AgdaPkt 2013-05-20 Closed Cancelled and Special

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7.A. - Page 65 Attachment 6 Limitations on Remedies The ability of the City to comply with its covenants under the Installment Purchase Contract and to generate Net Revenues sufficient to pay the Installment Payments and, therefore, of principal of and interest on the Bonds, may be adversely affected by actions and events outside of the control of the City and may be adversely affected by actions taken (or not taken) by voters, property owners, taxpayers or persons obligated to pay assessments, fees and charges. Furthermore,the remedies available to the owners of the Bonds upon the occurrence of an event of default under the Installment Purchase Contract are in many respects dependent upon judicial actions which are often subject to discretion and delay and could prove both expensive and time consuming to obtain. Initiatives In recent years several initiative measures have been proposed or adopted which affect the ability of local governments to increase taxes and rates. There is no assurance that the electorate or the State legislature will not at some future time approve additional limitations which could affect the ability of the City to implement rate increases which could reduce Net Revenues and adversely affect the security for the Bonds. See CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND FEES—Proposition 218." Bankruptcy The rights and remedies provided in the Installment Purchase Contract and the Indenture may be limited by and are subject to the provisions of federal bankruptcy laws, to other laws or equitable principles that may affect the enforcement of creditors' rights, to the exercise of judicial discretion in appropriate cases and to limitations on legal remedies against public agencies in the State of California. The various opinions of counsel to be delivered with respect to the Bonds, the Installment Purchase Contract and the Indenture, including the opinion of Bond Counsel, will be similarly qualified. If the City were to file a petition under Chapter 9 of the Bankruptcy Code, the Owners of the Bonds and the City could be prohibited from taking any steps to enforce their rights under the Indenture. Rate Process The passage of Proposition 218 by the California electorate potentially affects the City's ability to impose future rate increases, and no assurance can be given that future rate increases will not encounter majority protest opposition under Proposition 218. See "CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND FEES—Proposition 218" and "—Effect of Proposition 218 and of Possible General Limitations on Enforcement Remedies." Termination of Reserve Fund Certain proceeds of the Bonds have been used to establish a Reserve Fund for the Bonds (see "ESTIMATED SOURCES AND USES OF FUNDS" and "SECURITY FOR THE BONDS— Reserve Fund" herein), and a reserve fund was also established in connection with the execution and delivery of the 2007 Bonds and the 2006 Bonds. In the event the 2007 Bonds and the 2006 Bonds are no longer outstanding or the documents relating to the 2007 Bonds and the 2006 Bonds are amended to delete the requirement of a reserve fund for the 2007 Bonds and the 2006 Bonds, the Reserve Fund for the Bonds may be terminated in the sole discretion of the Authority. Under such circumstances, in the event of a failure by the City to pay Installment Payments when due, no other source of funds will be available to make such payments while the Trustee pursues available remedies under the Installment Purchase Contract and the Indenture. -42-