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a single City block between East 14th Street and Lafayette Avenue. The South Office Building and the Public Safety Building are on separate parcels and are not part of the Lease Property. The City and the Authority, based on comparable properties, insurance appraisals, and other records it maintains, estimate the current fair rental value of the Leased Premises to be not less than the amount of the annual Lease Payments. Modifications of Leased Property Under the Lease, the City will have the right during the term of the Lease to make additions, modifications and improvements to the Leased Property or any portion thereof. Such additions, modifications and improvements may not in any way damage the Leased Property, or cause the Leased Property to be used for purposes other than those authorized under the provisions of state and federal law; and the Leased Property, upon completion of any additions, modifications and improvements, must be of a value which is not substantially less than the value thereof immediately prior to the making of such additions, modifications and improvements. 8 Assignment and Subleasing The City may assign the Lease or sublease the Leased Property, or any portion thereof, without limitation, provided, the Lease and the obligation of the City to make Lease Payments remain obligations of the City and the City provides the notices, legal opinions and assurances required by the Lease. Substitution Under the Lease, the City has the option at any time and from time to time, to substitute other real property (the “Substitute Property”) for the Leased Property or any portion thereof (the “Former Property”), upon satisfaction of all of the requirements set forth in the Lease, which includes (among others) the following: • No Event of Default under the Lease has occurred and is continuing. • The City has obtained a CLTA policy of title insurance insuring the City’s leasehold estate under the Lease in the Substitute Property, subject only to Permitted Encumbrances (as defined in the Lease), in an amount at least equal to the estimated value thereof. • The City has certified in writing to the Authority and the Trustee that the Substitute Property serves the municipal purposes of the City and constitutes property which the City is permitted to lease under the laws of the State of California, and has been determined to be essential to the proper, efficient and economic operation of the City and to serve an essential governmental function of the City. • The Substitute Property does not cause the City to violate any of its covenants, representations and warranties made in the Lease. • The City has filed with the Authority and the Trustee a written certificate of the City or other written evidencing stating that the useful life of the Substitute Property at least extends to October 1, 2031, that the estimated value of the Leased Property, after substitution of the Substitute Property and release of the Former Property, is at least equal to the aggregate Outstanding principal amount of the Bonds, and the fair rental value of the Leased Property, after substitution of the Substitute Property and release of the Former Property, is at least equal to the Lease Payments thereafter coming due and payable under the Lease. • The City has mailed written notice of the substitution to each rating agency that then maintains a rating on the Bonds. See “APPENDIX C – SUMMARY OF PRINCIPAL LEGAL DOCUMENTS.” After a substitution, the Former Property will be released from the leasehold, as appropriate. The Authority and the City will also make any amendments needed to be made to the Lease, and will enter into any necessary site or ground leases in connection with such substitution. Such amendments may be made without the consent of Bondowners. The City is not entitled to any reduction, diminution, extension or other modification of the Lease Payments as a result of a substitution. 9 Release of Leased Property Under the Lease, the City has the option at any time and from time to time during the term of the Lease to release from the Lease any portion of the Leased Property; provided that the City satisfies all of the requirements under the Lease that are conditions precedent to such removal, which include (among others) the following: • No Event of Default under the Lease has occurred and is continuing. • The City has certified in writing to the Authority and the Trustee that the value of the property which remains subject to the Lease following such release is at least equal to the aggregate Outstanding principal amount of the Bonds, and the fair rental value of the property which remains subject to the Lease following such release is at least equal to the Lease Payments thereafter coming due and payable. • The City has mailed written notice of the release to each rating agency that then maintains a rating on the Bonds. See “APPENDIX C -SUMMARY OF PRINCIPAL LEGAL DOCUMENTS.” 10 THE BONDS Authority for Issuance The Bonds are being issued under the Bond Law, the Authority Resolution (which was adopted by the Board of Directors of the Authority on _____, 2012), the City Resolution (which was adopted by the City Council on _______, 2012), and the Indenture. General Provisions Bond Terms. The Bonds will be dated their date of delivery and issued in fully registered form without coupons in integral multiples of $5,000. The Bonds will mature in the amounts and on the dates, and bear interest at the annual rates, set forth on the inside cover page of this Official Statement. Payments of Principal and Interest. Interest on the Bonds will be payable on June 1 and December 1 in each year, beginning June 1, 2013 (each an “Interest Payment Date”). Principal on the Bonds will be payable on December 1 in the amounts and in the years set forth on the inside front cover of this Official Statement. While the Bonds are subject to the book-entry system, the principal, interest and any prepayment premium with respect to the Bonds will be paid by the Trustee to DTC for subsequent disbursement to beneficial owners of the Bonds. See APPENDIX F – “DTC AND THE BOOKENTRY ONLY SYSTEM.” Interest on the Bonds is payable from the Interest Payment Date next preceding the date of authentication thereof unless: • a Bond is authenticated on or before an Interest Payment Date and after the close of business on the preceding Record Date, in which event it will bear interest from such Interest Payment Date, • a Bond is authenticated on or before the first Record Date, in which event interest thereon will be payable from the Closing Date, or • interest on any Bond is in default as of the date of authentication thereof, in which event interest thereon will be payable from the date to which interest has been paid in full, payable on each Interest Payment Date. Principal and premium, if any, with respect to each Bond is payable upon surrender of such Bond at the Office of the Trustee in St. Paul, Minnesota, upon maturity or the earlier redemption thereof. The principal of, premium, if any, and interest on the Bonds will be payable in lawful money of the United States of America. Interest with respect to the Bonds will be computed on the basis of a 360 day year composed of twelve 30-day months. Transfer, Registration and Exchange See “APPENDIX C -SUMMARY OF PRINCIPAL LEGAL DOCUMENTS” for a description of the provisions of the Indenture relating to the transfer, registration and exchange of the Bonds. 11 Redemption Optional Redemption. The Bonds maturing on or before December 1, 20__ are not subject to optional redemption prior to their stated maturity. The Bonds maturing on or after December 1, 20__ are subject to redemption, as a whole or in part at the election of the Authority among maturities on such basis as designated by the Authority and by lot within a maturity, at the option of the Authority, on December 1, 20__ and on any date thereafter, at a redemption price equal to 100% of the principal amount of Bonds to be redeemed, together with accrued interest thereon to the date fixed for redemption, without premium. Special Mandatory Redemption From Insurance or Condemnation Proceeds. The Bonds are subject to redemption as a whole, or in part on a pro rata basis among maturities, on any date, from any Net Proceeds of insurance or an eminent domain award with respect to the Leased Property which are not applied to repair, rebuild or replace the Leased Property as provided in the Indenture, at a redemption price equal to 100% of the principal amount to be redeemed plus interest accrued thereon to the date fixed for redemption, without premium. Mandatory Sinking Fund Redemption. The Bonds maturing on December 1, 20__ (the “Term Bonds”) are subject to mandatory redemption in part by lot, at a redemption price equal to 100% of the principal amount thereof to be redeemed, without premium, in the aggregate respective principal amounts and on December 1 in the respective years as set forth in the following tables; provided, however, that if some but not all of the Term Bonds have been redeemed pursuant to an optional redemption or special mandatory redemption from insurance or condemnation proceeds, the total amount of all future sinking fund payments shall be reduced by the aggregate principal amount of the Term Bonds so redeemed, to be allocated among such sinking fund payments on a pro rata basis in integral multiples of $5,000 (as set forth in a schedule provided by the Authority to the Trustee). Mandatory Mandatory Sinking Fund Redemption of Term Bonds Maturing December 1, 20__ Sinking Fund Redemption Date (December 1) Principal Amount To Be Redeemed $ Notice of Redemption. Notice of redemption will be mailed by the Trustee, first class, postage prepaid, not more than 60 and not less than 30 days before any redemption date, to the respective registered Owners of any Bonds designated for redemption at their addresses appearing on the registration books maintained by the Trustee and to one or more Securities Depositories and the Municipal Securities Rulemaking Board. Neither the failure to receive any notice nor any defect therein will affect the proceedings for such redemption. Selection of Bonds for Redemption. Whenever provision is made in the Indenture for the redemption of less than all of the Bonds of a single maturity, the Trustee will select the Bonds to be redeemed from all Bonds of that maturity to be redeemed by lot in any manner which the Trustee in 12 its sole discretion deems appropriate. For purposes of such selection, Bonds will be deemed to be comprised of $5,000 portions and each portion will be subject to redemption as if such portion were a separate Bond. Effect of Redemption. If notice of redemption has been duly given and money for the payment of the redemption price of the Bonds called for redemption has been duly provided, such Bonds so called will cease to be entitled to any benefit under the Indenture other than the right to receive payment of the redemption price, and no interest will accrue thereon from and after the redemption date specified in such notice. Rescission of Redemption. The Authority has the right to rescind any notice of optional redemption of Bonds by written notice to the Trustee on or prior to the date fixed for redemption. Any notice of redemption shall be cancelled and annulled if for any reason funds will not be or are not available on the date fixed for redemption for the payment in full of the Bonds then called for redemption, and such cancellation shall not constitute an Event of Default. The Authority and the Trustee have no liability to the Bond Owners or any other party related to or arising from such rescission of redemption. The Trustee shall mail notice of such rescission of redemption in the same manner as the original notice of redemption was sent under the Indenture. Book-Entry Only System The Bonds will be issued as fully registered bonds in book-entry only form, registered in the name of Cede & Co. as nominee of DTC, and will be available to ultimate purchasers in integral multiples of $5,000, under the book-entry system maintained by DTC. While the Bonds are subject to the book-entry system, the principal, interest and any prepayment premium with respect to a Bond will be paid by the Trustee to DTC, which in turn is obligated to remit such payment to its DTC Participants for subsequent disbursement to Beneficial Owners of the Bonds. Purchasers of the Bonds will not receive certificates representing their their interests therein, which will be held at DTC. See “APPENDIX F -DTC AND THE BOOK-ENTRY ONLY SYSTEM” for further information regarding DTC and the book-entry system. 13 DEBT SERVICE SCHEDULE The table below shows annual debt service payments on the Bonds, assuming no optional or extraordinary redemption. Year Ending December 1 Principal Interest Debt Service 2013 $ $ $ 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 $ $ $ 14 SECURITY FOR THE BONDS The principal of and interest on the Bonds are not a debt of the Authority (except to the limited extent described in this Official Statement) or the City, nor a legal or equitable pledge, charge, lien or encumbrance, upon any of their respective property, or upon any of their income, receipts, or revenues except the Revenues and other amounts pledged under the Indenture. This section provides summaries of the security for the Bonds and certain provisions of the Indenture and the Lease. See “APPENDIX C -SUMMARY OF PRINCIPAL LEGAL DOCUMENTS” for a more complete summary of the Indenture and the Lease. Capitalized terms used but not defined in this section have the meanings given in APPENDIX C. Pledge of Revenues The Bonds are payable from and secured by a pledge of Revenues and certain funds and accounts established and held by the Trustee under the Indenture. Revenues, as defined in the Indenture, mean: (a) all amounts received by the Authority or the Trustee under or with respect to the Lease, including, without limiting the generality of the foregoing, all of the Lease Payments (including both timely and delinquent payments, any late charges, and whether paid from any source), but excluding (i) any amounts described in the provisions of the Lease relating to permitted amendments that provide for additional rental to be pledged or assigned for the payment of bonds issued to finance or refinance projects for which the City is authorized to expend its funds, and (ii) any “Additional Rental Payments” (consisting of certain administrative costs due to the Authority and the Trustee under the Lease), and (b) all interest, profits or other income derived from the investment of amounts in any fund or account established under the Indenture. Pursuant to the Assignment Agreement, the Authority has assigned to the Trustee for the benefit of the Owners of the Bonds, certain of its rights under the Lease, including its right to receive Lease Payments for the purpose of securing the payment of debt debt service on the Bonds and the right to pursue remedies in the event the City defaults under the lease. THE BONDS ARE SPECIAL OBLIGATIONS OF THE AUTHORITY PAYABLE SOLELY FROM AND SECURED BY A PLEDGE OF REVENUES AND CERTAIN FUNDS AND ACCOUNTS HELD UNDER THE INDENTURE. THE AUTHORITY HAS NO TAXING POWER. THE OBLIGATION OF THE CITY TO MAKE LEASE PAYMENTS UNDER THE LEASE 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 LEASE PAYMENTS UNDER THE LEASE CONSTITUTES AN INDEBTEDNESS OF THE CITY, THE COUNTY, THE STATE OF CALIFORNIA (THE “STATE”) OR ANY OF ITS POLITICAL SUBDIVISIONS (INCLUDING ANY MEMBER OF THE AUTHORITY) IN CONTRAVENTION OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATIONS. 15 Lease Payments; Covenant to Appropriate The City covenants, under the Lease, to make Lease Payments as rental for the right to use and occupy the Leased Property under the Lease. Amounts of the scheduled Lease Payments are calculated to be sufficient to pay debt service on the Bonds when due. Lease Payments will be paid by the City semiannually to the Trustee on the Business Day immediately preceding each Interest Payment Date. Upon receipt, the Trustee will deposit the Lease Payments in the Bond Fund for the purposes of paying principal of and interest on the Bonds. The City covenants under the Lease to take such action as may be necessary to include all Lease Payments and Additional Rental Payments in its annual budgets and to make the necessary annual appropriations for all such rental payments. Under certain circumstances described in the Lease, however, Lease Payments are subject to abatement during periods of substantial interference with the City’s use and occupancy of all or a portion of the Leased Property, as described in “ – Abatement” below. Abatement The Lease provides that 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. Such abatement will be in an amount determined by the City, such that the resulting unabated portion of the Lease Payments will represent fair consideration for the use and occupancy of the remaining usable portions of the Leased Property. In the case of abatement due to damage or destruction of the Leased Property, such abatement will continue for the period commencing with such damage or destruction and ending with the substantial completion of the work of repair or reconstruction. In the case of abatement due to a partial or temporary taking of the Leased Property under the power of eminent domain, (i) the Lease shall continue in full force and effect with respect Leased Property not taken or not permanently taken and (ii) the Lease Payments are subject to abatement in an amount determined by the City such that the resulting Lease Payments represent fair consideration for the use and occupancy of the remaining usable portions of the Leased Property. If all of the Leased Property is taken permanently under the power of eminent domain or sold to a government threatening to exercise the power of eminent domain, the term of the Lease ceases as of the day such possession is taken. Notwithstanding the foregoing, under the Lease, the Lease Payments will not be subject to abatement to the extent that proceeds of insurance against accident to or destruction of the Leased Property collected by the City or the Authority in the event of any such accident or destruction (including rental interruption insurance) or amounts in the Bond Fund are available to pay Lease Payments which would otherwise be abated, or Reimbursement Payments are received from the Successor Agency. The Successor Agency has agreed to reimburse the City for 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 "-Reimbursement Payments," below. 16 Insurance; Condemnation In the event of an abatement of Lease Payments, debt service on the Bonds may, to a certain extent, be covered by insurance proceeds. The City is required to procure and maintain rental interruption or use and occupancy insurance to cover loss, total or partial, of the use of any portion of the Leased Property constituting buildings or other improvements as a result of certain hazards pursuant to the Lease. Such insurance will be in an amount at least equal to the maximum amount of Lease Payments coming due and payable during any consecutive two Fiscal Years. The Net Proceeds of such insurance, if any, will be paid to the Trustee and deposited in the Bond Fund, for application as a credit towards the payment of the Lease Payments allocable to the insured improvements as the same become due and payable. The Lease also requires the City to maintain title insurance, standard commercial general liability insurance and casualty insurance with respect to the Leased Property. Any Net Proceeds under such title insurance policy will be deposited with the Trustee in the Bond Fund, to be credited towards the prepayment of the remaining Lease Payments under the Lease. The required casualty insurance will have a coverage amount at least equal to the lesser of (a) 100% of the replacement value of the insured buildings, or (b) 100% of the aggregate principal amount of the Bonds, and may be subject to such deductibles as the City deems adequate and prudent. See APPENDIX C – “SUMMARY OF PRINCIPAL LEGAL DOCUMENTS” for a description of provisions of the Lease Agreement and the Trust Indenture relating to the application of proceeds from the casualty insurance or condemnation awards. See “RISK FACTORS – Abatement.” Reimbursement Payments [TO BE REVISED, PENDING DATA FROM DAVID MEALY AND CALCULATION OF PAYMENT AMOUNTS AVAILABLE FOR LEASE PAYMENTS] Redevelopment Tax Increment. The Successor Agency has succeeded to the rights and obligations of the Redevelopment Agency under the Joint Exercise of Powers Agreement as a result of recent amendments to the California Community Redevelopment Law (the “Redevelopment Law”). The Successor Agency is thus a duly constituted successor agency under the laws of the State of California and pursuant to such laws has duly proceeded with redevelopment activities necessary for the implementation of the Alameda County -City of San Leandro Redevelopment Project Area (the “Joint Project Area”) under the provisions of the Redevelopment Law and pursuant to the Redevelopment Plan for the Project (the “Joint Project Plan”). The redevelopment plan for the Joint Project Area provides for tax increment financing in accordance with the provisions of Chapter 6, Part 1 of Division 24 of the California Health and Safety Code and Section 16 of Article XVI of the Constitution of the State of California. The Redevelopment Law provided a method for financing and refinancing redevelopment projects based upon an allocation of taxes collected within a project area. First, the assessed valuation of of the taxable property in a project area last equalized prior to adoption of the redevelopment plan is established and becomes the base roll. Thereafter, except for any period during which the assessed valuation drops below the base year level, the taxing agencies on behalf of which taxes are levied on property within the project area will receive the taxes produced by the levy of the then current tax rate upon the base roll. Taxes collected upon any increase in the assessed valuation of the taxable property in a project area over the levy upon the base roll may be pledged by a redevelopment agency to the repayment of any indebtedness incurred in financing the redevelopment project. Redevelopment agencies (and their successor agencies) 17 themselves have no authority to levy taxes on property and must look specifically to the allocation of taxes produced as above indicated. Subordinate Pledge of Tax Increment Revenues. To assist the City in paying the costs of the acquisition and construction of the projects financed by the 2001 Certificates (the “2001 Projects”), the Redevelopment Agency and the City entered into the Original Reimbursement Agreement, which provided that Tax Increment Revenues would be used and applied to repay the City for all lease payments (the “2001 Lease Payments”) made by the City to the Authority under the Lease Agreement between the Authority and the City dated as of December 1, 2001, which lease agreement leased the 2001 Projects (the “2001 Lease Agreement”). Such 2001 Lease Payments were defined in the Original Reimbursement Agreement as the “Reimbursement Payments,” and the City agreed that such reimbursed amounts would be used and applied to pay such 2001 Lease Payments. Under the Original Reimbursement Agreement, “Tax Increment Revenues” consisted primarily of those taxes received by the Redevelopment Agency due to increases in assessed valuation of taxable property in the City portion of the Joint Project Area above the designated base year assessment roll, and the term is defined in the Original Reimbursement Agreement as all taxes allocated to, and paid into a special fund of the Redevelopment Agency for the City portion of the Joint Project Area pursuant to Article 6 of Chapter 6 of the Law and Section 16 of Article XVI of the Constitution of the State of California, and as provided in the redevelopment plan for the Joint Project Area, including all payments and reimbursements, if any, to the Redevelopment Agency specifically attributable to ad valorem taxes lost by reason of tax exemptions and tax rate limitations, but excluding any amounts required to be used to improve the community’s supply of low or moderate income housing pursuant to Section 33334.2 of the Redevelopment Law (or any successor or related related Section of the Law). As security for the Redevelopment Agency’s payment obligation under the Original Reimbursement Agreement, the Redevelopment Agency pledged the Tax Increment Revenues to the City, and created a lien thereon for the benefit of the City, subject to the Redevelopment Agency's obligations under certain senior obligations. The Reimbursement Payments were not subject to abatement. Under the Amended Reimbursement Agreement, the Successor Agency has agreed to continue to use Tax Increment Revenues to reimburse the City for the portion of the Lease Payments relating to the refunding of the 2001 Certificates. As is required under the Redevelopment Law, the Successor Agency’s execution of the Amended Reimbursement Agreement was approved the Successor Agency’s Oversight Board and the Department of Finance of the State of California. Historical Tax Increment Information. [TO COME FROM DAVID MEALY] Senior Obligations Payable From Tax Increment Revenues. The pledge of Tax Increment Revenues for for payment of the Reimbursement Payments are subject to senior pledges of Tax Increment Revenues made by the Redevelopment Agency. In the event the Successor Agency does not have sufficient Tax Increment Revenues in a particular year to make such payment or any portion thereof, the City would allow the Successor Agency to carry the balance forward until there is sufficient Tax Increment Revenues available to meet such obligation or the City may, in its discretion, waive such payment(s). The earliest payments carried forward is to be paid first from available Tax Increment Revenues and then the next payments due, until the Successor Agency had become current with the required payment schedule. Additional Agency Obligations. In the Original Reimbursement Agreement, the Redevelopment Agency agreed that it would not issue any bonds or other obligations payable from Tax Increment Revenues on a parity with the amounts due under the Original Reimbursement 18 Agreement, unless and until the Redevelopment Agency has first delivered to the City a certificate certifying that the amount of Tax Increment Revenues in the fiscal year that such bonds are issued, or other obligations are executed, were equal to at least 1.00 times the amount required to pay the largest annual debt service on (i) certain obligations senior and on parity with the obligations under the Original Reimbursement Agreement existing on the date of that agreement’s execution, (ii) the obligations due under the Original Reimbursement Agreement, and (iii) the debt service and other payments due on such bonds or other obligations. The Amended and Restated Reimbursement Agreement contains an identical provision. Schedule of Reimbursement Payments. The table below sets forth the dates and amounts of the Reimbursement Payments. Schedule of Reimbursement Payments Payment Date ([Month, Day]) ReimbursementPayment Amount $ No assurances can be given that there will be sufficient Tax Increment Revenues to to enable the Successor Agency to make the Reimbursement Payments on a timely basis. 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. Remedies If the City defaults in performance of its obligations under the Lease, the Authority or the Trustee, as assignee of the Authority, may either terminate the Lease and re-enter and re-let all or a portion of the Leased Property or may retain the Lease and hold the City