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7.A. - Page 61 Attachment 6
<br /> have not decided whether) any such reduction or repeal by initiative would be enforceable in a
<br /> situation in which such rates and charges are pledged to the repayment of bonds or other
<br /> indebtedness. There can be no assurance that the courts will not further interpret, or the voters
<br /> will not amend, Article XIIIC and Article XIIID to limit the ability of local agencies to impose,
<br /> levy, charge and collect increased fees and charges for water, or to call into question previously
<br /> adopted water rate increases.
<br /> Effect of Proposition 218 on the City;Possible Limitations on Enforcement Remedies.
<br /> The general financial condition of the City may be affected by provisions of Article XIIIC
<br /> and Article XIIID. In particular, provisions of Article XIIIC (i) require taxes for general
<br /> governmental purposes to be approved by a majority vote and taxes for specific purposes, even
<br /> if deposited into the General Fund, to be approved by two-thirds vote, (ii) require any general
<br /> purpose tax which the City imposed, extended or increased, without voter approval, after
<br /> December 31, 1994, to be approved by majority vote on November 5, 1998 and (iii) provide that
<br /> all taxes, assessments, fees and charges are subject to reduction or repeal at any time through
<br /> the initiative process, subject to overriding constitutional principles relating to the impairment
<br /> of contracts. Provisions of Article XIIID that affect the ability of the City to fund certain services
<br /> or programs that it may be required or choose to fund include (i) adding notice,hearing,protest
<br /> and, in some cases, voter approval requirements to impose, increase or extend certain
<br /> assessments, fees and charges and (ii) adding stricter requirements for finding individualized
<br /> benefits associated with such levies.
<br /> The ability of the City to comply with its covenants under the Installment Purchase
<br /> Contract and to generate Net Revenues sufficient to pay the Installment Payments and,
<br /> therefore, the principal of and interest on the Bonds may be adversely affected by actions and
<br /> events outside of the control of the City and may be adversely affected by actions taken (or not
<br /> taken) under Article XIIIC or Article XIIID by voters, property owners, taxpayers or payers of
<br /> assessments, fees and charges. Furthermore, any remedies available to the owners of the Bonds
<br /> upon the occurrence of an event of default under the Installment Purchase Contract are in many
<br /> respects dependent upon judicial actions which are often subject to discretion and delay and
<br /> could prove both expensive and time consuming to obtain. In addition to the possible
<br /> limitations on the ability of the City to comply with its covenants under the Installment
<br /> Purchase Contract,the rights and obligations under the Bonds and the Indenture may be subject
<br /> to bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium
<br /> and other laws relating to or affecting creditors'rights,to the application of equitable principles,
<br /> to the exercise of judicial discretion in appropriate cases and to limitations on legal remedies
<br /> against cities in the State of California.
<br /> Based on the foregoing,in the event the City fails to comply with its covenants under the
<br /> Installment Purchase Contract, including its covenants to generate sufficient Net Revenues, as a
<br /> consequence of the application of Article XIIIC and Article XIIID, or to pay principal of or
<br /> interest on the Bonds, there can be no assurance that available remedies will be adequate to
<br /> fully protect the interests of the holders of the Bonds.
<br /> Proposition 26
<br /> On November 2, 2010, State voters approved Proposition 26 which amended certain
<br /> sections of Article XIIIC. The proposition attempts to define "tax" as used within Article XIIIC
<br /> as "any levy, charge, or exaction of any kind imposed by a local government, except the
<br /> following: (1) a charge imposed for a specific benefit conferred or privilege granted directly to
<br /> the payor that is not provided to those not charged, and which does not exceed the reasonable
<br /> costs to the local government of conferring the benefit or granting the privilege; (2) a charge
<br /> imposed for a specific government service or product provided directly to the payor that is not
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