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72 obligations over the objections of the Trustee or all of the Owners of the 2018 Bonds and without their consent, which Adjustment Plan may restructure, delay, compromise or reduce the amount of any claim of the Owners if the Bankruptcy Court finds that such Adjustment Plan is “fair and equitable” and in the best interests of creditors. The Adjustment Plans approved by the Bankruptcy Courts in connection with the bankruptcies of the cities of Vallejo, San Bernardino and Stockton resulted in significant reductions in the amounts payable by the cities in connection with lease revenue obligations substantially identical or similar to the 2018 Bonds. The City can provide no assurances about the outcome of the bankruptcy cases of other California municipalities or the nature of any Adjustment Plan if it were to file for bankruptcy. In addition, the City could either reject the Site Lease or the Lease or assume the Site Lease or the Lease despite any provision of the Site Lease or the Lease that makes the bankruptcy or insolvency of the City an event of default thereunder. If the City rejects the Lease, the Trustee, on behalf of the Owners of the 2018 Bonds, would have a pre-petition unsecured claim that may be substantially limited in amount, and this claim would be treated in a manner under an Adjustment Plan over the objections of the Trustee or Owners of the 2018 Bonds. Moreover, such rejection would terminate the Lease and the City’s obligations to make payments thereunder. The City may also be permitted to assign the Lease (or the Site Lease) to a third party, regardless of the terms of the transaction documents. In a bankruptcy of the City, if a material unpaid liability is owed to CalPERS, on the filing date, or accrues thereafter, such circumstances could create additional uncertainty as to the City’s ability to pay Lease Payments if the Lease is rejected. Given that the CalPERS is administered pursuant to State law, CalPERS may take the position, among other possible arguments, that its claims enjoy a higher priority than all other claims, that CalPERS has the right to enforce payment by injunction or other proceedings outside of a City bankruptcy case, and that CalPERS’ claims cannot be the subject of adjustment or other impairment under the Bankruptcy Code because that would purportedly constitute a violation of state statutory, constitutional and/or municipal law. CalPERS has unsuccessfully taken this position in recent bankruptcy cases in the State. However, it is uncertain how a bankruptcy judge in a City bankruptcy would rule on these matters. Litigation The City may be or become a party to litigation that has an impact on the City’s General Fund. Although the City maintains certain insurance policies that provide coverage under certain circumstances and with respect to certain types of incidents (see “THE CITY AND CITY FINANCIAL INFORMATION – Risk Management” for further information), the City cannot predict what types of liabilities may arise in the future and whether these may adversely affect the ability of the City to pay Lease Payments under the Lease when due. See also “CONCLUDING INFORMATION – Litigation.” State Law Limitations on Appropriations Article XIIIB of the California Constitution limits the amount that local governments can appropriate annually. The ability of the City to pay Lease Payments and other payments due under the Leases may be affected if the City should exceed its appropriations limit. The State may increase the appropriation limit of cities in the State by decreasing the State’s own appropriation limit. The City does not anticipate exceeding its appropriations limit. See “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS – Article XIIB of the State Constitution” above.