QUINN EMANUEL URQUHART & S ULLIVAN, LLP Kathleen M. Sul livan (SBN: 242261) e . .·· , �� . � �U[enor Cc '(�Y � It�·c ��� Sh !me���� 2 kathleensul\ivan @qu in nemanuel.com Erica P. Taggart (SBN: 2 1 58 1 7) 3 ericatag0oa@qu innemanuel.com � th 865 S. Figueroa Street, I 0 Floor 4 Los Angeles, CA 90017 Telephone: (2 1 3) 443-3000 5 Facsimile: (2 1 3) 443-3 1 00 6 Jonathan E. Pickhardt (pro hac vice to be filed) jonpickhardt@qui n nemanuel.com 7 Brad E. Rosen (pro hac vice to be filed) bradrosen @qui nnemanuel .com 8 51 Madison Avenue, 22" " Floor New York, New York 1 00 10-1601 9 Telephone: ( 2 1 2) 849-7000 10 Facsimile: (2 1 2) 849-7 1 00 II Attorneys for Plaintiffs/Peti tioners Syncora Guarantee Inc. and Syncora Capital 12 As surance Inc. 13 l8� t2l1 g , ,� Jf;� C� ��us����: 14 15 SUPERIOR COURT OF THE STATE OF CALORNIA COUNTY OF SACRAMENTO 16 17 SYNCORA GUARANTEE INC. and SYNCORA CAPITAL ASSURANCE C., 18 19 20 Plaint iffs and Peti tioners, -against - STATE OF CALIFORNIA; JOHN CHIANG, 21 i n h is official capacity as State Con troller; ANA J . MA TOSANTOS, in her official 22 capacity as Califoia Director of Finance; LARRY WALKER, in his offic ial capacity as 23 Auditor-Controller of San Bea rdino County, on his own behalf and as the representative of 24 all other County Auditors in the State of California, 25 26 27 28 Defendants and Resnnndents. CASE NO. COMPLAINT AND PETITION FOR WRIT OF MANDATE Trial Date: None Yet Set SERVICE ON ATTORNEY GENERAL REQUIRED BY RULE 8.29(C)(l)
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B . Based o n the Irrevocable Pledge of Tax Increment Revenue, Syncora Agreed to Enter Into a Contract as Bond Insurer of Various RDA Bonds . . . . .. . . . . . . . . . 9
C. Dissolution of the Redevelopment Agencies and Redistribution of Their Tax Increment Revenue . ... . ........... ........... ........ . . ......... . ... ................ ................... ..... I I
D. Recent Clean-Up Legislation Leaves Bondholder Indebtedness in Doubt . . . . . .... .. . . I 3
E. Downgrade of RDA debt after passage of AB26 ............ .. ............................. ......... I 4
A. The Contract Clauses of the California and United States Constitution Prohibit States from Impairing the Obligations of Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I 4
4 Moody's Downgrades California Tax A llocation Bonds Due to Near-Term Cash Flow Risks A rising From. Redevelopment Agencies ' Impending Dissolution; All Tax
5 Allocation Ratings Remain On Review For Possible Further Downgrade,
3 reducing state's obligation to fund a portion of a retirement fund impermissibly reduced
4 contractual ly required security).)
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B.
46.
The Redistrihutinn Prnvisions Impair Contractual Ohligations By Materially Changing the Rights and Responsibilities of Contracting Parties, Including Syncora
The Redistribution Provisions impair the contractual rights of parties to the RDA
8 indentures, including Syncora, in three ways: ( I ) they eliminate the bondholders lien on future
9 TIF, which assures the prompt repayment of debt. (2) they reduce the amount of i rrevocably
1 0 pledged TTF that successor agencies are authorized to hold as reserve against future debt
I I obligation to bondholder under the original terms of the bond i ndentures; and (3) they prohibit the
1 2 reinvestment of surplus TIF to develop the project area, thereby prohibiting the successor agency
1 3 from using redevelopment projects to drive increases i n future TIF revenue as required b y the
1 4 bond indentures. A s such, the Redistribution Provisions i nterfere with the vitality o f critical debt
1 5 security mechanisms created by the i rrevocable pledge of TIF in the bond indentures. Absent the
1 6 lien on TIF, RDA bondholders arc not able to enforce prompt repayment of debt i n the event of
1 7 default. Because TIF revenue constitutes the sole secured source o f repayment for bondholders
1 8 and Redistribution Provisions l imit the successor agencies' authority to hold surplus TIF, the
1 9 Redistribution Provisions increase the l i kelihood that debt wi l l default i n times of tax revenue
20 shortfall. And the Redistribution Provisions el iminate the main driving force behind future
2 1 increases in tax increment by prohibiting further redevelopment with TlF funds. Taken together,
22 the Redistribution Provisions severely impair the critical security mechanisms protecting
23 repayment of RDA debt, in direct contravention of bargained for contractual obligations between
24 the RDAs, the RDA bondholders, and the bond insurers.
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(a) The Redistribution Provisions eliminate the lien that ensured that whatever taxes were allocated would actuallv go to repay and otherwise secure bond indebtedness
Prior to the Redistribution Provisions' enactment, TIF revenue was to be "paid into
a special fund of the redevelopment agency to pay the principal of and interest on [RDA debts]" or
otherwise paid to the RDAs. (Health & Safety C. § 33670(b); id. § 33670(e).) To further enable
the RDAs to obtain financing for redevelopment projects, the RDAs were permitted to make TIF 7
8 revenue pledges "irrevocabl[e]." (Health & Safety C. § 3367 1 (funds under §33670(b) "may be
9 irrevocably pledged for the payment of I RDA debts]").) Under the bond indentures, the RDAs
1 0 granted liens on those col lected tax increment funds, subject to the terms and conditions of each
1 I individual indenture. (See, e.g., SoCal Indent. at 32. ("All the Pledged Tax Revenues and all
1 2 money i n the [named funds specified in the indenture], whether held by [the RDA] or the Trustee,
1 3 are hereby irrevocably pledged to the punctual payment of interest on and principal of and
1 4
1 5 redemption premiums, i f any, on the Bonds . . . . [T]his pledge . . . constitute[s] a first lien on the
1 6 Pledged Tax Revenues . . . . "); Hesperia Indent. at 32 (bonds "shall be secured by a pledge of and
1 7 lien on all of the Tax Revenues . . . . ").) The liens assured prompt repayment of the debt.
1 8 48. Moreover, the CRL provides that express pledges of TIF revenue were given
1 9 priority over other claims. (Health & Safety C . § 3367 1 .5 ("Whenever any redevelopment agency
20 is authorized to, and does, expressly pledge [T1F revenue] . . . to secure, di rectly or indirectly, the
2 1 obligations o f the agency including . . . bonded indebtedness . . . , then that pledge . . . shall have
22 priority over any other claim to those taxes not secured by a prior express pledge of those
23 taxes.").) The CRL thus bolstered the priority of the liens established to secure the RDA debts . .
24 49. The Redistribution Provisions expressly targeted such liens, by "deeming" the
25 underlying debts paid and extingu ished " [s [olely for the purposes of Section 1 6 of Article XV! of
26 the California Constitution." (Health & Safety C . § 34 1 74.) Thus, there are no longer first l iens
27 with express priority on the TIF revenue that stands as security for the RDA debts. Regardless of
28 any other contractual provision, the Redistribution Provisions el iminate the existence of the lien
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by the legal fiction that the bonds have been paid. Instead, the Redistribution Provisions provide a
2 framework where every six months, funds needed to pay only those debts coming due (in the six
3 upcoming months) are set aside. (Health & Safety C. § § 34 ! 83(a)(2-3).) Instead of all TIF
4 revenue being al located to the RDAs (and used to repay debt obligations or as otherwise specified
5 by the contractual terms of those debts), only money sufficient for the next s ix months is set aside,
6 unless the Depat1ment of Finance approves otherwise. As a result, the Redistribution Provisions
7 impair the security originall y promised i n connection with the RDA debts.
8 50. I n fact, the impairment of Syncora' s interest in TTF appears to be greater than the
9 impairment in U.S. Trust Co. v. New .Jersey. 43 1 U.S. I ( 1 977). There, the statute only threatened
1 0 future depletion of bondholder security by uneconomical investment. (U.S. Trust Co. , 43 1 U.S. at
I I 1 9.) I n the present case, the Redistribution Provisions not only threaten the health of future
1 2 security on the bondholders' i nvestments, but actually eliminate the l ien o n that security
1 3 immediately.
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(b) The Redistribution Provisions substantially reduced the available tax revenue (or repayment of bonds insured bv Syncora. redirecting that money for impermissible uses
As a result of the Redistribution B i l l , there i s an actual impairment of cash flows
1 7 governed by the indentures of the RDA debts. Before the Redistribution B i l l was implemented,
1 8 the RDAs made "irrevocable" pledges to the bondholders. (See SoCal Indent. at 32 (taxes "are
1 9 hereby irrevocably pledged to the punctual payment [ of the bonds]"); Hesperia Indent. at A-2
20 ("[A] I I of the tax revenues are irrevocably pledged" for repayment.).) These pledges were
2 1 authorized by the California Constitution and expressly provided for by the Legislature in the
22 Health and Safety Code. (See Cal. Cons!. art. XVI, § 1 6; Health & Safety C. § 3367 1 .)
23 52. The Redistribution Provisions "deem[ed]" any RDA debts extingu ished for
24 constitutional purposes, presumably to side-step the constitutional authorization that RDAs had to
25 irrevocably pledge TIF. (Health & Safety C. § 341 74.) Under the Redistribution Provisions.
26 funds in excess of those needed to pay for RDA debts coming due in the next six months must he
27 redistributed to local taxing agencies. (Health & Safety C. §34 1 83(a)(4).) Prior to the
28 Redistribution Provisions, the RDA was authorized to hold those funds as reserve against debt
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service at its discretion. But now those funds are to be distributed for purposes not contemplated
2 by the original i ndentures. Simply put, the successor agencies cannot hold as much reserve on
3 hand as the RDAs were able to hold, and thus, the successor agencies are more l i kely to default.
4 To the extent that AB26 provides mechanisms to address shortfalls, these mechanisms, are
5 inadequate to compensate for Syncora's original contractual rights. (See Teachers ' Retirement Bd.
6 v. Genest, 65 Cai.Rptr.3d 326, 345 ("The replacement of an express obligation to pay a fixed sum
7 of money with a promise to pay the sum if you prove you need it and, even then, only if you need it
8 before a specific date. is not a comparable new advantage") (emphasis in original); Bd. of Admin.
I 0 "may not properly speculate with regard to potential future mitigating factors" (quotations
I I omitted)).)
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(c) The Redistribution Provisions eliminated rhe reinvestment mechanism that facilira.ted repayment bv fostering increased taxes
53. Separate and apart from the reduction in the amount of tax revenues that RDAs are
authorized to reserve in order to repay debt, the Redistribution Provisions impair the contracts
among RDAs, bondholders, and Syncora by ignoring contractual provisions that dictate how
excess funds may be uti l ized, thus interfering with a reliable process for ensuring that bondholder
indebtedness is timely paid with whatever taxes are allocated.
54. The indentures do not permit the use of pledged funds for any purpose. To the
contrary, by their express contractual terms, they l imited the use of RDA funds to those purposes
authorized under the redevelopment law or those normally undertaken by the RDAs. (SoCal
Indent. at 35 (upon written request, an RDA may withdraw surplus funds and use them for "any
lawful purpose of the [RDA]") (emphasis added); Hesperia Indent. at 32 (lien released so that
excess funds may be used by the RDA "for any lawful purpose of the Redevelopment Law")
(emphasis added).) The "lawful purposes" of RDAs are l imited i n scope to the execution of
redevelopment in the defined project area. (See Health & Safety C. § 3302 1 i
2 Redevelopment includes:
(footnote continued)
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55 . Thus the framework established under the Redevelopment Law (Health & Safety
2 C. § 3367 1 ) and the terms of actual RDA debt provided bondholders and Syncora assurances that
3 surplus TTI0 revenues not reserved against future shortfal ls would be used for redevelopment
4 activity-which would. in turn. drive increases i n property values, thereby augmenting the future
5 TlF revenues securing R DA debt.
6 56. The Redistribution Provisions eliminated the contractual mechanisms that l imited
7 the use of TlF revenue to purposes of enhancing security on the RDA debt. Thus. the
8 Redistribution Provisions wi l l reduce the flow of funds available for repayment of debt insured by
9 Syncora in contravention of the debt i ndentures.
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(d) The Express Purpose o[AB26. and the Redistribution Provisions. was 10 redirect m.onev away from. RDAs
57. The purpose of AB26 generally, and the Redistribution Provisions specifical ly, is
clear from the actual provisions and structure of the bi l l . AB26 expressl y declares its intent to
l imit expenditures by the RDAs wherever possible so that TlF funds can be real located to cover
shortfalls on local debts that would otherwise be the responsibility of the State government. (!d. §
34 1 67(a) ("This part is intended to preserve, to the max imum extent possible, the revenues and
assets of redevelopment agencies so that those assets and revenues that are not needed to pay for
enforceable obligations may be used by local governments . . . . ").) And in fact, the Redistribution
(a) The alteration, improvement. modernization, reconstruction, or rehabi l i tation, or any combination of these, of existing structures in a project area. (b) Provision for open-space types of use, such as streets and other public grounds and space around bui ldings, and public or private bui ldings, structures and improvements, and improvements of public or private recreation areas and other public grounds. (c) The replanning or redesign or original development of undeveloped areas as to which either of the following conditions exist.
(I) The areas are stagnant or improperly util ized because of defective or i nadequate street layout, faulty lot layout in relation to size, shape, accessibili ty, or usefulness, or for other causes.
26 (2) The areas require replanning and land assembly for reclamation or development in the interest of the general welfare because of widely scattered ownership, tax delinquency, or
27 other reasons. (Health & Safety C. § 3302 1 .)
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Provisions provide a steady stream of funds diverted from the successor agencies to local taxing
2 agencies, which replace obligations that would otherwise be owed by the State.
3 58. In other li tigations surrounding various provisions of AB26, the State of California
4 has advanced the position that the purpose of the Redistribution Provisions was to free up money
5 for Cal i fornia in order to satisfy other funding priorities. Specifically, i n defending the
6 constitutionality of AB26 and Assembly Bi l l 27 ("AB27"),1 Cal i fornia Director of Finance Ana
7 Matosantos represented that AB26 and AB27 were "a significant component of the Legislature's
8 plan to close the more than $25 bill ion budget gap and to solve ongoing revenue challenges."
9 (Cal. Redevelopment Assoc. v. Marosantos. Case No. S 1 9486 1 , Resp't Informal Opp'n to Pet. for
1 0 Writ o f Mandate Br. 6 (July 27, 20 1 1 ) (submitted by Cali fornia Attorney General Kamala D.
1 1 Harris).) In other words, the State of California sought to solve Cal ifornia's budget crisis by
1 2 taking funds contractually pledged to increase the security on bonded debt for purposes unrelated
1 3 to the funds' intended beneficiaries. Because the money diverted from the RDAs under the
1 4 Redistribution Provisions was an i mportant, contractually pledged security, achievement of the
1 5 explicit goals of the Redistribution Provisions will cause an i mpairment.
1 6 59. Matosantos challenged the ability of the Legislature to d issolve the RDAs-that
1 7 issue has been resolved. There i s no question that the Legislature had the power to dissolve the
1 8 RDAs and prevent any new pledges of TlF. However, the Redistribution Provisions i nte1fere with
1 9 existing pledges ofTIF, duly authorized by the California Constitution and the CRL when made.
20 The Legislature may have changed i ts mind (albeit, after more than half a century) about the
2 1 appropriateness of RDAs, but it was not entitled to extinguish contractual pledges already duly
22 made for the repayment of RDA debt. The United States and California Constitutions prohibit a
23 1 AB27 was a partner bi ll to AB26. (201 1 Cal. Legis. Serv. 1 st Ex. Sess. Ch. 5 (A.B. 27)
24 (WEST).) It permitted the RDAs to avoid being dissolved under AB26 if they agreed to make
25 specified payments to the county Educational Revenue Augmentation Fund and a new county special di strict augmentation fund. (Health & Safety C. § 34 1 94.) AB27 was invalidated in
26 Matosantos because it violated Proposition 22, which prohibits any act of Legislature from requiring "a community redevelopment agency . . . to pay, remit, loan, or otherwise transfer,
27 d i rectly or indirectly, taxes on ad valorem real property and tangible personal property allocated to the agency pursuant to Section 1 6 of Article XVI." (Cal. Cons!. art. Xl l l , § 25.5(a)(7)(A).)
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state from impairing existing contractual obligations i n order to redistribute money at its pleasure
2 and discretion.
3
4 60.
(e) RDA bonds have alreadv been downgraded
RDA bonds have been and continue to be downgraded as a result of the
5 Redistribution Provisions. Even before the Redistribution Provisions went into effect, Tax
6 Al location Bonds (bonds secured by TIF or "TABs") were downgraded "primarily" due to "near-
7 term cash flow risks arising from" the anticipated affect of AB26, including the Redistribution
8 Provisions. (Moody 's Downgrades California Tax Allocation Bonds Due to Near-Term Cash
9 Flow Risks A rising From Redevelopment Agencies ' Impending Dissolution; All Tax Allocation
1 0 Ratings Remain On Review For Pos.<ihle Further Downgrade, Moody's Investors Service (Jan.
I I 1 7 , 20 1 2), http://www.moodys.com/research!MOODYS-DOWNGRADES-CALIFORNIA-TAX-
3 63. Credit downgrades on RDA debt reflect the increased risk of RDA debt investment
4 resulting from AB26, including the Redistribution Provisions. Syncora relied on contractual
5 pledges that should have precluded these increased risks. By impairing these contractual pledges,
6 the Redistribution Provisions have material ly harmed Syncora.
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c. The Redistribution Provisions are not a Reasonable and Necessarv Means to Further an Important Public Purpose
64. Because the Redistribution Provisions substantially impair Syncora's rights under
its contracts by el iminating critical security interests, the Redistribution Provisions violate the
Contract Clause un less they are "reasonable and necessary to serve an important public purpose"
(U.S. Trust Co., 43 1 U.S. at 25.) In undertaking this analysis, "complete deference to a legislative
assessment of reasonableness and necessity is not appropriate because the State's self-interest is at
stake." (!d. at 26.) Indeed, "a governmental entity can always find a use for extra money . . . . lf
a state could reduce its fi nancial obligations whenever i t wanted to spend the money for what it
regarded as an important public purpose, the Contract Clause would provide no protection at al l ."
(/d. ; see also Wilson, 52 Cai.App.4th at 1 1 55 ("[U.S. Trust] places the justification for an
impairment of a contractual funding obligation under the l ight of strict scrutiny. It requires the
state assert a compell ing interest for the impairment" (quotations omitted) (emphasis added)).)
65. The stated purpose of the RDA Dissolution B i l l (and by extension, the
Redistribution Provisions contained therein) is to divert money from RDAs to fi l l the State's
budget gaps ' (See, e.g., Health & Safety C. * 34 1 67(a) ("This part is intended to preserve, to the
maximum extent possible, the revenues and assets of redevelopment agencies so that those assets
and revenues that are not needed to pay for enforceable obligations may be used by local
governments to fund core governmental services including policy and fire protection services and
27 4 And to reduce the State 's funding obligations to localities under the Property Tax Relief Act.
28 (SB90).
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schools.").) But the State has already conceded, as part of the bi l l itself, that California i s
2 recovering slowly from a recession, even without this measure. (AB26 (stating that the
3 Legislature had found that "[t]he economy and the residents of this state are slowly recovering
4 from the worst recession since the Great Depression").) In the words of Cal ifornia Attorney
5 General Kamala D. Harris, the RDA Dissolution Act is one of the "choices [the Legislature]
6 made" to "close [California's] more than $25 bil l ion budget gap and to solve ongoing revenue
7 challenges." (Cal. Redevelopment Assoc. v. Matosantos, Case No. S 1 9486 1 , Resp't Informal
8 Opp'n to Pet.. for Writ of Mandate Br. 6 (July 27, 201 1 ) (submitted by Cal i fornia Attorney General
9 Kamala D . Harris) (emphasis added).)
1 0 66. The mere desire to preserve government revenue for other pu rposes does not justify
1 1 a substantial i mpairment of the government's contractual obl igations. "Thus a State cannot refuse
1 2 to meet its legitimate financial obligations simply because it would prefer to spend the money to
1 3 promote the public good rather than the private welfare of its creditors." (U.S. Trust Co., 43 1 U.S.
1 4 at 29; see also Brown v. Ferdon, 5 Cal. 2d 226, 234 (Cal. 1 936) (holding that a statute is not
1 5 legitimate where "l.i.Jt simply gives a debtor preference without any consideration of the rights of
1 6 the creditor").) The burden lies with the government to show extraordinary measures were truly
J 7 necessitated by a fiscal crisis. (See Wilson, 52 Cai.App.4th at 1 1 55 ("The party claiming
1 8 justi fication has the burden of establishing it."); Sonoma Cnty. Org. of Pub. Emps. v. Cnty. of
1 9 Sonoma, 2 3 Ca1.3d 296, 3 1 0 ( 1 979) (finding that "the government had not met [ i ts] burden of
20 establishing that" the "fiscal crisis" on which it relied as "justification for the impairment" actually
2 1 existed).)
22 67. The State's "fiscal crisis" justification rings hollow in light of recent spending
23 decisions such as the State's approval of in itial funding for a $68 bi l l ion high-speed rail project
24 last month 5 While state lawmakers may prefer to spend money on controversial, expensive
25
26 5 "California's Senate on Friday [J uly 6, 20 1 2] approved funding for the first chunk of a highspeed rail system that is expected to eventually link Los Angeles to San Francisco. In a vote of 2 l -
27 1 6, lawmakers gave the go-ahead for the issuance of $2.6 bil l ion in bonds, while Washington wil l
28 provide an additional $3.2 bil lion. The bi l l also includes close to $2 b i l l ion in fund ing for local
(footnote continued)
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projects such as high-speed rail (rather than meet their obligations to provide funding to localities),
2 the whims and preferences of state legislature do not justify the slate's impairment of contractual
3 obligations to Syncora. (See U.S. Trust Co., 43 1 U.S. at 29.) Indeed, the approved expenditure
4 itself undercuts the State's assettion that a "fiscal crisis" existed that justified the red istribution of
5 RDA funds to provide "core government services." (Health & Safety C. § 34 1 67(a) (slating the
6 purpose of the RDA Dissolution Act).)
7 68. Even if re-directing money to the state's budget gaps constituted a sufficiently
8 imp011ant public purpose, the impairment of Syncora's security i nterest is unconstitutional unless
9 it is reasonable and necessary to meet its purpose. (U.S. Trust Co., 43 1 U.S. at 26, 3 1 ("[A] State
1 0 i s not free to impose a drastic i mpairment when an evident and more moderate course would serve
I I its purposes equally well."); see also Valdes v. Cory, 1 39 Cal.App.3d 773, 79 1 (Cal. 1 983) (stating
1 2 that California must show that i t "gave considered thought to . . . the possibility of alternative, less
1 3 drastic, means of accompl ishing its goal."); Wilson, 52 Cai.App.4th at 1 1 6 1 (rejecting n ecessity
1 4 defense because defendant did not show consideration of or lack of other alternative means, did
1 5 not get input from impaired party, and did not show that i t gave considered thought to the effect of
1 6 the challenged provisions on the impaired party).)
1 7 69. The mechanisms of the Redistribution Provisions are neither necessary nor
1 8 appropriate. For example, the Redistribution Provisions provide that funds i n excess of RDA debt ·
1 9 obligations due within successive s ix month periods must be distributed to local agencies. As a
20 result, even i f an agency is in relatively good fiscal health, revenues that previously could have
2 1 constituted a security interest for Syncora must sti l l be transferred to that agency. Moreover, the
22 Redistribution Provisions have no temporal component or budgetary guideposts for when they
23 apply. In two years, or ten years, i f California's budget is balanced and its deficit significantly
24 reduced, Syncora's contractual rights wil l remain impaired under the Redistribution Provisions.
25 projects . . . . The cost of the completed project is estimated at more than $68 bil lion." (CNN Wire
26 Staff, California Senate Approves Funding for High Speed Rail, CNN.com (July 7, 20 1 2, I 0:3 1 AM), http://www .cnn.com/20 1 2/07 /06/travel/california-high-speed-rai IIi ndex. html ?hpt=hp_t2; see
27 also SENATE R. COMM., Senate Floor Analysis of SB 1 290 (20 1 2- 1 3 1 st Ex. Sess.).)
28
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Had legislators sought to tailor the impairment of rights to make it more reasonable and less
2 drastic, they might have incorporated limiting measures such as these.
3 70. Notably, however, the entire text of AB26 (which includes the Redistribution
4 Provisions), including the findings set forth therein, lack any indication that the State even
5 considered any alternative, more reasonable means such as those above. The legislative h istory
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6 similarly speaks of the tax revenue that lawmakers expect to wi thdraw from the successor agencies
7 each year, but-like the statutory text-lacks any consideration of other, narrower methods to
8 accomplish th is purpose. (See, e.g., Senate R. Comm., Senate Floor Analysis of A B 26, at I
9 (20 1 1 - 1 2 l sl Ex. Sess.); Senate R . Comm., Senate Floor Analysis of A B 1 484, at l -2, 8-9 (20 1 2-
I 0 1 3 I st Ex. Sess.).)
I I 7 1 . Because the legislation is not tailored to l imit the impairment on Syncora's
1 2 contractual rights to that which is reasonable or necessary, and because the S tate cannot show that
1 3 i t considered alternative, less drastic means, the substantial impairment of Syncora·s contractual
1 4 rights by the Redistribution Provisions violates the Contract Clause even i f the stated purpose of
1 5 the legislation - fi l l ing budget gaps - were a sufficient public purpose (which i t is not).
16 VI. THE IMPAIRMENT OF CONTRACT ALSO CONSTITUTES A DIRECT TAKING .JUSTIFYING COMPENSATION
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72. For the reasons described above, the Redistribution Provisions i mpaired Syncora's
contractual rights. To the extent that the Redistribution Provisions have already appropriated and
taken Syncora 's property interest in critical contractual rights for the period that the Redistribution
Provisions have been in operation, and to the extent that they may continue to appropriate and take
that property imerest for such additional time as they may remain in operation. the State has
effected a taking of Syncora's property and Syncora is entitled to just compensation.
73. The United States Constitution prevents "private property [from] be[ing] taken for
public use, without just compensation." (U.S. Const. amend Y.) The California Constitution
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provides that "private property may be taken or damaged for a public use and only when just
2 compensation . . . has first been paid to . . . the owner." (Cal. Con st. art I , § 1 9(a).)6
3 74. It has long been established that contractual rights can be "property within the
4 meaning of the Fifth Amendment." (Omnia Comm. Co. v. United Stales, 26 1 U.S. 502, 508
5 ( 1 923) (citations omitted): see also City r!f Oakland v. Oakland Raiders, 32 Cal. 3d. 60, 67 (Cal.
6 1 982) (recognizing contractual takings u nder Section 1 9 of the California Constitution).) In the
7 present case, bondholders (and bond insurers) have a property interest in the security contractually
8 pledged by the RDAs to the bondholders.
9 75. "[Djirect government appropriation or physical i nvasion of private prope1ty" is the
1 0 textbook example of a taking requiring just compensation. (Lingle v. Chevron U.S.A. Inc. , 544
1 1 U.S. 528, 537 (2005).) Direct takings i nclude takings of assets other than real property, such as
1 2 cash-assets. (See Webb's Fabulous Pharmacies, Inc. v. Beckwith, 449 U.S. 1 55, 1 64 ( 1 980)
1 3 (holding that a state could not appropriate interest on money held i n trust for creditors because "a
1 4 State, by ipse dixit, may not transform private property into public property without compensation,
1 5 even for [a] l imited duration . . . . ") (emphasis i n original).) The Redistribution Provisions
1 6 constitute a direct taking of unused security pledged to bondholders. At the most basic level, the
1 7 Redistribution Provisions authorize and instruct local taxing agencies to make direct withdrawals
1 8 from bondholder trust accounts. Similar to Webb's Fabulous Pharmacies, the Redistribution
1 9 Provisions appropriated property held for the ultimate benefit o f private parties and used it,
20 without permission, to cover general governmental debts.
2 1
22
23 6 Cal i fornia has a well developed doctrine providing for the availability of damages for takings clause claims. The Supreme Court of Cal i fornia has long held Section 1 9 of the Cal ifornia
24 Constitution (and its predecessor) to be "self-enforcing." (Rose v. Srate, 1 9 Cal.2d 7 1 3, 720 (Cal.
25 1 942).) Self-enforcing here means that the legislature need not take further action: the legal consequence of a "self-enforcing" constitutional provision is the automatic creation of a eommon-
26 law right (inverse condemnation) and a waiver of sovereign immunity. (!d. at 726; Holtz v. San Francisco Bay A rea Rapid Transit Dis!., 1 7 Cal. 3d 648, 652 (Cal. 1 976) ("The authority for
27 prosecution of an inverse condemnation proceeding derives from article I , section 1 9, of the Cal ifornia Constitution . . . . ").)
28
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76. Moreover, the Un ited States Supreme Court has held that the taking of a security
2 interest pledged to bondholders for a public purpose is only permissible so long as just
3 compensation is paid. ( U.S. Trust Co., 43 1 U .S . at 1 9 n. l 6 (noting that contract rights, including
4 Syncora's interest in security pledged to Port Authority bondholders, are "a form of property and
5 as such may be taken for a public purpose provided that just compensation is paid").)
6 77. Because the Redistribution Provisions take and appropriate the contractual rights of
7 Syncora, and those contractual rights are a form of property that cannot be taken by the
8 government without just compensation, Syncora is entitled to compensation for any deprivation of
9 that property i n terest in the past and, to the extent the deprivation remains without remedy, in the
1 0 future.
I I Causes of Action
1 2 FIRST CAUSE OF ACTION
1 3 Writ of Mandate
14 Code of Civil Procedure § 1085
1 5
16 78.
(Unconstitutional Impairment of an Obligation of Contract)
Syncora hereby incorporates by reference paragraphs I through 77 of this
I 7 Complaint as though ful ly set forth herein.
1 8 79. The rights of RDA bondholders and the bond insurers to the irrevocable pledge of
1 9 tax increment financing, pursuant to a lien supported by the RDA as principal, as security on RDA
20 debt are enforceable contractual rights. The Redistribution Provisions substantially impaired
2 1 Syncora's contractual rights. The impairment was neither necessary nor appropriate to achieve the
22 stated public purpose.
23 80. The impairment of contract rights caused by the Redistribution Provisions'
24 el imination of the iJTevocable pledge of tax increment financing to secure RDA debt violates
25 Article I, Section 9 of the Cal i fornia Constitution and Article 1 , Section I 0, Clause I of the U nited
26 States Constitution.
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8 1 . Syncora is beneficial ly interested i n the outcome of this l it igation as i t guarantees
2 RDA bonds secured by tax increment financing and is a direct party to the bondholder contracts
3 among RDAs, bondholders, and Syncora.
4 82. Syncora has no plain, speedy, and adequate remedy at law.
5 83. Respondents have a clear, present, and ministerial duty to comply with Article
6 XVI, Section 1 6 of the Cali fomia Constitution, the Community Redevelopment Law (see, e.g . ,
7 Health & Safety C. § 33670; id. § 33670.5), and the terms of the RDA debt indentures, pursuant to
8 the Contract Clauses of the United States and Cal ifornia Constitutions, without regard for the
9 Redistribution Provisions.
1 0 SECOND CAUSE OF ACTION
I I DECLARATORY RELIEF
1 2 Code of Civil Procedure § 1060
1 3 (Unconstitutional Impairment of an Obligation of Contract Under State Constitution)
1 4 84. Syncora hereby incorporates by reference paragraphs I through 83 o f this
1 5 Complaint as though fully set forth herein.
1 6 85. An actual controversy has arisen and now exists between Syncora and
1 7 Defendants/Respondents (and each of them), concerning their respective rights and duties.
1 8 Syncora contends that the Redistribution Provisions violate At1icle I , Section 9 of the California
1 9 Constitution. Respondents have complied with the Redistribution Provisions.
20 86. Syncora desires a judicial determination of its rights and a declaration of whether
2 1 the Redistribution Provisions violate Article I , Section 9 of the California Constitution and
22 whether Respondents must comply with Article XVI, Section 1 6 of the Cali fornia Constitution,
23 the Community Redevelopment Law (see, e.g., Health & Safety C. § 33670; id. § 33670.5), and
24 the terms of the RDA debts.
25 87. A judicial determination is necessary and proper at this time under the
26 ci rcumstances in order to determine whether the Redistribution Provisions violate Article I ,
27 Section 9 of the Cal i fornia Constitution and to prevent the improper diminution in the value of the
28 security pledged to the RDA debts.
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2
3
4
5
THIRD CAUSE OF ACTION
DECLARATORY RELIEF
Code of Civil Procedure § 1060
(Unconstitutional Impairment of an Obligation of Contract Under Federal Constitution)
88. Syncora hereby incorporates by reference paragraphs I through 87 of this
6 Complaint as though ful ly set forth herein.
7 89. An actual controversy has arisen and now exists between Syncora and
8 Defendants/Respondents (and each of them), concern ing their respective rights and duties.
9 S yncora contends that the Redistribution Provisions violate Article I, Section I 0, Clause 1 of the
1 0 U nited States Constitution. Respondents have complied with the Redistribution Provisions.
I I 90. Syncora desires a judicial determination of their rights and a declaration of whether
1 2 the Redistribution Provisions violate Article I , Section 1 0, Clause I of the United States
1 3 Constitution and whether Respondents must comply with Article XVI, Section 1 6 of the
1 4 .California Constitution, the Community Redevelopment Law (see, e.g., Health & Safety C. §
I 5 33670; id. § 33670.5), and the terms of the RDA debts.
1 6 9 1 . A judicial determination is necessary and proper at this time under the
17 circumstances in order to determine whether the Redistribution Provisions violate Article I ,
1 8 Section 1 0, Clause I of the United States Constitution and to prevent the i mproper diminution in
1 9 the value of the security pledged to the RDA debts.
20 FOURTH CAUSE OF ACTION
2 1
22
23
INJUNCTIVE RELIEF
Code of Civil Procedure § 526
(Unconstitutional Impairment of Obligations of Contract)
24 92. Syncora hereby incorporates by reference paragraphs 1 through 9 1 of this
25 Complaint as though fully set forth herein.
26 93. Syncora contends that the Redistribution Provisions impair its contracts in violation
27 of Article 1, Section 9 of the California Constitution and Article I, Section 1 0, Clause I of the
28 U nited States Constitution and submit that it is entitled to relief consisting, inter alia, of
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restrain i ng the commission of the complained of act, to wit, enforcement of the Redistribution
2 Provisions.
3 94. Syncora wi l l suffer irreparable injury unless the Court issues a permanent
4 injunction prohibiting the enforcement of Redistribution Provisions and directing Respondents to
5 cease enforcement of the Redistribution Provisions immediately because otherwise Respondents
6 wil l continue to implement the Redistribution Provisions notwithstanding that they violate Article
7 l, Section 9 of the California Constitution and Article I , Section 1 0, Clause I of the United States
8 Constitution.
9 95. If injunctive relief is not granted, the contractual rights of Syncora wil l continue to
I 0 be substantially impaired by the Redistribution Provisions because the Redistribution Provisions
I I change the contractually-assured uses of the pledged tax revenues.
1 2 96. Issuance of a permanent i njunction by the court is necessary to permit the
1 3 Oversight Board of successor agencies to utilize tax incremenl revenue for the only remaining
1 4 allowable purpose for those pledged funds: repayment of RDA debts.
1 5 97. Issuance of a permanent i njunction by the court is necessary to prevent further
1 6 impairment of those vested contractual rights conferred on RDA bondholders and their bond
1 7 insurers by Article XVI, Section 1 6 of the Cal ifornia Constitution, the Community Redevelopment
1 8 Law (see, e.g., Health & Safety C. § 33670: id. § 33670.5), and the terms of the RDA debts.
1 9 98. Issuance o f an injunction i s necessary to prevent a multiplicity of judicial
20 proceedi ngs pursuant to continued impairment that would result absent an injunction.
2 1 99. The replacement security ostensibly provided by the Redistribution Provisions
22 amounts to a conditional promise of partial coverage of debt service shortfalls in the future. Nor
23 does it provide any assurance that the full amount withheld u nder the Redistribution Provisions,
24 with i n terest, wil l be timely returned to the successor agencies in the amount required to pay
25 vested contractual benefits in connection with RDA debts.
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27
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2
3
SIXTH CAUSE OF ACTION
INVERSE CONDEMN A TTON
Article I , § 1 9 of the California Constitution
4 (Unconstitutional Taking of Private Property for Public Use Without .Just Compensation)
5 I 00. Syncora hereby incorporates by reference paragraphs I through 99 of this
6 Complaint as though fully set forth herein.
7 1 0 1 . Syncora has a mature and cognizable property interest i n its contractual right to the
8 security of the i rrevocably pledged tax increment revenues.
9 1 02. Through the Redistribution Provisions, Respondents appropriated Syncora's
I 0 property interest in its contractual rights.
I I 1 03 . Pursuant to the Redistribution Provisions, Respondents directly took Syncora's
1 2 private property interest in the security on bondholder debt and attempted to transform that
1 3 security. by the State's ipse dixit, into public property.
1 4 1 04. The Redistribution Provisions are not a regulatory provision because they do not, in
1 5 any meaningful way, regulate or promote the health, safety, morals or general welfare aside.
1 6 I 05 . To the extent the Redistribution Provisions did constitute a public i mprovement, it
1 7 is solely because they freed up public money for other government expenditures.
1 8 1 06. The deliberate design of the Redistribution Provisions prox imately caused the
1 9 injury to Syncora's property interest. The Redistribution Provisions reduced the credit quality of
20 the RDA bonds, thereby i ncreasing the likelihood that Syncora wil l have to pay claims under its
2 1 financial guarantee policies or debt service reserve policies and made it materially more difficult
22 for Syncora to pursue reimbursement through rights of subrogation. Furthermore, Syncora has
23 experienced an increased risk of loss as shown by a projected increase i n GAAP loss reserves
24 resulting from the Redistribution Provisions. Finally, the Redistribution Provisions severely
25 impaired Syncora's reasonable credit expectations when it underwrote RDA bonds. Syncora was
26 not compensated for its loss of contractual rights pursuant to the Redistribution Provisions.
27 1 07 . The Redistribution Provisions constituted a public taking without just
28 compensation in violation of Article I, Section I 9 of the California Constitution.
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I 08. If Syncora were not compensated through inverse condemnation, it would be
2 contributing more than its proper share to the public undertaking.
3 1 09. Article l, Section 1 9 of the California Constitution is self-enforcing, meaning that it
4 gives rise to a private right of action sounding i n inverse condemnation and it constitutes a waiver
5 of sovereign immunity.
6 SEVENTH CAUSE OF ACTION
7 INVERSE CONDEMNATION
8 Fifth Amendment or the United States Constitution
9 (Unconstitutional Taking or Private Property for Public Use Without Just Compensation)
I 0 1 1 0. Syncora hereby incorporates by reference paragraphs I through I 09 of this
I I Complaint as though fully set forth herein.
1 2 1 1 1 . Syncora has a mature and cognizable property interest i n its contractual right to the
1 3 security of the irrevocably pledged tax increment revenues.
1 4 1 1 2. Through the Redistribution Provisions, Respondents appropriated Syncora's
1 5 property interest i n its contractual rights.
1 6 1 1 3 . Pursuant to the Redistribution Provisions. Respondents directly took Syncora's
1 7 private property i nterest i n the security on bondholder debt and attempted to transform that
1 8 security, by the State 's ipse dixit, into public property.
1 9 1 14. The Redistribution Provisions are not a regulatory provision because they do not, i n
20 any meaningful way, regulate or promote the health, safety, morals or general welfare.
2 1 1 1 5. To the extent the Redistribution Provisions did constitute a public improvement, i t
22 is solely because they freed up public money for other government expenditures.
23 1 1 6. The deliberate design of the Redistribution Provisions proximately caused the
24 injury to Syncora's property i nterest. The Redistribution Provisions reduced the credit quality of
25 the RDA bonds, thereby increasing the l ikel ihood that Syncora wil l have to pay claims under its
26 financial guarantee policies or debt service reserve policies and made it materially more d i fficult
27 for Syncora to pursue reimbursement through rights of subrogation. Furthermore, Syncora has
28 experienced an i ncreased risk of loss as shown by a projected increase in GAAP loss reserves
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resulting from the Redistribution Provisions. Finally, the Redistribution Provisions severely
2 impaired Syncora's reasonable credit expectations when i t underwrote RDA bonds. Syncora was
3 not compensated for its loss of contractual rights pursuant to the Redistribution Provisions.
4 1 1 7 . The Redistribution Provisions constituted a public taking without just
5 compensation in violation of Amendment V of the United States Constitution.
6 1 1 8 . If Syncora were not compensated through inverse condemnation, i t would be
7 contributing more than its proper share to the public undertaking.
8 1 1 9. Amendment V of the United States Constitution is self-enforcing, meaning that i t
9 gives rise to a private right of action sounding in inverse condemnation and it constitutes a waiver
I 0 of sovereign immunity.
I I
1 2 I .
PRAYER FOR RELIEF
A peremptory writ of mandate, temporary restraining order, preliminary
1 3 injunction, and/or permanent injunction:
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2.
a. Enjoining Respondents from implementing, enforcing, and/or carrying out
the Redistribution Provisions;
b. Ordering Respondents to immediately return all money remitted by
successor agencies to local tax ing agencies pursuant to the Redistribution
Provision:
c. Ordering Respondents to hold al l future TIF revenue in the Redevelopment
Property Tax Trust Fund, or a s imi lar fund, for the exclusive benefi t of, and
distribution to, the bondholders, until such a time when the bondholders are
completely repaid; and
d. Ordering Respondents to pay damages pursuant to Cal. C. Civ. P. § 1 095.
A judicial declaration that:
a. The Redistribution Provisions violate Article !, Section 9 of the Cal i fornia
Constitution;
b. The Redistribution Provisions violate Article !, Section I 0, Clause I of the
United States Constitution;
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3.
4.
c. The Redistribution Provisions constitute a taking without just
compensation in violation of Article I, Section 1 9 of the California
Constitution; and
d. The Redistribution Provisions constitute a taking without just compensation
in violation of Amendment V of the United States Constitution.
The following injunctive relief:
a. An in junction barring Respondents from implementing the Redistribution
Provisions; and
b. An injunction ordering Respondents to immediately return all money
remitted by successor agencies to local taxing agencies pursuant to the
Redistribution Provision, with in terest as permitted and applicable.
The following damages:
a. From Respondents, such damages as the court may calculate pursuant to the
self-enforcing provisions of Article I, Section 1 9 of the California
Constitution, with interest as permitted and applicable;
b. From Respondents, such damages as the court may calculate pursuant to the
self enforcing provisions of Amendment V of the United States
Constitution, with interest as permitted and applicable; and
c. Such other damages as the court deems just and proper.
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2
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6
7
8
5. Additional Relief:
a. For reasonable attorneys' fees as allowed by law, including but not limited
to California Civil Code § 52. 1{h) and California Code of Civil Procedure
§§ 102 1 .5 & 1036;
b. For costs of suit as allowed by law: and
c. For such other and fun her relief as the Coun deems just and proper.
9 DATED: August I , 20 12
10
I I
1 2
1 3 Submitted by:
1 4 QUINN EMANUEL URQUHART & SULLIVAN, LLP 1 5
1 6
1 7 By Attorneys for Plaintiffs/Petitioners Syncora
1 8 Capital Assurance Inc. nnd Syncora
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Guarantee Inc.
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2 I, Frederick B. 1-lnat, declare:
VERIFICATION
3 I am Managing Director for Syncora Guarantee Inc. and Syncora Capital Assurance Inc.,
4 the Petitioners in this action. I have personal knowledge of the facts al leged in the foregoing
5 Petition and Complaint based on personal participation or on examination of original documents
6 and copies of original documents I believe to be true and correct, and the Petition and Complaint
7 contents are true o f my own knowledge.
8 I declare under penalty o f perjury under the laws of the state o f California that the
9 foregoing is true and correct.
1 0
II Executed August l, 20 1 2.
1 2
1 3
�--' > tl� 1 4
1 5 FREDERICK B. HNAT
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1 8
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0326 I .fi24 .11)/.1881\M 1 . 1
CERTIFICATE OF COMPLIANCE
2 Calirornia Rules or Court 8.204(c)(l)
3 Pursuant to California Rules of Court 8.204(c)(l), I hereby certify that the foregoing
4 Petition and Complaint was produced on a computer and contains I I ,855 words, including
5 footnotes, according to the word count of the computer program used to prepare the brief.
6 I declare under penalty of peijury under the laws of the state of California that the
7 foregoing is true and correct.
8 Executed on August 1 , 20 12
9
1 0
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Erica P. Taggart
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EXHIBIT A
�nc,y cr: MunldJual Deh1 I I IS;yn(llm Picll�y Numbers 'llrcss Eocptnsur.e I Association of Bay Areo Governments, CA ·Tax Allocation Bonds (Multiple
Colifomio l.ogi01i<' Airpnrt Aur�mil)' (rho "Arllhoricy JPA'"), the 1\11\hority moy '""i1e rc<levclopmont pov,•cu within tho lonitoty eompri•lnJ SCLA, ine:udinJ the PQwer to oollea ,., inorcrnerrr ro�cnuu oll<><'tl<ld lo SCU by rhe Member-. of VYEDA [a defined ht...,n) and tu in.....,CIII ""'"'" .. 1enr:nt<ld r,m oc:rivity ot Sct.A. !lorh rhc VVI!DA JPA ond Ill< 1\Urhoriry JPA prcvido lhor oll tu ii"IOtcm<:nr """""" ... .. reo ,., '""""" .. ond orl1rr r<veoua l<"<nl«l l'rom .-;iviry or .�CLA oholl be u•od oolcly for the P""""'"' of tho !"C"It. IIJ'CI"31ion. provisrM of "'rviou ond dc.,lnrrn.,.,t nf SCI .A. Thc AuthQ,;Iy io ompnwercd to rtod11• rhc ponion of ta• inettmerrl ,.......,u., oii<><Oiod tn SCLA by the �cm� o(VVEDA (a defined herein) ond all t"' incmncnl """"""" ir''"nlod by ootivirieo ot SCLA to ...,,.,.. !he iuu"""" of tu •l!ototiM tK>Mo or not .. , and oil ouoh t.or-<1 01 nore p101:eocd1 are "'�uircd to only be uo<ld ro1 rho redovolorment ond de•·elnpmen! ofSC,__._
6. Thc Ar.lhnrily hu ourhori•ed rhc ;..,roncc or it.rr Tu All..,..otinn RO"enrle Potiry Bond• (�ul).<m Colifomro \.ngiJiiCI Ailfl<ln Pf<ljc.:t) R.efln•;ling !>cri'" 1006 (rho '"llondo") in rho aggretote principal llli"IGIInt or S62.780,000 rnr I he purpo«> of: (i) "'�noncing cenoin nde•clopmont ootiviti01 bcnoiotong SCLA (rh< ""?mjmj, (ii) furtdin� 0 IU:oci'"O 1\Coount rorthe Bnndo. and (iii) funding <<>010 ori.,uoneo or tho Bon do.
7. 711• Aurhnriry hll dolmnilll:d to i,.. .. tire Bonrll pumnnr ro thio lndonrurc ond rn ""'"'"tho! Etondo in tho monnr:r pm•id..! hrm:in.
The Aulhnriry h ... dotcrminod that •ll thinso nec .. IO<}' lo ,.,,.e tho Bond•. ,..h:" •
_�lhonricotc:d by :he TNIItc &I'd isnod a io rhil lndcn:ruc pmviderl. tn be loa•l. opooill
l>bhgouono of 11-.o Aulh.,;.ry, ...,(OTO<ablc in oooood&nee -..irh rheir ror·m1. and to C<Jnstrllrl< rhio lod.,.,turo • valid ogrocment f,. rho u ... ond P'''"'" .. herein '" ronh <n or;oord.,ee wirh ill '""""'· ]\avo t>e<n done o;ld !1\trl, ond thc crcolion. e>ocoa;o., and doli""'l' ofthio lndcnlll<e 011d !he ereoticn. c•ooutiM ond luu•nce of rhe Bondo, orrbjoot ro rh& tcrm• he..,nf. ha•e ;,. oil ,.,,_,. been duly authori>.«l.
NOW ni£Rf\I'OR.e, THIS TNDEN11JRil WrT1-l!.SSf!TH.11••1 rn ""'" oo '"'""' tho p•)"'fl""t or the p�ncipof ul. and tile inlmot ond premium. if lilY. on. oil !'Iondo 11 lilY rimo i"'U<d a...-1 Outmoding undtt thio !ndcnnrrc. oocordin11 tO rhcrr rennr, ond W IO<Utc lhc f'<'IO,.,.,..,tc •not ....n .. rvan<O ofoll l).c C<J•enanr. llld condirion• tllorcin Slid herein 001 roM. a.">ll In �ocl"'c r!lo tcmto &r-<1 O<lrditiono •pon ond .. �jr:o:r to wbi<h the llonds 1n0 1<1 1\e iuued ard teoci•rd. an� in ooouid=rion �frho �remioeo urd of rho muruol """""""" hen:in «loloincd ond or tho purohaoo ond oce......,nce or the nond1 by o,..,.,.. �oreof. ond foo orher voN••I• conoidmtion, l�c rcccipt wh�rcof" ht:l"o�y oclmowl«<$«1. the Autho>rity d.,.. hore\<y wv....,t ond >!JIU ....;rh rho TNUeo, for tho ben<fir �r tire ""Poeli"" holders from limo 10 timc of the nonds,., rollo"'>:
·
AI!TICL� I DP.:Fl/"011"10��; F.QUAL SII.CURITV
lii!CTION 1.01. �- Unlcso rhc '""'"-'t other>.ioe �uira, 11w: '"""' dotfo� in lhJ� Seorion o�oll for all PIIIPOICS or this lndcrmrn: and of rt.o. Fl<mrio ond of •n� ""'�"''"· oprnrrm. 1<!'1"'1"1. �001! nr ollie• Mr:um""l hcnin 0"1 l�<Tein mention.<! h•�• L ... moan in�• httein •proifiorl.
TillS P.<.'DEN'TtlllE (!ho "lndCII<III'I'") ;, mftd.o 1111d entered inrn u nf hl!lO 1. 200!1. by .,n hctw.,.,r lho SOVTHP.R..'< CALIFOR..'ilA I.OG!STICS AIRrORT Al.o"TIIORTTV, • joinr pcW«o ourhority duly orpni>O<I ond cxi.,ina llr<lcr ..,d by •irrrrc �flhe l•wo of tho S1a10 nfC.\ifnmia (rl1c "'Aullrnrity"). and T1ffi BANK OF NE'*' YORK TRUST COMJ'ANY. !'I.A. .• o norion•l b>riL.inB L"nclolioo duly nr11rliud and ''"ling under rho t ..... , of:ho U,ited Sloroa nf 1\morico nnd our]"ltlrired rn l«<!'t ond eocc11:e trurru of !he cl>lrrooctor �croin •e1 fl"ltth wirfl o erl!J>O�Ic tnl!t offrcc locntcd in l.n• Anaelr.�. Catifom.ia. !ll tnlJtcc (:I-.e 'Tnlfll!e""):
R.I!CrT.o.LS:
71re Audloriry ;., o joinl ,.......,... '"""'rily. o ru�lic ll<>rly. corpo,..re oM rr>litie. duly <"IU!o<l. cotoblishcd 011d ourhorir«l ro l"-"111:1 b"Oin ... Md e>rcroisc ito powm. oil r11>rlcr ond pt��>UAnt 1<1 the Joint P.x.,.i .. of Powon Aot. indu�ing Artidco I llwuglo � nf Cll'"f't"" l. DivisiM �. Title I (conrmerc.lnR ,..jlJr Sor:tron 6SOO) of the Co•cmmenl Code of tile Stare of C.lifomOa ("'f....-al to ...,in .., rl1o "JPA L.ow"l Tile flO""'" nt rho Authoriry inr:ludc '.!>e pr11•er 10 ;...,c bond• llld incurodlerir-<lchlod;cOI for ony ofiiJ r:.<lrJ'<Ir&te �IIIJlOO"
2. 71rc Vi<�nr Vol\q ];can om!� �olo:rrnent A�rhority I'"VVEDA""). t joint P""'""" outholi<y dulyereorod �llnU&tll lb llro Jl'A L.o ... io ou<l"lll�<cd by Socrion 13•91.40rlfrhe rlcaltb ll. Srlft�y Code of rho StOic of C.Hromio to .,olu,jvcty o:<creiK the power-. or • ralc•olnjrme"l ogency r"'""""' Ill t�• Cammuniry Rode\'Cir"IP"''"' L.owofr�e Stale nrC.tifnmia (he�n1 Put I of Drvroi<>n 2• or rh& Heohh ond Sof<1y Code of c'rc Sill< of Collfomi&. u .,anded, ond "'ferro:! tG hr:rcin ullr• "l..aw"), in frnhenrnce of the ,.jovclr>pmcnr oro pn>jeol arco in tho Cout�ry nf SOil Bemlll"llino (rhe ''Countyj 11vn includCI �"' farmer Gr:nrgc Air fr>lc.. Sue. """" rcfomod !o u ��e So""""'Colifomio l.noiniCI Ai'i'On (""SCU'").
J. VVEDA 1\u odoptcd !J1<] oppn:>Yed rJ,e 199] Victor V•llq Rede•elopmonr NAn, •• uncnd<d (rho "Redevelopment l'lon'l, fm tho! rcdc...,loprn<:nt pmje<� oJU """""' ond d<:Jigna�cd u lho "!99l Viclor VoiiCJ Rcd..,elo�"""'' Pmjc.:t _..,.... (the ""VVEDA Pmjoct A"'o""), 1111<1 all requlttmeniJ or low for. ond pttoodent to. dl• o�<•prion ond o�m••l ol rOo Redovo!�pmcnl �I on ka•e boer> duly r;ompli«< wilh Tho VVF.DA r"'joot A,... includ .. SCLA ond land i171111ediotcly >Ojoconr to SCLA or in pm•imity rhcmo, iftelrlding det<:rionted pmp!r"liotl. itllldf.l]Unle in�crure ard bliahre:l. c.onditiono that �uire lire I""''"CI"1 ofo """""el<rp-n,.n! >grncy l�reool�c
• In ocr:o..Oillll't ,..jiJI tile t"""' or 1ho Founh Ar,en<lod Joint r:.terci ... or Po .. ..,. Ai"'cmcnr Cre>ting Vi<�or Volley �oonnmic O.v�lnpmenr Autho�l)' (tho ·vvr:DA lPAj. VVEDA hu del<&&!..! ilJ clr.::iJion makin; ourhoriry with "''pc<l to SCLA ro lire Aurhoril)', ..,hioh """" hu oil doc.ision mo\ing IUlhrrrirypun"""' to rho L.o"' wirh ""P"'t on lard ""'· Anonee. on�tror:rual ond �udaotory ;,,.,. eoor:crninB SCLA. indudinK rl1c ou:IWiril� tn inuo !Winrl.o Md 110reo oecrrrtd by, .. inortr:>enr '"""'"" .. 10 fiflllrce n:de•elormeor octivirie� ol SCI.A.
5. ln otldrtion In tho wrhorirydelcpred 10 it hy VVEDA.. :.he Autl"lllrily olto rclllno Ill ofilo inhe,.nt P"'..,_ a o join! P"'"'"m amhcril)' polll>uanl to tho !l'A l..aw. Pur-.uan\ lo tho Sooond A:rron�cd ond Rumed Joinr EH!Cill of Powera Al:fecrn�nt \,roaring Sn"thcrn
SECTION 4.03. I imil gn Stmjg• Mr Tho Authority r:o•cnanlll with tl:e O....on of oil of llre Bcndo n! any time O!J!standing llral ir will not 111\10 or inow lilY dchl or ohlilotinn po.yo.b!c &om 1M Plr:<lged To.o Ro>tnllCI L"d ,..,un:>:) by • lion and eh0111" "P"" tho Plcrtgcd Tu Rcvr:nu.a ocnior to the lic:t lll� c:l"llrBc ar:ocurina the O!JI<>ondinn Bo!"O:Ia rheretofa"' ioourd.
SECTlO� 4.04. �gtJm lrmjl qn In��- Tho Authn�ly co•or,niO with the Qwn.,, of •II of the Bond:> •I ""Y time Oll\ltondin8 11111 il will not cnl<l into MY obliptiM ot mole ony Ot�i"'" po.yoblo from ••••• ollocated 10 lire Al,llhonry uod..- tho [...o., lllo poymcnl& ,.;,h tt<t>ot"l 10 ..-hioh. toaorhor with pojmlt�ll tho:r<1oforc mode nr 10 bc mo�e wi\11 ""�"' to o1!>er obligorion• (inclu�ing. bt:T not hm,\C<l lo th� Bnndo) prc•in111ly entered inln by lho �ul/>nrity. would C'Oeo:l l�c thtrr-dTooti•e limit r>n tl<o omnunl of tu .. ... �ic� con b< ollo<oled to ll"oe .lulhoriry pur<uonl 10 Scc1i�n JJ33.1.l(o)(IJ(A) nf tho L.ow ond rt.o R<ldOYolclpment PIOll.
ART1Cl.F. v PL!!:DGF.n TA){ RF.VF.�UF.S; CJI.F .... TION OF VU:"lnS
SllCTIO"' 5.01. Mrslrn pf P!Mrp! In 8rY""""· All l).o l'l«l&ed T., ROll"""" llld oil money in lire Sl""'ill Fut�d (hereinafter dofi�od) •rod in thc lllndo or oocorrnr. ..., IJ!<ci�«l o.�� rmvidod for in lhio lll(]o:nturc, "'h<t�cr hold by tho Aullroriry or tho TnJs!ee. vc N::rt:r<y ,,..�<><'f�ly pl«lgcd tn '"" pnn<�uo! r•l"''""' or rhe '"'.,.... �n ond principal M ""� .WemptiO<! prcmillr."l.l. il any. on the llandl, Uld tho PledKfd Tu Rc•enu01 O!ld '"'" orhcr mOflcy oholl not bo ul<:ll for ony n\ller purpo,.. ...ttilo ony of the Bood• remain O!Jllt..,∋ orrbjor:t 10 lire l'!'lvioronl orl).io Indenture ""'"ining IPI'Iicllinn lh=of for rhc p��,..,.., &I'd on tho rtrtno ond tondrrion< ocr roftlo horcin. Subjoct 1n Scotion 9.02. thio rledgo on oil onn•tillJie o firot lion on rho Plr:<l�ed To.o R"'enu .. ond OU<;h nlt.er "''"�Y for rhc poyrncnt of tloo Uonrlo in KCon!onoe will< t�e term! !hereof. Th< Aulhority �rQonU and Wlmlllll rho� orhor thon the To>Oble Nnn·l!nuoina Bonds. 11><. Forwotd Ta.,hlo Nnn•Hnusin1 rt<ondo on� t"'= s,,;._. 21"J:lJ Oo.-.l._ it h., not hettloforc mode • pledgo or. pt«l o lion on nr oecurity lntcrm rn. "' modo on '"i.!l""m<nt nr 11lo nf the Plodgm Tu Rc�..,U<;O llrll rvo�s on • pority '"ith nr p�nr tn lhe rleclo• sror.r..t hetCur-<icr thO! .,.;II ho out.:andin3 uprm """'"" nflhc !Iondo.
SP.CTIO/'Il.Q2. Saera)l ftmd· Bwin! •n4 QO!!l!il gr ri��Therc ;, hereby continued 1 1f'<'lr.l fund to he brown u ahc "Southcm Colifnmi• LnEiJti'-' A1rp011 ArriMrity T&>. Alloo:�rion Re•rnuo Poriry Bonrlo �clirnrling Soriea 2006 Spe<iol Fuod" (herein, the "Spociol Fut�d"). ,.fUch ohall be held by lire Tnr�teo. The Aurhori:y •h•ll CIUOC rl1e trvroftr croll P\r:<l�;«l Tu R .... cnuea ttl rho TNII .. lor rlr:pooir ln rhc Speci•l fund """" receipt by rJ,o Aurhnrity th....,r. There •�•II nol be dcpo111ed wirh tho TnJ"« any t .. .,. eli£ihle for olloation 10 tho Aulhority for dO;K>oit in the S!'«iol Fund """""'' to 111< u ... ln on omnU�>I in cxco::" of th"' ""'"""I thai. toactl!or wrth o:l monoy rhrn "" dep<>oil •virh rJ,o TNO!oo in the Speciol Fund 011d (�.e ac=un" lhottirr. i1 sul!ioir:rrl 10 diochorgc oil Ool.<lonriing Htlnrl.o a pmvi� in Soction iO.oJ.
Tho Aulhority eo>YtnlliiJ llld ogo:,. that oil N..!a•d To• R"""""01 d""'sitcd hy rho Authority ""'h rho Tr"UBioc in !he SpccjaJ I'und Will be IUI)unrorl for thmuaJo ond held in trust in tho Spr:oiol Fwr�, And the Arnhority shall ha•·• no bcnofrclaJ righ; nr inr� in an� of 111<h
"
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advcT'II<Iy oiT<d t�c cocluoion �UmJtnt to ,.,.lion 103 ofl.hc Cn<lo ofinl....,l on tile Bondi finm •ho g1011 il'<nmc ofo.lle OWI!ero lhcr..,ffor f .... cni income II• purpooo.o.
(J) In any cue whc� ll1c RcKrv<: Acrount io il.lnded with a comhinotion or Ct<h and 1 Quatir:ed Rocrve Accoum Cr..clil lnllnomont, the TNmc o:ball drpl<t& oil <Hh hoW.e<o hcf"'c �n11•ing on lllc Quali�ed R""""'" Account Cn:<lil lnr.rurncr>t. Wi•.h "'l'nl 10 1 d>-ow on the Qoolified Rcoc"'c A<'l:<lur.t Credit Tn•tntmcn� ony rvoii1Mc monc)'l M dOf'O•it in the S�<ci•l F\11'<1 in M lll'lf!Uot equo\"' lhc R"'""'" A�CI'unt Dcfiricnt)' (rluo nil iniC!C.OI '"hich would hove o<.cnJco! on the amooml of wch Rcoc"'c .O.ccnunt Dcfioi..,cy "'hilc <111 dcpn•it in the R .. •"""' Accaunt) ohall b< u•od r.rot to r<inlt•tc ony Quolifled Rc:1.,..t }Iecount Credit ln•trumoott. ond oOG<>nd. 10 roploni<lt lhc cooh in tho R"'""'" Account In the event the Quoli�cd Ra� Accaunl Credit instrument will lo;lle or ••pire, the Tru"ee shall dnw upcm ouch Qllalifocd Rescl'\le Aa:aunt Credit lo•!rumcnt prior to i<> lopoingoo o.piring. ""d ohc TN."'" oh•ll drow U;>')n O.ol !">'tin• nfo�y ovoilnhlc monoyo on dcpo1it in the Spa:iol Fund i11 on &mouno oqu1l !he R .. .,.. AC<XJunl Dcficoency (phu oil in <ere.<! which would have accrued oo <he omowol oflhe Rc:rc,.,..o Account Dcficia.cy while on dopooll in l.llc R ... M! Ae<ount) and dq"<lsil ouch """'""' into the Rcsel"'e A«<lur>l unlit the ou:reptc amouru on dopo•it t!�<rein io cquol "' lho Reoorve ActO\J�I Rcquiremen� or llle Trunco lha\1 lUboti:llle ouch Q.olincd Reocrvo Auounl Credit !n<ln!mC<ll witb o Qualified RCICf'le Ace<>UI11 Credit !n!lnu-nent thol "lioRa ll\C n:quin:menlo o(l.llio SII�<a:lion {b)
(c) I'Oneip•l A�<mml. L, lho Bond You crdi:og December I, �006 ..-.! Cllch Bood Ye01 <hen:ollc:r whole ll'le Bonds are O•ouondifll, ll'le Tru'lloe ohll '"' uide fiom tho Spcci•l Pwwl ond ""' \on thJ.n �...., !') day> prior 10 the IJlplicoble 1nt�t Paymtmt Dlledt))OSit in tho l'rincipnl Mcount on amount of money thai, toscthcr with O.e pmecorl< nf "'1\onding nblis-"ion• or otl\or monr)� olcpr>.<ilrd �y tho Auohority utioh lllc Tm01ee for ouch pu'J'<'Oc, ,.;IJ he JUffooirnl In �·r I he princi�ol o(ohc !Iondo u lhe ••me b<ct�mco �uc. A\\ monc)"' dq>ooitcd in thcl"rin<ipol Account •hall b< '''"" and ,.irhd""'" b� the Truot� «>le\y fm the P"'l"'" of �·rins oho princir"'l <'fthc !Iondo 11 1.'>c1r mornnly.
(d) S.Elll..u. AO<r m:U:inB ohe dCj>O!iU rOQui..,... by J>ll"'Jil"OPh• (o) illrou� (c) &i>o•< in ony Bond Yeor, lhc TN<tcc ohoil <ronofc, any o'"ou:ot remaining on dCI>Oiil "' lh� �f""Ciol Fund to lhe llulh0<11y upon lhc Wrincn Roqu"'t of lite Au•bonty 10 he ••rei lor ony lowM JIU.'J)Oie ofohe AUIIteorily.
SECTION 5.07, Inyp)mm• gf Msme.,.. in fuM• Md Auol!nl'· t.:pen O.e Wnmn ll.equ<>! �fO.e Au!horioy re.ooived by the Tnate.o ol leW ,..... {2) Duo inc" ll•)"' prior 1o I he dole of ouch '""'"tmcn� moocy> in lho Sf*iol Fulld, tile ln!crCII Acoount, illc Principal Ac<xn1111, lhe r»pen!C Fund (n11<1 ony occount therein) nr O.e Rac"'e Ac<:ount oholl ho inv .. let! by <he Truo\e< in Authori�ed !r.vcol!n"""- In <he •borneo of1uch in.Wcti<HUI O.c TI'IUl<e oholl in,...�t in ille Autl!ori>.<<l ln•cstmcot> described in oulrpongnph (P) of rhc dcOnillon th=nf. The oblitpoim,. in "'hich oMne)"' in O.e Spo::iol Fwul, lhc lnl"""t A""""nl or O.c Principal Accounl ore JO invCII<d •�•II mlll'l:re prior to (!,o dote nn whi<h 1110h mono yo ore to\imo�od In bo require� to �e p•id 11111 hercomdor. "!he ohli3o!ion1 in which mone'ftl in lito �e10r'Yo Acrounl '" •o i""""'O<! •hoi\ M !ho .. "' deoctihod in oubpmjp1>ph (A), (1'1) a:>d (D) of lite defiruo"" of Aulhnrizorl lnvcotmo:n::, herein and •hall monon: nn more C�on Rvc (5) )'Ura from the dele of p�h&le by lite TNit<e 01 on !he final moll&rity date of the Bon<lo, w�he•or dOle i• ovli.,:, or
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.. ··-·-- HI ,,_.,._._ -
(b) Por ony Suppl<mcn141 !ndentun: e<eeOicd fO< ''"''""' roll>er than (I) • reflln<�ing In ohio in dcht "<l"iOC •o�inB•· n• {1) tho ;., .. ,non nf r...nty !)clot, ohc <""'""' nf oho IN""'' muol be ob,.ino! by I he Agoncyprinr In O.e i .. uancc of any ad�itinn.o1 """"" l>l<llor the C>eculion of ony ooch Supplcmrnl•1 lnd<nturc,
(c) Tho! lnouror oh•ll be deemed to be tht '"'' Holder of tlte Don� I far tlte p11r�ooo of ouroiJing ony Wlting right "' pri•ii•G• or givina "'Y """1<11t or dirttlion "' tll<ing "·Y nO.cr oction th., the llnld.,.. nftho 1\roro:\o an: enhl�ed In tal.e P"'""nl In A�itle ',IJTJ ond Articlo L\ihmof.
(d) Q(!,cr llun in <onn<:<lion with mlncbtnry •inki"ii fUnd rcdcmptiono, ony tctolmt>en of prindpol po)"''!rn:o, h>cluding ony Ofltionol ttdomp!ion. mu<t be oubj""' It> lho prior .. ..;�., co,.ent of tho lnouror
(e) The TNstec "'"'' be a oorMtcn:i�l t>Mk wiO. Lnlll II"'"''' o r o nllion•l honki"' .......:iotion.
{I} The Iruurer io o ohird·pa�y bencfitiory 10 lhi< lndO!'.turo, "'it� lho po�>er tn cnforu ony rigll� remedy or cloim canfe,..<l, �vcn or )ltlll1ial �c.-eundcr.
{c) If l�e In""'"' mokoo 1111y poym<nt of �rinoipol ondfrn io<crcol due n� the Bondi, lho Dando iholl rcmoin Qu,r.ondina foroll pwpoooo, and o�ol\ ro>t I><> doomed dofouc.l or nih......;,. totior.cd, orpoid byoho Ammrity, onO lito o11il"m-cnl ond plcdK• ofl.llc Tu Re .. nuco ond oil CO�<rlMII, "!ff'COmctl!cl and other obliJIIIiU!II Q( t�o Authoril� loth� l!o\derl h<fCundcr tholl conltnuo to nill ond .�.all n:n m the bcnoftl of lh� lnotucr, ond <he '"'"'"' ohoJI he oubroi"<>:l oo the n!lhll of ouch Hold ott.
SJI.cn0;-.1\ \.0l. �- lf,an l.lle thitd D"'in ... Ooy pri<n lo c'oc •doted O<hedulcd inl<rcll payment dolo �· p-incil'"l f"'fmenl dote (''Po,.-ncnl llno"), •herr ;, nm on depooio with oho TN•ICe lltld<J lho ln�CIIIIlll:, onor malcin; oil IBIIIfen or<! dqoeliU R>quiml under the bdCI'.turo, mnncyo wffocicnl In poy the priot:i,..l nf, 011d inlcrcot on, the Bond!r duo en •nch ?&)'lllent Dote, ohe Tn11t<e oholl ti'< notice 1<1 tho ln•urer ond to i" dC1i11not<d "''"t f>f•nyl (!he "ln<urer'o Fi�a�l A'<nl"l, loy IOic�no or l<lo<opy, nf tho ""'"'"" of <Uch defid<n<)' by 10 00 '·"'-· N- Yor� Ciry lit110, on ouch a"''""" D•Y- If, �n <ho o..,;,.,. flay pricrr "" the ro!oled ?1yment Daoe, thoro io oot en dq>o<it with the Tnttte<t m"'"')'l Jllmcient to p.ty O.e pri..,ipol of, and itru:>c1\ nn, tho Doodo duo on o\ICh Porm..,t Dole, the Truotce 1holl rr.oke o <loim u�der tho lnluntnoc Polioy and gi•e Mnce '" lho Insurer ond lhe '"'""'''' Fioeol Aient (if ony) by telepilonc of tho nmounr nf OilY dc�•ci•"''Y in lho omonnt •�Ubblo lo poy principal .,d inlm:ol, and tile o!l<><otion of ouch deAcicn<y bnwecn tho amounl .-..qu;..,:� on P"Y iniO!UI on !he [Iondo Uld !he •mount roqul rod 10 pay �ri..,ip41 of lho llt>ndo, C<'ttlirn>ed in '"-riti1111 1n Ito: rclotod ln•met ond tho lnour<r'o FI.OCol "'gmt hy 10;00 o.m., New Yntt City time, on ouch Puoine" D•y. by dcii.,nn; '�' Notico nf�nn�•ym<nl ontl Cor<i�co10.
Foo t�c fFIUl>JOe• of <he f"<ccdini parogroph. "Nooic•" mOon! oclephnni� m O.IO<Opiod nolieo.. ••�··�u .. nly e<>nfonnru in u oignal um:tng. or wrin"' noli«: by n:siltcrtd or oa1ifiorl m>il, from I�< Tn:Jt"' In the In'"""'· ""'ich oolioc •f-•11 'fiCCify (o) lhe nome of the ontity molina the doim, (b) the policy number, (cl lhe claimed omount and {d) lite dole ouch
by chrc"" or "'"" tranofon "rar.llc lrnon tho chock or wire tranofer u!od t� pay debt ...viro w•:h othor funr!< '""'lnb!o tn moke•urh p.•yn10nto.
Fundo held in tho _Policy Poymcnto JI<O:ouno oholl not bo invootod by tho Tru•l"" •nd moy nnl he •pplu:d 10 oonsfy ony ..,.to, «pon.<e< nt h•bih�,.,. of tho TN<I<o
ll�y fund.• rcrnoinins in t),� Policy l'oymonlo Acct>�.�nt follo..-l"'l o l'oym<nl Dolo oholl prcmpllybo remtltcd to tho Murucopal tlrmd lnouru.
S«tion 1.12. Ri�kto af lh< M••nirip•l Dnnd lnontfr.
The loll"wing prnvioiM• ohall •pply lor "' l"nf. •• •ny Scrioo A Hondo romnin Out<londong or tho Ag.,cyow .. omrunt.< tn tho Municipo.l llond ln.•uro�
(ol Ul""' the"""'""""' ol on E...,nl nf Od•ull under thi• I Mont""'" tno Mu.UCI'"I Bond lll!lutet •holl be doom«! the o.,..,.., ol o!l Soria A Bno.,]o, on<l ohol] hnYe nil the tighlll •• lh< ?wn"' nf oho S•""' 1\ llon•l•. •• "" opcoiflo·rl in Atloclo 3 h•t«>f. pt�Yidod thai 1},, t,4tonoopol llond lnO<o .. , •hoi] Ml be on d�f•ull u�d<t th� Muniripal llond l ...... o.nnce PC\Iicy
(b\ n,.. Munici�ol !lorul !"'""'' iu tloic�·r><ty t:.o.,.r,.,;.ry ""'"''"'"'" ..,,� •hoi\ r.., •• the f"'W<t ln<"nl"'«" •ny n,c;hl. "modym d.11m •onfon.�. �ivon nt �r-•ntcd u�d•' ih" ln<lent.,,.,
in ••��f tMo���",;'��.:.f�"':.;::.',�i�Y��S::�F�:';t,,�� ::,
n: 6:".:: Yoor purou,rnt In the prco!ding pangropho nl thio Socbnn 1.02 ond any l'•nty Debt lnolnlm<�f •�•II be r<l"oed /rom tho pled�c n�d loon Mt=ndoc ''" the se<:urity �I !Me llo�d.•. •h•ll be clepi).Oited in !Me un..,ol•iOiod ·'"'"""" ol ih< Ar,c�<y •nd moy be •pplioo:l �y tnc Agtn<y frn ""Y Towful putp<�se �f tJ,, ll.cd.-.olnpmt'lll !_.ow. Prior I<> th. r•ymonl o� lull cfth� pnn.,pal of ond in"'''" en 1hc Bcn<l•. ond tho poymono in lull nf oil nlkrnmoont. p.>yoblc heo=ndor •n<l u�d•r onv l"'arity O.bi !n.,rumonl•. lho 1\g� oh.>ll nOI h••• •ny �•nef,.,nl nght or intrr .. l in t�e <MIIOfO on <lop<>" I in iht Spc-.:iol Fund. o>topt oo moy be l""vid«< in thiolndcntu,.,.
S«tion &.OJ. Dtbl Suvleo F11nd; T••nor .. of 1\mouo" to Tou,.••· Thoro ;, "'""-�'Y ,...t.>hli>hod ,, 'P'""I �,.t f11nd lnb< t.nnwn " tho "Debt So <Vi"' l'un�··. whj,M •h.> II be ho-ld by I�Tno<t"" h<"f•undtt \n �"'"· Money• on tho Sr;·nnl Fund 1holl b<: tranol,.,cd l>y ihP A�Pn<y In
����u�;;.,:��ti����';:;",t ��::o,�� '.�:�·���:::!,;�":i��� �����\��.��:�� ��� o<<nun�o ond oub-o<C('unto '"' h<l"<'hy ost•bli1hcd with the Tn�oiNt. on the fnlt,..,..;nA ntdcr <Of pno�ty
(il withdrow lrnm tM� Rco.lc•dopmcno Pr<>:cct No. I Acr<>11nl •nd �;,�;��· �:.'�'s�:",;���-�:' :::.:·�� o�-��� !����·:�:"�!d�:�����";,,Troi� No. 1 Sho«: nf am.cunto n� dopn•il in oho Into,..., 1\etounl. io �quol to '"" Rode�elnpmcnt l'r<lt<"Ol No. I �hn,. ol t\.o amount 11f i�tcr .. t """,;ng du� aNI p•yo�l" �n ihe Du<0Und1ng Serico 1\ ll<>ndo�n ou,h � .... ond
(ii) "'.'thdrow from I�• Rode><lnpmonl PtotP<I No 2 A<<DLont ond ''''�•Iorio theln,.l� for dc""po>JI o� ih< lntc,.ot 1\<,.,unt. lhn Ro-do•<:lfl'm�nl f'"''ect No. 2 S�'" ol 1he am���� when nddcd In the Red•Y<Inpmcn1 r.�jcr1 No. 1 Shn,. nf ""'"o�,. on depnoio in oh" 1�""'""' 1\C<ou"'· io e�unl ta '"" Rodevelnpn><nt r...,.,..., No. 2 5�.,. ol tho ornnunt cf onto""'' loc<n•mt>A duo on<l p>yobl< nn the 0�\>london�: S.:ri•• II 6nnd.• nn <ttch dOlo •
(il woth� .. w from lho Rcdevdopmenl l'mj<:<"l Nn. I 1\crn�nl md "·'�·<fer to thr TN•Ico, lor dOp<><il in oh• l'"ric.rip•l 1\«nnnt. the Red.,.dnpmc"! rr"!"'' No. I Shore ol lho amount whi<h. when ndJed "' ihc R�M•dnpment l'rq<:<"l No. 1 ��"'< nl ohe on>n11nl 1hon nn dopn��il In tt.-> l'ri"<"ip·•l A«nunl • ..;11 � •Gual to th" Rede...topmont r,qoct Nn. I SMote "I the omn""' ol prinripol
D•los") until poymrnt <>f '"'h Pnn<op .. r Amnunl In f_ull. Th" rnnop•l llmounl h�r.of_., poy�Oio up�n pre .. niO�<>n \,orMf OI_IM pnncipol ""tp"'"'' <>llioe nl Union A on� of Coltlnmoo, N.A-. oo tru•loc (the "T1"1Jolcr"l, on \.oo_ Aroj:olc.<. Coltfnrnt•. nr " •u<h nthor pl.,<� •-• " do.,gn•ted hy thoT"'-''"'- IMeroot hrn:-c" '' �·>•blc by chcr� M droit('! tJ,, Tru""" mo11lod by �;� '�:�;�":!,ic;:,e,'�!�;o:; r:!;�\�:::;.�.·���of;'r:i-'"'�!.'�r�h:=;:� R=rrl Dale; prcvidod t�atot ;!:, wrill<n roque&<�� lhr """"''�r ot l•o•l SLOOO.OOO •r:t-"'"11"' prinoipal omnunt of Don do which written n:�oeol is on fofe_w1th tl1e Trust� •• of ony Httord IJ.re. 1nt�rc>t �n ourh B�n�; ohall bo po1d nn the '�"""rl'"! lntore." P.,ym�ol Dote �y """' trM15for In ""h .,;ttount"" •lloll be opecifie<l in"'"� wtitton ""'l"<ot.
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Thio Bm�d i• �nc of o duly outhmi .. d ''"""of bon�• of tl1• Agon.;y d.,.�gnoted u tho
;.���� �h;'�s':.�1,!;'�f'.�':!'s�;;:.�.5;"n<,;l�� ;;:,-.,:�;"�fb�;�h���·�.os:'�.�j���;'j Eig�ty•Fovc Tlluuoond Dullor• ($11,7115,00JI. oil of f.,_ ter>Ot and dote (0\n-pt lor "'"h vo,..OIIon, il any. "' mov bo ��uirod to dO!i�noto ooryin;; numb<,., l!lllunto..,, �· int<""l rat••) on� oil _i .. ucrl pu,.u'anl to !il the prnvi"""' of Port 1 cf Oivioinn 24 nf the Colifomlo Heohh onrl Sofety Code (tJ,e "Red•�•lop.,ont l.•_w·� and (oil on lnd<nture of Tru<L doted •• of Moy I. 2005. by and omong the City of Hnpcno. tl1o As"""! ond the T."''"'" (Ike "Indenture")_ The Ag<n<y ;1 �ulhori•od to; .. ,, the ll<lndo P"'""'"' to o eosoluhnn of ti\P Ag""'1' odapted m A�•il 10, 2r.-l.!l.
Mly •u� �:�h':\0:! j�; ��;:'�.:.d��;����t:;; ���e
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wko<i1 ""on �lo �I the afficr {)f tllr Truotoo) •�d oil ourpl""'c�i• th•rrt<> and to tJ,o
Rtd .. ei"Pm'""t !.ow ond tl1e R�lundin� Low f<>r o de..,.;ptan a tJ,e """" <>n whieh tho IIMolo ,,,. ; .. ,o:<l. tJ,o pmvi•mn.< wrtJ, .. gard !<> tllo n�tu"' ond o•tont<>f the H"''""& T" n...,�.._ " thot torm ,, 11ofin.,j in the fndon!lo� ond th,• n&hlo< l....._.,ndor of tlle ""TO"" af the Bond• and t�o nght.o. d01ttt1< ond omm01notico of l�o Tru•l"" nnd tkc nght.o 1nd n�li�o�ml-< cl tr... A�on<y th""'"ndor. tn •II of tho pmv;.,p,. nf wltkh tfw R<"!ll>ltr.-.1 Ow!1or of tkio (\nnd, b1 oootptonco Moren(. ••••mt.o Md agr..s
mndcro��.!:,�'�����fn:;�:�����=fi���"�.'�r�_;;,C: R:,�;�i��=.,�·pi,��o.�� ":'� H"-<perio Rodovelopmont l'rnjc<t :-J�. 2 ftho "Rodo .. lnpmenl Pmjorto") kn� t� rcr•y • p<>ttoon n( odvMo:<O from tho City ro!oling to I<>W-on� "'"''""'..,'""'me llnusin,ll •chvttoe.._
Thi• Bond and \llo int<rool herr<m ond �II othor p•nty nblig•tioou; and the into""'t tJ,or...,. (to tho <•t=loe! forth in th• lrd""tu'") '"' p.ryoblo h--om, ond_ are """"�d by • � ond li,on the Ht>u<i"'l Ta> Rnmu"" (u dofiord on the fnd""""") donv«l by the />.�""""1 from Red•velnpment Pl"<']oo\0.
Ao nnd tn the o>tont ..,t forth in tho hlentur<, oil ol the Hnu�n� T.u �""""""" ,,..., '"'"'""'hly pl<"<lgod in ":o:ntd•n« ...;rio tho :crmo hon."Oiond the P""''"inno of tho lnd•nNfO ond tho R"dovch;opmont l.o'IO,IO the poymon: of tko
���;'ii",';l;���;·.�;;��;�:.����:·n:."!�"���7.,· ;;�� ;:;�e;h���·�:tt:� h�d r�:���;· .. ��r�;'.�; Nnd• or pmp•rtin othor thon tho Hcu.01n� To• Ro"""" .. ond omnunto held in """'" fund• •nd •=unu ... ndor tho lnd<n!u"'.
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lnolon!ute, bul M •u<h mo<!ifoootion nr omtndmc:nl oholl permit a th•n�• in. Ill< tcrmo ol rod•mptinn or moh!fity of I"' p�ncip.rl of any OOit.<tondinr, !l<tnd Ot nf ony onmllm�l ol