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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 a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale. This Official Statement is not to be construed as a contract with the purchasers or owners of the Bonds. Statements contained in this Official Statement that involve estimates, forecasts or matters of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as representations of fact. The information set forth herein has been obtained from the Authority and the City and from other sources that the Authority and the City believe to be reliable. The information and expression of opinion herein are subject to change without notice and neither delivery of the Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the City or the Authority or any other parties described herein since the date hereof. All summaries of the Resolution or other documents are made subject to the provisions of such documents and do not purport to be complete statements of any or all of such provisions. Reference is hereby made to such documents on file with the City for further information in connection therewith. 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 a 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 overallot or effect transactions that stabilize or maintain the market price of such Bonds at a level above that which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time. The Underwriter may offer and sell the Bonds to certain dealers and dealer banks and banks acting as agents at prices lower than the public offering prices stated on the cover page hereof and said public offering prices may be changed from time to time by the Underwriter. The Bonds have not been registered under the Securities Act of 1933, as amended, in reliance upon an exemption contained in such act. The Bonds have not been registered or qualified under the securities laws of any state. Certain statements included or incorporated by reference in this Official Statement constitute “forward-looking statements.” Such statements are generally identifiable by the terminology used such as “plan,” “expect,” “estimate,” “budget” or other similar words. Such forward-looking statements include but are not limited to certain statements contained in the information in APPENDIX A – “CITY OF SAN LEANDRO GENERAL DEMOGRAPHIC AND FINANCIAL INFORMATION” in this Official Statement. The achievement of certain results or other expectations contained in such forward-looking statements involves known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements described to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Neither the Authority nor the City plans 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. The City maintains a website. However, the information presented therein is not part of this Official Statement and should not be relied upon in making an investment decision with respect to the Bonds. i TABLE OF CONTENTS Page THE REFINANCING PLAN ................................................................................................................ 3 Estimated Sources and Uses of Funds ....................................................................................... 6 THE LEASED PROPERTY ........................................................................... ....................................... 7 Description ............................................................................................................................... 7 Modifications of Leased Property ............................................................................................. 7 Assignment and Subleasing .......................................... ............................................................. 8 Substitution .......................................................................................................................... ..... 8 Release of Leased Property ....................................................................................................... 9 THE BONDS ................................................ ...................................................................................... 10 Authority for Issuance ...................................................................................... ....................... 10 General Provisions................................................................................................................... 10 Transfer, Registration and Exchange ...................................................................................... 10 Redemption...................................................................................... ....................................... 11 Book-Entry Only System ........................................................................................................ 12 SECURITY FOR THE BONDS .......................................................................................................... 14 Pledge of Revenues ........................................................ ......................................................... 14 Lease Payments; Covenant to Appropriate ............................................................................. 15 Abatement............................................................................................................................... 15 Insurance; Condemnation ................................... ..................................................................... 16 No Reserve Account ........................................................................................................... ..... 18 Remedies ................................................................................................................................ 18 THE AUTHORITY ................................... .......................................................................................... 20 THE CITY ................................................................................................ .......................................... 20 STATE BUDGET ............................................................................................................................... 20 CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS21 Article XIIIA of the State Constitution ................................................................................... 21 Article XIIB of the State Constitution ..................................................................................... 22 Articles XIIIC and XIIID of the State Constitution ................................................................ 23 Proposition 62 .................................................................................................................... ...... 24 Proposition lA .......................................................................................................................... 25 Future Initiatives ............................. ......................................................................................... 26 RISK FACTORS ............................................................................................. ................................... 26 Special Obligations of the Authority ....................................................................................... 26 No Pledge of Taxes ................................................................................................................. 26 Additional Obligations of the City ............................................... ........................................... 27 No Reserve Account ................................................................................................................ 27 Default .................................................................................................................................... 27 ii Abatement............................................................................................................................... 28 Hazardous Substances ................................... .......................................................................... 33 State Budget............................................................................................................. ............... 34 Limitations on Remedies Available to Bond Owners; Bankruptcy ........................................ 34 Loss of Tax-Exemption ..................................................... ...................................................... 36 Secondary Market for Bonds ................................................................................................... 36 TAX MATTERS ................................................................................................................................. 37 CERTAIN LEGAL MATTERS.............................. ............................................................................. 38 LITIGATION ........................................................................................................... ........................... 38 FINANCIAL STATEMENTS ............................................................................................................. 39 RATINGS .......................... ................................................................................................................. 39 CONTINUING DISCLOSURE ............................................................ ............................................... 39 FINANCIAL ADVISOR ..................................................................................................................... 40 UNDERWRITING .............................................................................................................................. 40 VERIFICATION OF MATHEMATICAL COMPUTATIONS .......................................................... 40 PROFESSIONAL SERVICES ............................................................................................................ 41 EXECUTION ...................................................................................................................................... 41 APPENDIX A – CITY OF SAN LEANDRO GENERAL DEMOGRAPHIC AND FINANCIAL INFORMATION .............................................................................. A-1 APPENDIX B – AUDITED FINANCIAL STATEMENTS OF THE CITY FOR THE FISCAL YEAR ENDED JUNE 30, 2012 .............................................................. B-1 APPENDIX C – SUMMARY OF PRINCIPAL LEGAL DOCUMENTS ........................................ C-1 APPENDIX D – FORM OF OPINION OF BOND COUNSEL ....................................................... D-1 APPENDIX E – FORM OF CONTINUING DISCLOSURE AGREEMENT .................................. E-1 APPENDIX F – DTC AND THE BOOK-ENTRY ONLY SYSTEM .............................................. F-1 OFFICIAL STATEMENT $________* SAN LEANDRO PUBLIC FINANCING AUTHORITY 2013 REFUNDING LEASE REVENUE BONDS INTRODUCTION This introduction is not a summary of this Official Statement. It is only a brief description of and guide to, and is qualified by, more complete and detailed information contained in the entire Official Statement, including the cover page and appendices, and the documents summarized or described in this Official Statement. A full review should be made of the entire Official Statement. The offering to potential investors is made only by means of the entire Official Statement. Capitalized terms used but not defined in this Official Statement have the meanings set forth in the Indenture (as defined below). See “APPENDIX C -SUMMARY OF PRINCIPAL LEGAL DOCUMENTS.” Authority for Issuance. The San Leandro Public Financing Authority (the “Authority”) is issuing its 2013 Refunding Lease Revenue Bonds (the “Bonds”) under the following legal authority: (a) Article 4 of Chapter 5, Division 7, Title 1 of the Government Code of the State of California, commencing with Section 6584 of said Code (the “Bond Law”), (b) a resolution adopted by the Board of Directors (the “Board”) of the Authority on _____, 2012 (the “Authority Resolution”), and a resolution adopted by the City Council (the “City Council”) of the City of San Leandro (the “City”) on _____, 2012 (the “City Resolution”), and (c) an Indenture of Trust (the “Indenture”), dated as of January 1, 2013, by and between the Authority and U.S. Bank National Association, as trustee (the “Trustee”). Form of Bonds; Book-Entry Only. The Bonds will be issued in fully registered form, registered in the name of The Depository Trust Company, New York, New York (“DTC”), or its nominee, which will act as securities depository for the Bonds. Purchasers of the Bonds will not receive certificates representing the Bonds that are purchased. See “THE BONDS -Book-Entry Only System” and “APPENDIX F -DTC AND THE BOOK-ENTRY ONLY SYSTEM.” Purpose of the Bonds. The Bonds are being issued to provide funds to refinance (i) $3,440,000 outstanding principal amount of 2001 Certificates of Participation (Joint Project Area Financing) (the “2001 Certificates”) and $9,490,000 outstanding principal amount of 2003 Certificates of Participation (City Hall Refinancing Project) (the “2003 Certificates,” and, together with the 2001 Certificates, the “Refunded Certificates”) of the City, together with related lease payment obligations, and (ii) pay the costs of issuing the Bonds. Security for the Bonds and Pledge of Revenues. The Bonds will be payable solely from and secured by Revenues and certain funds and accounts held under the Indenture. Revenues consist * Preliminary, subject to change. 2 primarily of Lease Payments to be made by the City pursuant to a Lease Agreement, dated as of January 1, 2013, between the City and the Authority (the “Lease”). See “THE LEASED PROPERTY.” Under the Lease, the City covenants to take such action as necessary to include the Lease Payments in its annual budgets and to make all necessary appropriations for such Lease Payments (subject to abatement under certain circumstances described in the Lease). See “SECURITY FOR THE BONDS.” The City’s 2012 audited General Fund revenues totaled $_____. Maximum annual debt service for the Bonds is expected to be approximately $_____. Annually, Lease Payments are expected to constitute ___ percent of 2012 audited General Fund revenues. See APPENDIX A -“CITY OF SAN LEANDRO GENERAL DEMOGRAPHIC AND FINANCIAL INFORMATION” and APPENDIX B -“AUDITED FINANCIAL STATEMENTS OF THE CITY FOR THE FISCAL YEAR ENDED JUNE 30, 2012.” The scheduled Lease Payments payable by the City under the Lease are calculated to be sufficient to permit the the Authority to pay the principal of, and interest on, the Bonds when due. However, in the event of any damage or destruction such that there is substantial interference with the use and occupancy of all or any portion of the Leased Property, or a temporary taking of the Leased Property or a permanent taking of a portion of the Leased Property, Lease Payments may be abated under the Lease without constituting a default. See “SECURITY FOR THE BONDS – Abatement” and “RISK FACTORS – Abatement.” However, proceeds of insurance may be available to pay Lease Payments in the event of insured damage, destruction or condemnation with respect to the Leased Property. Additionally, the Successor Agency to the Redevelopment Agency of the City of San Leandro (the “Successor Agency”), as successor to the Redevelopment Agency of the City of San Leandro (the “Redevelopment Agency”), has agreed to reimburse the City for the portion of the Lease Payments relating to the prepayment of the 2001 Certificates from Tax Increment Revenues and such obligation to reimburse is not subject to abatement. See “SECURITY FOR THE BONDS – Reimbursement Payments” below. Pursuant to an Assignment Agreement, dated as of January 1, 2013 (the “Assignment Agreement”), by and between the Authority and the Trustee, the Authority has assigned to the Trustee for the benefit of the Owners of the Bonds, certain of the Authority’s rights under the Lease, including its rights to receive Lease Payments and to enforce remedies in the event of a default by the City for the purpose of securing the payment of debt service on the Bonds. No Reserve Account. Neither the City nor the Authority will create or maintain a debt service reserve account with respect to the Lease Payments or for the Bonds. Additional Obligations. The City has existing obligations payable from the General Fund of the City (the “General Fund”), and the City is permitted to enter into other obligations which constitute additional charges against its revenues without the consent of Owners of the Bonds. See “APPENDIX A -CITY OF SAN LEANDRO GENERAL DEMOGRAPHIC AND FINANCIAL INFORMATION-General Fund Obligations.” Under the Indenture, the Authority covenants that no additional bonds, notes or other indebtedness shall be issued or incurred by the Authority which are payable out of the Revenues in whole or in part. Redemption. The Bonds are subject to redemption prior to their stated maturity dates. See “THE BONDS -Redemption.” 3 Abatement. The Lease provides that, except to the extent of proceeds of insurance against accident to or destruction of the Leased Property collected by the City or the Authority, amounts in the Bond Fund available to pay Lease Payments which would otherwise be abated, or Reimbursement Payments made by the Successor Agency to the City, the obligation of the City to pay Lease Payments will be subject to abatement by reason of (i) any damage or destruction such that there is substantial interference with the use and occupancy of all or any portion of the Leased Property, or (ii) a temporary taking of the Leased Property or a permanent taking of a portion of the Leased Property. See “SECURITY FOR THE BONDS – Abatement,” “SECURITY FOR THE BONDS – Reimbursement Payments” and “RISK FACTORS -Abatement.” Risks of Investment. The Bonds are repayable primarily from Lease Payments and other amounts payable by the City under the Lease. For a discussion of some of the risks associated with the purchase of the Bonds, see “RISK FACTORS.” Specifically, all California redevelopment agencies, including the Redevelopment Agency, were dissolved as of February 1, 2012 pursuant to ABx1 26. According to "trailer bill" legislation (AB 1484) effective on July 1, 2012, the State Department of Finance and the State Controller may require the return of funds improperly spent or transferred to a public entity in conflict with the provisions of the Community Redevelopment Law, as amended by ABx1 26 and AB 1484, and, if funds are not returned within 60 days, the funds may be recovered through an offset of sales and use tax or property tax allocations to the local agency, which, in the case of the Redevelopment Agency, is the City. See “RISK FACTORS -Redevelopment Agencies Dissolution.” THE BONDS ARE SECURED SOLELY BY THE PLEDGE OF REVENUES AND CERTAIN FUNDS HELD UNDER THE INDENTURE. THE BONDS ARE NOT SECURED BY A PLEDGE OF THE TAXING POWER OF THE CITY. THE AUTHORITY HAS NO TAXING POWER. NONE OF THE BONDS, NOR THE OBLIGATION OF THE AUTHORITY TO PAY PRINCIPAL OF OR INTEREST ON THE BONDS, NOR THE OBLIGATION OF THE CITY TO MAKE THE LEASE PAYMENTS, CONSTITUTES A DEBT OR A LIABILITY OF THE AUTHORITY, THE CITY, THE STATE OF CALIFORNIA OR ANY OF ITS POLITICAL SUBDIVISIONS WITHIN THE MEANING OF ANY CONSTITUTIONAL LIMITATION ON INDEBTEDNESS, OR A PLEDGE OF THE FULL FAITH AND CREDIT OF THE CITY. See “SECURITY FOR THE BONDS.” THE REFINANCING PLAN The Bonds are being issued to provide funds to (i) refinance the Refunded Certificates and the City’s related lease payment obligations, and (ii) pay the costs of issuing the Bonds. The 2001 Certificates were executed and delivered for the purposes of (i) financing certain capital projects within or benefit to the City portion of the Alameda County – City of San Leandro Redevelopment Project Area, (ii) funding a reserve fund for the 2001 Certificates and (iii) paying the costs of executing and delivering the 2001 Certificates. The 2003 Certificates were executed and delivered for the purposes of (i) refunding, on a current basis, the City of San Leandro Certificates of Participation (1993 Seismic Retrofit Financing Project) (the “1993 Certificates”), which were executed and delivered to finance improvements to the City Hall of the City and to refund, on an advance basis, the Parking Authority of the City of San Leandro 1982 Parking Lease Revenue Bonds, 4 which were issued to finance certain parking improvements for the City, (ii) financing the replacement of a City swimming pool and other improvements at an aquatics complex, (iii) funding a reserve fund for the 2003 Certificates and (iv) paying the costs of executing and delivering the 2003 Certificates. 5 The outstanding 2001 Certificates consist of the following: 2001 CERTIFICATES OF PARTICIPATION (JOINT PROJECT AREA FINANCING) (Base CUSIP† Number: 798432) Maturity Date (December 1) Principal Amount CUSIP† Prepayment Date* 2013 $180,000 BU3 January __, 2013 2014 185,000 BV1 January __, 2013 2015 195,000 BW9 January __, 2013 2016 205,000 BX7 January __, 2013 2017 210,000 BY5 January __, 2013 2026 2,465,000 CH1 January __, 2013 The outstanding 2003 Certificates consist of the following: 2003 CERTIFICATES OF PARTICIPATION (CITY HALL REFINANCING PROJECT) (Base CUSIP† Number: 798432) Maturity Date (December 1) Principal Amount CUSIP† Prepayment Date 2013* $400,000 CT5 6/1/2013 2014 420,000 CU2 6/1/2013 2015 440,000 CV0 6/1/2013 2016 465,000 CW8 6/1/2013 2017 490,000 CX6 6/1/2013 2018 510,000 CY4 6/1/2013 2019 540,000 CZ1 6/1/2013 2020 565,000 DA5 6/1/2013 2024 2,555,000 DB3 6/1/2013 2028 3,105,000 DC1 6/1/2013 ________________ * To be paid at maturity. Upon the issuance of the Bonds, a portion of the proceeds thereof and other available moneys with respect to the Refunded Certificates shall be applied to the purchase of certain direct obligations of the United States of America which, along with uninvested cash and earnings on the obligations, will satisfy the City’s payment obligations with respect to the Refunded Certificates until their payment or prepayment dates. These direct obligations and cash shall be deposited with U.S. Bank National Association, as trustee for the Refunded Certificates (the “Refunded Certificates Trustee”). † CUSIP® is a registered trademark of the American Bankers Association. Copyright© 2012 Standard & Poor’s, a Division of the McGraw Hill Companies, Inc. CUSIP® data herein is provided by Standard & Poor’s CUSIP Service Bureau. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP Service Bureau. CUSIP® numbers are provided for convenience of reference only. Neither the City, the Authority nor the Underwriters take any responsibility for the accuracy of such numbers. * Preliminary, subject to change. 6 The Refunded Certificates Trustee will apply the principal of and interest on such obligations, together with other moneys held by it to the payment or prepayment of the Refunded Certificates on their respective payment or prepayment dates set forth in the table above. The obligations of the United States of America so deposited with the Refunded Certificates Trustee will bear interest at such rates and will be scheduled to mature at such times and in such amounts that, when paid in accordance with their terms, together with any other funds held by the Refunded Certificates Trustee, will be sufficient to make full and timely payment of the principal of and interest evidenced and represented by the Refunded Certificates prior to their respective scheduled payment or prepayment dates and to pay the prepayment price of the outstanding Refunded Certificates on such prepayment dates. The prepayment price for the 2001 Certificates is the principal amount thereof plus accrued and unpaid interest to the date of prepayment. The prepayment price for the 2003 Certificates is the principal amount thereof plus accrued and unpaid interest to the date of prepayment, plus a redemption premium equal to 1% of the principal amount called for prepayment. For information on mathematical verification for the sufficiency of scheduled payments with respect to such obligations of the United States of America and other funds held by the Refunded Certificates Trustee to make such payments with respect to the Refunded Certificates, see “VERIFICATION OF MATHEMATICAL COMPUTATIONS.” Upon such irrevocable deposit with the Refunded Certificates Trustee and the receipt by the Refunded Certificates Trustee of irrevocable instructions from the Authority and the City, the Refunded Certificates will be prepaid and the owners of the Refunded Certificates will no longer be entitled to the benefits of the legal documents under which they were executed and delivered. The amounts held and invested by the Refunded Certificates Trustee are pledged solely to the payment of the Refunded Certificates. Neither the funds so-deposited with the Refunded Certificates Trustee nor the interest on such invested funds will be available for the payment of debt service on the Bonds. Estimated Sources and Uses of Funds The estimated sources and uses of funds relating to the Bonds and the Refunded Certificates are as follows: SOURCES: Principal Amount $ Less Underwriter’s Discount Plus Available Money Relating to the Refunded Certificates Total Sources $ USES: Refunding Fund Costs of Issuance (1) Total Uses $ ___________________ (1) Represents funds to be used to pay Costs of Issuance, which include legal fees, printing costs, rating agency fees, verification agent fees, trustee’s fee, title insurance costs and other miscellaneous expenses. 7 THE LEASED PROPERTY Lease Payments will be made by the City under the Lease for the use and occupancy of the Leased Property, which is described in greater detail below. Description The Property being leased under the Lease (the “Leased Property”) consists of the City Hall of the City (“City Hall”), including the land on which it is located, together with an adjacent parking lot, and all related improvements. City Hall. City Hall is a three-floor, approximately 73,114 square foot building located on East 14th Street in the downtown area of the City. The building was built in 1965. It houses the City Council Chambers and members’ offices, the offices of the City Manager, the officers of the Finance Director, the offices of the City’s Community Development Director and other administrative offices of the City. The Alameda County Fire Department currently occupies 3,849 square feet of City Hall for use as office space, in portions of the buildings basement and second floor, and will move from City Hall to new premises in Dublin, California in 2013. The City does not anticipate that any entity other than a City agency or department will move into the space currently occupied by the Alameda County Fire Department. The City complete seismic retrofit work on City Hall as part of a remodeling completed in 1996 and financed with the proceeds of the 1993 Certificates. City Hall has been constructed and retrofitted constructed in accordance with the then-applicable California Building Code and the building is protected by a fire sprinkler system designed in accordance with applicable requirements. City Hall is part of the City’s Civic Center Complex, which, in addition to the City Hall, includes the adjacent “South Office Building” and the City’s Public Safety (Police Administration) Building. All of the buildings are located within