AgdaPkt 2019-05-20 Joint SA PFA - Laserfiche WebLink

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8.A. - Page 52 of 73 Parity Debt of the Participating Members Attachment D The Participating Members are authorized by the respective Financing Agreements to incur indebtedness with a lien on Net Revenues or Surplus Revenues on a parity basis with the SBSA Bond Payments or Authority Bond Payments securing the 2019 Notes, if certain financial tests are met. See the caption "SECURITY FOR THE 2019 NOTES—Financing Agreements" herein and Appendix F "SUMMARY OF FINANCING AGREEMENTS" attached hereto. These financial tests may involve, to some extent, projections of Net Revenues. There can be no assurance that the assumptions which form the basis of such projections, if any, will be actually realized subsequent to the date of such projections. If such assumptions are not realized, the amount of future Net Revenues may be less than projected, and the actual amount of Net Revenues or Surplus Revenues may be insufficient to provide for the payment of the 2019 Notes and such additional indebtedness. Natural Disasters General. The Participating Members, like all northern California communities, are subject to unpredictable seismic activity, fires, floods, or other natural disasters. A severe natural disaster, such as an earthquake, fire, or flood, could result in substantial damage to each of the Participating Members, including their wastewater systems. Such an event—which could increase the costs of operating and maintaining the Participating Members' wastewater systems and could reduce revenues as a result of widespread damage—could adversely impact the Participating Members' ability to pay their SBSA Bond Payment or Authority Payments which represent the main source of Revenues under the Indenture for the payment of principal and interest on the 2019 Notes. Seismic Activity. Each of the Participating Members could experience ground shaking, ground failure, landslides or fault creep related to major faults in the area. San Andreas, fault, located approximately two miles west of the Participating Members, and the Hayward fault, located approximately 14 miles east of the Participating Members, are both active. Historic earthquakes have caused strong ground shaking and damage in the San Francisco Bay Area, the most recent being the magnitude 6.9 Loma Prieta earthquake on the San Andreas Fault in October 1989. The epicenter was approximately 50 miles south of the Participating Members and caused strong ground shaking for about 20 seconds. The casualty and liability insurance of the Participating Members may not cover losses due to earthquake. San Carlos carries earthquake insurance, however Redwood City, Belmont and West Bay do not. If there were to be an occurrence of severe seismic activity in the service areas of the Participating Members, there could be substantial damage to and interference with the operations of a Participating Member, which could impact the receipt of Net Revenues. Flooding. A portion of each of the Participating Members' service areas is mapped within the 100 -year flood plain and could be flooded during heavy rains. Fire. Wildfires have occurred in recent years in different regions of the State and a number of fires were recently burning in California, damaging and threatening thousands of homes. There can be no assurance fires will not occur in the boundaries of the Participating Members in the future, leading to decreased usage of any of the Members' wastewater system, and a decline in Net Revenues or Surplus Revenues available to pay debt service on the 2019 Notes. 566