565,787 1,025,192

81,872,544

$ 81,872,544

Total

$ 1,167,333 768,308 686,399 520,586 111,543

$ 3,254,169

Total

$ 9,300,641 8,978,598 8,901,426 8,737,902 8,321,904

41,099,751 40,250,038 35,288,727 22,915,787 13,750,192

197,544,966 (365,815)

$ 197,179, 151

The City is exposed to various risks of loss related to workers' compensation claims, torts, the theft of, damage to, and destruction of assets, errors and omission, natural disasters, and group health insurance claims. To deal with these risks, the City has adopted a formal risk management program. As part of this program various risk control techniques, including employee accident prevention training, are being implemented to minimize accident-related losses. An integral part of the program, however, continues to be insuring arrangements.

A. Description of Self-Insurance Pool Pursuant to Joint Powers Agreement

The City is a member of the CALIFORNIA JOINT POWERS INSURANCE AUTHORITY (Authority). The Authority is composed of 119 California public entities and is organized under a joint powers agreement pursuant to California Government Code §6500 et seq. The purpose of the Authority is to arrange and administer programs for the pooling of self-insured losses, to purchase excess insurance or reinsurance, and to arrange for group-purchased insurance for property and other coverages. The Authority's pool began covering claims of its members in 1978. Each member government has an elected official as its representative on the Board ofDirectors. The Board operates through a 9-member Executive Committee.

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June 30,2008

NOTE 9- RISK MANAGEMENT (CONTINUED)

A. Description of Self-Insurance Pool Pursuant to Joint Powers Agreement (Continued)

Audited financial statements for the Authority are available from Assistant Executive Officer, at California Joint Powers Insurance Authority, 8081 Moody Street, La Palma, California 90623.

B. Insurance Programs of the Authority

General Liability Each member government pays a primary deposit to cover estimated losses for a fiscal year (claims year). After the close of a fiscal year, outstanding claims are valued. A retrospective deposit computation is then made for each open claims year. Costs are spread separately between police and non-police. Costs are spread to members as follows: the first $30,000 of each occurrence is charged directly to the member's primary deposit; costs from $30,000 to $750,000 and the loss development reserves associated with losses up to $750,000 are pooled based on the member's share oflosses under $30,000. Losses from $750,000 to $5,000,000 and the associated loss development reserves are pooled based on the payroll. Costs of covered claims from $5,000,000 to $50,000,000 are currently paid by excess insurance. The protection for each member is $50,000,000 per occurrence and $50,000,000 annual aggregate. Administrative expenses are paid from the Authority's investment earnings.

Payments to the Authority for property and casualty coverage are recorded as expenditures in the General Fund.

Workers Compensation The City also participates in the workers' compensation pool administered by the Authority. Each member pays a primary deposit to cover estimated losses for a fiscal year (claims year). After the close of a fiscal year, outstanding claims are valued. A retrospective deposit computation is then made for each open claims year. Claims are pooled separately between public safety and non-public safety. Each member has a retention level of $50,000 for each loss and this is charged directly to the member's primary deposit. Loss from $50,000 to $100,000 and the loss development reserve associated with losses up to $100,000 are pooled based on the member's share of losses under $50,000. Losses from $100,000 to $2,000,000 and employer's liability losses from $5,000,000 to $10,000,000 and loss development reserves associated with those losses are pooled based on payroll. Losses from $2,000,000 to $5,000,000 are pooled with California State Association of Counties-Excess Insurance Authority members. Costs from $2,000,000 to $300,000,000 are transferred to reinsurance carriers. Costs in excess of$300,000,000 are pooled among the members based on payroll. Protection is provided per statutory liability under California Worker's Compensation law. Administrative expenses are paid from the Authority's investment earnings.

The City is responsible for workers' compensation claims incurred before July 1, 1997, under its selfinsured program. Estimated unpaid claims reflect the maximum probable outcome of all claims without regard to the City's self-insured retention level. Reserves are assessed for indemnity, medical, and expense categories. Indemnity claims are estimated on the basis of computations, which will develop the probable total future cost of compensation and medical benefits due or potentially due. Medical-only claims are estimated on the basis of computations, which will develop the total future cost of medical benefits due or potential.ly due. Liability estimates are not reduced for third party recoveries, subrogation recoveries, or aggregate excess insurance coverage.

Payments for workers' compensation coverage are recorded as an expense to Workers' Compensation Internal Service Fund.

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June 30, 2008

NOTE 9 -RISK MANAGEMENT (Continued)

B. Insurance Programs of the Authority (Continued)

Purchased Insurance

Environmental Insurance The City participates in the pollution legal liability and remediation legal liability insurance, which is available through the Authority. The policy covers sudden and gradual pollution of scheduled property, streets, and storm drains owned by the City. Coverage is on a claimsmade basis. There is a $50,000 deductible. The Authority has a limit of$50,000,000 for the 3-year period from July 1, 2005 through July 1, 2008. Each member of the Authority has a $10,000,000 limit during the 3-year term of the policy.

Property Insurance The City participates in the all-risk property protection program of the Authority. This insurance protection is underwritten by several insurance companies. The City's property is currently insured according to a schedule of covered property submitted by the City to the Authority. The City property currently has all-risk property insurance protection in the amount of$40,847,051. There is a $5,000 deductible per occurrence except for non-emergency vehicle insurance which has a $1,000 deductible. Premiums for the coverage are paid annually and are not subject to retroactive adjustments.

Crime Insurance The City purchases crime insurance coverage in the amount of $1,000,000 with $2,500 deductible. The fidelity coverage is provided through the Authority. Premiums are paid annually and are not subject to retroactive adjustments.

Special Event Tenant User Liability Insurance The City further protects against liability damages by requiring tenant users of certain property to purchase low-cost tenant user liability insurance for certain activities on City property. The insurance premium is paid by the tenant user and is paid to the City according to a schedule. The City then pays for the insurance. The insurance is arranged by the Authority.

During the past three fiscal (claims) years none of the above programs of protection have had settlements or judgments that exceeded pooled or insured coverage. There have been no significant reductions in pooled or insured liability coverage from coverage in the prior year.

Group Health Insurance

The "Risks of Loss" to the City under the City sponsored group health insurance plans include major medical, dental, and vision claims. Prior to August I, I999, the City contracted with Pacific Mutual Insurance Company for a fully insured plan for medical and dental coverage.

On August I, 1999, the City implemented a self-funded plan providing for the same benefits as the Pacific Mutual plan. The City's liability is limited to $I 00,000 per employee with an overall cap of I25% of projected medical claims and I 00% of dental and vision claims.

Medical Malpractice Insurance Coverage

The Hospital purchases commercial malpractice liability insurance on an occurrence basis. The policy coverage is $10,000,000 per occurrence with nominal deductible and no aggregate limitations. The Hospital accrues the deductible for all open claims.

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June 30, 2008

NOTE 10- PROPRIETARY FUNDS INFORMATION

The City maintains five enterprise funds. The Water and Wastewater funds account for the provision of basic utility services to all citizens. The Transit fund provides demand-response transit services. The Solid waste fund accounts for trash collection throughout the City. The Hospital is an acute care facility providing health care to the community and surrounding area.

NOTE 11 -CONTINGENT LIABILITIES

Amounts received or receivable from grant agencies are subject to audit and adjustment by grantor agencies, principally the federal government and the State of California. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable funds. The amount, if any, of expenditures which may be disallowed by grantors cannot be determined at this time although the City expects such amounts, if any, to be immaterial.

The City is a defendant in various lawsuits and the Hospital is subject to legal proceedings and claims that arise in the ordinary course of its business. In the opinion of City and Hospital management, the ultimate disposition of these lawsuits and proceedings will not have a material impact upon the financial condition of the City or the Hospital.

NOTE12-NETPATIENTREVENUE

Gross patient service revenue is recognized on the basis of usual and customary charges. The Hospital has agreements with third-party payors that provide for payments to the Hospital at amounts different from its established rates. The difference between gross charges generated from established rates and the related payments from third-party payors for the fiscal years ending June 30, 2008 and 2007 are reflected as contractual discounts and allowance for bad debts, as shown below:

Gross patient service revenue Less: Contractual discounts Less: Allowance for bad debts

2008 2007 $ 361,327,924 $269,609,527 (269,347,896) (183,137,240) ( 8.615.294) ( 11.862,820) $ 83 364 734 $ 74 609 467

The Hospital is reimbursed for services provided to patients under certain programs administered by governmental agencies. Laws and regulations governing the Medicare and Medi-Cal programs are complex and subject to interpretation. The Hospital believes that it is in compliance with all applicable laws and regulations and it is not aware of any pending or threatened investigations involving allegations of potential wrongdoing. While no such regulatory inquiries have been made, compliance with such laws and regulations can be subject to future government review and interpretation as well as significant regulatory action including fines, penalties, and exclusion from the Medicare and Medi-Cal programs.

A summary of the payment arrangements with these agencies is as follows:

Medicare

Inpatient acute care services rendered to Medicare program beneficiaries are paid at prospectively determined rates per discharge. These rates vary according to a patient classification system that is based on clinical, diagnostic and other factors. Inpatient nonacute services, certain outpatient services and defined capital and medical education costs related to Medicare beneficiaries are paid based on a cost reimbursement methodology. The Hospital is reimbursed for cost reimbursable items at a tentative rate, with final settlement determined after submission of annual cost reports by the Hospital and audits thereof by the Medicare fiscal intermediary.

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June 30,2008

NOTE 12- NET PATIENT REVENUE (Continued)

Medicare (Continued)

The Hospital's classification of patients under the Medicare program and appropriateness of their admission are subject to an independent review by a peer review organization under contract with the Hospital. Approximately 34% in 2008 and 38% in 2007 of gross patient service revenue was derived from services provided to Medicare patients.

Medi-Cal

The Medi-Cal program accounted for approximately 27% in 2008 and 24% in 2007 of gross patient service revenue. The Hospital is reimbursed under a cost reimbursement methodology for Medi-Cal beneficiaries.

Premium Revenue

During 1996, the Hospital entered into a joint powers agreement with Pioneers Memorial Hospital District. The Hospitals jointly established the Imperial Valley Health Resources Authority(IVHRA). Due to the existence of the joint powers agreement, the Hospitals were able to enter into a contract with a Health Maintenance Organization (HMO) to provide medical services to subscribing participants. Under the agreement with the HMO, IVHRA receives monthly capitation payments based on the number of HMO participants, regardless of services actually performed by either Hospital. The Hospital and Pioneers Memorial Hospital in tum, bill IVHRA for services provided to subscribing patients through a third-party administrator.

The Hospital has also entered into payment agreements with certain commercial insurance carriers, health maintenance organizations, and preferred provider organizations. Payments to the Hospital under these agreements include discounts from established charges.

NOTE 13- DEFERRED COMPENSATION PLAN

The City offers its employees a deferred compensation program created in accordance with Internal Revenue Code Section 457. The program, available to all full-time City employees at their option, permits participants to defer a portion of their salary until future years. The deferred compensation is not available to participants until termination, retirement, death, or unforeseeable emergency.

All amounts of compensation deferred under the program, all property and rights purchased with those amounts, and all income attributable to those amounts, property or rights are held for the exclusive benefit of the participants.

NOTE 14- OTHER POST EMPLOYMENT BENEFITS

The City provides postretirement health and dental care benefits, as provided for in various collective bargaining agreements for retirees that meet certain criteria. The City pays 100 percent of the employee's premium for health and dental care coverage for qualifYing management employees until age 65 and a portion of the employee's premium for qualifying non-management employees. Retirees may not convert the benefit into an in-lieu payment to secure coverage under independent plans.

As of fiscal year-end, thirteen retired management employees and nineteen retired non-management were receiving the above benefits. The City finances the plan on a pay-as-you-go basis. For the fiscal year ended June 30,2008, the City recognized $167,131 of incurred expenditures under the plan.

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June 30,2008

NOTE 15- DEFINED BENEFITS PENSION PLAN

A. Public Employees Retirement System (PERS)

Plan Description

The City of El Centro defined benefit pension plan, (the Plan), provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to plan members and beneficiaries. The Plan is part of the Public Agency portion of the California Public Employees Retirement System (Ca!PERS), an agent multiple-employer plan administered by Ca!PERS, which acts as a common investment and administrative agent for participating public employers within the State of California. A menu of benefit provisions as well as other requirements is established by State statutes within the Public Employee's Retirement Law. The City of EI Centro has adopted various optional benefits. Ca!PERS issues a separate comprehensive annual financial report. Copies of the CaiPERS' annual financial report may be obtained from the Ca!PERS Executive Office, 400 P Street, Sacramento, CA 95814.

Funding Policy

Active Plan members are required to contribute 7% (9% for safety employees) of their annual covered salary. The City makes the contributions required of City employees on their behalf and for their account. The City ofEI Centro is required to contribute the actuarially determined remaining amounts necessary to fund the benefits for its members. The actuarial methods and assumptions used are those adopted by the CalPERS Board of Administration. The required employer contribution rate for fiscal 2007/2008 was 6,967% (45.20% for safety employees). The contribution requirements of the plan members are established by State statute and the employer contribution rate is established and may be amended by Ca!PERS. The City's contributions to Ca!PERS for the fiscal years ending June 30, 2008, 2007, and 2006 for the Miscellaneous Plan were $1,115,155, $986,071, and $957,644, respectively, and equal 100% of the required contributions for each fiscal year. The City's contributions to Ca!PERS for the fiscal years ending June 30, 2008, 2007, and 2006 for the Safety Plan were $3,015,047, $2,640,094, and $2,359,710, respectively, and equallOO% of the required contributions for each fiscal year.

B. El Centro Regional Medical Center Retirement Income Plan

Plan Description

TheEl Centro Regional Medical Center Retirement Income Plan (the Plan), a single-employer defined benefit pension plan, is a separate trust fund of the City and is administered by the Hospital. The Plan covers all employees of the Hospital who are not members of a collective bargaining unit. The Plan provides retirement and death benefits to plan members and beneficiaries. The Hospital's Board of Directors has the authority to establish and amend benefit provisions. Additionally information may be obtained by acquiring to El Centro Regional Medical Center, 1415 Ross Ave, El Centro, CA 92243.

Funding Policy

The contribution requirements of plan members and the Hospital are established and may be amended by the Hospital's Board of Directors. Plan members are required to contribute 3% oftheir annual covered salary. The Hospital is required to contribute at an actuariallydetermined rate. The current rate is 5.9% of annual covered payroll.

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June 30, 2008

NOTE 15- DEFINED BENEFITS PENSION PLAN (Continued)

B. El Centro Regional Medical Center Retirement Income Plan (Continued)

Annual Pension Cost and Net Pension Obligation

The Hospital's annual pension cost and net pension obligation to the Plan for the current fiscal year were as follows:

Annual required contribution Interest on net pension obligation Adjustment to annual required contribution Annual pension cost Contributions made Increase in net pension obligation Net pension obligation beginning of fiscal year Net pension obligation end of fiscal year

June 30. 2008

$1,884,900 (53,800) 81.200

I ,912,300 (I .995, 700)

(83,400) (717.000)

$ (800 400)

2007 $ 1,749,900

(71 ,600) 108.200

1,786,500 (I ,548.600)

237,900 (954.900)

$(717 000)

The following information (which has not been audited by independent auditors) was provided to the Hospital by the Plan's actuaries, Creative Benefit Strategies, Inc., per their actuarial valuation dated January I, 2008. The Hospital's contribution for the fiscal years ending June 30, 2008, 2007, and 2006, were $1,912,300, $1,786,500, and $1,766,500, respectively, and the net pension obligations for the fiscal years ending June 30, 2008, 2007, and 2006, were ($800,400), ($717,000), and ($954,900).

NOTE 16- NET ASSETS AND FUND BALANCES

GASB Statement No. 34 adds the concept of Net Assets, which is measured on the full accrual basis, to the concept of Fund Balance, which is measured on the modified accrual basis.

A. Net Assets

Net Assets are divided into three captions under GASB Statement No. 34. These captions apply only to net assets as determined at the government-wide level and are described below:

Invested in Capital Assets, net of related debt describes the portion of net assets which is represented by the current net book value of the City's capital assets, less the outstanding balance of any debt issued to finance these assets.

Restricted describes the portion of net assets which is restricted as to use by the terms and conditions of agreements with outside parties, governmental regulations, Jaws, or other restrictions which the City cannot unilaterally alter. These principally include debt service requirements, and redevelopment funds restricted to low and moderate income housing purposes.

Unrestricted describes the portion of net assets which is not restricted as to use.

The government-wide statement of net assets reports $65,835,426 of restricted net assets ..

B. Fund Balances

Fund Balances consist of reserved and unreserved amounts. Reserved fund balances represent that portion of fund balance which is legally segregated.

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June 30, 2008

NOTE 17- INVESTMENT IN JOINT VENTURE- EL CENTRO REGIONAL MEDICAL CENTER (HOSPITAL)

The Medical Center has a fifty (50) percent interest in Imperial Valley Health Resources Authority (IVHRA) which is accounted for under the equity method. Additional information regarding the financial information for the joint venture can be obtained by acquiring at El Centro Regional Medical Center, 1415 Ross Ave, El Centro, CA 92243. Imperial Valley Health Resources Authority does not hold any assets. The Medical Center and the other agency involved in the joint venture reimburse the Imperial Valley Health Resources Authority monthly for expenses related to consultants and other expenses.

NOTE 18- PRIOR PERIOD ADJUSTMENTS

A prior period adjustment of ($307,203) in the government-wide statement was due to an overstatement of accumulated depreciation of $370,413, an overstatement of structures & improvements of($723,847), and an understatement of furniture, equipment, and books of$46,231.

A prior period adjustment of $435,847 in the government-wide statement was due to an understatement of deferred loss on refunding.

A prior period adjustment of ($129,702) was made to the government-wide statement, the Water Fund, and to the Wastewater Fund due to an overstated of deferred charges in the amountof($15,712) in the Water fund and an overstatement of deferred charges in the amount of ($113,990) in the Wastewater Fund.

A prior period adjustment of$717,000 was made to the government-wide statement and the Hospital Fund due to an understatement of Net Pension Obligation-Overfunded in the prior year.

A prior period adjustment of$41,447 was made to the government-wide statement and to the Water Fund due to an overstatement of interest payable in the previous year.

A prior period adjustment of ($41,447) was made to the government-wide statement and to the Wastewater Fund due to an understatement of interest payable in the previous year.

A prior period adjustment of $2,382,000 was made to the government-wide statements and to the Water Fund due to an overstatement of long-term debt in the previous year.

A prior period adjustment of ($2,382,000) was made to the government-wide statements and to the Wastewater Fund due to an understatement of long-term debt in the previous year.

NOTE 19- SUBSEQUENT EVENTS

On September 30, 2008, the Community Facilities District No. 2007-1 (Legacy Ranch) Special Tax Bonds, 2008 Series were issued in the amount of $1 ,220,000 by the City of EI Centro Community Facilities District No. 2007-1 (Legacy Ranch) which was established by the City pursuant to a Fiscal Agent Agreement, dated October 1, 2008. The Bonds are being issued to (i) finance certain capital facilities fees relating to authorized public improvements, (i i) fund a reserve account for the Bonds, and (iii) pay the costs of issuance of the Bonds. The Bonds will mature on September 1 of each year and shall bear interest between 5.10% and 6.00%. The Bonds are limited obligations of the District. The Bonds are payable solely from the Special Taxes to be levied on and collected from the owners of the taxable land within the District, and from certain other funds pledged under the Fiscal Agent Agreement. Neither the faith and credit nor the taxing power of the District, the City, the County of Imperial, the State of California or any political subdivision thereof is pledged to the payment of the Bonds. Except for the special taxes, no other revenues or taxes are pledged to the payment of the Bonds. The Bonds are not general or special obligations of the City nor general obligations of the District, but are limited obligations ofthe District payable solely from special taxes and amounts held under the Fiscal Agent Agreement.

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REQUIRED SUPPLEMENTARY INFORMATION

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CITY OF EL CENTRO Schedule of Revenues, Expenditures, and Changes in Fund Balance- Budget and Actual

General Fund For the Fiscal Year Ended June 30, 2008

Variance with Final Budget

Budgeted Amounts Actual Positive Original Final Amounts (Negative)

Revenues Taxes $ 13,127,000 $ 13,127,000 $ 13,380,580 $ 253,580 Licenses and Permits 405,400 405,400 481,803 76,403 Intergovernmental 7,017,570 7,039,558 7,214,948 175,390 Charges for Services 1,800,500 1,820,837 1,700,879 (119,958) Fines and Forfeitures 208,000 208,000 219,396 11,396 Interest 68,000 250,000 480,572 230,572 Other 965,000 835,737 1,024,623 188,886

Total Revenues 23,591,470 23,686,532 24,502,801 816,269


General Government 3,113,929 3,149,157 2,977,024 172,133

Public Safety 15,954,502 15,944,249 14,960,060 984,189

Public Works 1,998,182 1,998,182 1,728,249 269,933

Parks and Recreation 2,398,959 2,364,659 2,338,896 25,763

Community Development 2,465,327 2,477,295 2,318,929 158,366

Capital Outlay 521,489 634,223 1,455,658 (821,435)

Total Expenditures 26,452,388 26,567,765 25,778,816 788,949

Excess (Deficiency) of Revenues Over (Under) Expenditures (2,860,918) (2,881,233) (1,276,015) 1,605,218

Other Financing Sources (uses): Transfers In 2,287,036 2,287,036 1,856,463 (430,573)

Transfers Out (106,955) (106,955) (137,726) (30,771~

Total Other Financing Sources (Uses) 2,180,081 2,180,081 1,718,737 (461 ,344)

Net Change in Fund Balance (680,837) (701, 152) 442,722 1,143,874

Fund Balance- July I, 2007 12,550,736 12,550,736 12,550,736

Fund Balance - June 30, 2008 $ 11,869,899 $ 11,849,584 $ 12,993,458 $ 1,143,874

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OTHER SUPPLEMENTARY INFORMATION

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SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE

BUDGET AND ACTUAL

MAJOR GOVERNMENTAL FUND

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CITY OF EL CENTRO

SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES

BUDGET AND ACTUAL REDEVELOPMENT AGENCY CAPITAL PROJECTS FUND

FOR THE FISCAL YEAR ENDED JUNE 30, 2008

Variance with Final Final Budget

Budget Actual Positive (Negative)

Revenues

Interest $ 20,000 $ 1,025,774 $ 1,005,774

Other 347,000 288,678 (58,322)

Total Revenues 367,000 1,314,452 947,452

Expenditures

Current: Community development 2,056,390 1,448,380 608,010

Capital outlay 7,054,800 380,803 6,673,997

Total Expenditures 9,111,190 1,829,183 7,282,007

Excess (deficiency) of Revenues over (under) Expenditures (8, 744, 190} (514,731) 8,229,459

Other Financing Sources (uses):

Transfers in 950,000 950,000

Sales of property 754,878 (754,878)

Total Other Financing Sources (Uses) 754,878 950,000 195,122

NET CHANGE IN FUND BALANCE (7,989,312) 435,269 8,424,581

Fund Balance- July 1, 2007 20,259,897 20,259,897

Fund Balance- June 30, 2008 $ 12,270,585 $ 20,695,166 $ 8,424,581

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COMBINING STATEMENTS NONMAJOR GOVERNMENTAL FUNDS

SPECIAL REVENUE FUNDS

Special revenue funds are used to account for specific revenues that are legally restricted to expenditure for particular purposes

Gas Tax - This fund is used to account for the City's share of California State gas tax revenue expended for street improvements and maintenance.

Transportation Article 8 - This fund is used to account for State of California Transportation Development Act funds expended for street maintenance.

Community Development Block Grant (CDBG) - This fund is used to account for revenue and expenditures under the State of California CDBG program.

Library Assistance -This fund is used to account for the expenditure of private donations and grants from the State of California Public Library Fund.

Bus Shelter - This fund is used to account for revenue and expenditures that will be utilized in the maintenance of the Bus Shelters within the City.

Transportation Article 3 - This fund is used to account for State of California Transportation Development Act Funds expended for bicycle and pedestrian projects.

Home Program - This fund is used to account for the expenditure of grant funds received under the California Department of Housing and Community Development Investment Partnership Program.

Rental Rehab HUD - This fund is used to account for revenues and expenditures associated with the CaJifornia Department of Housing and Urban Development rental rehabilitation program.

Traffic Safety - This fund is used to account for traffic fines and forfeitures received by the City and used for traffic control supplies and equipment.

Wake Ave Extension - This fund is used for the collection and disbursement of mitigation fees for the construction of Wake Ave.

Traffic Congestion Relief - This fund is used to account for transportation funding from sales and use tax revenues expended for street maintenance, rehabilitation and reconstruction

Recreation Projects - This fund is used to account for contributions expended for recreation supplies and equipment.

Asset Forfeiture- This fund is used to account for revenues distributed by the Department of Justice from drug related seizures.

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Local Transportation Authority - This fund is used to account for the revenue and expenditure of funds generated by a one-half cent voter approved sales tax earmarked for street improvements.

Home Grants - This fund is used to account for revenues and expenditures associated with the Home program.

OTS Grant - This fund is used to account for the expenditure of grant funds received from the State of California, Office of Traffic Safety.

State COPS SLESF -This fund is used to account for the revenue and expenditure of funds from the Supplemental Law Enforcement Services Fund (SLESF) pursuant to Section 30061 of the California Government Code (AB 3229).

Annexation Fees- This fund is used to account for the collection and expenditure of annexation fees earmarked for public improvements.

HUD Entitlement - This fund is used to account for all revenues and expenditures authorized using the Entitlement guidelines.

CDBG Program Income - This fund is used to account for the collection of Community Development Block Grant loans made from program income.

Housing Enabled by Local Partnership - Program set up to provide for a source of funds from which to make mortgage loans to first time home buyers.

CALHOME Program- This program provides mortgage assistance loans to first time home-buyers.

Development Impact Fees - This fund is used to account for the collection and expenditure of development impact fees earmarked for public infrastructure improvements made necessary because of growth.

SIMPLOT - This fund is used to account for the expenditures of funds received in connection with the settlement of environmental litigation.

FHW A Grants - This fund is used to account for the expenditure of grant funds from the FHW A received through the California Department of Transportation.

Soft Drink Franchise- This fund is used to supplement Parks and Recreation activities.

Integrated Waste Management- Fund set up for the purpose of solid waste management and source reduction recycling.

Used Oil Grant- This fund is used for the establishment and maintenance of local used oil collection programs.

Per Capita Parks Grant - These funds are to be used for the acquisition and development of neighborhood, community, and regional parks and recreation land and facilities.

Department of Conservation - This fund is used to administer recycling activities through collection and public education.

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Tire Clean-up Grant - This grant provides funds for the clean-up of tires that have been illegally dumped in our communities.

Household Hazardous Waste - This program is to establish a permanent household hazardous waste collection facility and providing mobile collection events to service remote and underserved residents.

I-8 Imperial Ave. Overpass- This fund is used to account for fees charged on new developments for the overpass project.

Public Education & Amnesty Grant - This program is designed to educate the public about proper hauling and recycling of tires.

Used Oil Opportunity Grant -This grant provides funds for the collection of used oil.

EDA Revolving - This fund is used to hold excess EDA Loan funds collected and not currently used for loans.

Police and Fire Operational - This fund was set up to collect fees to mitigate impact to police and fire services from new developments.

Rural Business Enterprise Grant - This fund is to provide business training to the tenants of the El Centro Business Incubator.

Legacy Ranch CFD - This fund is used to account for the activity related to the new Community Facilities District.

Legacy Ranch L&LD - This fund is used to account for the activity related to the landscape & lighting district.

IV Commons - This fund is used to account for the activity related to the deposits received for the IV Commons.

Fire Mitigation - This fund is used to account for funds used for fire mitigation.

2002 Resource Bond Act - This grant provides funds for local assistance to the City as part of the California Clean Water, Clean Air, Safe Neighborhood Parks, and Coastal Protection Act of2002.

Redevelopment Housing - This fund is established to account for 20% of the redevelopment tax increment receipts, which are required to be set aside for low and moderate income housing.

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CAPITAL PROJECTS FUND

Capital projects funds are used to account for the acquisition and construction of major capital facilities other than those financed by proprietary funds and trust funds

Orange Ave Regional Lift Station - This fund is used to account for revenue and expenditures charged for the development of the lift station.

Park Development - This fund is used to account for fees charged on new development for the development and maintenance of parks.

Drainage Facilities - This fund is used to account for the fees charged on new development for drainage facilities.

Post Office Grant- This grant will be used for the renovation of the Old Post Office Pavilion.

Lotus Parallel - This fund is used to account for revenue and expenditures incurred in the development of the future water and sewer trunk from water and wastewater plants to 1-8.

liD Facility Crossing - This fund is used to collect monies from developers for the installation of siphon pipes to allow for the Orange and Hamilton Avenue crossing.

8'h Street Overpass Bridge - This fund is used to collect monies from developers for the lighting of the bridge.

Bridge/Road Improvements - This fund is used to collect monies from developers for the bridge and road improvements on Dogwood Rd and related areas.

Federal Highway Administration - This fund is used to account for expenditures of grant funds from the FHW A received through the California Department of Transportation used on miscellaneous projects.

Proposition lb - This grant provides funds used for safety improvements and repairs to state highways, upgrades to freeways to reduce congestion, repairs to local streets and roads, upgrades to highways along major transportation corridors, improvement to seismic safety of local bridges, expansion of public transit, and reduction of air pollution.

La Brucherie Green Belt - This fund is used to account for the construction of a non-motorized pathway along La Brucherie Road.

Colonia-El Dorado Street - This fund is used to account for grant funds received under the State Community Development grant program for street improvements in the El Dorado Colonia.

Buena Vista Landscaping & Lighting District- This fund is used to account for the activity related to the new district.

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DEBT SERVICE FUNDS

Debt service funds are used to account for the accumulation of resources and repayment of debt from governmental resources

Redevelopment Agency - This fund is used to account for debt service payments for the outstanding bonds issued by the Redevelopment Agency.

Lease Purchase - This fund is used to account for lease payments on various lease purchase arrangements.

80

CITY OF EL CENTRO COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES

NONMAJOR GOVERNMENTAL FUNDS Fiscal Year Ended June JO,l008

Capital Project Fund• Debt SerYice Nonmnjor 8th St. Overpass Bridge/Road Federal Highway Proposition La Brucherie Colonia-EI Buena Vista Redevelopment Governmental

Brid~e Ime;rovemcnt Administration IB Green Bch Dorado Street Landsca~ing ~enc~ Lease Purchase Funds Revenues:

Intergovernmental s s $ 518,113 $ 676,683 $ $ 349,641 $ s $ s 7,642,146

Taxes 27,803 4,417,356 5,634,630

Charges for services 1,377,034

Interest 699 195,065 291 3,505 7,349 448,304 1,839,945

Other 385 I ,888,769 To1al Revenues 699 195,450 518,113 676,683 291 353,146 35,152 4,865,660 18,382,524

Expenditures: Current: General Government Public Safety 528,402

Public Works 122,114 2,074_,604 Parks and Recreation 5,275 571,628 Community Development I ,954,287 Capital Outlay 575,15 I 227,978 5,310,996

00 Debt Service: Prinicipal 152,846 152,846 Interest 1,871,039 5,944 1,876 983

Total Expenditures 575,151 350.092 5,275 1,871,039 158,790 12,469,746

Excess (Deficiency) of Revenues over (Under) Expenditures 699 195,450 (57,038) 676,683 291 3,054 29,877 2,994,621 ~- (158,790) 5,912,778

Other Financing Sources (Uses): Transfers In 158,790 483,321

Transfers Out (950,000} (3. 152,058)

Total Other Financing Sources (Uses) (950,000) 158,790 (2,668,737)

Net Change in Fund Balances 699 195,450 (57,038) 676,683 291 3,054 29,877 2,044,621 3,244,041

fuod Balances- July I, 2007 1.715 22,474 47,021 6,964 17,373 171,782 9,649,468 35,597,127

Fund Balances- June 30, 2008 2,414 217,924 (10,017) 676,683 7,255 20,427 201,659 l1,694,089 38,841,168

Transponation Gas Tax ArticleS

Assets Cash and investments s 200 s 145,246 $ Receivables: Taxes Interest 851 8 Grants Notes Other 170,486 41,578

Restricted C~tsh and Investment with Fiscal Agent

Land held for resale

Total Assets $ 171 537 $ t86 832 $

00 tv

Liabilities AccouniS payable s 1,554 s s SalarieslbenefiiS payable Deferred revenue DeposiiS Due to other funds 110,361

Total Liabilities 111,915

Fund BAlAnces Reserved for:

Housing & Economic Development Public Work Projects Street Improvements 59,622 186,832 Public Protection Parks & Recreation Deb1 Service Low ond moderate income housing Land held for resale Unreserved, Undesignnted

Total Fund Balances 52 622 )86 832

Total Liabilities and fund Balanct!t s 121 :i31 s 186 832 $

CITY OF EL CENTRO COMBINING BALANCE SHEET

NONMAJORGOVERNMENTAL FUNDS June 30, 2008

Special Revenue Funds Library Bus T ransponation

CDBG Assistance Sheller Art.icle3

$ 72.889 $ 276.376 $ 41,144

316 821 17

2,395,584 1.757

2 195 584 $ 74 262 $ 277 )97 $ 41 16!

s 257 s s 592

2,395,584

----

2,395,584 849 ----

277.197 41.161

74.113

74 113 277 )97 4! 1~1

') 32:i ~8~ $ H2fi:Z $ ~zz 12z s :U 1~1

Home Rcnto1 Traffic Wake Ave Pro~m Rehab-HUD Safe~ Extension

$ 85,033 $ 411.042 $ 35,140 s 290,850

335 1,733 247 1,233

4,338,870 76,400 14,928 t,486 864

$ 4419166 $ 490 66) ~ ~

$ 154

4,338,870 76,400

4,339,024 76,400

100,142 414,261

36,251 292,083

100142 414 261 ~ 292 083

$ ~~321~6 s i2Q ~61 ~ ~

Traffic Recreation Asset Con&estion Relief Projects Forfeiture

Assets Cash and investmcn(s s $ 1,177 $ 573,935 Receivables: Taxes Interest 2.585

Grants Notes Other

Restricted Cash and Investment with Fiscal Agent

Land held for resale ----Total Assets $ I 171 ~

"" w Liabilities

Accounts payable $ $ 1.177 $ 7,418 Salaries/benefits payable Deferred revenue Deposits Due to other funds ----

Total Liabilities 1,177 --.2:lli.

Fund Balances Reserved for:

Housing & Economic Development Public Work Projects Street Improvements Public Protection 569.102 Porks & Rec[l:ation Debt Service Low and moderate income housing Land held for resale

Unreserved. Undesignated

Total Fund Balances ~

Total Liabilities and Fund Balances $ I 112 ~


NONMAJOR GOVERNMENTAL FUNDS June 30, 2008

Special Revenue Funds Loc:al Transportation Home OTS

Authori~ Grants Grant

$ 7.301.140 $ 35,279 $ 8,594

36,974

583,689

~21.801 S___ li212 $ 8 594

$ 232.457 $ $

232,457 -----

35.279

7,689,346 8,594

7,682.346 ___3_5.272 ___ 8,521

$ 1.921.803 $ 35.279 s 8.594

State COPS Annexation HUD SLESF Fees Entitlement

$ 190,881 $ 101,244 $ 512,482

842 429 2,465

602,692

$ 191 723 $___ 101.673 $ 1.117639

$ 15,Q41 $ $ 67.530 2,898

602,692

--~ 670,222

447,417 101,673

173,784

173 784 -- 101,673 447.417

s 191.723 $ 101.673 $ 1.117 619

(Continued)

CDBG Housing Enabled CALHOME Program Income b~ Local Partnershi2 Pro~m

Assets Cash and investmenls s 1,102,978 $ 447,800 $ 23.264 Receivabl!!s: Taxes Interest 4,655 5,149 99

Grants Notes 704,443 71,017 582,939 Other 7,260

Restricled Cash and Investment with Fiscal Agent


Total Assets $ _L&1Jtll6 $ 523 966 $ _____6fr6.302

·:xl .,!>.

Liabilities Accounts payable $ 18.442 $ $ 9 Salaries/benefits payable Deferred revenue 704,443 71,017 582.939 Deposits Due 10 other funds

Total Liabililies 722,885 71,017 582,948


Housing & Economic Development 1,096,451 452.949 23.354 Public Work Projects Street Improvements Public Protection Parks & Recreation Debt Service Low and moderate income housing Land held for resale Unreserved, Undesignated

Total Fund Balances 1.096.451 452.9A2 23.354

Total Liabilities and Fund Balances $ 1.819.336 $ 523.966 $ 606.302

Development

1m~act Fee

$ 9.297.338

40,660


NONMAJOR GOVERNMENTAL FUNDS June 30, 2008 (Continued)

Special Revenue Funds FHWA

Sim2lot Grants

$ 39,135 s g3,320

166 438

S_________2.3J1.991! L______39_3ill $ 83 758

$ 453,46g $ $

453,46g

8,8g4,530 39,301 83,758

___lL8_8A..i1Q 39 JOJ 83 758

$ 9.337.998 $ 39.301 $ _lB.IiS

Soft Drink Integrated Waste Used Oil Per Capita Franchise Management Grant Parks Grant

$ 2.367 $ 270,373 $ $ 800

10 1,249 24,105

$ 2377 $ 271.622 $ 24.105 $ ROO

$ s 3,506 $ 3,066

19,678

3,506 22,744

2,377 268,116 1,361 800

2 377 268 I 16 1.:161 goo

$ 2371 L_____2]J.622 $ 24.105 s 800

Department of Tire Clean-Up Conservation Grant

Assets Cash and investments s 35,405 $ 6,139 Receivables: Taxes Interest 214

Gmnts 212,756 Notes Other

Restricted Cash and Investment with Fiscal Agent


Total Assets $ _____3lll2 $ ___21B.895

00 v.

Liablliti .. Accounts payable $ 868 s 17,583 Salaries/benefits payable Defened revenue Deposits Due to other funds 166.808

Total Liabilities 868 ~391


Housing & Economic Development Public Work Projects 34,504 Streel improvement" Public Protection Parks & Recreation 34,751 Debt Service Low and moderate income housing Land held for resale Unreserved, Undesignated

Total Fund Balances 34.751 34.504

Total Liabilities and Fund Balances $ lS 6!9 $ ?18 895

Household Hazardous Waste

$ 5,683

24

$ 5 707

5,707

5.707

1i 5 707

s


NONMAJORGOYERNMENTAL FUNDS June 30, 2008

Special Revenue Funds I-8 Imperial Pub I ic Education & Used Oil

Ave Ove!Eass Amnest~ Grant O(!~Ortunit~ Grant

560,527 $ $

2,376

$___ __5.62..2.Q.1

487,200

487,200

75.703

75.7_01

$ ';62 901

EDA Police& Fire Rural Business Revolvins Fund O~mtionnl Fund Ente~rise Grant

s 8.659 s 419,696 s 1,285

184 !,777

$ 8 843 L_ 42U13 $ L28S

8,843

1.285

421,473

-- 8.8~ 421A2l --- 1.285

$ 8 843 $ 421 473 $ I 2&5

(Continued)

Legacy Legacy Ranch Lighting Ranch CFD and Landsca(!e District

Asstts Cash and investments $ 747,153 s 55.396 Receivables: Taxes 731 430

Interest 217 129 Grants Notes Other

Restricted Cash and Jnvw:stment with Fiscal Agent


Total Assets $ 748 101 $ ~5 95~

'"' 0"1 Liabilities Accounts payable s $

Salaries/benefits payable Deferred revenue Deposits 714,449

Due to other funds

Total Liabilities 714,449


Housing & Economic Development Public Work Projccl' 33,652

Street Improvements Public Protection Parks &. Recreation 55.955 Debt Service Low and moderate income housing Land held for r<Sale Unreserved, Undesignated

Total Fund Balances ~2 55 9~5

Total Liabilities and Fund Balnne:cs 5 1~a IQI s ~~m


NONMAJOR GOVERNMENTAL FUNDS June 30, 2008 (Continued)

S~ecial Revenue Funds Fire 2002 Re~oun:e Redevelopment

IV Commons Miti~ation Bond Act Housing

$ 63,327 $ 654,812 $ s 2,604,096

269 2,777 11,256

19,699 1,445,708

1,512

63 589 ----$ 63 .c;g§ ~ $ 19.699 $ 4J26.16l

$ $ $ s 2,7\6 \3,089

1,445,708 61,840

19 699 ---

61,840 \9.699 \,461,513 -

1,756

657,589

2,601,059 63,589

----1 756 ~ - __U64,6't8

$ ~J ~2~ ~ I 19 699 $ 4126.161

Capital Projects Funds Ornnge Ave. Park Drainage Post Office Regional Lift Develo(!ment Facili~ Grant

$ 147,673 s 284,101 $ 249,503

821 1,204 1,058

$ 148.494 S__ 285.305 $ 250.561

---- ---- __ 6_3,363

63,363

250,561 148,494

285,305

(63 363\

__ 148,121 285 305 25Q 561 __ 16D63l

$ 14&.494 $ 285.305 $ 250 561

Lotus liD Faciliry 8th St. Bridge/Road Parallel Crossins Ovc!Eass Bridse lmErovemem

Assets Cash and investments s 277,189 s 150,624 s !7,34U $ 6.165.109 Receivables: Taxes Interest 1,175 639 74 26,136

Grants Notes Other

Restricted Cash nnd Investment with Fiscal Agent


Total Assets $ 278 164 $ 151 ?63 $ 17 414 $ 6 121 245

OC> -...)

Liabilities Aecounts payable $ $ $ 15,000 $

Salaries/benefits payable Deferred revenue Deposits 242,650 132,960 5,973,321 Due to other funds

Total Liabilities 242,650 132,960 15,000 5.973,321

Fund Balances Resel'\'ed for:

Housing & Economic Development Public Work Projects Street Improvements 35,714 18.303 2,414 217,924

Public Protection Parks & Recreation Debt Service Low and moderate income housing Land held for resale Unreserved, Undesignoted

Total Fund Balnnces _____1hl_ 14 18,303 __ 2,414 217 924

Total Liabilities and Fund Balances ~ 27~.364 $ 151.263 s 17.414 $ 6.191.245


NON MAJOR GOVERNMENTAL FUNDS June JU, 2UU8

Capital Projects Funds Federal Highw•y Proposition La Brucheric Administration IB Green Bell

$ $ $ 7.224

31 1,016.267 676,683

$ I 0!6 267 s 676 6RJ $ 7255

s 406.346 $ s

619.938 ----

1,026,284 ----

676,683 7,255

(!0 017)

(10 017} §76 683 7 255

$ Llll6.261 s 616 683 $ z 255

Colonia-EI Dorado Street

$ 10

41 50,111

$ SOtfi?

$ 14,183

15,552

29,735

20,427

20427

$ so 162

Total Debt Service Nonmajor

Buena Vista Redevelopment Lease Governmental LandscaJ:!ing A gene~ Purchase Funds

$ 200,453 $ 8,861,206 $ s 42,872,637

400 1,561 822 36,474 188,980

1,999,621 10,217,653

823,560

2,796,409 2,796,409 63,589

$ 201 675 $ 1 I 694 089 $ 58,964,010

$ 16 s $ $ 1,260,791 16,579

10,217,653 7.612,420 1,015399

16 20,122,842

2,578,696 9.703,674 9,791,116 1,830,542

201,659 651,783 2,765,955 2,765,955

2,601,059 63,589

8 928 134 8,854,754

201 652 II 624 089 - 38.841.168

$ 201 615 L_li.69A.0&2 L s 58.964.010


NONMAJOR GOVERNMENTAL FUNDS For the Fiscal Year Ended June 30, 2008

Special Revenue Funds

Transportation Library Bus Transportation Home Rental Traffic Wake Ave Gas Tax Article 8 CDBG Assistance Shelter Article 3 Proa!am Rehab-HUD Safe~ Extension

Revenues: lntergovcnuncntal $ 716,011 $ 576,606 $ $ 32,642 $ 86,410 $ 37,177 Taxes Charges for services Interest 4,518 3,213 2,850 2,725 7,925 404 3,913 16,259 3,380 11,720 Other 50 117,188 16,332 16,479

Total Revenues 720,529 579,819 2,850 35,417 94,335 37,581 121,101 32,591 19,859 ll,720

Ex.pendirures: Current General Govenunent Public Safety Public Works 1,554 4,137 3,375 14,743 Parks and Recreation 26,427

Community Development 116,501 218,493 Capital Outlay 5,875 41,063 54,263

OCI Debt Service:

00 Prinicipal Interest

Total E•penditwes 1,554 4,137 116,501 26,427 9,250 41063 218 493 ~

E•cess (Deficiency) of Revenues over (Under) Expenditures 718,975 575,682 (I 13,651) 8,990 85_.()115 _(3.482) __ (9UW 32221_ ~.147) 11,720

Other Financing Sowces (Uses): Transfen; In Transfen; Out (760,000) ~000)

Total Other Financing Sowces (Uses) (760,000) (750,000)

Net Change in Fund Balances (41,025) (174,318) (113,651) 8,990 85,085 (3,482) (97,392) 32,591 (49,147) 11,720

Fund Balances- July I, 2007 100,647 361,150 113,651 65,123 192,112 44,643 197,534 381,670 85,398 280,363

Fund Balances- June 30, 2008 59,622 186,832 74,113 277,197 41,161 100,142 414,261 36,251 292,083

00 \0

Revenues: Intergovernmental Taxes Charges for services Interest Other

Total Revenues

Expenditures: Cwrent: General Government Public Safety Public Works Parks nnd Recreation Community Development

Capital Oullay Debt Service: Prinicipal Interest

Total Expenditures

Excess (Deficiency) of Revenues over (Under) Expenditures

Other Financing Sources (Uses): Transfers In Transfers Out

Total Other Financing Sources (Uses)

Net Change in Fund Balances

Fund Balances- July I, 2007

Fund Balnnces - June 30, 2008


NONMAJOR GOVERNMENTAL FUNDS Fiscal Year Ended June 30, 2008


Traffic Recreation Asset Local Transportation Home OTS State COPS Annexation HUD Entitlement Congestion Relief Projects Fortfeirure Authority Grants Grant SLESF Fees Program

1,384

1,384

1,384

(163,837)

(163,837)

(162,453)

162,453

912 34,987 35,899

113,979

!13,979

(78,080)

30,792

30,792

(47,288)

47,288

$ 665,707 2,455,125

34,998 321,658

700,705 2,776,783

493,049 1,360,055

357,580 400,525

850,629 1,760,580

(149,924) 1,016,203

(149,924) 1,016,203

719,026 6,673,143

~ 7,689,346

8,605 35,279 43,884

351,935

351,935

(308,051)

(308,05 I)

343,330

35,279

1,852 100,000

6,108

1,852 106,108

6,223 29,130

42,800

6,223 71,930

(4,371) 34,178

(4,371) 34,178

12,965 139,606

8,594 173,784

802,794

4,255 20,039

4,255 822,833

20,030

344,824 625,080

20,030 969,904

(15,775) (147,071)

(15,775) (147,071)

!17,448 594,488

101,673 447,417

(Continued)

\0 0


Total Revenues

Expenditures: Current. General Goverrunent Public Safel)l Public Worlos Parks and Recreation Communil)l Development Capital Outlay Debt Service: Prinicipal 1nterest

Total Expenditures


Other Financing Sources (Uses): Transfers In Transfers Out



Fund Balances- July 1, 2007

Fund Balances -June 30, 2008



(Continued)

Special Revenue Funds CDBG Housing Enabled CALHOME Development FHWA Soft Drink lntergrated Waste

Program Income by Local Partnership Program Impact Fee Simplot Grants Franchise Management

$ $ s 2,256 $ s $ 44,561 s s 248,133

1,377,034 36,987 47,983 1,493 382,230 1,578 2,767 97 9,156

315,291 121,523 945 4,461 352,278_ 169,506 3,742_ -- 1,759,264 ___l,ill_ 47,328 1,042 261,750

19,987 1,018 219,946

18,821 442,067 2,629 1,204,977 1,935

18,821 442,067 2,629 1,204,977 19,987 1,018 221,881

333,457 (272,561) 1,120 554,287 1,578 27,341 24 39,869

(51,857)

(51,857)

333,457 (272,561) 1,120 502,430 1,578 27,341 24 39,869

762,994 725,510 22.234 8,382,100 37,723 56,417 2,353 228,247

1,096,451 452,949 23,354 8,884,530 ~ ~ 2,377 268,116

Used Oil Per Capita Grant Pari<s Grant

$ 20,113 $ 800

336 20,449 800

53,617

53,617

(33.168) 800

(33,168) 800

34,529

1,361 800

\0 .......


T ota1 Revenues

Expenditures: Current: General Government Public Safety Public Works Parks and Recreation Community Development Capital Outlay Debt Service: Prinicipal Interest

Total Expenditures


Other Financing Sources (Uses):

Transfers ln Transfers Out



Fund Balances- July I, 2007

Fund Balances- June 30, 2008

Department of Conservation

11,163

2,780 36,538 50,481

50,195

50,195

286

286

34,465

34,751




Tire Clean-Up Household 1-8 Imperial Public Education & Used Oil EDA Police & Fire Rural Business Grant Hazard Waste

$ 212,757 $ 6,820

57

212,757 6,877

212,757 3,778

212,757 3,778

3,099

3,099

34,504 2,608

34,504 5,707

Ave Overpass Amnesty Grant Opporrunity Grant Revolvin~ Operational Enterprise Grant

$ 4,196 1,069

22,586

22,586 4,196 1,069

22,586 4,196 1,069

22,586 4,196 1,069

53,117 (4,196) (1,069)

75,703

13,002

1,465 25,518

14,467 25,518

50,516

50,516

(36,0491 25,518

(293,739)

(293,739)

(36,049) (268,221)

44,892 689,694

8,843 421,473

s 38,816

38,816

12,168 25,363

37,531

1,285

1,285

1,285

(Continued)



(Continued)

Special Revenue Funds Capital Project Funds Legacy Ranch Legacy Rilllch Lighting Fire 2002 Resource Redevelopment Orange Ave. Park Drainage Post Office Lotus liD Facility

CFD and Landsca~e District IV Commons Mitisation Bond Act Housing Reg!onal Lift DeveloE;ment Facili~ Grant Parallel Crossins Revenues:

Intergovernmental $ $ $ $ s 19,699 Taxes 29,685 55,447 1,104,339 Charges for services Interest 1,677 316 1,756 15,810 128,241 5,926 I 1,447 9,509 3,247 I 1,170 6,070 Other 24,333 13,160 530,665 501,079 57,573 62,165

Total Revenues 55,695 55,763 14,916 546,475 19,699 1,733,659 63,499 II 447 71,674 3,247 II 170 6,070

Expenditure<: Current: General Government Public Safety Public Works 24,333 13,160

Parks and Recreation 4,\\8 19,699 Community Development 748,268

Capital Outlay I ,554,614 193,792

Debt Service: \0 Prinicipal N

Interest

Total Expenditures 24,333 4 I 18 13,160 19,699 2,302,882 193,792

Excess (Def1ciency) of Revenues over (Under) Expenditures 31,362 51,645 1,756 546,475

-- - - (569,223)_ -- 63,499 __ 11,447 _71,674_ (1~,545) 11,170 6,070

Other Financing Sources (Uses): Transfers In 293,739

Transfers Out ~625)

Total Other Financing Sources (Uses) 111,114

Net Change in Fund Balances 31,362 51,645 1,756 6,,589 (569,223) 63,499 11,447 71,674 (190,545) 11,170 6,070

Fund Balances- July I, 2007 2,290 4,310 3,233,87t 84,995 273,858 178,887 127,182 24,544 ~

Fund Balances ·June 30, 2008 s 33,652 s 55,955 $ 1,756 $ 657,589 s _!______2,664,648 S __ l_48.~ s 285,305 __L__l50,561 ~ (63,363) $ 35,714 $ 18,303

SCHEDULES OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES -BUDGET AND ACTUAL


93

CITY OF EL CENTRO GAS TAX SPECIAL REVENUE FUND

SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE-BUDGET AND ACTUAL

For the Fiscal Year Ended June 30, 2008

Variance

Revenues: Interest Intergovernmental

Total Revenues

Expenditures: Public Works

Total Expenditures

Excess (Deficiency) of Revenues Over (Under) Expenditures

Other Financing Sources (Uses) Transfers Out


Net Change in Fund Balance

Fund Balance - July 1

Fund Balance- June 30

Final Budget

$ 500 741,000

741,500

2,000

2,000

739,500

(770,000)

(770,000)

(30,500)

100,647

$ 70,147

94

Actual Positive Amount (Negative)

$ 4,518 $ 4,018 716,011 {24,989)

720,529 (20,971)

1,554 446

1,554 446

718,975 (20,525)

(760,000) 10,000

(760,000) 10,000

( 41 ,025) (10,525)

100,647

$ 59,622 $ {10,525)

CITY OF EL CENTRO TRANSPORTATION ART 8 SPECIAL REVENUE FUND



Variance Final Actual Positive

Budget Amount (Negative)

Revenues: Interest $ 100 $ 3,213 $ 3,113 Intergovernmental 400,000 576,606 176,606

Total Revenues 400,100 579,819 179,719

Expenditures: Public Works 4,500 4,137 363

Total Expenditures 4,500 4,137 363

Excess (Deficiency) of Revenues Over (Under) Expenditures 395,600 575,682 180,082

Other Financing Sources (Uses) Transfers Out (750,000) (750,000)

Total Other Financing Sources (Uses) (750,000) (750,000)

Net Change in Fund Balance (354,400) (174,318) 180,082

Fund Balance- July 1 361,150 361,150

Fund Balance- June 30 $ 6,750 $ 186,832 $ 180,082

95

CITY OF EL CENTRO CDBG SPECIAL REVENUE FUND



Variance

Revenues: Interest $

Total Revenue

Expenditures: Community development

Total Expenditures



Fund Balance - June 30 $

Final Actual Budget Amount

- $ 2,850 $

2,850

116,501

116,501

(113,651)

113,651 113,651

113,651 =$====- $

96

Positive (Negative)

2,850

2,850

(116,501)

(116,501)

(113,651)

(113,651)

CITY OF EL CENTRO LIBRARY ASSISTANCE SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES AND

CHANGES IN FUND BALANCE-BUDGET AND ACTUAL For the Fiscal Year Ended June 30, 2008

Revenues: Interest Donations Intergovernmental

Total Revenue

Expenditures: Parks and Recreation

Total Expenditures



Fund Balance - June 30

$

$

Final Budget

200 $ 500

24,000

24,700

20,700

20,700

4,000

65,123

69,123 $

97

Actual Amount

2,725 $ 50

32,642

35,417

26,427

26,427

8,990

65,123

Variance Positive

(Negative)

2,525 (450)

8,642

10,717

(5,727)

(5,727)

4,990

74,113 ==$ ====4,=99=0

CITY OF EL CENTRO BUS SHELTER SPECIAL REVENUE FUND





Revenues: Intergovernmental $ 41,640 $ 86,410 $ 44,770 Interest 1,000 7,925 6,925

Total Revenue 42,640 94,335 51,695

Expenditures: Public Works 6,640 3,375 3,265 Capital Outlay 5,875 (5,875)

Total Expenditures 6,640 9,250 (2,610)

Net Change in Fund Balance 36,000 85,085 49,085


Fund Balance - June 30 $ 228,112 $ 277,197 $ 49,085

98

CITY OF EL CENTRO TRANSPORTATION ART. 3 SPECIAL REVENUE FUND



Revenues: Interest Intergovernmental

Total Revenue

Expenditures: Public Works Capital Outlay

Total Expenditures


Fund Balance- July I


$

$

Final Budget

500 $ 8,000

8,500

45,000

45,000

(36,500)

44,643

8,143 $

99

Actual Amount

404 $ 37,177

37,581

41,063

41,063

(3,482)

44,643

Variance Positive

(Negative)

(96) 29,177

29,081

45,000 (41,063)

3,937

33,018

41,161 $ 33,018 ======

CITY OF EL CENTRO HOME PROGRAM SPECIAL REVENUE FUND





Revenues: Other Income $ 96,000 $ 117,188 $ 21,188 Interest 2,000 3,913 1,913

Total Revenue 98,000 121,101 23,101

Expenditures: Community Development 98,000 218,493 {120,493)


Net Change in Fund Balance (97,392) (97,392)


Fund Balance - June 30 $ 197,534 $ 100,142 $ (97,392)

100

CITY OF EL CENTRO

RENTAL REHAB - HUD SPECIAL REVENUE FUND

SCHEDULE OF REVENUES, EXPENDITURES AND

CHANGES IN FUND BALANCE-BUDGET AND ACTUAL


Revenues:

Interest $ Other Income

Total Revenue

Expenditures: Community Development

Total Expenditures




Final Budget

2,000 $ 20,000

22,000

200,000

200,000

(178,000)

381,670

203,670 $

101

Actual Amount

16,259 $ 16,332

32,591

32,591

381,670

Variance

Positive (Negative)

14,259 (3,668)

10,591

200,000

200,000

210,591

414,261 ,;,$ ==2=10=f=,5=9,;;,1

CITY OF EL CENTRO TRAFFIC SAFETY SPECIAL REVENUE FUND



Revenues: Interest Other Income

Total Revenue

Expenditures: Public Works Capital Outlay

Total Expenditures


Fund Balance -July I


$

$

Final Budget

- $ 47,000

47,000

16,505 30,000

46,505

495

85,398

85,893 $

102

Actual Amount

3,380 $ 16,479

19,859

14,743 54,263

69,006

(49,147)

85,398

Variance Positive

(Negative)

3,380 (30,521)

(27,141)

1,762 (24,263)

(22,501)

(49,642)

36,251 =$ =~(4~9,=64=i2)

CITY OF EL CENTRO WAKE AVE EXTENSION SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES AND




Revenues: Interest $ 11,720 $ 11,720 $

Total Revenue ll,720 11,720

Net Change in Fund Balance 11,720 11,720

Fund Balance - July I 280,363 280,363

Fund Balance -June 30 $ 292,083 $ 292,083 $

103

CITY OF EL CENTRO

TRAFFIC CONGESTION RELIEF SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES AND


Revenues: Interest

Total Revenues

Other Financing Sources (Uses) Transfers Out



Fund Balance - July I


$

$



- $ 1,384 $ 1,384

1,384 1,384

(284,410) (163,837) 120,573

(284,410) (163 ,83 7) ___ 12_0..-<..,5_7_3

(284,410) (162,453) 121,957

162,453 162,453

(121 ,957) =$ ====- ~$ =~1;;,;,2~1 ',;,;;95,.;,7

104

CITY OF EL CENTRO RECREATION PROJECTS SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES AND


Variance

Revenues: Interest Other

Total Revenue


Total Expenditures


Other Financing Sources (Uses) Transfers In



Fund Balance- July 1


Final Budget

$ 70,000 70,000

89,300

89,300

(19,300)

(19,300)

47,288

$ 27,988

lOS


$ 912 $ 912 34 987 (35,013) 35,899 {34,101)

113,979 (24,679)

113,979 (24,679)

(78,080) (58,780)

30,792 30,792

30,792 30,792

(47,288) (27,988)

47,288

$ - $ (27,988)

CITY OF EL CENTRO ASSET FORFEITURE SPECIAL REVENUE FUND





Revenues: Interest $ - $ 34,998 $ 34,998 Intergovernmental 100,000 665,707 565,707

Total Revenue 100,000 700,705 600,705

Expenditures: Public Safety 493,049 (493,049) Capital Outlay 357,580 {357,580)

Total Expenditures 850,629 (850,629)

Excess (Deficiency) of Revenues Over (Under) Expenditures 100,000 (149,924) (249,924)


Transfers Out {300,000) 300,000

Total Other Financing Sources (Uses) (300,000) 300,000

Net Change in Fund Balance (200,000) (149,924) 50,076



106

CITY OF EL CENTRO

LOCAL TRANSPORTATION AUTHORITY SPECIAL REVENUE FUND



Variance

Final Actual Positive Budget Amount (Negative)

Revenues:

Interest $ 35,000 $ 321,658 $ 286,658 Intergovernmental 2,461,000 2,455,125 (5,875)

Total Revenue 2,496,000 2,776,783 280,783

Expenditures:

Public Works 1,360,055 ( 1 ,360,055)

Capital Outlay 7,681,000 400,525 7,280,475


Net Change in Fund Balance (5, 185,000) 1,016,203 6,201,203

Fund Balance- July 1 6,673,143 6,673,143

Fund Balance- June 30 $ 1,488,143 $ 7,689,346 $ 6,201,203

107

CITY OF EL CENTRO HOME GRANTS SPECIAL REVENUE FUND



Variance

Revenues: Other Interest

Total Revenue


Total Expenditures


Fund Balance - July I


Final Budget

$ - $

343,330

$ 343,330 $

108

Actual Amount

35,279 8,605

43,884

351,935

351,935

(308,051)

343,330

35,279

$

$

Positive (Negative)

35,279 8,605

43,884

(351 ,935)

(351 ,935)

(308,051)

(308,051)

CITY OF EL CENTRO

OTS GRANT SPECIAL REVENUE FUND





Revenues: Intergovernmental $ 6,852 $ 1,852 $ (5,000)

Total Revenue 6,852 1,852 (5,000)

Expenditures: Public Safety 6,852 6,223 629

Total Expenditures 6,852 6,223 629


Fund Balance - July 1 12,965 12,965

Fund Balance- June 30 $ 12,965 $ 8,594 $ (4,371)

109

CITY OF EL CENTRO STATE COPS SLESF SPECIAL REVENUE FUND




Budget Amount (l\1" egati ve)

Revenues: Intergovernmental $ 100,000 $ 100,000 $ Interest 800 6,108 5,308

Total Revenue 100,800 106,108 5,308 .

Expenditures: Public Safety 77,987 29,130 48,857 Capital Outlay 50,000 42,800 7,200

Total Expenditures 127,987 71,930 56,057

Net Change in Fund Balance (27,187) 34,178 61,365

Fund Balance- July I 139,606 139,606

Fund Balance -June 30 $ 112,419 $ 173,784 $ 61,365

110

CITY OF EL CENTRO

ANNEXATION FEES SPECIAL REVENUE FUND






Revenues: Interest $ $ 4,255 $ 4,255

Total Revenue 4,255 4,255

Expenditures: Public works 20,030 {20,030)

Total Expenditures 20,030 {20,030)



Fund Balance- June 30 $ 117,448 $ 101,673 $ {15,775)

Ill

CITY OF EL CENTRO HUD ENTITLEMENT PROGRAM SPECIAL REVENUE FUND





Revenues: Intergovernmental $ 688,932 $ 802,794 $ 113,862 Interest 20,039 20,039

Total Revenue 688,932 822,833 133,901

Expenditures: Community Development 564,174 344,824 219,350 Capital Outlay 456,758 625,080 (168,322)

Total Expenditures 1,020,932 969,904 51,028

Excess (Deficiency) of Revenues Over (Under) Expenditures (332,000) (147,071) 184,929

Other Financing Sources (Uses)

Transfers In 307,000 (307,000)

Total Other

Financing Sources (Uses) 307,000 (307,000)

Net Change in Fund Balance (25,000) (147,071) (122,071)


Fund Balance- June 30 $ 569,488 $ 447,417 $ (122,071)

112

CITY OF EL CENTRO CDBG PROGRAM INCOME SPECIAL REVENUE FUND




Total Revenue


Total Expenditures



Transfers Out




Fund Balance -June 30

$

$

Final Budget

295,000 $ 12,000

307,000

307,000

(307,000)

(307,000)

762,994

Actual Amount

315,291 $ 36,987

352,278

18,821

18,821

333,457

333,457

762,994

Variance Positive

(Negative)

20,291 24,987

45,278

(18,821)

(18,821)

26,457

307,000

307,000

333,457

762,994 $ 1,096,451 ~$ =~3=3~3,=45=7

113

CITY OF EL CENTRO

HOUSING ENABLED BY LOCAL PARTNERSHIP SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES AND

CHANGES ll\J FUND BALANCE-BUDGET AND ACTUAL


Revenues: Interest Other

Total Revenue


Total Expenditures




$

$

Final Budget

725,510

$

725,510 $

114

Actual Amount

47,983 $ 121,523

169,506

442,067

442,067

(272,561)

725,510

Variance Positive

(Negative)

47,983 121,523

169,506

(442,067)

(442,067)

(272,561)

452,949 $ (272,561)

CITY OF EL CENTRO CALHOME PROGRAM SPECIAL REVENUE FUND



Revenues: Intergovernmental Interst

Total Revenue


Total Expenditures




$

$

Final Budget

10,500 $

10,500

10,500

22,234

32,734 $

115

Actual Amount

2,256 $

1,493

Variance

Positive (Negative)

(8,244) 1,493

3,749 ___ (,__6,7 51)

2,629 (2,629)

2,629 (2,629)

1,120 (9,380)

22 234

23,354 ..:...$~=,:,;.(9.1.,;,,3=8='0)

CITY OF EL CENTRO

DEVELOPMENT IMPACT FEE SPECIAL REVENUE FUND



Revenues: Charges for services Interest

Total Revenue

Expenditures:

Public Works Capital Outlay

Total Expenditures



Transfers Out

Total Other

Financing Sources (Uses)




$

Final Budget

461,000 188,700

649,700

100,000 1,075,407

1' 175,407

(525,707)

(57,000)

(57,000)

(582,707)

8,382,100

$

Actual Amount

1,377,034 382,230

1,759,264

1,204,977

1,204,977

554,287

(51,857)

(51,857)

502,430

8,382,100

$

Variance

Positive (Negative)

916,034 193,530

1,109,564

100,000 (129,570)

(29,570)

1,079,994

5,143

5,143

1,085,137

$ 7,799,393 $ 8,884,530 $ I ,085,137

116

CITY OF EL CENTRO SIMPLOT SPECIAL REVENUE FUND





Revenues: Interest $ 500 $ 1,578 $ 1,078

Total Revenue 500 1,578 1,078

Net Change in Fund Balance 500 1,578 1,078

Fund Balance -July 1 37,723 37,723

Fund Balance- June 30 $ 38,223 $ 39,301 ~$==~1,0=7=8

117

CITY OF EL CENTRO FHW A GRANTS SPECIAL REVENUE FUND



Variance

Revenues: Intergovernmental Interest

Total Revenue

Expenditures: Capital Outlay

Total Expenditures




Final Budget

$ -

56,417

$ 56,417

118


$ 44,561 $ 44,561 2,767 2,767

47,328 47,328

19,987 (19,987)

19,987 (19,987)

27,341 27,341

56,417

$ 83,758 $ 27,341

CITY OF EL CENTRO SOFT DRINK FRANCHISE SPECIAL REVENUE FUND




Total Revenue


Total Expenditures




$

$

Final Budget

800 $ 90

890

800

800

90

2,353

2,443 $

119

Actual Amount

945 $ 97

1,042

1,018

1,018

24

2,353

Variance Positive

(Negative)

145 7

152

(218)

(218)

(66)

2,3 77 =$ ======l=( 6=£6)

CITY OF EL CENTRO INTEGRA TED WASTE MANAGEMENT SPECIAL REVENUE FUND





Revenues: Intergovernmental $ 248,000 $ 248,133 $ 133 Other 4,461 4,461 Interest 9,156 9,156

Total Revenue 248,000 261,750 13,750

Expenditures: Public Works 185,500 219,946 (34,446)

Capital Outlay 3,600 1,935 1,665


Net Change in Fund Balance 58,900 39,869 (19,031)



120

CITY OF EL CENTRO USED OIL GRANT SPECIAL REVENUE FUND



Final Actual Variance Positive


Revenues: Intergovernmental Other

Total Revenue


Total Expenditures




$ 165,565 $

165,565

165,565

165,565

34,529

$ 34,529 $

121

20,113 $ (145,452) 336 336

20,449 {145,116)

53,617 111,948

53,617 111,948

(33,168) (33,168)

34,529

1 ,361 ~$ =~(:6,;3 3~, 1~6,;;t8)

CITY OF EL CENTRO PER CAP IT A PARKS GRANT SPECIAL REVENUE FUND





Revenues: Intergovernmental $ - $ 800 $ 800

Total Revenue 800 800

Net Change in Fund Balance 800 800


Fund Balance- June 30 $ - $ -'------ 800 $ -----800

122

CITY OF EL CENlRO DEPARTMENT OF CONSERVATION SPECIAL REVENUE FUND



Revenues: Intergovernmental Other Interest

Total Revenue


Total Expenditures




$

$

Final Budget

58,000 $

58,000

42,000

42,000

16,000

34,465

50,465 $

123

Actual Amount

11,163 $ 36,538

2,780

50,481

50,195

50,195

286

34,465

Variance Positive

(Negative)

(46,837) 36,538

2,780

(7,519)

(8,195)

(8,195)

(15,714)

34' 7 51 ::::$ ==(~1 ::f5 '=71==4)

CITY OF EL CENTRO

TIRE CLEAN-UP GRANT SPECIAL REVENUE FUND



Revenues: Intergovernmental $

Total Revenue


Total Expenditures



Fund Balance - June 3 0 $

Final Budget

441,046 $

441,046

441,046

441,046

34,504

34,504 $

124

Actual Amount

212,757 $

212,757

212,757

212,757

34,504

Variance Positive

(Negative)

(228,289)

(228,289)

228,289

228,289

34,504 =$====

CITY OF EL CENTRO HOUSEHOLD HAZARDOUS WASTE SPECIAL REVENUE FUND




Total Revenue


Total Expenditures




$

$


- $ 6,820 57

6,877

3,778

3,778

3,099

2,608 2,608

2,608 $ 5,707

125

Variance Positive

(Negative)

$ 6,820 57

6,877

(3,778)

(3,778)

3,099

$ 3,099

CITY OF EL CENTRO I-8 IMPERIAL AVE OVERPASS SPECIAL REVENUE FUND



Revenues: Interest $

Total Revenue


Fund Balance - July l


Final Budget

15,000 $

15,000

15,000

53,117

68,117 $

126

Actual Amount

Variance Positive

(Negative)

22,586 .:..._$ __ ___c7...z.:,5:....::8....::...6

22,586 7,586

22,586 7,586

53,117

75,703 ~$==~7,,;,58;,;,6

CITY OF EL CENTRO PUBLIC EDUCATION & AMNESTY GRANT SPECIAL REVENUE FUND





Revenues: Intergovernmental $ - $ 4,196 $ 4,196



Fund Balance- July 1 (4,196) (4,196)

Fund Balance - June 30 $ (4,196) $ - $ 4,196

127

CITY OF EL CENTRO USED OIL OPPORTUNITY GRANT 7 SPECIAL REVENUE FUND





Revenues: Intergovernmental $ - $ 1,069 $ 1,069



Fund Balance - July I (1,069) (1 ,069)

Fund Balance - June 30 $ (1,069) =$====- =$=====1,=06=9

128

CITY OF EL CENTRO EDA REVOLVING SPECIAL REVENUE FUND





Revenues: Intergovernmental $ $ 13,002 $ 13,002 Interest 2,000 1,465 (535)

Total Revenue 2,000 14,467 12,467

Expenditures: Community Development 2,000 50,516 (48,516)





129

CITY OF EL CENTRO POLICE & FIRE OPERATIONAL SPECIAL REVENUE FUND



Final Budget

Actual Amount

Variance Positive

(Negative)


Total Revenue


Transfers Out

Total Other





$

$

143,017 $

20,000

163,017

(182,626)

(182,626)

(19,609)

689,694

670,085 $

130

- $

25,518

25,518

(293,739)

(293,739)

(268,221)

689,694

421,473 $

(143,017) 5,518

(137,499)

(111,113)

(111,113)

(248,612)

(248,612)

CITY OF EL CENTRO RURAL BUSINESS ENTERPRISE GRANT SPECIAL REVENUE FUND



Revenues: Intergovernmental

Total Revenue

Expenditures: Community Development Capital Outlay

Total Expenditures




Final Budget

$ - $

$ - $ =======

131

Actual Amount

38,816

38,816

12,168 25,363

37,531

1,285

$

Variance Positive

(Negative)

38,816

38,816

(12,168) (25,363)

(37,531)

1,285

1 ,285 $ 1,285 ===='===

CITY OF EL CENTRO

LEGACY RANCH CFD SPECIAL REVENUE FUND



Revenues:

Other

Tax Interest

Total Revenue


Total Expenditures




$

$

Final Budget

- $

2,290

2,290 $

132

Actual Amount

24,333 $

29,685 1,677

55,695

24,333

24,333

31,362

2,290

Variance Positive

(Negative)

24,333 29,685

1,677

55,695

(24,333)

(24,333)

31,362

33,652 ~$ ==3=1~,3=6=2

CITY OF EL CENTRO LEGACY RANCH LIGHTING AND LANDSCAPING DISTRICT SPECIAL REVENUE FUND





Revenues: Tax $ - $ 55,447 $ 55,447 Interest 316 316


Expenditures: Parks and Recreation 4,118 {4,118)

Total Expenditures 4,118 {4,118)




133


Total Revenue

Expenditures: Public works

CITY OF EL CENTRO IV COMMONS SPECIAL REVENUE FUND




$ - $ I3,I60 I,756

I4,9I6

13,I60

Total Expenditures I3,I60

Net Change in Fund Balance 1,756


Variance Positive

(Negative)

$ 13,I60 I,756

I4,9I6

(13,I60)

(13,I60)

I,756

Fund Balance- June 30 $ - $ ~====

I ,756 =$===I==, 7=5=6

134

CITY OF EL CENTRO FIRE MITIGATION SPECIAL REVENUE FUND




Total Revenue



Transfers Out

Transfers In

Total Other





$

$


401,319 $ 530,665 15,810

401,319 546,475

401,319 546,475

(182,625)

293,739

111,114

401,319 657,589

401,319 $ 657,589

135

Variance Positive

(Negative)

$ 129,346 15,810

145,156

145,156

(182,625)

293,739

111,114

256,270

$ 256,270

Revenues: Intergovernmental

Total Revenue

Expenditures:

CITY OF EL CENTRO

2002 RESOURCE BOND ACT SPECIAL REVENUE FUND





$ - $ 19,699

19,699

Parks and Recreation 19,699

Total Expenditures 19,699



Variance

Positive (Negative)

$ 19,699

19,699

(19,699)

(19,699)

Fund Balance - June 30 $ - $ - $ ~==== ======= =======

136

CITY OF EL CENTRO REDEVELOPMENT AGENCY HOUSING SPECIAL REVENUE FUND



Variance Final Positive

Budget Actual (Negative)

Revenues:

Property Tax Increment $ 911,400 $ 1,104,339 $ 192,939 Interest 62,400 128,241 65,841 Other Revenues 50,000 501,079 451,079

Total Revenues 1,023,800 1,733,659 709,859

Expenditures:

Community Development 2,050,963 748,268 1,302,695 Capital Outlay 1,507,500 1,554,614 (47,114)


Net Change in Fund Balance (2,534,663) (569,223) 1,965,440

Fund Balance - July I 3,233,871 3,233,871

Fund Balance- June 30 $ 699,208 $ 2,664,648 $ 1,965,440

137

CITY OF EL CENTRO

ORANGE AVE REGIONAL LIFT CAPITAL PROJECTS FUND



Variance


Revenues:

Interest $ 800 $ 5,926 $ 5,126

Other 57 573 57 573

Total Revenues 800 63 499 62,699

Net Change in Fund Balance 800 63,499 62,699

Fund Balance - July 1 84 995 84 995


138

CITY OF EL CENTRO PARK DEVELOPMENT CAPITAL PROJECTS FUND SCHEDULE OF REVENUES, EXPENDITURES AND




Revenues: Interest $ 7,000 $ 11,447 $ 4,447

Other 2 000 (2,000}

Total Revenues 9 000 11447 2447




139

CITY OF EL CENTRO

DRAINAGE FACILITY CAPITAL PROJECTS FUND




Variance



Other 30 000 62,165 32,165

Total Revenues 32,500 71 674 39174




140

CITY OF EL CENTRO POST OFFICE GRANT CAPITAL PROJECTS FUND SCHEDULE OF REVENUES, EXPENDITURES AND


Variance


Total Revenues

Expenditures: Capital Outlay

Total Expenditures



Fund Balance (Deficit) - June 30

$

$

Final Budget

70,856 $

70 856

199 060 199,060

(128,204)

127,182

(1,022) $

141


$ (70,856) 3,247 3,247

3 247 (67,609)

193,792 5 268 193,792 5 268

(190,545) (62,341)

127,182

(63,363) $ (62,341)

CITY OF EL CENTRO LOTUS PARALLEL CAPITAL PROJECTS FUND






Total Revenues 1 000 11 170 10 170


Fund Balance- July 1 24 544 24 544


142

CITY OF EL CENTRO liD FACILITY CROSSING CAPITAL PROJECTS FUND





Revenues: Interest $ - $ 6,070 $ 6,070

Total Revenues 6070 6 070




143

CITY OF EL CENTRO 8TH STREET OVERPASS BRIDGE CAPITAL PROJECTS FUND





Revenues: Interest $ 300 $ 699 $ 399

Total Revenues 300 699 399

Net Change in Fund Balance 300 699 399

Fund Balance - July 1 1 715 1 715

Fund Balance- June 30 $ 2,015 $ 2,414 $ 399

144

CITY OF EL CENTRO BRIDGE/ROAD IMPROVEMENT CAPITAL PROJECTS FUND




Total Revenues




$

$

Final Budget

22.474

$

Actual Amount

385 195.065

195.450

195,450

22.474

Variance Positive

(Negative)

385 195.065

195 450

195,450

22,474 $ 217,924 $ 195,450 ===~=

145

CITY OF EL CENTRO

FEDERAL HIGHWAY ADMINISTRATION CAPITAL PROJECTS FUND




Revenues: Intergovernmental $

Total Revenues

Expenditures:

Capital Outlay

Total Expenditures



Fund Balance (Deficit) - June 30 $

Final

Budget

100,000 $

100 000

100.000 100.000

47 021

47,021 $

146

Actual

Amount

Variance

Positive

(Negative)

518,113 _$ __ 4_18--'-,1_1_3

518.113 418 113

575 151 (475.151) 575 151 (475.151)

(57,038) (57,038)

47 021

(1 0,0 17) ~$ ==(*=5=:f7 '=03===8)

CITY OF EL CENTRO PROPOSITION lB CAPITAL PROJECTS FUND


For the Fiscal Year Ended June 30, ?.008



Revenues: Intergovernmental $ $ 676,683 $ 676,683

Total Revenues 676,683 676,683



Fund Balance - June 30 $ - $ ~====

676,683 ==$ ==6=7===6,=68=3

147

CITY OF EL CENTRO LA BRUCHERIE GREEN BELT CAPITAL PROJECTS FUND





Revenues: Interest $ - $ 291 $ 291

Total Revenues 291 291

Net Change in Fund Balance 291 291

Fund Balance- July 1 6 964 6 964

Fund Balance- June 30 $ 6,964 $ 7,255 $ 291

148

CITY OF EL CENTRO

COLONIA -EL DORADO STREET CAPITAL PROJECTS FUND SCHEDULE OF REVENUES, EXPENDITURES AND




Revenues: Intergovernmental $ 746,974 $ 349,641 $ (397,333) Interest 3,505 3,505

Total Revenues 746 974 353 146 (393,828)

Expenditures: Public Works 121,974 122,114 (140)

Capital Outlay 625,000 227,978 397,022

Total Expenditures 746 974 350,092 396,882


Fund Balance -July 1 17 373 17 373


149

CITY OF EL CENTRO BUENA VISTA LANDSCAPING AND LIGHTING DISTRICT CAPITAL PROJECTS FUND

SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE-BUDGET AND ACTITAL




Revenues: Taxes $ 30,000 $ 27,803 $ (2,197) Interest 500 7,349 6,849

Total Revenues 30 500 35,152 4 652

Expenditures: Parks and Recreation 8,500 5,275 3,225

Total Expenditures 8 500 5 275 3.225


Fund Balance- July 1 171.782 171 782


ISO

CITY OF EL CENTRO REDEVELOPMENT AGENCY DEBT SERVICE FUND SCHEDULE OF REVENUES, EXPENDITURES AND

CHANGES IN FUND BALANCE-BUDGET AND ACTUAL For The Fiscal Year Ended June 30, 2008

Variance Final Positive

Budget Actual (Negative)

Revenues:

Taxes $ 3,644,600 $ 4,417,356 $ 772,756 Interest 80,000 448,304 368,304

Total Revenues 3,724,600 4,865,660 1,141,060

Expenditures:

Debt Service: Interest and Fiscal Charges 1,649,666 1,871,039 (221,373)

Total Expenditures 1,649,666 I ,871,039 (221,373)

Excess (Deficiency) ofRevenues Over (Under) Expenditures 2,074,934 2,994,621 919,687


Transfers Out (950,000) (950,000)

Total Other Financing Sources (Uses) (950,000) (950,000)

Net Change in Fund Balance 1,124,934 2,044,621 919,687

Fund Balance - July 1, 9,649,468 9,649,468

Fund Balance- June 30, $ 10,774,402 $ 11,694,089 $ 919,687

!51

CITY OF EL CENTRO LEASE PURCHASE DEBT SERVICE FUND



Revenues: Interest

Total Revenues

Expenditures: Debt service: Principal Interest

Total Expenditures


Other Financing Sources Transfers In

Total Other Financing Sources


Fund Balance- July I


Final Budget

Actual Amount

Variance Positive

(Negative)

$ - $ - $ =--------- =--------- =---------

153,167 10 788

163,955

(163,955)

163,955

163,955

152,846 5 944

158,790

(158,790)

158 790

158 790

321 4 844 5 165

5 165

(5,165)

(5,165)

$ - $ - $ ~==== ~==== ~====

152

COMBINING STATEMENTS NONMAJOR PROPRIETARY FUNDS

PROPRIETARY FUNDS

Proprietary funds are used to account for operations that are financed and operated in a manner similar to private business enterprises - for these funds, it is the intent of the City Council that the costs of providing goods or services to the general public on a continuing basis be financed or recovered primarily through user charges

Transit - This fund is used to account for revenues and expenses associated with a demand response public transportation service.

Solid Waste - This fund is used to account for revenue and expenditures associated with the collection and disposal of solid waste.

153

ASSETS

Current Assets: Cash and Investments Receivables

Accounts Receivable (Net of Allowance for Uncollectibles)

Interest Receivable

Total Current Assets

Total Assets

LIABILITIES AND FUND EQUITY

Liabilities: Current Liabilities: Accounts Payable

Deposits Payable

Total Current Liabilities

Total Liabilities

Net Assets (Deficit) Unrestricted

Net Assets (Deficit)

CITY OF EL CENTRO NONMAJOR PROPRIETARY FUNDS

COMBINING STATEMENT OF NET ASSETS June 30, 2008

Transit

$ 8,796

8,796

8,796

39,850

39,850

39,850

(31,054)

$ (31,054)

154

$

$

Solid

Waste Totals

193,944 $ 202,740

471,779 471,779 1,576 1,576

667,299 676,095

667,299 676,095

365,556 405,406

72,000 72,000

437,556 477,406

437,556 477,406

229,743 198,689

229,743 $ 198,689

CITY OF EL CENTRO NON MAJOR PROPRIETARY FUNDS

COMBINING STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS FOR THE FISCAL YEAR ENDED JUNE 30, 2008

Solid Transit Waste

Operating Revenues

Charges for Services $ 31,911 $ 3,737,471

Total Operating Revenues 31,911 3,737,471

Operating Expenses

Contractual Services 210,723

Supplies and Services 3,670,725

General and Administrative 16,684 20,154

Total Operating Expenses 227,407 3,690,879

Operating Income (Loss) (195,496) 46,592

Non-Operating Revenue (Expenses) Intergovernmental 161,320

Interest Revenue 99 6,712

Total Non-Operating

Revenue (Expenses) 161,419 6,712

Changes in Net Assets (34,077) 53,304

Net Assets- Beginning of Fiscal Year 3,023 176,439

Net Assets (Deficit)- End of Fiscal Year $ (31,054) $ 229,743

155

Totals

$ 3,769,382 3,769,382

210,723

3,670,725 36,838

3,918,286

(148,904)

161,320 6,811

168,131

19,227

179,462

$ 198,689

CITY OF EL CENTRO NONMAJOR PROPRIETARY FUNDS

COMBINING STATEMENT OF CASH FLOWS For the fiscal Year Ended June 30, 2008

Transit

CASH FLOWS FROM OPERA T!NG ACTIVITIES:

Cash Received from Users $ 31,911 Cash Payments to Suppliers and Contractors (209,194) Cash Payments for General and Administrative Expenses (16,684)

Net Cash Provided (Used) By Operating Activities (193,967)

CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Intergovernmental Revenue 161,320

Net Cash Provided (Used) By Noncapital Financing Activities 161,320

CASH FLOWS FROM INVESTING ACTIVITIES: Interest Received 531

Net Cash Provided (Used) in Investing Activities 531

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (32,116)

CASH AND CASH EQUIVALENTS, BEGINNING OF FISCAL YEAR 40,912

CASH AND CASH EQUIVALENTS, END OF FISCAL YEAR $ 8,796

Reconciliation to Statement of Net Assets: Cash and Cash Equivalents $ 8,796

CASH FLOWS FROM OPERATING ACTIVITIES: Operating Income (Loss) $ (195,496)

Adjustment to Reconcile Operating Income (loss) to Net Cash Provided (Used) by Operating Activities:

Changes in Assets and Liabilities: (Increase) Decrease in Accounts Receivable Increase (Decrease) in Deposits Payable Increase (Decrease) in Accounts Payable and Accrued Liabilities 1,529

Total Adjustments 1,529

Net Cash Provided (Used) By Operating Activities $ (193,967)

156

Solid Waste Total

$ 3,942,939 $ 3,974,850 (3,862,599) (4,071,793)

(20,154) (36,838)

60,186 (133,781)

161,320

161,320

5,136 5,667

5,136 5,667

65,322 33,206

128,622 169,534

$ 193,944 $ 202,740

$ 193,944 $ 202,740

$ 46,592 $ (148,904)

133,468 133,468 72,000 72,000

(191,874) (190,345)

13,594 15,123

$ 60,186 $ (133,781)

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 or agencies of the City on a cost reimbursement basis

Workers' Compensation - This fund is used to account for the revenue and expenses associated with providing Workers' Compensation benefits.

Post Employment Benefits - This fund is used to account for the revenue and expenses associated with providing unemployment benefits.

Group Health Insurance - This fund is used to account for the revenue and expenses associated with providing group health benefits.

Motor Vehicle - This fund is used to account for costs of operating and maintaining automotive equipment used by City departments.

157

ASSETS

Cash and Investments Other Receivables Interest Receivable

Total Assets

LIABILITIES AND NET ASSETS

Liabilities: Accounts Payable Salaries/Benefits Payable

Total Liabilities

NET ASSETS Unrestricted

Net Assets

CITY OF EL CENTRO fNTERNAL SERVICE FUNDS

COMBINING STATEMENT OF NET ASSETS June 30, 2008

Post Workers' Employment

Compensation Benefits

$ 3,643,245 $ I ,635,986 452,387

14,498 6,796 4,110,130 1,642,782

69,I02

69,102

4,041,028 1,642,782

Group Health Insurance Motor Vehicle Totals

$ 1,197,093 $ 43,064 $ 6,519,388 16,395 468,782 6,2I8 398 27,910

1,219,706 43,462 7,016,080

44,300 24,850 138,252 7,788 7,788

44,300 32,638 146,040

1,175,406 10,824 6,870,040

$ 4,041,028 $ 1,642,782 $ 1,175,406 ,.;$:;,..=,.;1;,;;;0~,8~24;., $ 6,870,040

I 58

Charges for Services

Total Operating Revenues

Operating Expenses: Personal Services Supplies and Services Total Operating Expenses

Operating Income (Loss)

Non-Operating Revenue (Expenses)

Interest Revenue

Total Non-Operating Revenue


Net Assets - Beginning of Fiscal Year


CITY OF EL CENTRO INTERNAL SERVICE FUNDS

COMBINING STATEMENT OF REVENUES, EXPENSES, AND CHANGES

IN NET ASSETS For the Fiscal Year Ended June 30, 2008

Post Workers' Employment Group Health

Compensation Benefits Insurance

$ 2,302,262 $ 618,200 $ 3,370,414

2,302,262 618,200 3,370,414

1,129,762 353,762 3,363,511

1,129,762 353,762 3,363,511

1,172,500 264,438 6,903

I 12,842 61,724 53,884

112,842 61,724 53,884

I ,285,342 326,162 60,787

2,755,686 1,316,620 1,114,619

$ 4,041,028 $ 1,642,782 $ 1,175,406

159

Motor Vehicle Totals

$ 438,000 $ 6,728,876

438,000 6,728,876

194,687 194,687 243,093 5,090,128 437,780 5,284,815

220 1,444,061

656 229,106

656 229,106

876 1,673,167

9,948 5,196,873

$ 10,824 $ 6,870,040

CITY OF EL CENTRO INTERNAL SERVICE FUNDS

COMBINING STATEMENT OF CASH FLOWS


Workers' Post Employment

Compensation Benefits

CASH FLOWS FROM OPERATING ACTIVITIES:

Cash Received from Users $ 2,297,545 $ 618,200 Cash Payrr:ents to Suppliers and Contractors (1,145,781) (353,762) Cash Payments for Employees and Benefit Programs

Net Cash Provided (Used) By Operating Activities 1,151,764 264,438

CASH FLOWS FROM INVESTING ACTIVITIES: Interest received 116,488 65,550

Net Cash Provided (Used) In Investing Activities 116,488 65,550

NET INCREASE (DECREASE) IN CASH AND CASH

EQUIVALENTS 1,268,252 329,988

CASH AND CASH EQUIVALENTS, BEGINNING OF FISCAL YEAR 2,374,993 1,305,998

CASH AND CASH EQUIVALENTS, END OF FISCAL YEAR $ 3,643,245 $ 1,635,986

Reconciliation with Statement of Net Assets

Cash and Investments $ 3,643,245 $ 1,635,986

CASH AND CASH EQUIVALENTS $ 3,643,245 $ 1,635,986

Reconciliation of Operating Income to Net Cash Provided (Used)

by Operating Activities

Operating Income (Loss) $ 1,172,500 $ 264,438

Adjustment to Reconcile Operating Income (Loss) to Net Cash Provided by Operating Activities

(Increase) Decrease in Other Receivables (4,717)

Increase (Decrease) Accounts Payable and Accrued Liabilities (16,019)

Total Adjustments (20,736)

Net Cash Provided (Used) By Operating Activities $ 1,151,764 $ 264,438

160

Group Health Motor Insurance Vehicle Totals

$ 3,361,216 $ 438,000 $ 6,714,961 (3,380,263) (230,287) (5,110,093)

(193,088) (193,088)

(19,047) 14,625 1,411,780

57,539 258 239,835

57,539 258 239,835

38,492 14,883 1,651,615

1,158,601 28,181 4,867,773

$ 1,197,093 $ 43,064 $ 6,519,388

$ 1,197,093 $ 43,064 $ 6,519,388 $ 1,197,093 $ 43,064 $ 6,519,388

$ 6,903 $ 220 $ 1,444,061

(9,198) (13,915) (16,752) 14,405 (18,366)

(25,950) 14,405 (32,281)

$ (19,047) $ 14,625 $ 1,411,780

PARTNERS: RONALD A. lEVY. C.P.A. CRAIG A. HARUHBM. C.P.A. HADLEY Y. HUI, C.P.A.


9107 WILSHIRE BlVD .. STE 400 BEVERLY HillS, CA 90210 PHONE: (310) 273-27.(5 FAX: (310) 273-1689 EMAIL: [email protected]

REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF

FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS

The Members of the City Council of the City of El Centro

El Centro, California

We have audited the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City ofEI Centro (City), California, as of and for the fiscal year ended June 30, 2008, and have issued our report thereon dated December 15, 2008. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.

Internal Control Over Financial Reporting

In planning and performing our audit, we considered the City's internal control over financial reporting as a basis for designing auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the City's internal control over financial reporting.

A control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the City's ability to initiate, authorize, record, process, or report financial data reliably in accordance with accounting principles generally accepted in the United States of America such that there is more than a remote likelihood that a misstatement of the City's financial statements that is more than inconsequential will not be prevented or detected by City's internal control.

161

OFFICES: BEVERLY HilLS • SANTA MARIA

MEMBER AMERICAN INSTTTVT( Of C.P.A:s • CA~IA SOOElV Of C.PA's • CAi.IFORNIA SOCIE!Y OF MUNICIPAL ~CE OFFICffiS • CALJFOilNIA ASSOCIATION OF SCHOOL BUSIN~SS Q;~IC:tA!..S

A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected by the City's internal control.

Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in the internal control over financial reporting that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above.

We noted certain other matters that we reported to management of the City in a separate letter dated December 15, 2008.

Compliance and Other Matters

As part of obtaining reasonable assurance about whether the City's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instance of noncompliance or other matters that are required to be reported under Government Auditing Standards.

This report is intended solely for the information and use of the City Council, Management, federal awarding agencies, and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.

Moss, Levy & Hartzheim, LLP Beverly Hills, CA December 15, 2008

162


PARTNERS: RONAlD A. LEVY. C.P.A. CRAIG A. HARlZHBM. C.P.A. HADLEY Y. HUI, C.P.A.

9107 WILSHIRE Bl VO. STE 400 BEVERLY HILLS, CA 90210 PHONE: (310)273-2745 FAX: (310)273-1689

REPORT ON COMPLIANCE WITH ARTICLE Xllm- APPROPRIATIONS LIMIT

The Honorable Members of the City Council of the City ofEI Centro El Centro, California

EMAil: [email protected]

We have applied the procedures enumerated below to the accompanying Appropriations Limit of the City of El Centro, California for the fiscal year ended June 30, 2008. These procedures, which were agreed to by the League of California Cities and presented in their Article XIIIB Appropriations Limitation Uniform Guidelines, were perfonned solely to assist you in meeting the requirements of Section 1.5 of Article XIIIB of the California Constitution. This report is intended for the information of management and the City Council. This restriction is not intended to limit the distribution of this report, which is a matter of public record.

The procedures performed and our findings were as follows:

I. We obtained the computations from the City of El Centro and detennined that the limit and annual adjustment factors were adopted by resolution of the City Council. We also detennined that the population and inflation options were selected by a recorded vote of the City Council.

2. For the accompanying Appropriations Limit, we added last year's limit to total adjustments, and agreed the resulting amount of this year's limit.

3. We agreed the current year information presented in the accompanying Appropriations Limit to the other computations described above.

4. We agreed the prior year Appropriations Limit presented in the accompanying Appropriations Limit to the prior year Appropriations Limit adopted by the City Council during the prior year.

These agreed-upon procedures are substantially less in scope than an audit, the objective of which is the expression of an opinion on the accompanying Appropriations Limit. Accordingly, we do not express such an opinion.

163 OFFICES: BEVERLY HillS • SANTA MARIA

MEMBP AMERICAN INSTrflJTE OF C.P.A:s • CAUFOI'lNIA SOCIETY OF C.P.A.$ • CALIFQRI\IIA SOCIETY C$ MUNICIPAl Af'W-ICE OFFICERS • CALIFORNIA ASSOCIATION OF SCHOOl SUSINESS OfFICIALS

Based on the application of the procedures referred to above, nothing came to our attention that caused us to believe that the accompanying Appropriations Limit was not computed in accordance with Article XIIIB of the California constitution. Had we performed additional procedures or had we conducted an audit of the accompanying Appropriations Limit and the other completed worksheets described above, matters might have come to our attention that could have been reported to you.

~,...,, .:(~ ., Nw!}~

Moss, Levy & Hartzheim, LLP Beverly Hills, CA December 15, 2008

164

STATISTICAL SECTION

Statistical Section

This part of the City of El Centro's Comprehensive Annual Financial Report presents detailed information in a context for understanding what the information in the financial statements, note disclosures, and supplemental information says about the City's overall financial health.

Contents

Financial Trends These schecules 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 factors affecting the City's ability to generate its property and sales 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 comparison over time and with other governments.

Operating Information

Sources:

These schedule contain information about the City's operations and resources to help the reader understand how the City's financial information relates to the services the City provides and the activites it performs.

Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial report for the relevant year. The City implemented GASB Statement No. 34 as of June 30, 2004; schedules presenting government-wide information, include information beginning in that year.

Governmental Activities

Invested In Capital Assets, net of related debt

Restricted

Unrestricted Total Governmental Activities Net Assets

Business-Type Activities

Invested In Capital Assets, net ofre1ated debt

Restricted

Unrestricted Total Business-Type Activities Net Assets

Primary Government

Invested In Capital Assets, net of related debt

Restricted

Unrestricted

Total Primary Government Net Assets

1 This information is not available.

Source: City of El Centro Finance Department

CITY OF EL CENTRO NET ASSETS BY COMPONENT

LAST SIX FISCAL YEARS (Accrual Basis of Accounting)

Fiscal Year 2003 2004 2005 2006

$28,583,648 $30,3 61 ,3 54 $28,870,122

20,371,749 23,267,909 26,804,255

7,486,620 8,709,680 11,369,288

56,442,017 62,338,943 67,043,665

5,906,071 22,378,738 25,531,455

0 0 0

49,852,783 37,142,597 36,265,244

55,758,854 59,521,335 61,796,699

34,489,719 52,740,092 54,401,577

20,371,749 23,267,909 26,804,255

57,339,403 45,852,277 47,634,532

$112,200,871 $121,860,278 $128,840,364

165

2007 2008

$45,474,580 $57,566,767

52,414,019 58,137,871

8,789,396 8,367,919

106,677,995 124,072,557

20,471,742 45,118,649

7,715,631 7,697,555

39,036,994 26,600,045

67,224,367 79,416,249

65,946,322 102,685,416

60,129,650 65,835,426

47,826,390 34,967,964

$173,902,362 $203,488,806

CITY OF EL CENTRO CHANGES IN NET ASSETS LAST SIX FISCAL YEARS

(Accrual Basis of Accounting) Page I of2

Fiscal Year 2003 2004 2005 2006 2007 2008

Expenses Governmental Activities

General Government $1,921,870 ($7,430) $3,938,201 $2,975,649 $3,105,885

Public Safety 10,548,732 12,018,667 13,132,377 13,951,000 15,709,050

Community Development 7,426,721 8,605,549 9,635,722 5,703,142 3,745,060

Public Works 6,190,449 9,719,760 4,338,732 5,317,733 6,401,722

Parks and Recreation 1,952,488 1,835,819 2,373,475 2,628,335 3,027,847

Interest on Long-Term Debt 522,402 510,811 525,529 1,453,682 1,970,229 Total Governmental Activities Expenses 28,562,662 32,683,176 33,944,036 32,029,541 33,959,793


Water 3,707,932 4,075,849 5,165,290 7,185,564 7,123,415

Wastewater 4,871,774 5,475,935 5,655,157 7,098,821 7,220,805

Hospital 74,435,726 79,361,120 83,840,216 75,338,605 81,947,795

Other 3,487,869 3,611,082 3,883,673 3,867,784 3,918,286 Total Business-Type Activities Expenses 86,503,301 92,523,986 98,544,336 93,490,774 100,210,301

Total Primary Government Net Expenses $115,065,963 $125,207,162 $132,488,372 $125,520,315 $134,170,094

Program Revenues Governmental Activities

Charges for Services

General Government $0 $359,682 $295,775 $2,244,273 $323,057

Public Safety 288,595 1,337,987

Community Development 1,432,847

Public Works 3,849,689 4,506,380 3,500,346 2,723,312 87,305


Operating Contributions and Grants 5,276,337 6,784,641 4,350,197 4,936,244 7,614,490

Capital Contributions and Grants 0 2,013,947 2,539,094 3,110,778 9,952,116 Total Governmental Activities Program Revenues 9,126,026 13,664,650 10,685,412 13,337,088 20,850,940

Business-Type Activities Charges for Services

Water 4,158,011 4,336,235 4,975,974 6,692,648 7,045,506

Wastewater 4,631,299 5,024,280 5,667,928 6,317,205 7,003,379

Hospital 75,348,464 79,882,779 83,311,387 75,492,941 84,339,214

Other 3,499,125 3,609,675 3,889,707 3,835,388 3,769,382

Operating Contributions and Grants 567,553 599,429 671,001 414,689 623,509

Capital Contributions and Grants I ,982,392 2,156,278 1,750,619 2,890,620 1,882,104 Total Business-Type Activities Program Revenues 90,186,844 95,608,676 I 00,266,616 95,643,491 I 04,663,094

Total Primary Government Program Revenues $99,312,870 $109,273,326 $110,952,028 $108,980,579 $125,514,034

166

CITY OF EL CENTRO CHANGES IN NET ASSETS LAST SIX FISCAL YEARS

(Accrual Basis of Accounting) Page 2 of2

Fiscal Year 2003 2004 2005 2006 2007 2008

Net {Expense)/Revenue

Governmental Activities {$19,436,636) ($19,018,526) ($23,258,624) ($18,692,453) ($13,108,853)

Business-Type Activities 3,683,543 3,084,690 1,722,280 2,152,717 4,452,793

Total Primary Government Net Expense ($15,753,093l ($15,933,836) ($21,536,344l ($16,539,736) ($8,656,060)

General Revenues and Other Changes in Net Assets Governmental Activities

Taxes

Property Taxes $5,171,397 $5,284,655 $6,127,471 $8,631,946 $9,220,182

Sales Taxes 7,053,567 6,332,845 7,612,804 7,508,267 10,199,467

Other Taxes 3,807 ,Ill 3,156,345 4,309,493 4,667,911 6,100,198

License & Permits 637,015 1,127,931 627,032 356,737

Fines & Forfeitures 101,186 98,483 308,777 245,420

Revenue From Other Agencies 5,908,891 7,628,758 7,098,025 12,258,415 997,746

Bond/Loan Proceeds less increase in debt 0 0 850,000

MisceJlaneous Revenue 281,781

Gain on Sales of Property 250,928 296,130

Use of Money and Property 1,196,210 1,291,073 1,029,744 2,687,724 3,575,397 Total Governmental Activities 24,126,305 24,920,090 27,963,346 36,652,550 30,374,771


Use of Money and Property 455,959 664,824 876,849 1,742,045 7,128,138

Other 259,105 32,967 (313,868l 23,653 Total Business-Type Activities 715,064 697,791 562,981 1,742,045 7,151,791

Extraordinary Item- Litigation Settlement Extraordinary Item - Gain on Foreclosure of Property

Total Primary Government $24,841,369 $25,617,881 $28,526,327 $38,394,595 $37,526,562


Goverrunental Activities $4,689,669 $5,901,564 $4,704,722 $17,960,097 $17,265,918

Business-Type Activities 4,398,607 3,782,481 2,285,261 3,894,762 11,604,584 Total Primary Government $9,088,276 $9,684,045 $6,989,983 $21,854,859 $28,870,502

1 This information is not available.


167

CITY OF EL CENTRO FUND BALANCES OF GOVERNMENTAL FUNDS

LAST TEN FISCAL YEARS (Modified Accrual Basis of Accounting)

Fiscal Year 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

General Fund Reserved $5,000 $306,700 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $1,305,150 Unreserved 1,043,659 $2,305,201 $3,647,570 $3,168,225 $2,801,472 $3,971,954 $5,776,391 8,140,224 12,545,736 11,688,308

Total General Fund $1,048,659 $2,611,901 $3,652,570 $3,173,225 $2,806,472 $3,976,954 $5,781,391 $8,145,224 $12,550,736 $12,993,458

All Other Governmental Funds Reserved Unreserved, Reported In:

Special Revenue Funds 6,773,024 7,448,073 10,106,923 9,635,215 12,585,963 17,468,912 16,267,256 17,749,096 24,978,631 25,355,720 Debt Service Funds 1,299,607 1,448,601 1,714,114 1,942,123 1,847,583 2,867,705 3,644,551 4,865,171 9,649,468 11,694,089 Capital Projects Funds 7,697,417 8,564,147 4,635,409 4,190,616 3,201,568 971,588 3,356,102 4,189,988 21,228,925 _11486,525

Total All Other Governmental Funds $15,770,048 $17,460,821 $16,456,446 $15,767,954 $17,635,114 $21,308,205 $23,267,909 $26,804,255 $55,857,024 $59,536,334

Total Governmental Funds $16,818,707 $20,072,722 $20, I 09,016 $18,941,179 $20,441,586 $25,285,159 $29,049,300 $34,949,479 $68,407,760 $72,529,792


168

Revenues Taxes Licenses and Pennits From Other Agencies Charges for Services Fines and Forfeitures Interest Other

Total Revenues


General Goverrnnent Public Safety Public Works Parks and Recreation Community Development

Capital Outlay Debt Service

Principal Retirement Interest and Fiscal Charges Other

Total Expenditures

Excess of Revenues Over (Under) Expenditures

Other Financing Sources (Uses) Transfers In Transfers Out Sales of Property Issuance of Long Tenn Debt Payment of Refunded Bond Escrow Agent Lease Proceeds/Short Term Deb!


Net Change In Fund Balances

Debt Service as a percentage of non-capital expenditures


-CITY-OF EL CENTRO

CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS

(Modified Accrual Basis of Accounting)

Fiscal Year 1999 2000 2001 2002 2003 2004 2005 2006 2007

$9,260,729 $10.653,859 $11,103,042 $11,462,925 $12,134,443 $13,886,789 $13,418,119 $15,737,431 $17,443,206 107,873 111,669 142,675 194,108 241,692 637,015 l,I27,93I 627,032 356,737

7,591,840 6,444,148 8,335,308 10,088,082 9,237,179 11,299,035 13,008,047 13,987,316 21,342,682 284,768 353,732 397,733 383,797 608,583 3,849,689 1,958,357 3,500,346 3,317,257

52,645 56,915 66,181 70,305 125,553 101,186 98,483 308,777 245,420 920,140 1,037,770 1,395,427 1,035,252 888,570 450,520 59I,073 1,029,744 2,687,724

1,223,369 1,785,476 2,251,760 3,622,781 2,289,766 2,282,407 7 323,048 2312337 3 380 088

19,441,364 20,443,569 23,692,126 26,857,250 25,525,786 32 506,641 37,525,058 37,502,983 48,773,114

1,431,183 1,511,667 1,874,277 2,173,262 2,040,425 1,597,453 1,770,274 2,406,970 2,724,653 7,757,487 8,397,173 9,153,161 10,311,430 10,034,059 11,029,835 12,018,704 13,234,287 13,488,447 5,087,747 2,291,494 2,068,301 7,002,065 3,249,750 4,563,253 9,719,760 6,200,384 2,970,548 1,450,555 1,793,73.8 1,875,097 2,312,586 2,499,734 7,467,088 1,835,819 2,357,737 2,283,911 3,665,023 2,579,049 7,868,593 5,955,003 4,428,673 2,053,904 6,896,060 5,780,631 5,619,056

9,300,478

736,768 872,655 802,761 947,970 1,065,271 831,862 1,040,944 1,176,114 458,136 546,553 570,590 569,241 548,037 548,867 522,402 510,811 525,529 854,985 26,406 31,522 44,401 192,105 658 600 297,271 668,545 771,153 I 512 139

20,701,722 18,047,888 24,255,832 29,442,458 24,525,379 28,363,0@ 34,460,9_17 3~,452,805 39,212,353

(1,260.358) 2,395,681 (563,706) (2,585,208) 1,000,407 4,143,573 3,064,141 5,050,178 9,560,761

1,301,666 1,238,603 1,598,895 1,582,132 1,670,057 1,179,738 1,204,278 1,731,448 2,065,655 ( 1,30 1,665) (1,238,603) (1,598,895) (1,582,133) ( 1,670,057) (1,179,738) ( 1,204,278) (1,731,448) (2,065,655)

562,002 31,195,000 (7,785,011)

800,000 858,334 600,000 1,417,372 500,000 700,000 700,000 850,000

800,001 858,334 600,000 1,417,371 500,000 700,000 700,000 850,000 23,971,991

2008

$19,015,210 481,803

14,857,094 3,077,913

219,396 3,346,291 3,202 070

44,199,777

2,971,024 15,488,462 3,802,853 2,910,524 5,721,596 7,147,457

152,846 1,876,983

0

40,077,745

4,122,032

3,289,784 (3,289,784)

($460.357) $3,254,015 $36,294 ($1,167,837) $1,500,4Q7 $4,!l43,513 $3,764,liJ - $5,900,llll_ _$33,532,7_g_- ~122,032

6.4% 9.2% 6.1% 7.00/o 10.8% 6.1% 6.6% 7.9% 7.6% 6.3%

169

CITY OF EL CENTRO

PROPERTY AD VALOREM TAX ASSESSED VALUES LAST TEN FISCAL YEARS

Ci Year County Portion of

Ended Assessed Tax Rate Assessed

June 30 Value 2 Per$100 Value Tax Rate Tax Levy

1999 1,190,977,616 1.0000 1,031,367,254 0.196% 2,020,465 2000 1,249,279,834 1.0000 1,071,452,270 0.192% 2,060,169 2001 1,299,275,370 1.0000 1,109,355,828 0.199% 2,209,361 2002 1,370,677,204 1.0000 1,156,590,900 0.185% 2,145,089 2003 1,451,247,992 1.0000 1,204,818,711 0.177% 2,136,239 2004 I ,623,838,675 1.0000 1,313,643,297 0.168% 2,210,900 2005 1,659,657,727 1.0000 1,318,905,946 0.143% 1,890,762 2006 I ,975,300,675 1.0000 1,578,601,793 0.200% 2,182,924 2007 2,318,419,841 1.0000 1,891,410,157 0.174% 3,283,938 2008 2,719,192,480 1.0000 2,219,640,838 0.146% 3,230,297

1 Estimated Actual Value of Taxable Prope1ty is not available since passage of Proposition 13 in 1978. Property assessed values may rise only to a maximum of2% per year unless there is new construction or when the property is sold. Consequently, estimated values are not available.

2 Pursuant to chapter 1207 of the statutes of 1978, "Assessed Value" means 100% of full taxable value.

Source: Imperial County Auditor's/Controller's Office

170

Redevelof!ment Agenc~ Portion of Assessed

Value Tax Rate

159,610,362 1.036% 177,827,564 1.032% 189,919,542 1.083% 214,086,304 1.026% 246,429,281 1.012% 310,195,378 1.018% 340,751,781 1.024% 396,698,882 0.820% 427,009,684 1.048% 499,551,642 1.030%

Tax Levy

1,653,515 1,835,090 2,056,320 2,195,583 2,493,721 3,158,365 3,488,725 3,994,402 4,474,239 5,144,949

CITY OF CITY OF EL CENTRO DIRECT AND OVERLAPPING PROPERTY TAX RATES

(Rate per $100 of Assessed Value) LAST TEN FISCAL YEARS

Fiscal Year 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

City Direct Rates:

City basic rate $0.225 $0.223 $0.219 $0.211 $0.201 $0.199 $0.196 $0.196 $0.202

Redevelopment Agency 0.115 0.121 0.131 0.146 0.167 0.176 0.180 0.175 0.193

Total City Direct Rate 0.000 0.340 0.344 0.350 0.357 0.368 0.375 0.375 0.371 0.395

Overlapping Rates:

Imperial County 0.260 0.259 0.259 0.256 0.254 0.252 0.252 0.254 0.260

El Centro Elementary District 0.223 0.221 0.218 0.215 0.210 0.206 0.206 0.206 0.214

Central Union High School 0.220 0.219 0.218 0.216 0.213 0.213 0.213 0.214 0.177

Imperial Valley College District 0.066 0.066 0.065 0.065 0.087 0.087 0.087 0.087 0.087

Imperial County School Service 0.019 0.019 0.018 0.019 0.018 0.018 0.018 0.018 0.019

Central Cemetary District 0.017 0.017 0.017 0.017 0.016 0.016 0.016 0.017 0.017

Total Direct Rate 0.000 1.145 1.145 1.145 1.145 1.168 1.168 1.168 1.167 1.168

NOTE: In 1978, California voters passed Proposition 13, which sets the property tax rate at a 1.000% fixed amount. This 1.000% is shared by all taxing agencies for which the subject property resides within. In addition to the fixed amount, property owners are charged taxes as a percentage of assessed property values for the payment of bonded debt service on the voter-approved School District and Community College bonds.

1 Information not available

Source: Imperial County Auditor/Controller's Office

171

CITY OF EL CENTRO PRINCIPAL PROPERTY TAXPAYERS

AS OF JUNE 30, 2008 AND 1998

Fiscal Year 2008 Fiscal Year 1998 Percent Of Percent Of

Total Total Assessed Assessed Assessed Assessed

Taxpayer Valuation Valuation Rank Valuation Valuation Rank

Imperial Valley Mall II, LP $ 40,499,125 1.49% 0.00%

IV PlazaLLC 21,532,841 0.79% 2 6,449,330 5.70% 6

RJ Development Co. LLC 16,331,276 0.60% 3 11,439,151 1.01% 2

West Courthouse LLC 16,247,032 0.60% 4 0.00%

Wal-Mart Stores Inc. 14,287,350 0.53% 5 0.00% 8

Lowes HIW Inc 14,271,852 0.52% 6 0.00%

Target Corporation 13,040,357 0.48% 7 0.00%

Dillard Stores Services Inc 12,617,230 0.46% 8 9,601,862 0.84% 3

Macy's California Inc. 12,259,539 0.45% 9 0.00%

Costco Wholesale Corporation 10,420,560 0.38% 10 0.00%

Parkside Villas Assoc. LTD 13,289,703 1.17%

John & Virginia Ryerson 9,195,149 0.81% 4

Pacific View Const. Co. 8,524,171 0.75% 5

Imperial Hardware 5,283,514 0.46% 7

Alexander Haagen Prop. 4,695,460 0.41% 8

BLM-EI Centro 4,219,644 0.37% 9

VAT Partners II 4,190,980 0.37% 10

$171,507,162 6.31% $76,888,964 11.89%

Source: Imperial County Assessor's Office

172

CITY OF CITY OF EL CENTRO PROPERTY TAX LEVIES AND COLLECTIONS

LAST TEN FISCAL YEARS

Collected within the Year Taxes Levied Fiscal Year of Levy Delinquent Total Collections to Date

Ended for the Total Percent Tax June 30 Fiscal Year Amount of Levy Collection

1999 3,673,980 3,529,687 96.07%

2000 3,895,259 3,740,819 96.04%

2001 4,265,681 3,976,290 93.22%

2002 4,340,672 4,214,684 97.10%

2003 4,629,960 4,485,142 96.87%

2004 5,369,265 5,171,397 96.31%

2005 5,379,487 5,284,655 98.24%

2006 6,177,326 6,127,471 99.19%

2007 7,758,177 8,631,946 111.26%

2008 8,375,246 9,107,247 108.74%

Note: The amounts presented include City property taxes and Redevelopment Agency tax increment.

Source: Imperial County Auditor's/Controller Office

173

Percent Amount of Levy

3,529,687 96.07%

3,740,819 96.04%

3,976,290 93.22%

4,214,684 97.10%

4,485,142 96.87%

5,171,397 96.31%

5,284,655 98.24%

6,127,471 99.19%

8,631,946 111.26%

9,107,247 108.74%

CITY OF EL CENTRO RATIOS OF OUTSTANDING DEBT BY TYPE


Governmental Activities Business-T~e Activities General Bonded Tax Total Certificates Total

Fiscal Debt Capital Allocation Governmental Of Capital Revenue Business-Type Year Outstanding Leases Loan Payable Activities Partici~ation Leases Bonds Activities

1999 7,685,393 98,155 800,000 8,583,548 15,976,037 683,199 5,269,663 21,928,899 2000 7,391,399 328,834 700,000 8,420,233 15,788,067 1,197,414 4,797,753 21,783,234 2001 6,970,886 281,073 700,000 7,951,959 15,529,178 3,445,520 38,790,595 57,765,293 2002 6,582,877 877,593 750,000 8,210,470 10,883,128 2,688,156 38,811,108 52,382,392 2003 6,512,417 772,546 500,000 7,784,963 10,509,529 1,953,040 38,831,621 51,294,190 2004 5,317,295 615,684 700,000 6,632,979 16,137,416 3,120,163 37,877,134 57,134,713 2005 4,355,449 459,739 700,000 5,515,188 15,464,602 3,076,112 36,882,647 55,423,361 2006 2,944,829 784,061 850,000 4,578,890 80,392,387 2,816,616 35,843,159 119,052,162 2007 21,546,773 202,366 950,000 22,699,139 79,480,477 2,530,211 34,763,672 116,774,360 2008 19,500,911 49,520 1,300,000 20,850,431 78,598,687 3,073,735 33,634,185 115,306,607

Total Percentage Fiscal Primary Of Personal Per

Year Government Income 1 Capita 1

1999 $30,512,447 6.2% $794 2000 30,203,467 6.0% 775 2001 65,717,252 8.8% 1,674 2002 60,592,862 7.5% 1,546 2003 59,079,153 7.1% 1,493 2004 63,767,692 7.3% 1,592 2005 60,938,549 6.8% 1,487 2006 123,631,052 13.5% 2,943 2007 139,473,499 15.2% 3,315 2008 136,157,038 13.8% 3,143

Note: Details regarding the City's outstanding debt can be found in the Notes to the Financial Statements.

1 See the table of Population and Unemployment Rate later in this section for personal income and population data.

Source: City of Centro Finance Department

174

CITY OF EL CENTRO RATIOS OF GENERAL BONDED DEBT OUTSTANDING


Less: Amounts Total Redevelopment Available General Percentage

Agency Tax Lease inDebt Bonded of Assessed Allocation Revenue Service Debt Value of

Fiscal Year Bonds Bonds Funds Outstanding Property 1

1999 8,985,000 0 1,299,607 7,685,393 0.6% 2000 8,840,000 0 1,448,601 7,391,399 0.6% 2001 8,685,000 0 1,714,114 6,970,886 0.5% 2002 8,525,000 0 1,942,123 6,582,877 0.5% 2003 8,360,000 0 1,847,583 6,512,417 0.4% 2004 8,185,000 0 2,867,705 5,317,295 0.3% 2005 8,000,000 0 3,644,551 4,355,449 0.3% 2006 7,810,000 0 4,865,171 2,944,829 0.1% 2007 31,195,000 0 9,648,227 21,546,773 0.9% 2008 31,195,000 0 11,694,089 19,500,911 0.7%

1 Estimated Actual Value ofTaxable Property is not available since passage of Proposition 13 in 1978. Property assessed values may rise only to a maximum of2% per year unless there is new construction or when the property is sold. Consequently, estimated values are not available.


175

Per

Capita

200 190 178 168 165 133 106 70 512 450

CITY OF EL CENTRO STATEMENT OF DIRECT AND OVERLAPPING DEBT

As of June 30, 2008

2007 - 2008 Assessed Valuation: Redevelopment Incremental Valuation:

City Adjusted Assessed Valuation

OVERLAPPING TAX AND ASSESSMENT DEBT El Centro Elementary School District 1992 Bond Centro Union High School 1993 Bond Imperial Valley College 2004 Bond

TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT

TOTAL OVERLAPPING OTHER DEBT 2

TOTAL OVERLAPPING DEBT

CITY DIRECT DEBT 1

TOTAL DIRECT AND OVERLAPPING DEBT 1

1 Excludes enterprise revenue, mortgage revenue and tax allocation bonds and non-bonded capita11ease obligations.

2 No overlapping debt exist

Source: Imperial County Auditor/Controller's Office

176

$2,719,192,480 499,551,642

$2,219,640,838

OUTSTANDING DEBT

6/30/2008

$12,210,000 17,550,000 33,930,000

63,690,000

0

$63 690 000

ESTIMATED SHARE OF

OUTSTANDING % APPLICABLE DEBT

80.00% $9,768,000 82.00% 14,391,000 28.00% 9,500,400

33,659,400

0

$33,659,400

Q

$33,659,400

CITY OF EL CENTRO COMPUTATION OF LEGAL DEBT MARGIN


Total Assessed Valuation

Debt Limit- 15% of Total Assessed Valuation

Amount of Debt Applicable to the Limit

Legal Debt Margin

LEGAL DEBT MARGIN INFORMATION LAST TEN FISCAL YEARS

Total Legal Debt Debt Debt

$2,719,192,480

$407,878,872

136,157,038

$271,721,834

Total Debt Applicable

As A Percentage

Fiscal Year Limit Applicable Margin Of Debt Limit

1999 $178,646,642 $30,512,44 7 $148,134,195 17.1% 2000 187,391,975 30,203,467 157,188,508 16.1% 2001 194,891,306 65,717,252 129,174,054 33.7% 2002 205,601,581 60,592,862 145,008,719 29.5% 2003 217,687,199 59,079,153 158,608,046 27.1% 2004 243,575,801 63,767,692 179,808,109 26.2% 2005 248,948,659 60,938,549 188,010,110 24.5% 2006 296,295,101 123,631,052 172,664,049 41.7% 2007 347,762,976 139,473,499 208,289,477 40.1% 2008 407,878,872 136,157,038 271,721,834 33.4%

Source: City ofEl Centro Finance Department

177

Certificates of Participation (Water Fund)

Year Less: Net Ended Water Operating Available

June 30 Revenue 1 ExEenses 2 Revenue Princi~al Interest

1999 3,380,729 2,338,924 1,041,805 168,041 101,083 2000 3,585,074 2,685,180 899,894 178,563 92,461 2001 3,535,590 2,764,421 771,169 189,413 83,311 2002 3,599,586 3,038,109 561,477 19,561 73,670 2003 3,700,394 3,333,506 366,888 205,446 63,494 2004 4,207,837 3,249,082 958,755 287,619 63,989 2005 4,408,200 3,519,539 888,661 302,192 94,583 2006 5,071,728 4,533,498 538,230 301,775 75,158 2007 7,077,791 4,586,429 2,491,362 169,345 1,252,492 2008 10,258,815 4,772,739 5,486,076 176,275 1,625,062

Revenue Bonds (Hospital Fund)

Year Less: Net Ended Hospital Operating Available

June 30 Revenue ~enses 2 Revenue Principal Interest

1999 53,675,453 51,295,910 2,379,543 2000 51,728,572 49,226,582 2,501,990 2001 56,908,736 52,685,225 4,223,511 2002 60,224,254 55,102,240 5,122,014 1,698,880 2003 62,405,258 59,125,882 3,279,376 2,980,235 2004 75,348,464 69,259,700 6,088,764 975,000 2,005,235 2005 79,882,779 73,387,230 6,495,549 1,015,000 1,963,798 2006 83,992,429 77,748,347 6,244,082 1,060,000 1,920,000 2007 75,492,941 69,726,995 5,765,946 1,100,000 1,875,610 2008 84,339,214 76,521,688 7,817,526 1,150,000 1,828,860

1 Interest Revenue is included for this calculation

Depreciation is eliminated for this calculation.

Source: City of Centro Finance Department

CITY OF EL CENTRO PLEDGED-REVENUE COVERAGE


Total

Debt Service

269,124 271,024 272,724

93,231 268,940 351,608 396,775 376,933

1,421,837 1,801,337

Total

Debt Service

1,698,880 2,980,235 2,980,235 2,978,798 2,980,000 2,975,610 2,978,860

Debt Service

Coverage

3.87 3.32 2.83 6.02 1.36 2.73 2.24 1.43 1.75 3.05

Debt Service

Wastewater

Revenue 1

3,783,596 4,092,816 4,306,034 4,458,487 4,368,951 4,671,759 5,115,277 5,767,446 6,710,963

10,111,441

Property Tax

fn,.. .. • .. nent Coverage ... _,_ ..

1,270,611 1,413,389 1,537,290

3.01 1,701,935 1.10 1,937,498 2.04 2,439,386 2.18 2,752,499 2.10 3,239,705 1.94 4,148,981 2.62 4,417,356

178

Certificates of Participation (Wastewater Fund)

Less: Net Debt Operating Available Total Service

Expenses 2 Revenue Principal Interest Debt Service Coverage

2,083,242 1,700,354 30,000 800,498 830,498 2.05 3,021,237 1,071,579 30,000 798,878 828,878 1.29 2,740,571 1,565,463 90,000 795,998 885,998 1.77 2,673,470 1,785,017 185,000 874,266 1,059,266 1.69 2,906,375 1,462,576 185,000 485,545 670,545 2.18 3,348,581 1,323,178 200,000 477,396 677,396 1.95 3,867,372 1,247,905 370,621 571,398 942,019 1.32 4,274,172 1,493,274 390,440 572,734 963,174 1.55 4,204,570 2,506,393 405,403 1,732,866 2,138,269 1.17 4,291,305 5,820,136 705,515 2,077,794 2,783,309 2.09

Redevelopment A~enc~ Tax Allocation Bond

Total Debt Service

Princi~ Interest Debt Service Coverage

140,000 503,565 643,565 1.97 145,000 497,686 642,686 2.20 155,000 491,269 646,269 2.38 160,000 489,026 649,026 2.62 165,000 476,861 641,861 3.02 175,000 468,869 643,869 3.79 185,000 460,226 645,226 4.27 190,000 450,990 640,990 5.05 200,000 653,901 853,901 4.86

0 1,344,868 1,344,868 3.28

Fiscal Year

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

CITY OF EL CENTRO POPULATION AND UNEMPLOYMENT RATE


Personal Income 2 Unemployment

Population I Total Per Capita Rate 2

38,450 494,082,500 12,850 23.0% 38,962 504,557,900 12,950 25.0% 39,247 748,989,748 19,084 20.0% 39,186 802,960,326 20,491 17.0% 39,567 836,802,483 21,149 18.0% 40,047 872,784,318 21,794 17.0% 40,982 893,161,708 21,794 18.0% 42,002 915,391,588 21,794 15.0% 42,071 916,895,374 21,794 17.0% 43,316 986,262,004 22,769 22.5%

I Source: California Department of Finance 2 Source: California Employement Development Department 3 Source: El Centro Elementary School District

179

Elementary

School

Enrollment 3

6,252 6,237 6,261 6,279 6,239 3,277 6,200 5,821 5,732 5,769

CITY OF EL CENTRO PRINCIPAL EMPLOYERS

AS OF JUNE 30, 2008 AND 1995

Fiscal Year 2008

Percent of Total

Employer Tvpe Of Business Employees Employment Rank

County of Imperial 1 Governmental 1,800 3.09%

Centinela State Prison Prison 1,285 2.21% 2

El Centro School System Education 1,209 2.08%

Calipatria State Prison Prison 1,205 2.07% 4

Imperial Irrigation District Water and Power 1,200 2.06%

Naval Air Facility Military 1,000 1.72% 6

Homeland Security/U.S. Border Patrol I Government 991 1.70% 7

El Centro Regional Medical Center 1 Hospital 812 1.39% 8

Imperial Valley College Education 520 0.89% 9

Wal Mart 1 Retail 504 0.87% 10

Cal Energy Operating Co./Ormat Power 240 0.41% II

Costco 1 Retail 200 0.34% 12

Burgers and Beers Retail 200 0.34% 12

Dillards 1 Retail 120 0.21% 13

11,286 19.39%

"Total Employment" as used above represents the total employment within the County oflmperial

1 Employers within or near the geographical boundaries of the City of El Centro

Source: City of El Centro Economic Development Department

180

Employees

2,003

1,024

876

0

1,213

203

379

574

500

320

120

Fiscal Year 1995

Percent of Total

Employment Rank

3.46%

1.77%

!.51% 4

2.09% 2

0.35% 9

0.65% 7

0.99%

0.86% 6

0.55%

0.21% 10

7,212 12.46%

Governmental Activities General Government Public Safety Public Works Parks and Recreation Community Development Water Sewer Disposal Transit

Total Government-Wide Employees

Source: City ofEl Centro Finance Department

1999

19.0 110.0 20.3 17.0 14.0 21.2 17.5 0.0 0.0

219.0

CITY OF EL CENTRO EMPLOYEES BY FUNCTION (FULL TIME EQUIVALENTS)


Fiscal Year 2000 2001 2002 2003 2004

19.0 21.5 21.5 21.5 21.5 112.0 111.0 112.0 114.0 114.0 20.3 20.3 20.3 22.3 22.3 19.0 20.0 18.0 16.0 16.0 14.0 16.0 17.0 17.0 17.0 22.2 22.7 22.7 24.2 24.2 19.5 20.0 20.0 19.5 19.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

226.0 231.5 231.5 234.5 234.5

181

2005 2006 2007 2008

20.0 23.0 24.0 28.0 109.0 114.5 121.5 127.0 12.0 13.3 13.3 13.0 13.0 14.0 15.0 15.0 20.0 20.5 21.5 21.0 23.7 22.8 22.8 23.0 24.3 23.9 23.9 24.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

222.0 232.0 242.0 251.0

CITY OF EL CENTRO CONSTRUCTION ACTIVITY AND BANK DEPOSITS

LAST TEN CALENDAR YEARS

Other Additions and

Corrunercial and Office 1 Residential Construction I Alerations 1

Calendar Total Total Number Number Number Bank

Year Permits Valuation Permits Valuation Permits Valuation Permits Valuation Deposits •·

1999 337 12,362,667 112 7,871,782 200 4,218,109 25 272,776 351,307

2000 360 13,251,237 96 7,456,356 231 5,449,592 33 345,289 412,074

2001 333 18,243,271 100 11,944,839 210 6,034,334 23 264,098 394,237

2002 436 23,569,342 88 14,247,411 312 8,797,876 36 524,055 461,827

2003 492 37,894,994 125 21,627,094 330 15,882,762 37 385,138 498,353

2004 763 130,863,059 164 78,785,477 543 51,350,427 56 727,155 485,797

2005 1,432 180,074,779 261 48,624,137 1080 130,333,180 91 1,117,462 651,243

2006 787 77,837,746 180 26,717,271 501 47,358,435 106 3,762,040 995,491

2007 698 55,021,009 186 34,921,521 126 $16,510,363 386 3,589,125 1,148,186

2008 701 73,238,974 280 39,305,493 153 $31,561,282 268 2,372,199 808,801

* Amounts expressed in thousands

Source: City of El Centro Building Department

Source: Federal Deposit Insurance Corporation

182

CITY OF EL CENTRO CAPITAL ASSETS STATISTICS

BY FUNCTION LAST TEN FISCAL YEARS

Fiscal Year 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Police: Stations 1 1 1 1 1 1 1 1 1 Number of Police Officers 47 52 46 48 49 49 48 48 55 58

Fire: Stations 2 2 2 2 2 2 2 2 2 2 Number of Firefighters 33 33 33 33 36 36 33 33 37 40

Parks and Recreation: Parks 12 12 12 12 12 13 13 13 13 14 Community Centers

Library

Water:

Number of customers 7,793 7,859 7,915 8,015 8,092 8,175 8,775 9,404 9,514 9,519

Maximum pumping capacity 17,000 17,000 17,000 17,000 17,000 17,000 17,000 17,000 17,000 17,000

(thousands of gallons)

Average daily consumption 8,000 8,000 8,000 8,000 8,000 8,000 8,000 8,000 8,000 8,000


Miles of lines and mains 125 125 125 125 127 131 131 131 131 131

Wastewater:

Maximum treatment capactiy 8,000 8,000 8,000 8,000 8,000 8,000 8,000 8,000 8,000 8,000


Average daily flow 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000


Miles oflines and mains 120 120 120 120 122 129 129 129 129 129

Other:

City Land Area (Square Miles) 9.20 9.20 9.20 9.80 9.80 9.80 10.05 10.05 10.05 10.05

Miles of Storm Drain 25.0 25.0 25.0 25.0 26.0 26.0 17.0 26.0 26.0 26.0

Miles of City Streets 97.0 97.0 105.0 105.0 105.0 105.0 105.0 105.0 105.0 105.0


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Number of Utility

Fiscal Year Population Customers

1999 38,450 7,793

2000 38,962 7,859

2001 39,247 7,915

2002 39,186 8,015

2003 39,567 8,092

2004 40,047 8,175

2005 40,982 8,775

2006 42,002 9,404

2007 42,071 9,514

2008 43,316 9,519

CITY OF EL CENTRO DEMANDS FOR CITY SERVICES


Number of Number of Number of Police 911 Emergency Sworn

Calls- Total Calls Officers

48,975 47

49,231 52

52,235 46

48,099 16,393 48

50,368 15,657 49

53,846 15,033 49

46,830 15,120 48

49,274 13,975 48

57,034 15,956 55

42,832 17,712 58

1 Includes calls for fires, medical calls, traffic accidents and hazardous conditions. 2 This infonnation is not available.

Source: City of City of El Centro Finance Department, Fire Depmtment, and Police Department

184

Number of Number of Fire Fire

Calls 1 Fighters

33

33

33

33

36

3,134 36

3,184 33

3,394 33

3,301 37

3,353 40


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APPENDIX C

SUMMARY OF PRINCIPAL LEGAL DOCUMENTS

The following is a summary of certain provisions of the Indenture and the Lease Agreement, and is supplemental to the summary of other provisions of such documents described elsewhere in this Official Statement. This summary does not purport to be comprehensive or definitive, and reference should be made to such documents for full and complete statements of their respective provisions. All capitalized terms used but not otherwise defined in this Appendix shall have the meanings assigned to such terms in the Indenture and the Lease Agreement.

INDENTURE

Definitions

“Act” means Articles 1 through 4 (commencing with Section 6500), Chapter 5, Division 7, Title 1 of the Government Code of the State, as in existence on the Closing Date or as thereafter amended from time to time.

“Additional Rental Payments” means the additional rental payable by the City under and pursuant to the Lease.

“Assignment Agreement” means that certain Assignment Agreement, dated as of December 1, 2009, by and between the Authority and the Trustee.

“Authority” means the El Centro Financing Authority, a joint powers authority duly organized and existing under the Joint Exercise of Powers Agreement and the laws of the State.

“Authority Board” means the governing body of the Authority.

“Authorized Denominations” means (1) $5,000 or any integral multiple thereof for the 2009 Series A Bonds or (2) $1,000 or any integral multiple thereof for the 2009 Series B Bonds.

“Base Rental Payments” means the Base Rental Payments under the Lease.

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

“Bond Law” means the Marks-Roos Local Bond Pooling Act of 1985, constituting Article 4 of the Act, as in existence on the Closing Date or as thereafter amended from time to time.

“Bond Year” means each twelve-month period extending from December 2 in one calendar year to December 1 of the succeeding calendar year, both dates inclusive, except that the first Bond Year shall begin on the Closing Date and shall end on December 1, 2010.

“Bonds” means the 2009 Series A Bonds and the 2009 Series B Bonds.

“Business Day” means a day other than (i) a Saturday or Sunday, (ii) a day on which commercial banks in the city in which the Trustee maintains its Trust Office are authorized or required by law or executive order to close or (iii) a day on which the New York Stock Exchange is closed.

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“Certificate of the Authority” means a certificate in writing signed by the Chairman or Vice Chairman of the Authority or by any other officer of the Authority duly authorized by the Chairman or by the Authority for that purpose, as evidenced in writing to the Trustee.

“Certificate of the City” means a certificate in writing signed by the City Manager of the City or by any other officer of the City duly authorized for that purpose.

“City” means the El Centro, California.

“Closing Date” means the date of delivery of the Bonds to the Original Purchaser thereof.

“Code” means the Internal Revenue Code of 1986 and any regulations promulgated thereunder.

“Costs of Issuance” means all expenses incurred in connection with the authorization, issuance, sale and delivery of the Bonds, including but not limited to all compensation, fees and expenses (including but not limited to fees and expenses for legal counsel) of the Authority and the Trustee, compensation to any financial consultants or underwriters, legal fees and expenses, filing and recording costs, rating agency fees, costs of preparation and reproduction of documents, costs of printing and fees and costs for any guaranty, surety bond, letter of credit or other credit facility.

“Defeasance Securities” means:

(a) U.S. Treasury Certificates, Notes and Bonds (including State and Local Government Series — “SLGS”)

(b) Direct obligations of the Treasury which have been stripped by the Treasury itself, CATS, TIGRS and similar securities.

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

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

(e) Obligations issued by the following agencies which are backed by the full faith and credit of the U.S.:

(i) U.S. Export-Import Bank (Eximbank)

(1) Direct obligations or fully guaranteed certificates of beneficial ownership

(ii) Farmers Home Administration (FmHA)

(1) Certificates of beneficial ownership

(iii) Federal Financing Bank

(iv) General Services Administration

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(1) Participation certificates

(v) U.S. Maritime Administration

(1) Guaranteed Title XI financing

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

(1) Project Notes

(2) Local Authority Bonds

(3) New Communities Debentures – U.S. government guaranteed debentures

(4) U.S. Public Housing Notes and Bonds – U.S. government guaranteed public housing notes and bonds.

“Depository” means DTC and its successors and assigns or if (a) the then Depository resigns from its functions as securities depository of the Bonds, or (b) the Authority discontinues use of the Depository, any other securities depository which agrees to follow the procedures requested to be followed by a securities depository in connection with the Bonds and which is selected by the Authority.

“Depository Participant” means a member of, or participant in, the Depository.

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

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

“Fair Market Value” means the price at which a willing buyer would purchase the investment from a willing seller in a bona fide, arm’s length transaction (determined as of the date the contract to purchase or sell the investment becomes binding) if the investment is traded on an established securities market (within the meaning of section 1273 of the Tax Code) and, otherwise, the term “fair market value” means the acquisition price in a bona fide arm’s length transaction (as referenced above) if (i) the investment is a certificate of deposit the value of which is determined in accordance with applicable regulations under the Tax Code, (ii) the investment is an agreement with specifically negotiated withdrawal or reinvestment provisions and a specifically negotiated interest rate (for example, a guaranteed investment contract, a forward supply contract or other investment agreement) the value of which is determined in accordance with applicable regulations under the Tax Code, (iii) the investment is a United States Treasury Security-State and Local Government Series that is acquired in accordance with applicable regulations of the United States Bureau of Public Debt, or (iv) the investment is the Local Agency Investment Fund of the State of California, but only if at all times during which the investment is held its yield is reasonably expected to be equal to or greater than the yield on a reasonably comparable direct obligation of the United States.

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

“Indenture” means the Indenture, dated as of December 1, 2009 as originally executed or as it may from time to time be amended or supplemented in accordance with the Indenture.

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“Independent Certified Public Accountant” means any certified public accountant or firm of certified public accountants appointed and paid by the Authority, and who, or each of whom:

(a) is in fact independent and not under domination of the Authority or the City;

(b) does not have any substantial interest, direct or indirect, in the Authority or the City; and

(c) is not connected with the Authority or the City as an officer or employee of the Authority or the City but who may be regularly retained to make annual or other audits of the books of or reports to the Authority or the City.

“Information Services” means the Electronic Municipal Market Access System (referred to as “EMMA”), a facility of the Municipal Securities Rulemaking Board, at www.emma.msrb.org; provided, however, in accordance with then current guidelines of the Securities and Exchange Commission, Information Services shall mean such other organizations providing information with respect to called Bonds as the Authority may designate in writing to the Trustee.

“Interest Payment Date” means April 1 and October 1 of each year, commencing April 1, 2010.

“Joint Exercise of Powers Agreement” means that certain Joint Exercise of Powers Agreement, dated as of July 1, 1996,, entered into under the Act by the City of El Centro and the Redevelopment Agency of the City of El Centro, together with any amendments thereof and supplements thereto.

“Lease” means that certain Lease Agreement, dated as of December 1, 2009, each by and between the Authority as lessor and the City as lessee, as it may be further amended or modified.

“Leased Property” means, collectively, those certain parcels of real property, together with the improvements thereon, leased by the Authority to the City pursuant to the Lease, as more fully described in Exhibit A to the Lease, as such Exhibit A may be revised and amended from time to time pursuant to the terms of the Indenture and of the Lease.

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

“Maximum Annual Debt Service” in respect of any Bond Year means the largest of the sums obtained for that or any succeeding Bond Year after totaling the following for each such Bond Year:

A. The principal amount of all Outstanding Bonds maturing or required to be redeemed by mandatory sinking account redemption in such Bond Year; and

B. The interest that would be due during such Bond Year on the aggregate principal amount of Bonds which would be Outstanding in such Bond Year if the Bonds Outstanding on the date of such computation were to mature or be redeemed in accordance with the applicable maturity or mandatory sinking account redemption schedule. At the time and for the purpose of making such computation, the amount of Bonds already retired in advance of the above mentioned schedule or schedules shall be deducted pro rata from the remaining amounts thereon.

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

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“Nominee” means the nominee of the Depository, which may be the Depository, as determined from time to time pursuant to the Indenture.

“Original Purchaser” means the original purchaser of the Bonds.

“Outstanding,” when used as of any particular time with reference to Bonds, means (subject to the provisions of the Indenture) all Bonds theretofore executed, issued and delivered by the Authority under the Indenture except:

(a) Bonds theretofore canceled by the Trustee or surrendered to the Trustee for cancellation;

(b) Bonds paid or deemed to have been paid within the meaning of the Indenture; and

(c) Bonds in lieu of which or in substitution for which other Bonds shall have been executed, issued and delivered pursuant to the Indenture or any Supplemental Indenture.

“Owner” when used with respect to any Bond, means the person in whose name the ownership of such Bond shall be registered on the Registration Books.

“Permitted Investments” means any of the following which at the time of investment are legal investments under the laws of the State for the moneys proposed to be invested therein (the Trustee is entitled to conclusively rely on a Request of the Authority directing investment in such Permitted Investment as a certification by the Authority to the Trustee that such Permitted Investment is a legal investment under the laws of the State), but only to the extent that the same are acquired at Fair Market Value:

(a) Direct obligations of the United States of America (including obligations issued or held in book-entry form on the books of the Department of the Treasury of the United States of America) or obligations the timely payment of the principal of and interest on which are fully guaranteed by the United States of America, including instruments evidencing a direct ownership interest in securities described in this clause such as Stripped Treasury Coupons rated or assessed in the highest Rating Category by S&P and Moody’s and held by a custodian for safekeeping on behalf of holders of such securities.

(b) Bonds or notes which are exempt from federal income taxes and for the payment of which cash or obligations described in clause (a) of this definition in an amount sufficient to pay the principal of, premium, if any, and interest on when due have been irrevocably deposited with a trustee or other fiscal depositary and which are rated in the highest rating category by S&P and Moody’s.

(c) Obligations, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following: Federal Home Loan Bank System, Government National Mortgage Association, Farmer’s Home Administration, Federal Home Loan Mortgage Corporation or Federal Housing Administration; provided that with respect to the funds and accounts established under the Indenture, such obligations shall at no time exceed an amount equal to ten percent (10%) of the aggregate principal amount of the Bonds Outstanding.

(d) Deposit accounts, certificates of deposit or savings accounts (i) fully insured by the Federal Deposit Insurance Corporation or (ii) with banks whose short term obligations are rated no lower than A-1 by S&P and P-1 by Moody’s including those of the Trustee and its affiliates.

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(e) Federal funds or banker’s acceptances with a maximum term of one year of any bank that has an unsecured, uninsured and unguaranteed obligation rating of “Prime-1” or “A3” by Moody’s and “A-l” or “A” or better by S&P (including the Trustee).

(f) Repurchase obligations with a term not exceeding 30 days pursuant to a written agreement between the Trustee and either a primary dealer on the Federal Reserve reporting dealer list which falls under the jurisdiction of the SIPC or a federally chartered commercial bank whose long-term debt obligations are rated A or better by S&P and Moody’s, with respect to any security described in clause (1); provided that the securities which are the subject of such repurchase obligation (i) must be free and clear of all liens, (ii) in the case of a SIPC dealer, were not acquired pursuant to a repurchase or reverse repurchase agreement, (iii) must be deposited with the Trustee and maintained through weekly market valuations in an amount equal to 104% of the invested funds plus accrued interest; and further provided that the Trustee must have a valid first perfected security interest in such securities.

(g) Taxable government money market portfolios that have a rating by S&P of Am-G or Am or better and rated in one of the three highest rating categories of Moody’s consisting of securities issued or guaranteed as to payment of principal and interest by the full faith and credit of the United States, subject to a maximum permissible limit equal to six months of principal and interest on the Bonds including portfolios of the Trustee and its affiliates.

(h) Tax-exempt government money market portfolios that have a rating by S&P of Am-G or Am or better and rated in one of the three highest rating categories of Moody’s consisting of securities which are rated in the highest Rating Categories of S&P and Moody’s subject to a maximum permissible limit equal to six months of principal and interest on the Bonds.

(i) Money market funds registered under the Investment Company Act of 1940, the shares in which are registered under the Securities Act of 1933 and that have a rating by S&P of AAAm-G or AAAm and rated in one of the two highest Rating Categories of Moody’s, including those managed or advised by the Trustee or its affiliates.

(j) 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.

(k) Investment agreements, including guaranteed investment contracts (“GICs”) forward purchase agreements and reserve fund put agreements with banks or other financial institutions rated, or guaranteed by institutions rated, or with senior unsecured debt rated, by S&P and Moody’s, in one of the two highest rating categories assigned by such agencies.

(l) Any other investments for which each rating agency then rating the Bonds confirms that such investment will not adversely affect its ratings on the Bonds.

“Project Costs” means any costs or expenses incurred in connection with the construction of the Transportation Improvements.

“Qualified Reserve Account Credit Instrument” means an irrevocable standby or direct-pay letter of credit or surety bond issued by a commercial bank or insurance company and deposited with the Trustee pursuant to the Indenture, provided that all of the following requirements are met: (i) at the time of issuance of such letter of credit or surety bond, the long-term credit rating of such commercial bank or insurance company is “AA” or “Aa2” by S&P and Moody’s, respectively, or higher, and, if rated by A.M. Best & Company a minimum rating of “A”; (ii) such letter of credit or surety bond has a term which ends

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no earlier than the last Interest Payment Date of the series of Bonds to which the Reserve Requirement applies; (iii) such letter of credit or surety bond has a stated amount at least equal to the portion of the Reserve Requirement with respect to which funds are proposed to be released pursuant to the Indenture; and (iv) the Trustee is authorized pursuant to the terms of such letter of credit or surety bond to draw thereunder amounts necessary to carry out the purposes specified in the Indenture, including the replenishment of the Interest Account or the Principal Account.

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

“Record Date” means, with respect to any Interest Payment Date, the fifteenth calendar day of the month immediately preceding such Interest Payment Date, whether or not such day is a Business Day.

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

“Rental Payments” means collectively the Base Rental Payments and the Additional Rental Payments.

“Request of the Authority” means a request in writing signed by the Chairman or Vice Chairman of the Authority or by any other officer of the Authority duly authorized by the Chairman or by the Authority for that purpose, as evidenced in writing to the Trustee.

“Request of the City” means a request in writing signed by the City Manager or by any other officer of the City duly authorized for that purpose.

“Responsible Officer” means any member of the Board of Directors of the Authority or any other person authorized by resolution of the Board of Directors of the Authority to act on behalf of the Authority under or with respect to the Lease or the Indenture.

“Revenues” means (i) all Base Rental Payments payable by the City pursuant to the Lease (including prepayments), (ii) any proceeds of Bonds originally deposited with the Trustee and all moneys on deposit in the funds and accounts (other than the Rebate Fund) established under the Indenture, (iii) investment income with respect to such moneys held by the Trustee and (iv) any insurance proceeds or condemnation awards received by or payable to the Trustee relating to the Base Rental Payments.

“S&P” means Standard & Poor’s, a Division of the McGraw Hill Companies, Inc., and its successors and assigns.

“Securities Depositories” means The Depository Trust Company, New York, New York and its successors and assigns or if (i) the then Securities Depository resigns from its functions as depository of the Bonds or (ii) the Authority discontinues use of the then Securities Depository pursuant to the Indenture, any other securities depository which agrees to follow the procedures required to be followed by a securities depository in connection with the Bonds and which is selected by the Authority.

“Series” means either series of Bonds.

“Site and Facility Lease” means that certain Site and Facility Lease, dated as of December 1, 2009, by and between the City and the Authority, pursuant to which the Authority leases the Leased Property from the City.

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“State” means the State of California.

“Supplemental Indenture” means any agreement supplemental to or amendatory of the Indenture entered into in accordance with the provisions of the Indenture.

“Tax Certificate” means the Tax Certificate dated the date of the original delivery of the Bonds relating to the requirements of certain provisions of the Code, as such certificate may from time to time be modified or supplemented in accordance with the terms thereof.

“Tax Law Change” means legislation that has been enacted by the Congress of the United States or passed by either House of the Congress, or a decision has been rendered by a court of the United States, or an order, ruling, regulation (final, temporary or proposed) or official statement has been made by or on behalf of the Treasury Department of the United States, the Internal Revenue Service or other governmental agency of appropriate jurisdiction, the effect of which, as reasonably determined by the Authority, would be to suspend, reduce or terminate the payments from the United States Treasury to the Authority with respect to the 2009 Series B Bonds, or to state or local government issuers generally with respect to obligations of the general character of the 2009 Series B Bonds, pursuant to sections 54AA or 6431 of the Code of an amount equal to 35% of the interest due thereon on each interest payment date (the “Subsidy Payments”); provided, that such suspension, reduction or termination of the Subsidy Payments is not due to failure by the Authority to comply with the requirements under the Code to receive such Subsidy Payments.

“Transportation Improvements” means the Transportation Improvements within the City to be financed with proceeds of the Bonds.

“Trust Office” means the corporate trust office of the Trustee in Los Angeles, California (provided that for the purpose of maintenance of Registration Books and presentation of Bonds for transfer, exchange or payment such term means the corporate trust office of U.S. Bank, N.A. in St. Paul, Minnesota) or such other offices as may be specified to the Authority by the Trustee in writing.

“Trustee” means U.S. Bank National Association, and its successors and assigns, and any other corporation or association that may at any time be substituted in its place as provided in the Indenture.

“Written Request of the Authority” means a request in writing signed by a Responsible Officer.

“2009 Series A Bonds” means the El Centro Financing Authority Lease Revenue Bonds (Transportation Improvements), 2009 Series A.

“2009 Series A Costs of Issuance Fund” means the fund by that name established and held by the Trustee pursuant to the Indenture.

“2009 Series A Interest Account” means the account by that name established and held by the Trustee pursuant to the Indenture.

“2009 Series A Principal Account” means the account by that name established and held by the Trustee pursuant to the Indenture.

“2009 Series A Reserve Account” means the account by that name established and held by the Trustee pursuant to the Indenture.

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“2009 Series A Reserve Requirement” means, as of any calculation date in a Bond Year, an amount equal to the least of (i) ten percent (10%) of the sale proceeds (within the meaning of section 148 of the Code) of the 2009 Series A Bonds, (ii) 125% of average annual debt service on the 2009 Series A Bonds for that and every succeeding Bond Year, or (iii) Maximum Annual Debt Service on the 2009 Series A Bonds.

“2009 Series B Bonds” means the El Centro Financing Authority Lease Revenue Bonds (Transportation Improvements), 2009 Series B (Federally Taxable Build America Bonds).

“2009 Series B Costs of Issuance Fund” means the fund by that name established and held by the Trustee pursuant to the Indenture.

“2009 Series B Interest Account” means the account by that name established and held by the Trustee pursuant to the Indenture.

“2009 Series B Principal Account” means the account by that name established and held by the Trustee pursuant to the Indenture.

“2009 Series B Reserve Account” means the account by that name established and held by the Trustee pursuant to the Indenture.

“2009 Series B Reserve Requirement” means, as of any calculation date in a Bond Year, an amount equal to the least of (i) ten percent (10%) of the sale proceeds (within the meaning of section 148 of the Code) of the 2009 Series B Bonds, (ii) 125% of average annual debt service on the 2009 Series B Bonds for that and every succeeding Bond Year, or (iii) Maximum Annual Debt Service on the 2009 Series B Bonds.

Deposit and Application of Proceeds

Costs of Issuance Funds

There is established a fund to be held by the Trustee known as the “2009 Series A Costs of Issuance Fund,” into which shall be deposited a portion of the proceeds of the sale of the 2009 Series A Bonds pursuant to the Indenture. There is established a fund to be held by the Trustee known as the “2009 Series B Costs of Issuance Fund,” into which shall be deposited a portion of the proceeds of the sale of the 2009 Series B Bonds pursuant to the Indenture. The moneys in the 2009 Series A Costs of Issuance Fund and the 2009 Series B Costs of Issuance Fund shall be used to pay Costs of Issuance from time to time and shall be disbursed by the Trustee upon delivery to the Trustee of a requisition, substantially in the form attached as Exhibit B to the Indenture, executed by an officer of the Authority. On the date that is 180 days following the Closing Date, or upon the earlier receipt by the Trustee of a Request of the Authority certifying that all Costs of Issuance have been paid or provided for, the Trustee shall transfer any remaining amounts in the 2009 Series A Costs of Issuance Fund and the 2009 Series B Costs of Issuance Fund to the Lease Revenue Fund and the Trustee shall then close the 2009 Series A Costs of Issuance Fund and the 2009 Series B Costs of Issuance Fund.

Construction Funds

The Trustee shall establish and maintain separate funds to be known as the “2009 Series A Construction Fund” and the “2009 Series B Construction Fund.” The 2009 Series A Construction Fund and the 2009 Series B Construction Fund are herein collectively referred to as the “Construction Funds” and each separately as a “Construction Fund.” The Trustee shall disburse or transfer all amounts in a

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Construction Fund, as stated in a Request of the City (as described below) for the payment of the cost of the construction of the Transportation Improvements (including reimbursement to the City for any such costs paid by it).

Before any payment of money is made from a Construction Fund, the Authority shall file or shall cause the City to file with the Trustee a requisition in substantially the form set forth as Exhibit C to the Indenture, showing with respect to each payment of money to be made --

(a) the name and address of the person to whom payment is due;

(b) the amount of money to be paid;

(c) the purpose for which the obligation to be paid was incurred; and

(d) that such amount has not been paid previously for such purpose from the respective Construction Fund.

Each such requisition shall state and shall be sufficient evidence to the Trustee --

(a) that an obligation in the stated amount has been properly incurred under and pursuant to the Indenture and that such obligation is a proper charge against the respective Construction Fund; and

(b) that there has not been filed with or served upon the City a stop notice or any other notice of any lien, right to lien or attachment upon, or claim affecting the right to receive payment of, any of the money payable to the person named in such requisition which has not been released or will not be released simultaneously with the payment of such obligation, other than liens accruing by mere operation of law.

Upon receipt of each such requisition, the Trustee shall pay the amount set forth in such requisition as directed by the terms thereof.

When the construction of the Transportation Improvements has been completed, the Authority shall deliver or shall cause the City to deliver to the Trustee a Certificate of the City, stating the fact and date of such completion and stating that all the Project Costs have been determined and paid (or that all such costs have been paid less specified claims which are subject to dispute and for which a retention in the Construction Fund is to be maintained in the full amount of such claim until such dispute is resolved). Following the delivery of such certificate, the Trustee shall transfer amounts then on deposit in the Construction Funds (but less the amount of any such retention) to the Lease Revenue Fund.

Revenues; Flow of Funds

Pledge of Revenues; Assignment of Rights

Subject to the provisions of the Indenture, the Bonds shall be secured by a first lien on and pledge (which shall be effected in the manner and to the extent provided in the Indenture) of all of the Revenues, including all of the moneys in the Interest Accounts, the Principal Accounts and the Reserve Accounts, including all amounts derived from the investment of such moneys, except for those amounts derived from the investment of moneys in the 2009 Series B Reserve Account. The Bonds shall be equally secured by a pledge, charge and lien upon the Revenues and such moneys without priority for number, date of the Bonds, date of execution or date of delivery; and the payment of the interest on and principal of the Bonds and any premiums upon the redemption of any portion thereof shall be and are secured by an

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exclusive pledge, charge and lien upon the Revenues and such moneys. So long as any of the Bonds are Outstanding, the Revenues and such moneys shall not be used for any other purpose; except that out of the Revenues there may be apportioned such sums, for such purposes, as are expressly permitted by the Indenture.

The Authority transfers in trust and assigns to the Trustee, for the benefit of the Owners from time to time of the Bonds, all of the Revenues and all of the right, title and interest of the Authority in the Lease with respect to the Revenues, including its rights to receive the Base Rental Payments scheduled to be paid by the City under and pursuant to the Lease and any and all of the other rights of the Authority under the Lease as may be necessary to enforce payment of such Base Rental Payments when due or otherwise to protect the interest of the Owners of the Bonds, including its leasehold title to the Leased Property leased to the City pursuant to the Lease with respect to the Base Rental Payments. The Trustee accepts such assignments. The Trustee shall be entitled to and shall receive all of the Revenues, and any Revenues collected or received by the Authority shall be deemed to be held, and to have been collected or received, by the Authority as the agent of the Trustee and shall forthwith be paid by the Authority to the Trustee.

Lease Revenue Fund; Receipt, Deposit and Application of Revenues

All Revenues shall be deposited by the Trustee in a special fund designated as the “Lease Revenue Fund,” which the Trustee shall establish, maintain and hold in trust under the Indenture. In the event the City pays more than 100% of the Base Rental Payments coming due 15 days prior to any Interest Payment Date, the Trustee shall deposit into the Lease Revenue Fund only that portion of the Base Rental Payments which the City is required to make under the Lease, and shall remit any excess to the City.

On or before each Interest Payment Date, the Trustee shall transfer from the Lease Revenue Fund and deposit into the following respective accounts (each of which the Trustee shall establish and maintain within the Lease Revenue Fund), the following amounts in the following order of priority, the requirements of each such account (including the making up of any deficiencies in any such account resulting from lack of Revenues sufficient to make any earlier required deposit) at the time of deposit to be satisfied before any transfer is made to any account subsequent in priority:

(a) Interest Accounts. The Trustee shall establish and maintain separate accounts to be known as the “2009 Series A Interest Account” and the “2009 Series B Interest Account.” The 2009 Series A Interest Account and the 2009 Series B Interest Account are herein collectively referred to as the “Interest Accounts” and each separately as an “Interest Account.” On or before each Interest Payment Date, the Trustee shall deposit in each Interest Account an amount required to cause the aggregate amount on deposit in such Interest Account to equal the amount of interest becoming due and payable on such Interest Payment Date on all respective Outstanding Bonds. No deposit shall be made into an Interest Account if the amount contained therein is at least equal to the interest becoming due and payable upon all respective Outstanding Bonds on each succeeding Interest Payment Date within the then current Bond Year. All moneys in the Interest Accounts shall be used and withdrawn by the Trustee solely for the purpose of paying the interest on the Bonds as it shall become due and payable (including accrued interest on any Bonds redeemed prior to maturity).

(b) Principal Accounts. The Trustee shall establish and maintain separate accounts to be known as the “2009 Series A Principal Account” and the “2009 Series B Principal Account.” The 2009 Series A Principal Account and the 2009 Series B Principal Account are herein collectively referred to as the “Principal Accounts” and each separately as a “Principal Account.” On or before each Interest Payment Date, the Trustee shall deposit in each Principal Account an amount required to cause the

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aggregate amount on deposit in such Principal Account to equal the principal amount of the respective Bonds maturing or required to be redeemed through mandatory sinking account redemption on such Interest Payment Date pursuant to the Indenture or pursuant to a Supplemental Indenture, as the case may be. All moneys in the Principal Accounts shall be used and withdrawn by the Trustee solely for the purpose of paying the principal of the Bonds.

(c) Reserve Accounts.

(1) The Trustee shall establish and maintain separate accounts to be known as the “2009 Series A Reserve Account” and the “2009 Series B Reserve Account.” The 2009 Series A Reserve Account and the 2009 Series B Reserve Account are herein collectively referred to as the “Reserve Accounts” and each separately as a “Reserve Account.” On or before each Interest Payment Date, the Trustee shall deposit in each Reserve Account such amount as may be necessary to maintain a balance therein equal to the respective Reserve Requirement. No deposit shall be made in a Reserve Account so long as there shall be on deposit an amount equal to the respective Reserve Requirement. All money in the Reserve Accounts (or available to be drawn from a Qualified Reserve Account Credit Instrument) shall be used and withdrawn by the Trustee solely for the purpose of replenishing the respective Interest Accounts or the respective Principal Accounts in such order, in the event of any deficiency at any time in either of such accounts, or for the purpose of paying the interest on or principal of or redemption premiums, if any, on the Bonds in the event that no other money of the Authority is lawfully available therefor. All moneys in the 2009 Series A Reserve Account (or available to be drawn from a Qualified Reserve Account Credit Instrument held in the 2009 Series A Reserve Account Reserve Account) in excess of the Reserve Requirement may be applied to the retirement of all 2009 Series A Bonds then Outstanding. All moneys in the 2009 Series B Reserve Account (or available to be drawn from a Qualified Reserve Account Credit Instrument held in the 2009 Series B Reserve Account Reserve Account) in excess of the Reserve Requirement will be deposited into a segregated account of the 2009 Series B Construction Fund to be established by the Trustee, which monies will be applied at the written direction of the Authority to finance only capital expenditures, as defined in Treasury Regulation 1.150-1(b).

(2) Upon prior written notification to Moody’s and S&P, the Reserve Requirement may be satisfied by crediting to a Reserve Account moneys or a Qualified Reserve Account Credit Instrument or any combination thereof, which in the aggregate make funds available in each Reserve Account in an amount equal to the respective Reserve Requirement. Upon the deposit with the Trustee of such Qualified Reserve Account Credit Instrument to satisfy the 2009 Series A Reserve Requirement, the Trustee shall transfer any excess amounts then on deposit in the 2009 Series A Reserve Account into a segregated account of the Lease Revenue Fund to be established by the Trustee, which monies shall be applied at the written direction of the Authority either (i) to the payment within one year of the date of transfer of capital expenditures of the Authority permitted by law, or (ii) to the redemption of 2009 Series A Bonds on the earliest succeeding date on which such redemption is permitted hereby, and pending such application shall in accordance with written direction of the Authority be held either not invested in investment property (as defined in section 148(b) of the Code), or invested in such property to produce a yield that is not in excess of the yield on the 2009 Series A Bonds; provided, however, that the Authority may by written direction to the Trustee cause an alternative use of such amounts if the Authority shall first have obtained a written opinion of nationally recognized bond counsel substantially to the effect that such alternative use will not adversely affect the exclusion pursuant to section 103 of the Code of interest on the 2009 Series A Bonds from the gross income of the owners thereof for federal income tax purposes. Upon the deposit with the Trustee of such Qualified Reserve Account Credit Instrument to satisfy the 2009 Series B Reserve Requirement,

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the Trustee shall transfer any excess amounts then on deposit in the 2009 Series B Reserve Account into a segregated account of the 2009 Series B Construction Fund to be established by the Trustee, which monies shall be applied at the written direction of the Authority to finance only capital expenditures, as defined in Treasury Regulation 1.150-1(b).

(3) In any case where a Reserve Account is funded with a combination of cash and a Qualified Reserve Account Credit Instrument, the Trustee shall deplete all cash balances before drawing on the Qualified Reserve Account Credit Instrument. With regard to replenishment, any available moneys provided by the Authority or the City shall be used first to reinstate the Qualified Reserve Account Credit Instrument and second, to replenish the cash in such Reserve Account. In the event the Qualified Reserve Account Credit Instrument is drawn upon, the Authority shall make payment of interest on amounts advanced under the Qualified Reserve Account Credit Instrument after making any payments pursuant to this subsection.

(d) Surplus. On or before April 2 and October 2 of each year the Trustee shall determine the amount, if any, remaining in the Lease Revenue Fund after making the deposits required by paragraphs (a) through (c) above and the transfers of investment earnings pursuant to the Indenture, and shall apply such amount as a credit against the next following Base Rental Payment. Notwithstanding the foregoing, if directed in a Request of the City, the Trustee shall, with respect to all or any portion of such amount, pay, or set aside an amount for the payment of, any Rebate Requirement (as defined in the Tax Certificate) in accordance with a computation made by the City.

Investments

All moneys in any of the funds or accounts established with the Trustee pursuant to the Indenture shall be invested by the Trustee solely in Permitted Investments pursuant to the written direction of the Authority given to the Trustee two Business Days in advance of the making of such investments. In the absence of any such direction from the Authority, the Trustee shall invest any such moneys in money market funds described in subsection (i) of the definition of Permitted Investments. Moneys in the Reserve Accounts shall not be invested in investments having maturities extending beyond 5 years; provided, however, that if such Permitted Investments may be redeemed at par so as to be available on each Interest Payment Date, any amount in the Reserve Accounts may be invested in such redeemable Permitted Investments maturing on any date on or prior to the final scheduled payment date of the Bonds. Obligations purchased as an investment of moneys in any fund or account shall be deemed to be part of such fund or account.

The Trustee shall transfer all investment earnings on amounts in the Principal Accounts, the Interest Accounts and the Reserve Accounts (to the extent not necessary to replenish the Reserve Accounts to the respective Reserve Requirement), to the Lease Revenue Fund. Notwithstanding the foregoing, all investment earning on amounts in the 2009 Series B Reserve Account shall be transferred into a segregated account of the 2009 Series B Construction Fund to be established by the Trustee, which monies shall be applied at the written direction of the Authority to finance only capital expenditures, as defined in Treasury Regulation 1.150-1(b). All investment earnings on amounts in the Construction Funds shall be retained therein. For purposes of acquiring any investments under the Indenture, the Trustee may commingle funds held by it under the Indenture. The Trustee may act as principal or agent in the acquisition of any investment and may impose its customary charges therefor. The Trustee may act as manager, sponsor, advisor or depository with respect to any Permitted Investment. The Trustee shall incur no liability for losses arising from any investments made pursuant to the Indenture. The Authority acknowledges that regulations of the Comptroller of the Currency grant the Authority the right to receive brokerage confirmations of security transactions to be effected by the Trustee under the Indenture as they occur. The Authority specifically waives the right to receive such confirmation to the extent permitted by

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applicable law and agrees that it will instead receive periodic cash transaction statements which include detail for the investment transactions effected by the Trustee under the Lease; provided, however, that the Authority retains its right to receive brokerage confirmation on any investment transaction requested by the Authority.

Covenants of the Authority

Punctual Payment

The Authority shall punctually pay or cause to be paid the principal, interest and premium (if any) to become due in respect of all the Bonds, in strict conformity with the terms of the Bonds and of the Indenture, according to the true intent and meaning thereof, but only out of Revenues and other assets pledged for such payment as provided in the Indenture.

Extension of Payment of Bonds

The Authority shall not directly or indirectly extend or assent to the extension of the maturity of any of the Bonds or the time of payment of any claims for interest by the purchase of such Bonds or by any other arrangement, and in case the maturity of any of the Bonds or the time of payment of any such claims for interest shall be extended, such Bonds or claims for interest shall not be entitled, in case of any default under the Indenture, to the benefits of the Indenture, except subject to the prior payment in full of the principal of all of the Bonds then Outstanding and of all claims for interest thereon which shall not have been so extended. Nothing in the Indenture shall be deemed to limit the right of the Authority to issue Bonds for the purpose of refunding any Outstanding Bonds, and such issuance shall not be deemed to constitute an extension of maturity of the Bonds.

Against Encumbrances

The Authority shall not create, or permit the creation of, any pledge, lien, charge or other encumbrance upon the Revenues and other assets pledged or assigned under the Indenture while any of the Bonds are Outstanding, except the pledge and assignment created by the Indenture. Subject to this limitation, the Authority expressly reserves the right to enter into one or more other indentures for any of its corporate purposes, including other programs under the Bond Law, and reserves the right to issue other obligations for such purposes.

Power to Issue Bonds and Make Pledge and Assignment

The Authority is duly authorized pursuant to law to issue the Bonds and to enter into the Indenture and to pledge and assign the Revenues, the Lease and other assets purported to be pledged and assigned, respectively, under the Indenture in the manner and to the extent provided in the Indenture. The Bonds and the provisions of the Indenture are and will be the legal, valid and binding special obligations of the Authority in accordance with their terms, and the Authority and the Trustee (subject to the provisions of the Indenture) shall at all times, to the extent permitted by law, defend, preserve and protect said pledge and assignment of Revenues and other assets and all the rights of the Bond Owners under the Indenture against all claims and demands of all persons whomsoever.

Accounting Records and Financial Statements

The Trustee shall at all times keep, or cause to be kept, proper books of record and account, prepared in accordance with corporate trust industry standards, in which complete and accurate entries shall be made of all transactions by the Trustee relating to the proceeds of Bonds, the Revenues, the Lease

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and all funds and accounts established pursuant to the Indenture. Such books of record and account shall be available for inspection by the Authority and the City during regular business hours with reasonable prior notice.

Additional Obligations

The Authority covenants that no additional bonds, notes or indebtedness shall be issued or incurred that are payable out of the Revenues in whole or in part.

Lease

The Trustee, as assignee of the Authority’s rights under the Lease with respect to the Revenues, shall receive amounts due from the City pursuant to the Lease with respect to the Revenues.

The Authority will faithfully comply with, keep, observe and perform all the agreements, conditions, covenants and terms contained in the Lease required to be complied with, kept, observed and performed by it and, together with the Trustee, will enforce the Lease against the City in accordance with its terms.

So long as any Bond remains Outstanding, the Authority will not alter, amend or modify the Lease without the prior written consent of the Trustee, which consent shall be given only (i) if the Trustee receives an opinion of counsel selected by the Authority that such alteration, amendment or modification will not result in any material impairment of the covenants made or the security given or intended to be given for the payment of the Base Rental Payments, or (ii) if the Trustee first obtains the written consents of the Owners of at least a majority in aggregate principal amount of the Bonds then Outstanding to such alteration, amendment or modification.

Prior to any amendment or modification of the Lease pursuant to the Indenture, the Authority shall deliver to the Trustee an opinion of nationally recognized bond counsel to the effect that such amendment or modification has been adopted in accordance with the requirements of the Indenture.

Tax Covenants

The Authority shall not use, permit the use of, or omit to use Gross Proceeds or any other amounts (or any property the acquisition, construction or improvement of which is to be financed directly or indirectly with Gross Proceeds) in a manner that if made or omitted, respectively, would cause the interest on any of the 2009 Series A Bonds to fail to be excluded pursuant to section 103(a) of the Code from the gross income of the owners thereof for federal income tax purposes.

Rebate Fund

1. In addition to the other funds and accounts created pursuant to the Indenture, the Trustee shall establish and maintain a fund separate from any other fund or account established and maintained under the Indenture designated the “Rebate Fund” (the “Rebate Fund”). Within the Rebate Fund, the Trustee shall maintain such accounts or subaccounts as are specified in a Written Request of the Authority to the Trustee pursuant to the Tax Certificate. The Trustee shall deposit moneys in the Rebate Fund pursuant to a Written Request of the Authority. Subject to the transfer provisions provided in subparagraph (5) below, all money at any time deposited in the Rebate Fund shall be held by the Trustee in trust, to the extent required to satisfy the Rebate Requirement, for payment to the federal government of the United States of America, and none of the Authority, the Trustee or the Owner of any 2009 Series A Bond shall have any right in or claim to such money.

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2. Upon a Written Request of the Authority, an amount shall be deposited into the Rebate Fund by the Trustee from deposits by the Authority, if and to the extent required, so that the balance of the amount on deposit thereto shall be equal to the Rebate Requirement. Computations of the Rebate Requirement shall be furnished by or on behalf of the Authority in accordance with the Tax Certificate. The Authority shall provide the Trustee with a Certificate of the Authority evidencing that the computation of the Rebate Requirement has been made.

3. The Trustee shall have no obligation to rebate any amounts required to be rebated pursuant to subparagraph (1) above, other than from moneys held in the funds and accounts created under the Indenture or from other moneys provided to it by the Authority.

4. The Trustee shall invest all amounts held in the Rebate Fund in Permitted Investments as directed by a Written Request of the Authority. Money, including investment earnings, shall not be transferred from the Rebate Fund except as provided in subparagraph (5) below.

5. Upon receipt of a Written Request of the Authority, the Trustee shall remit part or all of the amounts in the Rebate Fund to the United States of America, as so directed. In addition, if the Authority so directs, the Trustee will deposit moneys into or transfer moneys out of the Rebate Fund from or into such accounts or funds as directed by the Written Request of the Authority. Any funds remaining in the Rebate Fund in excess of the Rebate Requirement as of the end of any Bond Year shall be transferred to the Interest Account.

6. Notwithstanding any other provision of the Indenture, the obligation to remit the Rebate Requirement to the United States and to comply with all other requirements of the Tax Certificate shall survive the defeasance or payment in full of the 2009 Series A Bonds.

Modification and Amendment of the Indenture

Amendment

The Indenture and the rights and obligations of the Authority and of the Owners may be modified or amended at any time by a Supplemental Indenture, which shall become binding upon adoption, without consent of any Owner, to the extent permitted by law, but only for any one or more of the following purposes:

(a) to add to the covenants and agreements of the Authority in the Indenture contained, other covenants and agreements thereafter to be observed, or to limit or surrender any rights or powers reserved to or conferred upon the Authority so long as such limitation or surrender of such rights or powers shall not materially adversely affect the Owners;

(b) to make such provisions for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective provision contained in the Indenture, or in any other respect whatsoever as the Authority may deem necessary or desirable, provided under any circumstances that such modifications or amendments shall not materially adversely affect the interests of the Owners in the reasonable judgment of the Authority; or

(c) for any other purpose that does not materially adversely affect the interests of the Owners.

Except as set forth in the preceding paragraph, the Indenture and the rights and obligations of the Authority and of the Owners may only be modified or amended at any time by a Supplemental Indenture,

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which shall become binding when the written consent of the Owners of a majority in aggregate principal amount of the Bonds then Outstanding are filed with the Trustee. No such modification or amendment shall (a) extend the maturity of or reduce the interest rate on any Bond or otherwise alter or impair the obligation of the Authority to pay the principal, interest or redemption premiums (if any) at the time and place and at the rate and in the currency provided therein of any Bond without the express written consent of the Owner, (b) reduce the percentage of Bonds required for the written consent to any such amendment or modification, or (c) modify any of the rights or obligations of the Trustee without its written consent thereto.

Copies of any modification or amendment to the Indenture, the Site and Facility Lease or the Lease shall be sent to S&P and Moody’s at lest 10 days prior to the effective date thereof.

Effect of Supplemental Indenture

From and after the time any Supplemental Indenture becomes effective pursuant to the Indenture, the Indenture shall be deemed to be modified and amended in accordance therewith, the respective rights, duties and obligations of the parties to the Indenture and all Owners of Outstanding Bonds, as the case may be, shall thereafter be determined, exercised and enforced subject in all respects to such modification and amendment, and all the terms and conditions of any Supplemental Indenture shall be deemed to be part of the terms and conditions of the Indenture for any and all purposes.

Prior to entering into any Supplemental Indenture pursuant to the Indenture, the Authority shall deliver to the Trustee an opinion of nationally recognized bond counsel to the effect that such Supplemental Indenture has been adopted in accordance with the requirements of the Indenture.

Endorsement or Replacement of Bonds After Amendment

After the effective date of any action taken as provided in the Indenture, the Authority may determine that the Bonds shall bear a notation, by endorsement in form approved by the Authority, as to such action, and in that case upon demand of the Owner at such effective date and presentation of such Bond for that purpose at the Trust Office of the Trustee, a suitable notation as to such action shall be made on such Bond. If the Authority shall so determine, new Bonds so modified as, in the opinion of the Authority, shall be necessary to conform to such Owners’ action shall be prepared and executed, and in that case upon demand of the Owner at such effective date such new Bonds shall be exchanged at the Trust Office of the Trustee, without cost to each Owner, for Bonds then Outstanding, upon surrender of such Outstanding Bonds.

Events of Default and Remedies of Bond Owners

Events of Default

The following events shall be Events of Default under the Indenture:

(a) Default in the due and punctual payment of the principal of or premium on any Bond when and as the same shall become due and payable, whether at maturity as therein expressed, or by proceedings for redemption.

(b) Default in the due and punctual payment of any installment of interest on any Bond when and as such interest installment shall become due and payable.

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(c) Failure by the Authority to observe and perform any of the covenants, agreements or conditions on its part in the Indenture or in the Bonds contained, other than as referred to in the preceding clauses (a) and (b), for a period of 30 days after written notice, specifying such failure and requesting that it be remedied has been given to the Authority by the Trustee, or to the Authority and the Trustee by the Owners of not less than 25% in aggregate principal amount of the Outstanding Bonds; provided, however, that if in the reasonable opinion of the Authority the failure stated in such notice can be corrected, but not within such 60-day period, the Trustee and such Owners shall not unreasonably withhold their consent to an extension of such time if corrective action is instituted by the Authority within such 60-day period and diligently pursued until such failure is corrected.

(d) The filing by the Authority of a petition or answer seeking reorganization or arrangement under the Federal bankruptcy laws or any other applicable law of the United States of America, or if a court of competent jurisdiction shall approve a petition, filed with or without the consent of the Authority, seeking reorganization under the Federal bankruptcy laws or any other applicable law of the United States of America, or if, under the provisions of any other law for the relief or aid of debtors, any court of competent jurisdiction shall assume custody or control of the Authority or of the whole or any substantial part of its property.

Remedies; No Acceleration

Upon the occurrence of an Event of Default the Trustee shall have the right:

(a) by mandamus or other action or proceeding or suit at law or in equity to enforce its rights against the Authority or any member, officer or employee thereof, to compel the Authority or any such member, officer or employee to perform and carry out its or his or her duties under law and the agreements and covenants required to be performed by it or him contained in the Indenture;

(b) by suit in equity to enjoin any acts or things which are unlawful or violate the rights of the Trustee; or

(c) by suit in equity upon the happening of an Event of Default to require the Authority and its members, officers and employees to account as the trustee of an express trust.

Subject to the Indenture, if an Event of Default shall have occurred and be continuing and if requested so to do by the Owners of at least 25% in aggregate principal amount of Outstanding Bonds and indemnified as provided in the Indenture, the Trustee shall be obligated to exercise such one or more of the rights and powers conferred by the Indenture, as the Trustee, being advised by counsel, shall deem most expedient in the interests of the Owners.

No remedy by the terms of the Indenture conferred upon or reserved to the Trustee (or to the Owners) is intended to be exclusive of any other remedy, but each and every such remedy shall be cumulative and shall be in addition to any other remedy given to the Trustee or the Owners under the Indenture or now or hereafter existing at law or in equity.

No delay or omission to exercise any right or power accruing upon any Event of Default shall impair any such right or power or shall be construed to be a waiver or any such Event of Default or acquiescence therein; such right or power may be exercised from time to time as often as may be deemed expedient.

The Trustee shall have no right to declare the principal of or interest on the Bonds to be due and payable immediately.

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Application of Revenues and Other Funds After Default

All amounts received by the Trustee pursuant to any right given or action taken by the Trustee under the provisions of the Indenture shall be applied by the Trustee in the following order upon presentation of the Bonds, and the stamping thereon of the amount of the payment if only partially paid, or upon the surrender thereof if fully paid:

First, to the payment of the fees, costs and expenses of the Trustee, including reasonable compensation to its agents, attorneys and counsel;

Second, to the payment of the whole amount of interest on and principal of the Bonds then due and unpaid, with interest on overdue installments of principal and interest to the extent permitted by law at the lesser of 12% per annum or the maximum rate permitted by law, provided, however, that in the event such amounts shall be insufficient to pay in full the full amount of such interest and principal, then such amounts shall be applied to the payment of such principal and interest without preference or priority of principal over interest, or interest over principal, or of any installment of interest over any other installment of interest, ratably to the aggregate of such principal and interest; and

Third, to the extent not already paid, to the reimbursement of any provider of a Qualified Reserve Account Credit Instrument in accordance with the terms thereof.

Power of Trustee to Control Proceedings

In the event that the Trustee, upon the happening of an Event of Default, shall have taken any action, by judicial proceedings or otherwise, pursuant to its duties under the Indenture, whether upon its own discretion or upon the request of the Owners of at least a majority in aggregate principal amount of the Bonds then Outstanding, it shall have full power, in the exercise of its discretion for the best interests of the Owners of the Bonds, with respect to the continuance, discontinuance, withdrawal, compromise, settlement or other disposal of such action; provided, however, that the Trustee shall not, unless there no longer continues an Event of Default, discontinue, withdraw, compromise or settle, or otherwise dispose of any litigation pending at law or in equity, if at the time there has been filed with it a written request signed by the Owners of a majority in aggregate principal amount of the Outstanding Bonds opposing such discontinuance, withdrawal, compromise, settlement or other disposal of such litigation and if the Trustee is indemnified as provided in the Indenture. Any suit, action or proceeding which any Owner shall have the right to bring to enforce any right or remedy under the Indenture may be brought by the Trustee for the equal benefit and protection of all Owners similarly situated and the Trustee is appointed (and the successive respective Owners issued under the Indenture by taking and holding the same, shall be conclusively deemed so to have appointed it) the true and lawful attorney-in-fact of the respective Owners for the purpose of bringing any such suit, action or proceeding and to do and perform any and all acts and things for and on behalf of the respective Owners as a class or classes, as may be necessary or advisable in the opinion of the Trustee as such attorney-in-fact.

Appointment of Receivers

Upon the occurrence of an Event of Default under the Indenture, and upon the filing of a suit or other commencement of judicial proceedings to enforce the rights of the Trustee and of the Owners under the Indenture, the Trustee shall be entitled, as a matter of right, to the appointment of a receiver or receivers of the Revenues and other amounts pledged under the Indenture, pending such proceedings, with such powers as the court making such appointment shall confer.

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Non-Waiver

A waiver of any default or breach of duty or contract by the Trustee or any Owners shall not affect any subsequent default or breach of duty or contract, or impair any rights or remedies on any such subsequent default or breach. No delay or omission of the Trustee or any Owner 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 of any such default or an acquiescence therein; and every power and remedy conferred upon the Trustee or Owners by the Bond Law or by the Indenture may be enforced and exercised from time to time and as often as shall be deemed expedient by the Trustee or the Owners, as the case may be.

Rights of Owners

Subject to the Indenture, no Owner shall have the right to institute any suit, action or proceeding at law or in equity, for any remedy under or upon the Indenture, unless (a) such Owner shall have previously given to the Trustee written notice of the occurrence of an Event of Default; (b) the Owners of a majority in aggregate principal amount of all the Bonds then Outstanding shall have made written request upon the Trustee to exercise the powers granted in the Indenture or to institute such action, suit or proceeding in its own name; (c) said Owners shall have tendered to the Trustee indemnity reasonably acceptable to the Trustee against the costs, expenses and liabilities to be incurred in compliance with such request; and (d) the Trustee shall have refused or omitted to comply with such request for a period of 60 days after such written request shall have been received by, and said tender of indemnity shall have been made to, the Trustee.

Such notification, request, tender of indemnity and refusal or omission are declared, in every case, to be conditions precedent to the exercise by any Owner of any remedy under the Indenture; it being understood and intended that no one or more Owners shall have any right in any manner whatever by his or their action to enforce any right under the Indenture, and that all proceedings at law or in equity to enforce any provision of the Indenture shall be instituted, had and maintained in the manner provided in the Indenture and for the equal benefit of all Owners.

The right of any Owner to receive payment of the principal of and interest and premium (if any) on such Bond as provided in the Indenture or to institute suit for the enforcement of any such payment, shall not be impaired or affected without the written consent of such Owner, notwithstanding the foregoing provisions or any other provision of the Indenture.

Termination of Proceedings

In case the Trustee shall have proceeded to enforce any right under the Indenture by the appointment of a receiver or otherwise, and such proceedings shall have been discontinued or abandoned for any reason, or shall have been determined adversely, then and in every such case, the Authority, the Trustee and the Owners shall be restored to their former positions and rights under the Indenture, respectively, with regard to the property subject to the Indenture, and all rights, remedies and powers of the Trustee shall continue as if no such proceedings had been taken.

Defeasance; Discharge of Indenture

Subject to the Indenture, if the Authority shall pay and discharge any or all of the Outstanding Bonds in any one or more of the following ways:

(a) by well and truly paying or causing to be paid the principal of and interest and premiums (if any) on such Bonds, as and when the same become due and payable;

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(b) by irrevocably depositing with the Trustee, in trust, at or before maturity, money which, together with the available amounts then on deposit in the funds and accounts established with the Trustee pursuant to the Indenture, is fully sufficient to pay such Bonds, including all principal, interest and redemption premiums (if any); or

(c) by irrevocably depositing with the Trustee or any other fiduciary, in trust pursuant to an escrow deposit agreement, Defeasance Securities in such amount as an Independent Certified Public Accountant shall determine in a written report acceptable in form and substance, and addressed, to the Authority and the Trustee, filed with the Trustee (upon which report the Trustee may conclusively rely) will, together with the interest to accrue thereon and available moneys then on deposit in the funds and accounts established with the Trustee pursuant to the Indenture, be fully sufficient to pay and discharge the indebtedness on such Bonds (including all principal, interest and redemption premiums) at or before their respective maturity dates;

and delivering an opinion of Bond Counsel acceptable in form and substance, and addressed, to the Authority and the Trustee to the effect that the Bonds are no longer Outstanding under the Indenture, and if such Bonds are to be redeemed prior to the maturity thereof notice of such redemption shall have been mailed pursuant to the Indenture or provision satisfactory to the Trustee shall have been made for the mailing of such notice, then, at the Request of the Authority, and notwithstanding that any of such Bonds shall not have been surrendered for payment, the pledge of the Revenues and other funds provided for in the Indenture with respect to such Bonds, and all other pecuniary obligations of the Authority under the Indenture with respect to all such Bonds, shall cease and terminate, except only the obligation of the Authority to pay or cause to be paid to the Owners not so surrendered and paid all sums due thereon from amounts set aside for such purpose as aforesaid, and all amounts due the Trustee. Any funds held by the Trustee following any payment or discharge of the Outstanding Bonds pursuant to the Indenture, which are not required for said purposes, shall after payment of amounts due the Trustee under the Indenture be paid over to the Authority.

LEASE AGREEMENT

Definitions

“Assignment Agreement” means the Assignment Agreement, dated as of December 1, 2009, by and between the Authority and the Trustee, relating to the Lease.

“Base Rental Payments” means the Base Rental Payments due under the Lease.

“Expiration Date” means the expiration date of the Lease.

“Insurance Consultant” means an individual or firm retained by the City as an independent insurance consultant, experienced in the field of risk management.

“Interest Component” means the interest component of any Base Rental Payments as set forth in the exhibit to the Lease relating to such Base Rental Payments.

“Lease” means the Lease Agreement.

“Net Proceeds” means any insurance or condemnation proceeds, paid with respect to the Leased Property remaining after payment therefrom of all expenses in the collection thereof.

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“Permitted Encumbrances” means, with respect to the Leased Property, as of any particular time, (i) the Project Lease; (ii) the Lease, (iii) the Indenture, the Assignment Agreement and the Trustee’s and the Authority’s interests in the Leased Property, (iv) liens for taxes and assessments not then delinquent, (v) utility, access and other easements and rights of way, restrictions and exceptions that as certified in a Certificate of the City will not interfere with or impair the use intended to be made of the Leased Property; (vi) encumbrances upon any additions and improvements to the Leased Property as permitted in the Lease and which do not materially impair the use intended to be made of the portions of the Leased Property other than such additions and improvements; (vii) any sublease or use permitted by the Lease, (viii) covenants, conditions or restrictions or liens of record relating to the Leased Property and existing on the Closing Date; and (xiv) such minor defects, irregularities, encumbrances and clouds on title as normally exist with respect to property similar in character to the Leased Property and as do not materially impair the use intended to be made of property affected thereby.

“Principal Component” means the principal component of any Base Rental Payments as set forth in the exhibit to the Lease relating to such Base Rental Payments.

Term

The Authority leases to the City and the City leases from the Authority, on the terms and conditions set forth in the Lease, the Leased Property.

The term of the Lease shall commence on the later of December 1, 2009, or the date on which the Lease is filed of record in the Official Records of Imperial County.

The term of the leasehold interest created shall expire on the earliest of (i) the Expiration Date; (ii) the date the last Base Rental Payment is made under the provisions of the Lease; or (iii) the date of discharge of the Indenture. Notwithstanding the foregoing, the term of the Lease Agreement shall automatically be extended for a period of ten (10) years, if, on the Expiration Date, the Indenture has not been fully discharged, and shall terminate on the date when the Indenture has been fully discharged.

Throughout the term of the Lease Agreement, title to the Leased Property shall remain in the City.

Rental

Subject to the provisions of the Lease, the City agrees to pay to the Authority, its successors or assigns, as rental for the use and possession of the Leased Property, the following amounts at the following times:

Base Rental Payments. The City shall pay the Base Rental Payments to the Authority or to the Trustee in accordance with the Base Rental Payment Schedule attached to the Lease as Exhibit B, less any amounts credited against the Base Rental Payments pursuant to the Indenture. The obligation of the City to pay the Base Rental Payments and any Additional Base Rental Payments shall each rank pari passu. Upon and after the issuance of any other bonds secured by Base Rental Payments with respect to the Leased Property, the City shall pay the Base Rental Payments with respect to such bonds as provided in the Indenture for such bonds, in accordance with the Base Rental Payment Schedule which shall be attached to the Lease as an Exhibit prior to the delivery of such bonds, as adjusted for any prepayments. On or before each March 15 and September 15 the City shall pay to the Trustee the Base Rental Payments coming due on the next succeeding April 1 and October 1, respectively, as set forth in Exhibit B and such payments shall constitute payment in arrears in consideration for the City’s use and possession of the Leased Property for the six-month period preceding the due date of such Base Rental Payments.

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Additional Rental. The City shall also pay, as “Additional Rental” under the Lease, in addition to the Base Rental Payments, to the Authority or to the Trustee such amounts in each year as shall be required for the payment of all costs and expenses (not otherwise paid for or provided for out of the proceeds of sale of the Bonds) incurred by the Authority or the Trustee in connection with the execution, performance or enforcement of the Lease or the assignment of the Lease, the Indenture, or the Authority’s or the Trustee’s interest in the Leased Property, including, but not limited to, all fees, costs and expenses, all administrative costs of the Authority relating to the Leased Property (including, without limiting the generality of the foregoing, salaries and wages of employees, overhead, insurance premiums, taxes and assessments (if any), expenses, compensation and indemnification of the Trustee payable by the Authority under the Indenture), fees of auditors, accountants, attorneys or engineers, and all other reasonable and necessary administrative costs of the Authority or charges required to be paid by it to comply with the terms of the Bonds or of the Indenture.

Such Additional Rental shall be billed to the City by the Authority or the Trustee from time to time. Amounts so billed shall be paid by the City within sixty (60) days after receipt of the bill by the City.

Fair Rental Value. Such payments of Base Rental Payments and Additional Rental for each rental payment period shall constitute the total rental for said rental payment period, and shall be paid by the City in each rental payment period for and in consideration of the right of the use and possession of, and the continued quiet use and enjoyment of, the Leased Property during each such period for which said rental is to be paid. The parties have agreed and determined that such total rental represents the fair rental value of the Leased Property for each such period. In making such determination, consideration has been given to other obligations of the parties under the Lease, the uses and purposes which may be served by the Leased Property and the benefits therefrom which will accrue to the City and the general public. The determination of fair rental value of the Leased Property pursuant to this paragraph shall not be deemed to be controlling in connection with a determination of fair value of the Leased Property by the parties for any other purpose.

Payment of Base Rental Payments. Each installment of Base Rental Payments payable under the Lease shall be paid in lawful money of the United States of America to the order of the Trustee at the corporate trust office of the Trustee in St. Paul, Minnesota, or such other place as the Trustee shall designate. Each installment of Additional Base Rental Payments payable under the Lease shall be paid in lawful money of the United States of America to the order of a trustee designated with respect thereto. The Base Rental Payments and any Additional Base Rental Payments which the City shall enter into with respect to the Leased Property shall be made on a pari passu basis with each other. Notwithstanding any dispute between the City and the Authority, the City shall make all Base Rental Payments when due, without deduction or offset of any kind, and shall not withhold any Base Rental Payments pending the final resolution of any such dispute. In the event of a determination that the City was not liable for said Base Rental Payments or any portion thereof, said Base Rental Payments or excess of payments, as the case may be, shall, at the option of the City, be credited against subsequent Base Rental Payments due under the Lease or be refunded at the time of such determination.

Increases in Aggregate Base Rental Payments. The City covenants that, except for the Base Rental Payments, it shall not incur any Additional Base Rental Payments, or permit an increase in the Base Rental Payments, without first obtaining an opinion of nationally recognized bond counsel to the effect that the resulting aggregate Base Rental Payments are not greater than the fair rental value of the Leased Property, and that the incurring of such Additional Base Rental Payments will not impair the validity and enforceability of the Lease or impair the exclusion of interest on bonds payable from Base Rental Payments from the gross income of the owners thereof for federal income tax purposes. Subject to

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the receipt of such an opinion, Additional Base Rental Payments may be incurred under the Lease as set forth in an Exhibit to be attached to the Lease.

Covenant to Budget and Appropriate. The City covenants to take such action as may be necessary to include all Base Rental Payments and Additional Rental due under the Lease in its annual budget and to make the necessary annual appropriations for all such Base Rental Payments and Additional Rental, subject only to abatement as provided in the Lease. The City will furnish to the Authority and the Trustee annually, on or before August 1, a certificate stating that it has complied with the covenant set forth in this paragraph. 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 agreed to be carried out and performed by the City. The obligation of the City to make Base Rental Payments or Additional Rental payments 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 Bonds nor the obligation of the City to make Base Rental Payments or Additional Rental payments constitutes an indebtedness of the City, the State or any of its political subdivisions within the meaning of any constitutional or statutory debt limitation or restriction.

Maintenance; Utilities, Taxes and Assessments

During such time as the City or any assignee or sublessee thereof is in possession of the Leased Property, all maintenance and repair, ordinary or extraordinary, of the Leased Property shall be the responsibility of the City, and the City shall pay for or otherwise arrange for the payment of (a) all utility services supplied to the Leased Property, (b) the cost of operation of the Leased Property, and (c) the costs of maintenance of and repair to the Leased Property resulting from ordinary wear and tear or want of care on the part of the City. The City shall at the City’s sole cost and expense keep and maintain the Leased Property clean and in a safe and good condition and repair. The Authority shall have no obligation to alter, remodel, improve, repair, decorate, or paint the Leased Property or any part thereof, and the parties affirm that the Authority has made no representations or warranties to the City respecting the condition of the Leased Property.

The City shall comply with all statutes, ordinances, regulations, and other requirements of all governmental entities that pertain to the occupancy or use of the Leased Property. The Authority has no responsibility or obligation whatsoever to construct any improvements, modifications or alterations to the Leased Property.

The City waives the right to make repairs at the Authority’s expense under Subsection 1 of Section 1932 and Section 1942 of the California Civil Code, or any other such law, statute, or ordinance now or hereafter in effect.

The parties contemplate that the Leased Property will be used for public purposes by the City and, therefore, that the Leased Property will be exempt from all taxes presently assessed and levied with respect to real and personal property, respectively. In the event that the use, possession or acquisition by the Authority or the City of the Leased Property is found to be subject to taxation in any form, the City will pay during the term of the Lease, as the same respectively become due, all taxes and governmental charges of any kind whatsoever that may at any time be lawfully assessed or levied against or with respect to the Leased Property and any other property acquired by the City in substitution for, as a renewal or replacement of, or a modification, improvement or addition to the Leased Property; provided, that with respect to any governmental charges or taxes that may lawfully be paid in installments over a period of

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years, the City shall be obligated to pay only such installments as are accrued during such time as the Lease is in effect.

Changes to the Leased Property

The City shall have the right during the term of the Lease to acquire and construct improvements or to attach fixtures, structures or signs to the Leased Property if such improvements, fixtures, structures or signs are necessary or beneficial for the use of the Leased Property by the City; provided, however, that no such acquisition or construction shall result in a material reduction in the value of the Leased Property, reduce the fair rental value thereof or substantially alter the nature of the Leased Property.

Upon termination of the Lease, the City may remove any fixture, structure or sign added by the City, but such removal shall be accomplished so as to leave the Leased Property, except for ordinary wear and tear and damage by casualty, in substantially the same condition as it was in before the fixture, structure or sign was attached.

Insurance

The City shall secure and maintain or cause to be secured and maintained at all times with insurers of recognized responsibility or through a program of self-insurance to the extent specifically permitted in the Lease, all coverage on the Leased Property required by the Lease.

Such insurance shall consist of:

(1) Comprehensive general liability coverage against claims for damages including death, personal injury, bodily injury or property damage arising from operations involving the Leased Property. Such insurance shall afford protection with a combined single limit of not less than $1,000,000 per occurrence with respect to bodily injury, death or property damage liability, or such greater amount as may from time to time be recommended by the City’s risk management officer or an independent insurance consultant retained by the City for that purpose; provided, however, that the City’s obligations under this clause (1) may be satisfied by self-insurance;

(2) Workers’ compensation insurance issued by a responsible carrier authorized under the laws of the State to insure employers against liability for compensation under the Labor Code of the State, or any act enacted as an amendment or supplement thereto or in lieu thereof, such workers’ compensation insurance to cover all persons employed by the City in connection with the Leased Property and to cover full liability for compensation under any such act; provided, however, that the City’s obligations under this clause (2) may be satisfied by self-insurance, and

All policies or certificates issued by the respective insurers for insurance, with the exception of workers’ compensation insurance, shall provide that such policies or certificates shall not be canceled or materially changed without at least 30 days’ prior written notice to the Authority and the Trustee. Evidence of such policies in the form of a certificate of the City required by the Lease shall be deposited with the Trustee by the City as available. Certificates of comprehensive general liability and workers’ compensation insurance shall be furnished by applicable insurers to the City, and, at least ten days prior to the expiration dates of such policies, if any, evidence of renewals shall be deposited with the Trustee.

If the City elects to provide self insurance pursuant to clauses (1) and/or (2) above, the City shall annually cause to be delivered to the Trustee a certificate of an Insurance Consultant certifying to the adequacy of the City’s reserves for such insurance.

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All policies or certificates of insurance provided for in the Lease shall name the City as a named insured and the Authority and the Trustee as additional insureds. All proceeds of insurance maintained under clauses (1) and (2) shall be deposited with the City.

Notwithstanding the generality of the foregoing, the City shall not be required to maintain or cause to be maintained more insurance than is specifically referred to above or any policies of insurance other than standard policies of insurance with standard deductibles offered by reputable insurers at a reasonable cost on the open market.

Form of Policies. All policies of insurance required by the Lease and any statements of self-insurance shall be in form satisfactory to the Authority. The City shall pay or cause to be paid when due the premiums for all insurance policies required by the Lease and shall promptly furnish or cause to be furnished evidence of such payments to the Authority and the Trustee. All such policies shall provide that the Authority and the Trustee shall be given thirty (30) days’ notice of each expiration, and any intended cancellation thereof or reduction of the coverage provided thereby. The City shall deliver to the Trustee on or before the Closing Date and each anniversary of the Closing Date a certificate that all insurance required under the Lease is in full force and effect. In the event that the City obtains insurance through a pooled insurance program of governmental entities, an annual statement or memorandum of coverage delivered to the Authority and the Trustee will satisfy the requirements of this subsection. The Trustee and the Authority shall not be responsible for the sufficiency of any insurance required in the Lease or payment of premium and shall be fully protected in accepting payment on account of such insurance or any adjustment, compromise or settlement of any loss agreed to by the City.

Damages, Destruction and Condemnation; Application of Net Proceeds

If prior to the termination of the term of the Lease (a) the Leased Property is destroyed (in whole or in part) or is damaged by fire of other casualty, or (b) title to, or the temporary use of, any portion of the Leased Property or the estate of the Authority or the City in the Leased Property or any portion shall be taken under the exercise of the power of eminent domain by any governmental body or by any person or firm or corporation acting under governmental authority, then the City and the Authority shall, as expeditiously as possible, continuously and diligently prosecute or cause to be prosecuted the repair or replacement thereof, unless the City elects not to repair or replace the Leased Property or portion thereof, in accordance with the provisions of the Lease. In the event that Net Proceeds are insufficient to repair or replace the Leased Property or portion thereof, the City shall, to the extent permitted by law, use its best efforts to fund any deficiency from any legally available funds.

If there is an abatement of rental payments pursuant to the Lease as a result of such casualty or event, and the City elects pursuant to the Lease to apply such insurance proceeds and such other sums as are deposited by the City to the prepayment of Base Rental Payments rather than replacing or repairing the destroyed or damaged portion of the Leased Property, then the Lease shall terminate with respect to the destroyed or damaged portion of the Leased Property as of the later of the date of such election by the City or the date the amount required by the Lease is received by the Trustee.

The provisions of Section 1932, Subdivision 2, and Section 1933, Subdivision 4, of the California Civil Code, including any amendments thereto and any other law which may be in force during the term of the Lease which authorizes the termination of the Lease upon the partial or complete destruction of the Leased Property, are waived by the City.

The City covenants and agrees, to the extent it may lawfully do so, that so long as any of the Bonds remain outstanding and unpaid, the City will not exercise the power of condemnation with respect to the Leased Property. The City further covenants and agrees, to the extent it may lawfully do so, that if

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for any reason the foregoing covenant is determined to be unenforceable or if the City should fail or refuse to abide by such covenant and condemns the Leased Property, the appraised value of the Leased Property shall not be less that the greater of (i) if such Bonds are then subject to redemption, the principal and interest components of the Bonds outstanding through the date of their redemption, or (ii) if such Bonds are not then subject to redemption, the amount necessary to defease such Bonds to the first available redemption date in accordance with the Indenture.

The City shall deposit any proceeds received from insurance and condemnation awards with respect to the destruction or partial destruction of Leased Property with the Trustee. The City shall have 45 days from the date of any such destruction or partial destruction to determine whether to repair the Leased Property or use insurance and condemnation award proceeds received to redeem Bonds. If the City determines to repair the Leased Property, disbursements from the Trustee shall only be made upon presentation of invoices in a form acceptable to the Trustee. If the City determines to cause the redemption of less than the full amount of the Bonds Outstanding, such redemption shall only be made to the extent the remaining fair market value of the Leased Property is sufficient to support the remaining Base Rental Payments supporting debt service on the Bonds.

Default

If default shall be made by the City in the observance or performance of any agreement, condition, covenant or term contained in the Lease required to be observed or performed by it (including without limitation the payment of any Base Rental Payments or Additional Rental due under the Lease), subject to the provisions of the Lease, the Authority shall not exercise any rights of entry upon or repossession of the Leased Property. IN THE EVENT OF SUCH DEFAULT, THE AUTHORITY MUST THEREAFTER MAINTAIN THE LEASE IN FULL FORCE AND EFFECT AND MAY ONLY RECOVER RENT AND OTHER MONETARY CHARGES AS THEY BECOME DUE, ALL WITHOUT TERMINATING THE CITY’S RIGHT TO POSSESSION OF THE LEASED PROPERTY. THIS IS THE SOLE AND EXCLUSIVE REMEDY AVAILABLE AGAINST THE CITY UNDER THE LEASE OR OTHERWISE.

The Authority or its assignee shall have the right to pursue any remedy available at law or in equity, except as otherwise expressly provided in the Lease, including the remedy described in California Civil Code Section 1951.4 as the same may be amended from time to time.

Each and all of the remedies given to the Authority under the Lease or by any law now existing or hereafter enacted are cumulative and the exercise of any one remedy shall not impair the right of the Authority to any or all other remedies.

In addition to any default resulting from breach by the City of any agreement, condition, covenant or term of the Lease, if (i) the City’s interest in the Lease or any part thereof is assigned or transferred, either voluntarily or by operation of law, except as provided in the Lease; or (ii) the City shall file any petition or institute any proceedings under any act or acts, state or federal, dealing with or relating to the subject of bankruptcy or insolvency or under any amendment of such act or acts, either as a bankrupt or as an insolvent or as a debtor or in any similar capacity, wherein or whereby the City asks or seeks or prays to be adjudicated a bankrupt, or is to be discharged from any or all of its debts or obligations, or offers to its creditors to effect a composition or extension of time to pay its debts, or asks, seeks or prays for a reorganization or to effect a plan of reorganization or for a readjustment of its debts or for any other similar relief, or if the City shall make a general or any assignment for the benefit of its creditors; or (iii) the City shall abandon the Leased Property or any portion thereof, then in each and every such case the City shall be deemed to be in default under the Lease.

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Neither the Authority nor the City shall be in default in the performance of any of its obligations under the Lease (except for the obligation of the City to pay Base Rental Payments when due pursuant to the Lease) unless and until it shall have failed to perform such obligation within thirty (30) days after notice by the Authority or the City, as the case may be, to the other party properly specifying wherein it has failed to perform such obligation.

Prepayment and Credits

Prepayment From Net Proceeds

The City may prepay, from Net Proceeds of insurance or a condemnation award received by it pursuant to the Lease, the Principal Component of Base Rental Payments then unpaid (and corresponding Interest Component), in whole or in part on any date, pursuant to the Lease, at a prepayment price equal to the sum of the Principal Component prepaid plus accrued interest thereon to the date of prepayment.

Prepayments made pursuant to this subsection (a) shall be allocated pro rata among the Principal Components of Base Rental Payments and any Additional Base Rental Payments.

Optional Prepayment.

The City may at its option prepay from any source of available moneys for redemption of Bonds pursuant to the Indenture, all or any part (in an integral multiple of $5,000) of the Principal Component of Base Rental Payments (and corresponding Interest Component), so that the aggregate annual amounts of Principal Component of Base Rental Payments which shall be payable after such prepayment shall each be an integral multiple of $5,000

The Authority and the City agree that any prepayment in part under the Lease and the redemption of any Bonds by the Authority pursuant to the Indenture shall be credited towards the City’s obligations under the Lease at the option of the City in any manner determined in writing delivered to the Trustee by the City. A prepayment made pursuant to the Lease shall not cause a defeasance of any Bonds unless the requirements of the Indenture are satisfied.

In the event of prepayment in full of the Principal Component of all Base Rental Payments, such that the Lease shall be terminated by its terms as provided in the Lease, all amounts then on deposit under the Indenture which are to be credited to the City’s obligations to make Base Rental Payments shall be credited towards the amounts then required to be so prepaid.

Mechanics’ Liens

In the event the City shall at any time during the term of the Lease cause any improvements or other work to be done or performed or materials to be supplied, in or upon the Leased Property, the City shall pay, when due, all sums of money that may become due for, or purporting to be for, any labor, services, materials, supplies or equipment furnished or alleged to have been furnished to or for the City in, upon or about the Leased Property and which may be secured by any mechanics’, materialmen’s or other liens against the Leased Property or the Authority’s interest therein, and will cause any such lien to be fully discharged and released at the time the performance of any obligation secured by any such lien matures or becomes due, except that, if the City desires to contest any such lien it may do so. If any such lien shall be reduced to final judgment and such judgment or such process as may be issued for the enforcement thereof is not promptly stayed, or if so stayed and said stay thereafter expires, the City shall forthwith pay and discharge said judgment.

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Quiet Enjoyment

The parties mutually covenant that the City, so long as it keeps and performs the covenants and agreements contained in the Lease, shall at all times during the term of the Lease peaceably and quietly have, hold and enjoy the Leased Property without suit, trouble or hindrance from the Authority.

Indemnification

The City shall, to the full extent then permitted by law, indemnify, defend, protect and hold harmless the Authority, the Trustee and their members, officers, directors and employees from and against any and all liabilities, obligations, losses, claims and damages whatsoever, regardless of the cause thereof (except for claims arising out of willful misconduct or gross negligence on the part of the Authority or the Trustee), and expenses in connection therewith, including, without limitation, counsel fees and expenses, penalties and interest arising out of or as the result of the entering into of the Lease and the Indenture, the payment of the costs of acquiring the Leased Property or any accident in connection with the operation, use, condition or possession of the Leased Property or any portion thereof resulting in damage to property or injury to or death to any person. The indemnification arising under this section shall continue in full force and effect notwithstanding the full payment of all rent obligations under the Lease or the termination of the Lease for any reason. The City agrees not to withhold or abate any portion of the payments required pursuant the Lease by reason of any defects, malfunctions, breakdowns or infirmities of the Leased Property. The Authority and the City mutually agree to promptly give notice to each other of any claim or liability indemnified against following either party’s learning thereof.

Assignment

The parties understand that the Lease and the rights of the Authority under the Lease, with certain exceptions, will be assigned to the Trustee as provided in the Indenture and the Assignment Agreement, to which assignments the City consents.

Neither the Lease nor any interest of the City under the Lease shall be mortgaged, pledged, assigned or transferred by the City by voluntary act or by operation of law or otherwise; provided that, subject to the provisions of the Lease, the City may sublease all or any portion of the Leased Property, and may grant concessions to others involving the use of any portion of the Leased Property, whether such concessions purport to convey a leasehold interest or a license to use a portion of the Leased Property. The City shall at all times remain liable for the performance of the covenants and conditions on its part to be performed under the Lease, notwithstanding any subletting or granting of concessions which may be made. Nothing contained in the Lease shall be construed to relieve the City from its obligation to pay Base Rental Payments and Additional Rental Payments as provided in the Lease or to relieve the City from any other obligations contained in the Lease.

Abatement of Rental

The obligation of the City to pay Base Rental Payments and Additional Rental Payments shall be abated during any period in which by reason of any damage, destruction or condemnation there is substantial interference with the use by the City of the Leased Property or any portion thereof. Such abatement shall be in an amount such that the resulting Base Rental Payments in any year during which such interference continues does not exceed the fair rental value of the portions of the Leased Property as to which such damage, destruction or taking do not substantially interfere with the City’s use and right of possession, as evidenced by a Certificate of the City. Such abatement shall continue for the period commencing with the date of such interference and ending with the restoration of the Leased Property to tenantable condition.

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Covenants of the City Regarding Tax-Exempt Status of the 2009 Series A Bonds

The City shall not use, permit the use of, or omit to use Gross Proceeds or any other amounts (or any property the acquisition, construction or improvement of which is to be financed directly or indirectly with Gross Proceeds) in a manner that if made or omitted, respectively, would cause the interest on any of the 2009 Series A Bonds to fail to be excluded pursuant to section 103(a) of the Code from the gross income of the owners thereof for federal income tax purposes.

Net Lease

Subject to the provisions relating to abatement, the Lease shall be deemed and construed to be a “Triple-Net-Lease” and the City agrees that rental provided for in the Lease shall be an absolute net return to the Authority, free and clear of any expenses, taxes, fees, insurance premiums, rebate payments, Leased Property costs, reserve deposits, charges or setoffs whatsoever.

Amendments

The Lease may be amended in writing as may be mutually agreed by the Authority and the City, subject to the written approval of Trustee; provided, that no such amendment which materially adversely affects the rights of the Owners shall be effective unless it shall have been consented to by the Owners of more than majority in aggregate principal amount of the Bonds then Outstanding, and provided further, that no such amendment shall (a) extend the payment date of any Base Rental Payment, without the prior written consent of the Owner of each Bond so affected, or (b) reduce the percentage of the Bonds the consent of the Owners of which is required for the execution of any amendment hereof.

The Lease and the rights and obligations of the Authority and the City under the Lease may also be amended or supplemented at any time by an amendment thereof or supplement thereto which shall become binding upon execution by the Authority and the City without the written consents of any Owners, but only to the extent permitted by law and only for any one or more of the following purposes:

(a) to add to the agreements, conditions, covenants and terms required by the Authority or the City to be observed or performed in the Lease and other agreements, conditions, covenants and terms thereafter to be observed or performed by the Authority or the City, or to surrender any right or power reserved therein to or conferred therein on the Authority or the City, and which in either case shall not materially adversely affect the interests of the Owners;

(b) to make such provisions for the purpose of curing any ambiguity of correcting, curing or supplementing any defective provision contained in the Lease or in regard to questions arising thereunder which the Authority or the City may deem desirable or necessary and not inconsistent therewith, and which shall not materially adversely affect the interests of the Owners;

(c) to effect a Substitution or Removal;

(d) to increase the amount of Base Rental Payment payable under the Lease for the purpose of allowing the Authority to add any real property to be acquired and leased thereunder; or

(e) for any other purpose which shall not materially adversely affect the interests of the Owners.

Essentiality

The City covenants and agrees that the Leased Property is essential to the City’s exercise of its governmental functions.

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APPENDIX D

FORM OF CONTINUING DISCLOSURE AGREEMENT

This CONTINUING DISCLOSURE AGREEMENT (the “Disclosure Agreement”), dated as of December 1, 2009, is executed and delivered by the CITY OF EL CENTRO (the “City”) and U.S. Bank National Association, as trustee (the “Trustee”) under the Indenture (as defined below) and as Dissemination Agent hereunder (the “Dissemination Agent”) in connection with the issuance by the El Centro Financing Authority (the “Authority”) of its $4,615,000 El Centro Financing Authority Lease Revenue Bonds (Transportation Improvements), 2009 Series A (Bank Qualified) (the “2009 Series A Bonds”) and $10,125,00 El Centro Financing Authority Lease Revenue Bonds (Transportation Improvements), 2009 Series B (Federally Taxable Build America Bonds) (the “2009 Series B Bonds” and, together with the 2009 Series A Bonds, the “Bonds”). The Bonds are being issued pursuant to an Indenture, dated as of December 1, 2009 (the “Indenture”), by and between the Authority and the Trustee. The City, the Dissemination Agent and the Trustee covenant and agree as follows:

SECTION 1. Purpose of the Disclosure Agreement. This Disclosure Agreement is being executed and delivered by the City and the Dissemination Agent for the benefit of the Owners and Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying with Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended. The City and the Dissemination Agent acknowledge that the Authority has no responsibility for continuing disclosure.

SECTION 2. Definitions. In addition to the definitions set forth in the Indenture, which apply to any capitalized term used in this Disclosure Agreement unless otherwise defined in this Section, the following capitalized terms shall have the following meanings:

“Annual Report” shall mean any Annual Report provided by the City pursuant to, and as described in, Sections 3 and 4 of this Disclosure Agreement.

“Beneficial Owner” shall mean any person which (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Bonds for federal income tax purposes.

“Disclosure Representative” shall mean the City Manager of the City or his or her designee, or such other officer or employee as the City shall designate in writing to the Dissemination Agent and the Trustee from time to time.

“Dissemination Agent” shall mean U.S. Bank National Association, acting in its capacity as Dissemination Agent hereunder, or any successor Dissemination Agent designated in writing by the City and which has filed with the Trustee a written acceptance of such designation.

“Listed Events” shall mean any of the events listed in Section 5(a) of this Disclosure Agreement.

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“MSRB” shall mean the Municipal Securities Rulemaking Board.

“Participating Underwriter” shall mean the original underwriter of the Bonds required to comply with the Rule in connection with offering of the Bonds.

“Repository” shall mean, until otherwise designated by the Securities and Exchange Commission, the Electronic Municipal Market Access website of the MSRB located at http://emma.msrb.org.

“Rule” shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time.

“State” shall mean the State of California.

SECTION 3. Provision of Annual Reports.

(a) The City shall, or shall cause the Dissemination Agent to, not later than eight (8) months after the end of the City’s fiscal year, commencing with the Annual Report for the 2008-09 fiscal year, provide to each Repository copies of an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Agreement. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 4 of this Disclosure Agreement; 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. 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(f).

(b) Not later than fifteen (15) Business Days prior to the date specified in subsection (a) for providing the Annual Report to each Repository, the City shall provide the Annual Report to the Dissemination Agent and the Trustee (if the Trustee is not the Dissemination Agent). If by such date, the Trustee has not received a copy of the Annual Report, the Trustee shall contact the City and the Dissemination Agent to determine if the City is in compliance with the first sentence of this subsection (b). The City shall provide a written certification with each Annual Report furnished to the Dissemination Agent and the Trustee to the effect that such Annual Report constitutes the Annual Report required to be furnished by it hereunder. The Dissemination Agent and Trustee may conclusively rely upon such certification of the City and shall have no duty or obligation to review such Annual Report.

(c) If the Trustee is unable to verify that an Annual Report of the Commission has been provided to each Repository by the date required in subsection (a), the Dissemination Agent shall send a notice to each Repository in substantially the form attached hereto as Exhibit A.

(d) The If the Annual Report is delivered to the Dissemination Agent for filing, the Dissemination Agent shall: (i) determine each year, prior to the date for providing the Annual Report, the name and address of each Repository, and file the Annual Report so provided therewith; and (ii) upon verification of filing, file a report with the City and (if the Dissemination

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Agent is not the Trustee) the Trustee certifying that the Annual Report has been provided pursuant to the Disclosure Agreement, stating the date it was provided and listing the Repository or Repositories to which it was provided.

SECTION 4. Content of Annual Reports. The City’s Annual Report shall contain or include by reference the following:

(1) The audited financial statements of the City for the prior fiscal year, prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board. If 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 in a format similar to the financial statements contained in the final Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available.

(2) The following tables presented in Appendix A of the Official Statement, updated for the fiscal year covered by the Annual Report, to the extent not included in section (1) above:

(i) General Fund Balance Sheet;

(ii) Statement of Revenues, Expenditures, and Changes in Funds Balance;

(iii) Assessed Valuation of Taxable Property; and

(iv) Property Tax Levies and Collections.

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 public entities related thereto, which have been submitted to each Repository or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the MSRB. The City shall clearly identify each such other document so included by reference.

The contents, presentation and format of the Annual Reports may be modified from time to time as determined in the judgment of the City to conform to changes in accounting or disclosure principles or practices and legal requirements followed by or applicable to the City or to reflect changes in the business, structure, operations, legal form of the City or any mergers, consolidations, acquisitions or dispositions made by or affecting the City; provided that any such modifications shall comply with the requirements of the Rule.

SECTION 5. Reporting of Significant Events.

(a) Pursuant to the provisions of this Section 5, the City shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds, if material:

(1) principal and interest payment delinquencies;

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(2) non-payment related defaults;

(3) modifications to rights of Bondholders;

(4) optional, contingent or unscheduled bond calls;

(5) defeasances;

(6) rating changes;

(7) adverse tax opinions or events adversely affecting the tax-exempt status of the Bonds;

(8) unscheduled draws on the debt service reserves reflecting financial difficulties;

(9) unscheduled draws on credit enhancements reflecting financial difficulties;

(10) substitution of credit or liquidity providers, or their failure to perform;

(11) release, substitution or sale of property securing repayment of the Bonds.

(b) The Trustee shall, within five (5) Business Days of obtaining actual knowledge of the occurrence of any of the Listed Events, or as soon as reasonably practicable thereafter contact the Disclosure Representative, inform such person of the event, and request that the City promptly notify the Dissemination Agent in writing whether or not to report the event pursuant to subsection (f) of this Section.

(c) Whenever the City obtains knowledge of the occurrence of a Listed Event, whether because of a notice from the Trustee pursuant to subsection (b) or otherwise, the City shall as soon as possible determine if such event would be material under applicable Federal securities law.

(d) If the City has determined that knowledge of the occurrence of a Listed Event would be material under applicable federal securities laws, the City shall promptly notify the Dissemination Agent in writing. Such notice shall instruct the Dissemination Agent to report the occurrence pursuant to subsection (f) of this Section.

(e) If in response to a request under subsection (b), the City determines that the Listed Event would not be material under applicable Federal securities law, the City shall so notify the Dissemination Agent in writing and instruct the Dissemination Agent not to report the occurrence pursuant to subsection (f).

(f) If the Dissemination Agent has been instructed by the City to report the occurrence of a Listed Event, the Dissemination Agent shall file a notice of such occurrence with the MSRB and each Repository. Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(4) and (5) of subsection (a) of this Section need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to Owners of affected Bonds pursuant to the Indenture.

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SECTION 6. Filings with the MSRB. All information, operating data, financial statements, notices and other documents provided to the MSRB as Repository in accordance with this Disclosure Agreement shall be provided in an electronic format prescribed by the MSRB and shall be accompanied by identifying information as prescribed by the MSRB.

SECTION 7. Termination of Reporting Obligation. The City’s obligations under this Disclosure Agreement shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the City shall give notice of such termination in the same manner as for a Listed Event under Section 5(f).

SECTION 8. 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 Agreement, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. 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 Agreement. If at any time there is not any other designated Dissemination Agent, the Trustee shall be the Dissemination Agent. The initial Dissemination Agent shall be U.S. Bank National Association. The Dissemination Agent may resign by providing thirty days written notice to the City and the Trustee. The Dissemination Agent shall not be responsible for the content of any report or notice prepared by the City. The Dissemination Agent shall have no duty to prepare any information report nor shall the Dissemination Agent be responsible for filing any report not provided to it by the City in a timely manner and in a form suitable for filing.

SECTION 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Agreement, the City, the Dissemination Agent and the Trustee may amend this Disclosure Agreement (and the Trustee and the Dissemination Agent shall agree to any amendment so requested by the City provided, neither the Trustee or the Dissemination Agent shall be obligated to enter into any such amendment that modifies or increases its duties or obligations hereunder), and any provision of this Disclosure Agreement may be waived, provided that the following conditions are satisfied:

(a) If the amendment or waiver relates to the provisions of Sections 3(a), 4, or 5(a), 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 Bonds, or the type of business conducted;

(b) The undertakings herein, as proposed to be amended or waived, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the primary offering of the Bonds, after taking into account any subsequent amendments or interpretations of the Rule and any change in circumstances; and

(c) The amendment or waiver either (i) is approved by the Owners of the Bonds in the same manner as provided in the Indenture for amendments to the Indenture with the consent of Owners, or (ii) does not, in the opinion of a nationally recognized bond counsel, materially impair the interests of the Owners or Beneficial Owners of the Bonds.

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In the event of any amendment or waiver of a provision of this Disclosure Agreement, the City shall describe such amendment in the next Annual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (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(f), 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 Agreement shall be deemed to prevent the City from disseminating any other information, using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Agreement. If 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 Agreement, the City shall have no obligation under this Agreement 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 or the Trustee to comply with any provision of this Disclosure Agreement, the Trustee, at the written request of any Participating Underwriter or the Owners of at least 25% aggregate principal amount of Outstanding Bonds, shall but only to the extent funds in an amount satisfactory to the Trustee have been provided to it or it has been otherwise indemnified to its satisfaction from any cost, liability, expense or additional charges and fees of the Trustee whatsoever, including, without limitation, fees and expenses of its attorneys, or any Owner or Beneficial Owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the City or Trustee, as the case may be, to comply with its obligations under this Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed an Event of Default under the Indenture, and the sole remedy under this Disclosure Agreement in the event of any failure of the City or the Trustee to comply with this Disclosure Agreement shall be an action to compel performance.

SECTION 12. Duties, Immunities and Liabilities of Trustee and Dissemination Agent. Article VI of the Indenture is hereby made applicable to this Disclosure Agreement as if this Disclosure Agreement were (solely for this purpose) contained in the Indenture and the Trustee and Dissemination Agent shall be entitled to the protections, limitations from liability and indemnities afforded the Trustee thereunder. The Dissemination Agent and the Trustee shall have only such duties as are specifically set forth in this Disclosure Agreement, and the City agrees to indemnify and save the Dissemination Agent and the Trustee, their 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 costs and expenses (including attorneys fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent’s or the Trustee’s respective gross

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negligence or willful misconduct. The Dissemination Agent shall be paid compensation by the City for its services provided hereunder in accordance with its schedule of fees as amended from time to time and all expenses, legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. The Dissemination Agent and the Trustee shall have no duty or obligation to review any information provided to them hereunder and shall not be deemed to be acting in any fiduciary capacity for the City, the Bondholders, or any other party. The obligations of the City under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds.

SECTION 13. Notices. Any notices or communications to or among any of the parties to this Disclosure Agreement may be given as follows:

To the City: City of El Centro 1275 Main Street

El Centro, California 92243 Attention: City Manager

To the Trustee: U.S. Bank National Association 633 West Fifth Street, 24th Floor Los Angeles, California 90071 Attention: Corporate Trust Services

Any person may, by written notice to the other persons listed above, designate a different address or telephone number(s) to which subsequent notices or communications should be sent. Any notice or communication may also be sent by electronic mail, receipt of which shall be confirmed.

SECTION 14. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the City, the Trustee, the Dissemination Agent, the Participating Underwriter and Owners and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity.

SECTION 15. Counterparts. This Disclosure Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.

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IN WITNESS WHEREOF, the parties hereto have executed this Disclosure Agreement as of the date first above written.

CITY OF EL CENTRO By____________________________________ City Manager

U.S. BANK NATIONAL ASSOCIATION, as Trustee and Dissemination Agent

By_____________________________________ Authorized Officer

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EXHIBIT A

NOTICE TO REPOSITORIES OF FAILURE TO FILE ANNUAL REPORT

Name of Obligor: City of El Centro (the “City”)

Name of Bond Issue: $4,615,000 El Centro Financing Authority Lease Revenue Bonds (Transportation Improvements), 2009 Series A (Bank Qualified)

$10,125,00 El Centro Financing Authority Lease Revenue Bonds (Transportation Improvements), 2009 Series B (Federally Taxable Build America Bonds)

Date of Issuance: December 16, 2009

NOTICE IS HEREBY GIVEN that the City has not provided an Annual Report with respect to the above-named Bonds as required by the Continuing Disclosure Agreement dated as of December 1, 2009, between the City and the Trustee. [The City anticipates that the Annual Report will be filed by _____________.]

Dated:_______________

U.S. BANK NATIONAL ASSOCIATION, on behalf of the City


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APPENDIX E

FORM OF OPINION OF BOND COUNSEL

On the delivery date of the Bonds, Fulbright & Jaworski L.L.P., Los Angeles, California, Bond Counsel, proposes to render its final approving opinion in substantially the following form:

[Closing Date]







Ladies and Gentlemen:

We have acted as Bond Counsel in connection with the issuance by the El Centro Financing

Authority (the “Authority”) of its $4,615,000 El Centro Financing Authority Lease Revenue Bonds, (Transportation Improvements), 2009 Series A (Bank Qualified) (the “2009 Series A Bonds”) and $10,125,000 El Centro Financing Authority Lease Revenue Bonds (Transportation Improvements), 2009 Series B (Federally Taxable Build America Bonds) (the “2009 Series B Bonds” and, together with the 2009 Series A Bonds, the “Bonds”). The Bonds are being issued pursuant to an Indenture, dated as of December 1, 2009 (the “Indenture”), by and between the Authority and U.S. Bank National Association, as trustee (the “Trustee”). Capitalized terms used herein and not otherwise defined shall have the meanings assigned to them in the Indenture.

The Bonds are limited obligations of the Authority secured under the Indenture by a pledge of Revenues and certain other moneys held under the Indenture. The Revenues consist primarily of (i) the Base Rental Payments made by the City of El Centro (the “City”) pursuant to the Lease Agreement, dated as of December 1, 2009 (the “Lease Agreement”), by and between the Authority, as lessor, and the City, as lessee, (ii) any proceeds of Bonds originally deposited with the Trustee and all moneys on deposit in the funds and accounts (other than the Rebate Fund) established under the Indenture, (iii) investment income with respect to such moneys held by the Trustee and (iv) any insurance proceeds or condemnation awards received by or payable to the Trustee relating to the Base Rental Payments.

The City has leased certain real property and improvements (the “Leased Property”) to the Authority pursuant to the Site and Facility Lease, dated as of December 1, 2009 (the “Site Lease”), between the City and the Authority.

Pursuant to the Assignment Agreement, dated as of December 1, 2009 (the “Assignment Agreement”), by and between the Authority and the Trustee, the Authority has assigned to the Trustee, for the benefit of the Owners, certain of the Authority’s rights under the Site Lease and the Lease Agreement, including the right to receive Base Rental Payments under the Lease Agreement.

As Bond Counsel, we have examined copies certified to us as being true and complete copies of the proceedings of the Authority and the City in connection with the issuance of the Bonds. We have also examined and relied upon such certificates of officers of the Authority, the City and others as we have considered necessary for the purposes of this opinion.

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Based upon the foregoing, we are of the opinion that:

1. The Bonds constitute valid and binding limited obligations of the Authority as provided in the Indenture, and are entitled to the benefits of the Indenture.

2. The Indenture has been duly and validly authorized, executed and delivered by the Authority and, assuming the enforceability thereof against the Trustee, constitutes the legally valid and binding obligation of the Authority, enforceable against the Authority in accordance with its terms. The Indenture creates a valid pledge, to secure the payment of principal of and interest on the Bonds, of the Revenues and certain other amounts held by the Trustee in certain funds and accounts established pursuant to the Indenture, subject to the provisions of the Indenture permitting the application thereof for other purposes and on the terms and conditions set forth therein.

3. The Lease Agreement has been duly and validly authorized, executed and delivered by the Authority and the City and constitutes the legally valid and binding obligation of the Authority and the City, enforceable against the Authority and the City in accordance with its terms.

4. The Site Lease has been duly and validly authorized, executed and delivered by the Authority and the City and constitutes the legally valid and binding obligation of the Authority and the City, enforceable against the Authority and the City in accordance with its terms.

5. The Assignment Agreement has been duly and validly authorized, executed and delivered by the Authority and, assuming the enforceability thereof against the Trustee, constitutes the legally valid and binding obligation of the Authority, enforceable against the Authority in accordance with its terms.

6. The Internal Revenue Code of 1986 (the “Code”) imposes certain requirements that must be met subsequent to the issuance and delivery of the 2009 Series A Bonds for interest thereon to be and remain excluded from the gross income of the owners thereof for federal income tax purposes. Noncompliance with such requirements could cause the interest on the 2009 Series A Bonds to be included in gross income retroactive to the date of issue of the 2009 Series A Bonds. Each of the Authority and the City has covenanted in the Indenture and the Lease Agreement, respectively, to maintain the exclusion of interest on the 2009 Series A Bonds from the gross income of the owners thereof for federal income tax purposes.

In our opinion, under existing statutes, regulations, rulings and court decisions, interest on the Bonds is exempt from personal income taxes of the State of California and, assuming compliance with the aforementioned covenants, interest on the 2009 Series A Bonds is excluded pursuant to section 103(a) of the Code from the gross income of the owners thereof for federal income tax purposes and is not included in the computation of the alternative minimum taxable income of the owners thereof for federal income tax purposes.

Except as stated in the preceding two paragraphs, we express no opinion as to any federal or state tax consequences of the ownership or disposition of the Bonds. Furthermore, we express no opinion as to any federal, state or local tax law consequences with respect to the Bonds, or the interest thereon, if any action is taken with respect to the Bonds or the proceeds thereof predicated or permitted upon the advice or approval of other bond counsel.

The opinions expressed in paragraphs 1 through 5 above are qualified to the extent the enforceability of the Bonds, the Indenture, the Lease Agreement, the Site Lease and the Assignment Agreement may be limited by applicable bankruptcy, insolvency, debt adjustment, reorganization, moratorium or similar laws or equitable principles relating to or limiting creditors’ rights generally or as to the availability of any particular remedy. Further, the enforceability of the Bonds, the Indenture, the

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Lease Agreement, the Site Lease and the Assignment Agreement is subject to the effect of general principles of equity, including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing, to the possible unavailability of specific performance or injunctive relief, regardless of whether considered in a proceeding in equity or at law, and to the limitations on legal remedies against governmental entities in California. We advise you that we have not made or undertaken to make any investigation of the state of title to, or ownership of, any of the property described in the Lease Agreement and the Site Lease, or of the accuracy or sufficiency of the descriptions of such property contained therein, and we express no opinion with respect to such matters.

No opinion is expressed herein on the accuracy, completeness or fairness of the Official Statement or other offering material relating to the Bonds.

Our opinions are based on existing law, which is subject to change. Such opinions are further based on our knowledge of facts as of the date hereof. We assume no duty to update or supplement our opinions to reflect any facts or circumstances that may thereafter come to our attention or to reflect any changes in any law that may thereafter occur or become effective. Moreover, our opinions are not a guarantee of result and are not binding on the Internal Revenue Service; rather, such opinions represent our legal judgment based upon our review of existing law that we deem relevant to such opinions and in reliance upon the representations and covenants referenced above.

Respectfully submitted,


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APPENDIX F

BOOK-ENTRY SYSTEM

The information in this Appendix F concerning DTC and its book-entry system has been obtained from sources that the Authority and the City believe to be reliable, but the Authority and the City take no responsibility for the accuracy thereof.

General

The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered bond certificate will be issued for each maturity of the Bonds, in the aggregate principal amount of such maturity, and will be deposited with DTC.

DTC is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation, and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has Standard & Poor’s highest rating: AAA. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com and www.dtc.org. The information set forth on these websites is not incorporated by reference herein.

Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC’s records. The ownership interest of each actual purchaser of each Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Bonds, except in the event that use of the book-entry system for the Bonds is discontinued.

To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be

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requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.

Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time.

Redemption notices shall be sent to DTC. If less than all of the Bonds 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.

Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy 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 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).

Principal, premium, if any, and interest payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the Authority or the Trustee, on a payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC nor its nominee, the Trustee, or the Authority, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal, premium, if any, and interest payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Authority or the Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the Authority or the Trustee. Under such circumstances, in the event that a successor depository is not obtained, Bond certificates are required to be printed and delivered.

The City or the Authority may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Bond certificates will be printed and delivered.

Documents

cdiacdocs.sto.ca.govcdiacdocs.sto.ca.gov/2009-1343.pdfNEW ISSUE – FULL BOOK ENTRY RATINGS: S&P: “A” (See “RATINGS” herein) In the opinion of Fulbright & Jaworski L.L.P.,