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TABLE OF CONTENTS <br /> <br /> Page Page <br />INTRODUCTION ...................................................................... 1 <br />General .................................................................................... 1 <br />The Authority ......................................................................... 1 <br />The City and the Enterprise ................................................. 1 <br />Authority for Issuance of the Bonds ................................... 2 <br />Purpose of the Bonds ............................................................ 2 <br />Security and Source of Repayment ..................................... 2 <br />Outstanding Enterprise Debt ............................................... 2 <br />Future Parity Obligations ..................................................... 2 <br />Rate Covenant ........................................................................ 3 <br />Redemption ............................................................................ 3 <br />Book-Entry Form ................................................................... 3 <br />Continuing Disclosure .......................................................... 3 <br />Tax Matters ............................................................................. 4 <br />Professionals Involved in the Offering ............................... 4 <br />Forward-Looking Statements .............................................. 4 <br />Other Matters ......................................................................... 5 <br />Other Information .................................................................. 5 <br />FINANCING PLAN .................................................................. 5 <br />ESTIMATED SOURCES AND USES OF PROCEEDS .......... 6 <br />DEBT SERVICE REQUIREMENTS ......................................... 7 <br />THE BONDS ............................................................................... 7 <br />General Provisions ................................................................. 7 <br />Book-Entry Only System ...................................................... 7 <br />Transfer and Exchange .......................................................... 8 <br />Terms of Redemption ............................................................ 8 <br />SECURITY FOR THE BONDS ............................................... 10 <br />Revenues; Pledge of Revenues .......................................... 10 <br />2017 Installment Payments; Application of Systems <br />Revenues ............................................................................. 11 <br />Covenant to Maintain and Budget .................................... 12 <br />No Reserve Fund ................................................................. 12 <br />Special Obligation; Obligations Absolute ........................ 12 <br />Rate Covenants; Collection of Rates and Charges .......... 13 <br />Additional Debt ................................................................... 14 <br />Insurance; Net Proceeds; Condemnation Awards .......... 16 <br />THE AUTHORITY ................................................................... 17 <br />THE ENTERPRISE ................................................................... 18 <br />General Background ............................................................ 18 <br />Management ......................................................................... 18 <br />Service Area .......................................................................... 18 <br />Water Supply and Demand ................................................ 18 <br />Historical Wholesale Water Cost ....................................... 21 <br />Water Conservation Program ............................................ 22 <br />Water Storage and Distribution System ........................... 22 <br />Water Quality and Environmental Issues and <br />Regulatory Requirements ................................................. 23 <br />Capital Improvement Program .......................................... 24 <br />Billing and Collection Procedures ..................................... 24 <br />Current Water Rates, Fees and Charges ........................... 25 <br />Water Rate Increases ........................................................... 26 <br />Comparative Monthly Water Bills .................................... 28 <br />Customer Base ...................................................................... 28 <br />ENTERPRISE FINANCIAL INFORMATION ..................... 30 <br />Budgetary Process ............................................................... 30 <br />Financial Statements ............................................................ 31 <br />Enterprise Accounting ........................................................ 31 <br />Outstanding Enterprise Obligations ................................. 32 <br />Capitalization Policy ........................................................... 32 <br />Historical Revenues, Expenses and Debt Service <br />Coverage ............................................................................. 34 <br />Projection of Revenues, Expenses and Debt Service <br />Coverage ............................................................................. 35 <br />INVESTMENT OF CITY FUNDS .......................................... 35 <br />CONSTITUTIONAL LIMITATIONS ON <br />APPROPRIATIONS AND FEES ............................................ 36 <br />Article XIIIA ......................................................................... 36 <br />Article XIIIB .......................................................................... 36 <br />Proposition 218 ..................................................................... 37 <br />Effect of Proposition 218 on the City; Possible <br />Limitations on Enforcement Remedies. ......................... 39 <br />Proposition 26 ....................................................................... 39 <br />Future Initiatives .................................................................. 40 <br />RISK FACTORS RELATING TO THE BONDS ................... 40 <br />General .................................................................................. 40 <br />Limited Obligations ............................................................. 41 <br />Risks Relating to Water Supplies ...................................... 41 <br />Wholesale Water Costs ....................................................... 42 <br />Seismic Considerations ....................................................... 43 <br />Environmental Regulation ................................................. 43 <br />Maintenance and Operation Costs .................................... 43 <br />Limited Recourse on Default ............................................. 43 <br />Limitations on Remedies .................................................... 43 <br />Initiatives ............................................................................... 44 <br />Bankruptcy ............................................................................ 44 <br />Rate Process .......................................................................... 44 <br />Insurance ............................................................................... 44 <br />Tax Exemption ..................................................................... 44 <br />Parity Obligations ................................................................ 45 <br />Secondary Market ................................................................ 45 <br />APPROVAL OF LEGAL PROCEEDINGS ............................ 45 <br />LITIGATION ............................................................................ 45 <br />RATINGS .................................................................................. 45 <br />CONTINUING DISCLOSURE ............................................... 46 <br />TAX MATTERS ........................................................................ 46 <br />General .................................................................................. 46 <br />Form of Opinion ................................................................... 48 <br />UNDERWRITING .................................................................... 48 <br />MUNICIPAL ADVISOR ......................................................... 48 <br />OTHER INFORMATION ........................................................ 48 <br />MISCELLANEOUS .................................................................. 48 <br /> <br />APPENDIX A: GENERAL INFORMATION ABOUT THE CITY OF REDWOOD CITY AND SAN MATEO COUNTY <br />APPENDIX B: COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY FOR THE FISCAL YEAR ENDED <br />JUNE 30, 2016 <br />APPENDIX C: CITY INVESTMENT POLICY <br />APPENDIX D: SUMMARY OF PRINCIPAL LEGAL DOCUMENTS <br />APPENDIX E: FORM OF FINAL OPINION OF BOND COUNSEL <br />APPENDIX F: FORM OF CONTINUING DISCLOSURE CERTIFICATE <br />APPENDIX G: BOOK-ENTRY ONLY SYSTEM <br />8.C. - Page 24