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-44- <br />dependent upon judicial actions which are often subject to discretion and delay and could <br />prove both expensive and time consuming to obtain. <br /> <br />Initiatives <br /> <br />In recent years several initiative measures have been proposed or adopted which affect <br />the ability of local governments to increase taxes and rates. There is no assurance that the <br />electorate or the State legislature will not at some future time approve additional limitations <br />which could affect the ability of the City to implement rate increases which could reduce Net <br />Revenues and adversely affect the security for the Bonds. See CONSTITUTIONAL <br />LIMITATIONS ON APPROPRIATIONS AND FEES—Proposition 218.” <br /> <br />Bankruptcy <br /> <br />The rights and remedies provided in the 2017 Installment Purchase Contract and the <br />Indenture may be limited by and are subject to the provisions of federal bankruptcy laws, to <br />other laws or equitable principles that may affect the enforcement of creditors’ rights, to the <br />exercise of judicial discretion in appropriate cases and to limitations on legal remedies against <br />public agencies in the State of California. The various opinions of counsel to be delivered with <br />respect to the Bonds, the 2017 Installment Purchase Contract and the Indenture, including the <br />opinion of Bond Counsel, will be similarly qualified. If the City were to file a petition under <br />Chapter 9 of the Bankruptcy Code, the Owners of the Bonds and the City could be prohibited <br />from taking any steps to enforce their rights under the Indenture. <br /> <br />Rate Process <br /> <br />The passage of Proposition 218 by the California electorate potentially affects the City’s <br />ability to impose future rate increases, and no assurance can be given that future rate increases <br />will not encounter majority protest opposition under Proposition 218. See “CONSTITUTIONAL <br />LIMITATIONS ON APPROPRIATIONS AND FEES—Proposition 218” and “—Effect of <br />Proposition 218 and of Possible General Limitations on Enforcement Remedies.” <br /> <br />Insurance <br /> <br />The 2017 Installment Purchase Contract obligates the City to obtain and keep in force <br />various forms of insurance or self-insurance, subject to deductibles, for repair or replacement of <br />a portion of the Enterprise in the event of damage or destruction to such portion of the <br />Enterprise. The City expects to self-insure a portion of the risk of loss as permitted by the 2017 <br />Installment Purchase Contract. No assurance can be given as to the adequacy of any such self- <br />insurance or any additional insurance to fund necessary repair or replacement of any other <br />portion of the Enterprise. Significant damage to the Enterprise could result in a lack of the <br />ability to generate sufficient Net Revenues to repay the Bonds. The City does not, and does not <br />expect to, maintain earthquake insurance on the Enterprise. <br /> <br />Tax Exemption <br /> <br />The Authority and the City have covenanted that they will take all actions necessary to <br />assure the exclusion of interest with respect to the Bonds from the gross income of the Owners <br />of the Bonds to the same extent as such interest is permitted to be excluded from gross income <br />under the Internal Revenue in the gross income of the Owners thereof for federal tax purposes. <br />See “TAX MATTERS.” See also “TAX MATTERS—Changes in Federal and State Tax Law.” <br /> <br />8.C. - Page 69