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59 <br />City’s distribution of costs amongst its customer classes and not the City’s ability to adopt rates <br />at levels that are sufficient to fully fund its costs of service. <br />Articles XIIIC and XIIID and the City’s Water Rates and Charges. The City’s current <br />water rates (see “THE ENTERPRISE – Current Water Rates, Fees and Charges”) were adopted <br />by resolution of the City Council on March 20, 2019, following notice to property owners and a <br />public hearing held at least 45 days after the notice had been mailed, in compliance with Articles <br />XIIIC and XIIID. <br />Further, the City believes its water rates and charges do not constitute “taxes” under Article <br />XIIIC as revised by Proposition 26 because, as described in subsection 1(e)(7) of Article XIIIC, <br />they are “property-related fees imposed in accordance with the provisions of Article XIIID” (and <br />are also charges for a “property-related service” as defined in subsection 2(g) of Article XIIID) and <br />because, as described in subsection 1(e)(2) of Article XIIIC, they are charged for water service, <br />“a specific government service or product provided directly to the payor that is not provided to <br />those not charged.” <br />Conclusion. It is not possible to predict how courts will further interpret Article XIIIC and <br />Article XIIID in future judicial decisions, and what, if any, further implementing legislation will be <br />enacted. <br />Under the Bighorn case, local voters could adopt an initiative measure that reduces or <br />repeals the City’s rates and charges, though it is not clear whether (and California courts have <br />not decided whether) any such reduction or repeal by initiative would be enforceable in a situation <br />in which such rates and charges are pledged to the repayment of bonds or other indebtedness, <br />as is the case with respect to the Bonds. <br />There can be no assurance that the courts will not further interpret, or the voters will not <br />amend, Article XIIIC and Article XIIID to limit the ability of local agencies to impose, levy, charge <br />and collect increased fees and charges for water services, or to call into question previously <br />adopted water services rate increases. <br />Insurance <br />The 2024 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 Enterprise. <br />The City expects to self-insure a portion of the risk of loss as permitted by the 2024 Installment <br />Purchase Contract. No assurance can be given as to the adequacy of any such self- insurance <br />or any additional insurance to fund necessary repair or replacement of any other portion of the <br />Enterprise. Significant damage to the Enterprise could result in a lack of the ability to generate <br />sufficient Net Revenues to repay the Bonds. The City does not, and does not expect to, maintain <br />earthquake insurance on the Enterprise. <br />Secondary Market <br />There can be no guarantee that there will be a secondary market for the Bonds or, if a <br />secondary market exists, that any Bonds can be sold for any particular price. Prices of bond <br />issues for which a market is being made will depend upon then-prevailing circumstances. Such <br />prices could be substantially different from the original purchase price. No assurance can be given <br />that the market price for the Bonds will not be affected by the introduction or enactment of any <br />8.A. - Page 73 of 255 <br />701