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INDIO WATER

AUTHORITY
AGENDA
September 18, 2006
at 5:30 p.m.
150 Civic Center Mall
Indio, California
Call to Order and ROLL CALL: President Gene Gilbert
Vice President Ben Godfrey
Commissioner Jerry Barba
Commissioner Bertha Bastidas
Commissioner Melanie Fesmire
Commissioner Richard Friestad
Commissioner Steve Sanchez
Commissioner Lupe Ramos Watson
Commissioner Michael Wilson
PLEDGE OF ALLEGIANCE
puBuc- CO  ENT This is the time set aside for public comment on any matter not appearing on the agenda. If you wish
to speak please complete a "request to speak" form and limit your comments to three minutes (fom7s are located in the lobby of Council Chamber).
Please watch the timing device on the podium.
1. CONSENT CALENDAR
a. Approve Minutes of July 17, 2006 (Cynthia Hernandez, Secretary)
Recommendation: Approve
b. Approve payment of warrants (Michael Busch, Treasurer) Recommendation: Approve
c. Adopt Resolution authorizing investment of monies in the Local Agency Investment
Fund (LAIF) and authorize the Executive Director, Treasurer and Fiscal Officers or their
successors to order the deposit or withdrawal of monies in the LAIF (Michael Busch,
Treasurer) Recommendation: Approve
d. Investment Report Quarter Ending June 30, 2006(Michael Busch, Treasurer)
Recommendation: Receive/File
e. Authorize Professional Services Agreement with Richard C. Slade and Associates for
the preparation of Well Siting and Hydrogeologic Study (Jim Smith, Public Works
Director) Recommendation: Approve
f. Authorize Professional Services Agreement with RBF Consulting to design and
prepare engineering plans, specifications and costs estimates for upgrade of Plant 2
on a time and material basis not to exceed $549,638.00 (Jim Smith, Public Works
Director) Recommendation: Approve
g. Authorize Professional Services Agreement with Boyle Engineering to design and
prepare engineering pans, specifications and cost estimates for upgrades to Plant 1
on a time and materials basis not to exceed $578,201.00 (Jim Smith, Public Works
Director) Recommendation: Approve
ADMINISTRATIVE ITEMS:
2. Authorize the issuance and delivery of Indio Water Authority 2006 Water Revenue
Bonds, Series A, approving a Third Amendment to Lease, a Bond Purchase Contract,
an Indenture of Trust, a Preliminary Official Statement and a Final Official Statement,
and authorizing official actions and execution of documents related thereto (Michael
Busch, Treasurer) Recommendation: Approve
3. Consider rescheduling the October 16, 2006 regular meeting to October 17, 2006
due to conflict in schedule with Candidate's Forum (Cynthia Hernandez, Secretary)
Recommendation: Reschedule
4. Executive Director Report
5. Commissioner comments and/or questions
ADJOURN
NEXT REGULAR MEETING
October 16, 2006
at 5:30 p.m.
DECLARATION OF POSTING
I, Cynthia Hernandez, Secretary of the Indio Water Authority, do hereby declare that the foregoing agenda for the meeting of
September 18, 2006 was posted on the outside entry to the Council Chamber, 150 Civic Center Mall on September 15, 2006.
Datg eptember 15, 20066
C  la Hernandez, Secretary
PUBLIC NOTICE
The Indio City Council Chamber is handicapped accessible. Persons with disabilities can receive the agenda in an alternative
format and should call the City Clerk's office at 760-391-4006. Notification 48 hours prior to a meeting will enable the City to make
reasonable arrangements to ensure accessibility to that meeting (28 CFR 35.102.35 104 ADA Title 11).
Indio City Council
Indio Redevelopment Agency
Indio Water Authority
Agenda Report
TO:  GLENN D. SOUTHARD, EXECUTIVE DIRECTOR
FROM:  MICHAEL BUSCH, MANAGEMENT SERVICES DIRECTOR
DATE:  September 18, 2006
SUBJECT: CITY, AGENCY and IWA INVESTMENT REPORTS - QUARTER ENDING
June 30, 2006
SUMMARY
As required by the Investment Policy and State law, Quarterly Investment Reports showing
investment activity are to be presented to the City Council, Redevelopment Agency Board, and
Indio Water Authority for review and acceptance.
Staff Recommendation
Staff recommends that the City Council, Agency Board and Indio Water Authority receive and file
the City and Agency Investment Reports for the quarter ending June 30, 2006.
ANALYSIS
City
During the quarter ending June 30, 2006, City held investments increased by $7,807,142. The City
transferred $9,343,000 into Local Agency Investment Fund (LAIF) and purchased $1,092,874 in
additional Government Securities. The funding for the LAIF transfer and the Government Security
purchase was obtained from the maturity of Government Securities and funds from City's operating
account. The investment changes implemented during the quarter were the result of a diversified
investment portfolio plan to insure that City funds continue to earn interest in accordance with the
City's investment policy.
Redevelopment Agency
During the quarter ending June 30, 2006, the Agency had investments in LAIF. There was an
overall increase of $25,951 in Agency-held investments, as shown on the attached Agency
Investment Report (Attachment C). The increase in investments was the result of interest earned
during the quarter.
Water Authority
During the quarter ending June 30, 2006, the Water Authority had investments in LAIF and a
Certificate of Deposit (CD). There was an overall increase of $92,875 in Water Authority-held
investments, as shown on the attached Agency Investment Report (Attachment D). The increase in
investments was the result of interest earned during the quarter.
ITEM NO. ld
FOR CITY COUNCIL AGENDA
City Council/Redevelopment Agency
September 18, 2006
Page 2 of 3
FINANCIAL REVIEW
City
The City's investment portfolio is highly liquid. LAIF investments are available with 24-hour
notification. The weighted average of days to maturity of all investments is approximately 190 days.
At June 30, 2006, the current market value of City-held investments totaled $74,938,440 of which
$39,950,585 was invested in LAIF, $12,401,822 in CDs, $13,933,594 in Government Securities and
$8,652,439 in a premium savings account. All of these investment tools are in accordance with the
Investment Policy.
Redevelopment Agency
The Agency's investment portfolio is highly liquid with 100 percent of investable cash held in the
Agency's LAIF account which is available with 24-hour notification.
At June 30, 2006, the market value of investments held in the Agency LAIF account totaled
$2,304,348.
Water Authority
The Authority's investment portfolio is also highly liquid part of the portfolio in LAIF and available
with 24-hour notification. The inclusion of CDs has diversified the portfolio and improved the yield
while maintaining investment safety. The weighted average of days to maturity of both investments
is approximately 63.85 days.
At June 30, 2006, the market value of investments held in Authority accounts totaled $7,933,894, of
which $3,812,142 was invested in LAIF and $4,121,751 in CDs. Both investment tools are in
accordance with the Investment Policy.
Overall Quarterly Performance
Overall, City, Redevelopment Agency and Water Authority investments earned $1,174,361
between April 1, 2006 and June 30, 2006.
INVESTMENT COMMITTEE REVIEW
The Investment Committee reviewed the City and Agency Quarterly Investment Reports prior to
this meeting. All questions and comments by the Committee members were addressed and
resolved by staff.
PUBLIC NOTICE PROCESS
This item has been noticed through the regular agenda notification process. Copies are available
at the City Hall public counter and the Public Library.
ALTERNATIVES TO THE STAFF RECOMMENDATION
In addition to the staff recommendation, there are the following alternatives:
1.  Request more information.
Prepared by:
CA__\
Brian Kinder
Accountant
Michael Busch
Management Services Director
Submitted by:
City Council/Redevelopment Agency
September 18, 2006
Page 3 of 3
Attachments: A — Treasurer's Report as of June 30, 2006
B — City Quarterly Investment Report
C — Agency Quarterly Investment Report
D — Water Authority Quarterly Investment Report
Attachment A
CITY OFINDIO
TREASURER'S REPORT OFPOOLEDCASH
AS OFJune 30, 2006
CASH ACCOUNTS BANK BALANCE
DEPOSITS
INTRANSIT
OUTSTANDING
CHECKS BOOK BALANCE
Union Bank of CA - General/Payroll $  31,739,247.84 1,306,122.79 2,954,410.34 $  30,090,960.29
Reconciling Items
Union Bank Premium Savings 8,652,438.96 8,652,438.96
Total Operating Accounts 40.391.686.80 1,306,122.79 2,954,410.34 38,743,399.25
INVESTMENT ACCOUNTS
GENERAL ACCOUNT:
PFFBank CDs 12,401,821.58 12,401,821.58
Local Agency Investment Fund (LA1F) 39,950,585.24 39,950,585.24
Money Market and Bank Deposits 15,050.00 15,050.00
Treasury Securities 6,313,963.00 6,313,963.00
Federal Agency Securities 7,604,581.00 7,604,581.00
WATER AUTHORITY:
PFFBank CDs 4,121,751.42 4,121,751.42
Local Agency Investment Fund (LAIF) 3,812,142.27 3,812,142.27
REDEVELOPMENT AGENCY
Local Agency Investment Fund (LAIF) 2,304,347.83 2,304,347.83
Total Investment Accounts 76,524,242.34 76,524,242.34
City of Indio Petty Cash Funds 4,150.00
TOTAL POOLEDCASH ANDINVESTMENTS 116,915,929.14 $  115,271,791.59
CASH WITH FISCAL AGENT
Cert of Participation 2002 Series A S  378,193.96 $  378,193.96
Indio AD01-1 923,624.55 923,624.55
Indio AD02-1 622,540.51 622,540.51
Indio AD02-2 223,287.03 223,287.03
Indio AD02-3 581,508.29 581,508.29
Indio AD03-1 211,559.16 211,559.16
Indio AD03-2 176,128.96 176,128.96
Indio AD03-3 1,343,672.42 1,343,672.42
Indio AD03-5 166,712.93 166,712.93
Indio AD03-6 189,379.66 189,379.66
Indio AD90-1 233,206.28 233,206.28
Indio AD99-1 553,418.51 553,418.51
Indio AD04-1 206,034.40 206,034.40
Indio AD04-2 313,410.28 313,410.28
Indio AD04-3 3,456,252.96 3,456,252.96
Indio CFD2004-3 12,647,819.37 12,647,819.37
Indio CFD2005-1 (Area #1) 4,456,792.83 4,456,792.83
Indio CFD2005-1 (Area #2) 5,788,576.89 5,788,576.89
PFA Taxable Tax Increment 1997 Series A 24.27 24.27
PFA Taxable Tax Increment 1997 Series B 289,466.62 289,466.62
Indio Water Bond 5,920,824.55 5,920,824.55
PFA Revenue Bond 4,315,000.80 4,315,000.80
Indio RDA 04A 152,484.84 152,484.84
Indio RDA 04B 12,249,244.49 12,249,244.49
RDA Housing Set-Aside Revenue 338,104.68 338,104.68
TOTAL CASH WITH FISCAL AGENT 55,737,269.24 $  55,737,269.24
Ihereby certify that the investment portfolio of the City of Indio complies with its investment policy and the California Government Code
Sections pertaining to d investment of local agency fun  Pending any future actions by the City Council or any unforeseen castastrophy,
the City has an ey jf cash flow to meet its ex  requirement for the next six months.
MICHAEL P. BUSCH
Finance Director
WEIGHTED AVERAGE DAYSTOMATURITY'
BEGINNING OF QUARTER: 117 61
ENO OF QUARTER: 190 82
GoVI Securities % 19%
Prermum Savings % 12%
LAIF % 53%
CDs % 17%
Note 1: Market Valuation is taken from month-end statements published by LAIF, PFF Bank & Trust, Union Bank And Morgan Stanley.
i)a-114#
Glenn D Sou ard, City Manager
Brian Kinder, Accountant
Att8ChrTerlt 5
CITYOF INDIO
INVESTMENT REPORT - CITYGENERAL ACCOUNT
APRIL 1, 2006 THROUGH JUNE 30, 2006
ADDS/(SELLS1/
INVESTMENT
CITYHELD
UBOC
ULIOC431114
UBOC-WW7
UBOC CE8
UBOC-WY3
U80C-6X5
UBOC-CU2
UBOC-0F4
ULIOCAH3
UBOC-WX5
UBOC-AC4
UBOC4374
ULIOC-F.F3
PFF
PFF
UBOC-RH9
UBOC-TE4
U8OC-CR3
PFF
PEP
PFF
PFF
PFF
PFF
PFF
PFF
PFF
PFF
PFF
PFF
PFF
PFF
PFF
PFF
PFF
PURCHASE MATURITY
DESCRIPTION DATE DATE
PAR
VALUE
BALANCES all APRIL 1
ORIGINAL
COST
2006
MARKET
VALUE (note 1)
(MATURMES)
DURING PERIOD
a COST
PAR
VALUE
BALANCESSI JUNE30
ORIGINAL
COST
2006
MARKET
VALUE (note 1)
INTEREST INTEREST
EARNED RECEIVED
DURING QTR YIELD DURING OTR
NVESTMENTS
Union Bank Prernar- Sayings 08/05/05 N/A 5,000,000 8,568.481 5,000,000 8,652,439 82.282.75 4.11% 82.282.75
Union Bank Cnin,,• A.ceount Interest N/A N/A WA WA N/A N/A 146,667 37 4.11% 146,667.37
PFF - Catkin, ,I riposil carom a8/02106 2.000.000 2.054.698 2,000,000 2.075.851 20.962.95 4.01% 20.952,95
FIFF -C.,' f ,,, -,f ( 'Wag 11105/05 11/05/06 10 000 000 10.197.779 - 10 072.367 10.326,171 128 392.45 4.40% 128.392 45
mMatnj P--/ Deposits N/A N/A 62.588 62.588 (47.5381 62.588 15.050
j. i .5 Treasury Note 02706705 11/15/06 1.462 037 1494 290 1.492.037 1.500.390
Donau stales Treasury elti
Vaffig§---...--QMO 993 043 264905 (286.000) 993.013 -
tanned Steles Treaswy Nole 02/09/06 04115/09 598,144 595.313 599144 592.825
United Stales Treasury Bit 02/09/06 04.020/05 899.071 703.491 (706,000) 899 071 -
United Steles Trees,/ Note 02/111/96 05/15/06 1.011.271 999.840 (1.000.0001 1.011.271 -
Unite clalimLfreast•na Note __E2:10106 08131/06 987,539 990.350 987 .539 995.740
United States Treasta_Notg orayoe 12/31/06 497,484 498,076 497.484 489.339
United States Tteate•ry Note 071,3•06 1 9 942 489 375 489.942 489.200
United Staters Treasury Fall 02116/06 OSP3/06 99 322 99.875 (100 000) 99.322 -
United Steles Treasury Note 03/03% 05/15/07 1.000.857 999.583 1.000 857 997.352
United States Tteaslay Note 0 05/15/05 701.712 699,642 701.712 686.932
United Steles Treasury Note 02113/00 0831/07 544.602 543 576 541.802_ /2215
United States Treasury BIS 05702/06 08.22/06 295.045 298.045
United Stites Tresennt Bti 05.12'06 (296 0151 -
TOTAL TREASURYSECURITIES 8,440,904 5.313.853
Federal Herne LNMTGCORP 02/13/06 061907 509.768 508,71ip 509.788 508.300
Fedeml Home LN MTG CORP 07/13/06 03/15105 508.163 507.311 508.163 506.813
Federal Hans LN MTG CORP 02/11'06 12/15/05 511 462 512 039 511,462 513 KC
Federated POLne-gia FIN. 03/13/06 NIA 372 522 372.522 (243.5251 372.522 125.997
Peddle MAC 03/13/06 07/08108 497,250 495,850 497.250 494.025
Freddie MAC 03/13/06 09(.4/07 198 212 196.182 198.212 197.806
Freddie MAC 03/13/06 496 335 496 842 495.425
Freddie MAC 03/13/06 12/05/07 498.880 497.925 498 890 498.210
Federal Home Loan paw QriV AMMll 256 250 246.250 256 250 245.938
Federal Home Lree_flank 928/08 /1 12/10/07 487550 457.345 487.550 486.250
Federal Howe Lam Bank 03113/06 10/21905 252.200 252.444 252.200_ 261.714
Federal Home Loan Munk 03/13(06 05/10/07 196.227 196.626 196.227 198.626
Federal Home Loan Bank 03/13/06 ON09/07 298.266 398.314 298.266 298.218
74651111 HOP 4040BEII 03/13/06 02122/07 271.425 271.563 271.425 271.736
Federal Home Loan Bank 63•13/013 11/23/10 497,535 495.156 497.535 493.125
Federal Hoene (nen Bank 03/13/06 499.219 497.030 499.219 495.780
ffflaielMg 05/13106--9/25/10 246 503 24.140 246 503 242.813
Federal Home Loan Sal 03/13/08 497.500 457.665 487560_ 488,720
Federal Nome LoanBank 03/13106 1026106 497.8213 497.655 (4978201 497 820 -
Freddie Dianno, WOO 0527/06 09/26/00 298.079 296 079 298.310
Federal Hone I ea^ 1310 06a9/06 12/08/09 498.750 495.750 497.158
TOTAL FEDERAL AGENCYSECURITIES 7.652.929 7,604.551 179,953.49 179.983 49
LOCAL AGENCY INVEST!/ENT FUND /LAJF) 30.306.507 30,607,585 9,343.600 30 306,507 39950,5135 373,964 373.964
GRANDTOTAL OF INVESTMENTS
 
S
 
S 64.067.711 S 67.432,376 S  7,278.940 S
 
85,232.955 S 74.938.439 E  932.243
 
932.243
Al managed investments are shown above and conform to the Investment Poiicy. All investrneat twisactions during this period ere included in this report.
Safficent investment liquidity and anticipated revenues are available to meet the Agency's budgeted expenditure requirements for the next six months.
Glenn D. Southar4, City Manager
Brian Kinder, Accountant
Attchment C
CITY OF INDIO
INVESTMENT REPORT - REDEVELOPMENT AGENCY FUND
APRIL 1, 2006 THROUGH JUNE 30, 2006
ADDS/(SELLS)!
PURCHASE  MATURITY
iTMENT DESCRIPTION  DATE  DATE
ALANCES , (;21 ARKIL 1, 2006  (MATURITIES)  BALANCES p JUNE 30, 2006 INTEREST  INTEREST
EARNED  RECEIVED
DURING QTR  YIELD  DURING QTR
PAR
VALUE
ORIGINAL
COST
MARKET
VALUE (note 1)
DURING PERIOD
0 COST
PAR
VALUE
ORIGINAL
COST
MARKET
VALUE (note 1)
EVELOPMENT AGENCY HELD INVESTMENTS
LOCAL AGENCY INVESTMENT FUND (LAIF) 2,267,963 2,267,963 2,267,963 2,304,348  25,951 4.53% 25.951
2.267,983 $ 2,267,963 $
 
2,267,963 $ 2,304,348 $  25,951
 
25,951
INVE
RED
Note 1: Market Valuation is taken from month-end statements published by LAIF, PFF Bank & Trust and Union Bank.
REDEVELOPMENT AGENCY HELD INVESTMENT DATA:
WEIGHTED AVERAGE DAYS TOMATURITY:
 
BEGINNING OF QUARTER:  0.00
 
END OF QUARTER:  0.00
Gov't Securities %  0%
 
LAIF %  100%
 
CDs %  0%
All managed investments are shown above and conform to the Investment Policy. All investment transactions during this period are included in this report.
Sufficent investment liquidity and anticipated revenues are available to meet the Agency's budgeted expenditure requirements for the next six months.
Michael P. Busch, Management Services Director
Glenn L. Southard, City Man er
Attachment
CITY OF INDIO
INVESTMENT REPORT - WATER AUTHORITY FUND
APRIL 1, 2006 THROUGH JUNE 30, 2006
ADDS/(SELLS)/
BALANCES APRIL 1 2006
 
(MATURITIESI
 
BALANCES Cal JUNE
PURCHASE  MATURITY
3TMENT DESCRIPTION  DATE  DATE
PAR
VALUE
...
ORIGINAL
COST
MARKET
VALUE note 1)
DURING PERIOD
COST
PAR
VALUE
ORIGINAL
COST
MARKET
VALUE (note 1)
...._.._.
EARNED  RECEIVED
DURING QTR  YIELD  DURING QTR
ER AUTHORITY HELD INVESTMENTS
PFF - 'Certificate of Deposit 05/01/06 07/31/06 - 4,000,000 4,071,822 4,071,822 4,121,751 49,930 5.10% 49,930 i
LOCAL AGENCY INVESTMENT FUND (LAIF) 3,760,626 3,760,626 3,812,142 3,812,142 42,945 4 53% 42,946 ,
$ 7,760,626 $ 7,832,448 $
 
7,883,964
 
7,933,894 $
 
92,875
 
$  92,876
Note 1: Market Valuation is taken from month-end statements published by LAIF, PFF Bank & Trust and Union Bank.
WATER AUTHORITY HELD INVESTMENT DATA:
WEIGHTED AVERAGE DAYS TOMATURITY:
BEGINNING OF QUARTER:  16.60
END OF QUARTER: 63.85
Gov't Securities % 0%
LAIF % 48%
CDs % 52%
All managed investments are shown above and conform to the Investment Policy. All investment transactions during this period are included in this report.
Sufficent investment liquidity and anticipated revenues are available to meet the Agency's budgeted expenditure requirements for the next six months.
INVE
WA
Michael P. Busch, Management Services Director
Brian Kinder, Accountant
INDIO WATER AUTHORITY
AGENDA REPORT
TO:  Indio Water Authority President and Commissioners
FROM:  Glenn D. Southard, Executive Director
SUBJECT: RESOLUTION OF THE INDIO WATER AUTHORITY
AUTHORIZING THE ISSUANCE AND DELIVERY OF ITS INDIO
WATER AUTHORITY 2006 WATER REVENUE BONDS,
APPROVING A THIRD AMENDMENT TO LEASE, AN
INDENTURE OF TRUST, AN ESCROW AGREEMENT, A
PRELIMINARY OFFICIAL STATEMENT AND A FINAL
OFFICIAL STATEMENT, AND A BOND PURCHASE
CONTRACT, AND AUTHORIZING OFFICIAL ACTIONS AND
EXECUTION OF DOCUMENTS RELATED THERETO
DATE:  September 18, 2006
SUMMARY
At the June 29, 2006 Indio Water Authority (IWA) meeting, staff presented, and the IWA
Board approved, an increase in water utility rates necessary to address a significant
backlog of capital maintenance projects as well as current capital needs. As discussed
during the meeting, staff informed the Board of its intent to secure bond financing for
such improvements.
Over the past 60 days, staff has solicited proposals for bond underwriting and counsel
services to establish a bond financing team to structure and sell Indio Water Authority
Revenues Bonds. Through an RFQprocess, staff determined De La Rosa & Co. to be the
most qualified bond underwriting firm among several bidders. Additionally, with the
assistance of the City Attorney's Office, staff determined Jones Hall to be the most
qualified firm to assist the 1WA with bond counsel services.
Based on the $96 million backlog of capital maintenance projects and current capital
needs, staff has determined that a bond issuance amount of about $61 million (of which
$52.3 million is to be spent on new IWA projects) is necessary to begin to address
priority projects over the next 3 years. To meet the financial needs of the IWA, staff
believes a 30 year term is appropriate. Because the current Lease Agreement between the
ITEM NO. 2
City of Indio and the IWA expires in 2031, the current Lease Agreement must be
amended to 2037, slightly exceeding the proposed debt service term. The lease is the
basis under which the IWA has the legal authority to operate the City-owned water
system and collect water revenues. As a result, the existing lease term must be extended
to 2037 to legally ensure that the IWA can continue operating the water system and
collecting revenues to repay debt payments beyond 2031.
As part of this financing, IWA and bond underwriting staff concluded it would
appropriate to refinance the existing 2004 Water Enterprise Revenue Bonds as part of this
process. Refinancing of existing bonds improves IWA debt service coverage, reduces
short term debt payments allowing the IWA to raise revenues before any principal debt
payments are due, and reduces administrative time on debt programs.
STAFFRECOMMENDATION
The Indio Water Authority Board approve the attached Resolution including:
• The issuance and delivery of Indio Water Authority 2006 Water Revenue Bonds;
• A Third Amendment to Lease;
• Indenture of Trust, Escrow Agreement, Preliminary Official Statement, Final
Closing Statement, Bond Purchase Agreement, Legal Services Agreement; and
• Authorize the Board President and Executive Director to take official actions and
to execute related documents
ANALYSIS
Current Operational Conditions
The Water Master Plan identified several key areas of needed improvement in the water
system including new reservoirs, wells and treatment facilities, new/replacement piping,
and routine capital maintenance needs. To date, most of the projects identified are
unfunded. They total a $96 million capital maintenance backlog. The major project
categories and associated costs are summarized:
I New Reservoirs & Upgrades to Existing Facilities $31.5 MM
I Wells & Treatment Facilities $41.6 MM
I New Maintenance of Existing Facilities $12.8 MM
I Pipe Improvements $10.1 MM
Total: $96 Million
The delay in implementation of these projects has increased the costs significantly.
Furthermore, the addition of new water facilities and infrastructure resulting from
unprecedented development has increased staffing requirements as well as operational
and capital maintenance costs. To fully address the backlog of projects and current
capital needs, bond financing to address priority needs over the next 3 years is necessary.
Financing Options
The IWA has two options to address its capital maintenance backlog and current capital
needs; 1) pay as you go; and 2) long term financing. Under the first option, the TWA
would fund needed capital maintenance projects when funds became available. With a
2.5 percent increase in each of the last five years, capital maintenance costs will increase
another $2.4 million in FY 2006-07 alone if nothing is done. The IWA does not have
sufficient revenues to properly address the needed improvements. The cost to complete
the capital maintenance backlog, even after using pay-as-you-go revenues, will continue
to increase over time.
The second option is to issue long term debt in the form of water revenue bonds. Similar
to the water revenue bond issue in 2004, this option is being recommended because it will
address the immediate needs of the IWA. Additionally, bond financing will provide
funds to aggressively address the IWA capital maintenance backlog and current capital
needs programmed over the next three years.
Bond Financing Team
In February 2006 staff prepared and solicited Bond Underwriter Requests for
Qualifications (RFQ) and on March 3, 2006 staff received proposals from eight (8)
different firms. The list of firms is:
1. De La Rosa & Co.
2, JP Morgan
Piper Jaffray
4. Southwest Securities Public Finance
5 Henderson Capital Partners
6. UBS Investment Bank
7. Stone and Youngberg LLC
8. Wedbush Morgan Securities
Through an extensive review of costs, previous work history, proposed staffing, and firm
qualifications a short list of three firms was selected to be interviewed by staff and an
outside source, the Chief Financial Officer for the City of Beverly Hills. The three short
listed firms were De La Rosa & Co., Stone and Youngberg LLC, and Wedbush Morgan
Securities. Based on an analysis of the submitted proposals and results of the interviews,
De La Rosa & Co. was determined to be the most qualified to perform bond underwriting
services for the IWA. The firm of De La Rosa & Co. is considered one of the top 5
underwriters in California.
Also in February 2006 staff, with the assistance of the City Attorney, prepared and
solicited Bond Counsel Request for Qualifications (RFQ) and on March 3, 2006 staff
received proposals from six (6) bond counsel firms. The list of firms is:
1. Orrick, Herrington & Sutcliffe
2. Best, Best & Krieger
3. Pillsbury, Winthrop, Shaw, Pittman
4. Fullbright & Jaworski
5. Jones Hall
6. Quint & Thimmig
Similar to the review of bond underwriters, through a review of costs, previous work
history, proposed staffing, and firm qualifications a short list of three firms was selected.
The three short listed firms included Jones Hall, Fullbright & Jaworski, and Orrick,
Herrington & Sutcliffe, all considered the best in this field. Based on submitted
proposals and reference checks, Jones Hall was determined to be the most qualified to
perform bond counsel services for the IWA. The firm of Jones Hall has a long history in
California is has been long considered one of the best bond counsel firms.
To formalize the selection process and to move forward on the issuance of bond
financing and bond counsel services, a Purchase Contract and Legal Services Agreement
must be executed between the IWA and De La Rosa & Co. and Jones Hall.
Bond Financing Structure/Project Financing Plan
The IWA proposes to issue $61.4 million in water revenue bonds to finance capital
projects, prepay the 2004 Water Enterprise Revenue Bonds, and pay bond issuance costs.
The 2004 Bonds are being prepaid to enable the IWA to issue its 2006 Bonds under a
new debt coverage test. Without redesigning this debt coverage test, the IWA would only
be able to issue about $23 million in senior bonds today. The IWA would have to wait
until future rate increases were implemented before more senior bonds could be issued.
As an alternative, the IWA could issue subordinate bonds, but at a substantially higher
borrowing cost. The table below outlines the uses of the proposed bond proceeds.
Par Amount of Bonds
Original Issue Premium
Prior Bond Reserve Fund
$61,435,000
$3,618,791
$830,314
Total Funds To Be Raised $65,884,105
Project Fund $52,310,000
Prepay 2004 Bonds $11,836,837
Bond Insurance (AAA Rating) $921,719
Bond Reserve Fund Surety $128,016
Bond Issuance Costs $687,533
Total Funds To Be Expended $65,884,105
The table below provides a summary of bond issuance costs.
Bond Counsel $125,000
Disclosure Counsel $40,000
Underwriter's Discount $450,933
Rating Agency $20,000
Trustee $8,000
Printer $12,000
Miscellaneous/Contingency $31,600
Total Bond Issuance Costs $687,533
The 2006 Bonds will be structured as fixed rate bonds and be paid off over 30 years. A
30 year bond term is appropriate based on the useful life of the assets to be financed and
to spread the debt burden among future ratepayers prudently. The 2006 Bonds will be
structured with only interest payments through FY 2009 to give the Authority time to
build up its revenue base through implementation of its adopted rate increases. Full
principal and interest payments will begin in FY 2010.
The 2006 Bonds will be issued with bond insurance which will give the bonds an "AAA"
bond rating. The "AAA" rating will enable the IWA to garner the lowest interest rates in
the municipal bond market. Based on today's rates, the 2006 Bonds would have an
overall interest rate of 4.58%.
During the first three years, the IWA will utilize interest earnings from the $52.3 million
project fund to help offset its annual bond payments. The chart below outlines the
estimated net bond payments in the first 5 years for the 2006 Bonds based on today's
interest rate of 4.58%.
Fiscal
Year
Ending
Annual Bond
Payment
Interest
Earnings from
Project Fund
Annual Net
Bond
Payment
2007 $1,485,276 ($909,613) $575,664
2008 $3,163,903 ($1,423,995) $1,739,908
2009 $3,163,903 ($726,528)$2,437,375
2010 $4,263,903 ($101,714) $4,162,189
2011 $4,262,253 ($0) $4,262,253
The annual average bond payment is estimated to be $4.27 million from FY 2011-12 an
beyond.
The bond proceeds will be allocated based on priority needs within the capital
maintenance function and on current capital needs. A majority of bond proceeds will be
allocated to the design and construction of several reservoir facilities, upgraded wells and
boosters, and pipeline improvements. To pay its fair share for the design and
construction of the City/IWA Corporate Yard Facility, the IWA will contribute
$8 million toward facility costs.
The chart below reflects the proposed funding plan of $118 million in capital
maintenance and new capital projects over the next three years from available and
anticipated development impacts fees, operating revenues, and bond proceeds.
Three Year Capital Project Funding Summary
Total
Project Category
Operations &
Impact Fees Bond Proceeds
Reserviors 44,030,000 19,320,000 63,350,000
Wells and Boosters 12,150,000 14,300,000 26,450,000
Pipeline Improvements 7,854,000 5,351,000 13,205,000
System Administration 1,008,500 436,500 1,445,000
Capital Equipment & 17,500 6,501,000 6,518,500
Improvements
Other Improvements 1,600,000 6,400,000 8,000,000
Totals 66,660,000 52,308,500 118,968,500
City / IWA Lease Agreement
To achieve the proposed financing structure, the City/IWA Lease Agreement must be
amended to reflect the 30 year term of the bonds. Currently, the City/IWA Lease
Agreement expires on November 1, 2031. The lease is the basis under which the IWA
has the legal authority to operate the City-owned water system and collect water
revenues. The proposed bond debt schedule reflects interest and principal payments until
April 1, 2036. Because the current lease term and bond payment term do not match, the
existing lease term must be extended to November 1, 2037 to legally ensure that the IWA
can continue operating the water system and collecting revenues to repay debt payments
to April 2036.
In order to provide assurance to investors, staff is recommending the City/IWA Lease be
amended to provide the TWA with a revenue source through water rate revenues through
November 2037. The proposed amendment constitutes the third such amendment
between the City and IWA. Unlike the previous amendments, the City will not be
receiving any up-front cash as part of the amendment. All bond proceeds will be
allocated to IWA projects.
PUBLICNOTICE PROCESS
This item has been noticed through the regular Agenda notification process. A copy of
this item is available at the City Hall public counter.
ALTERNATIVES:
Request additional information.
Submitted by:
I l
1\gImel Busch
Treasurer
List of Attachment(s):
A. Resolution
B. Third Amendment to the Lease
C. Indenture of Trust *
D. Preliminary Official Statement *
E. Bond Purchase Contract (BPA)
F. Legal Services Agreement
G. Escrow Agreement *
* Avail abl e in,theFinance Department
ATTACHMENT A
IWA RESOLUTION NO. 2006-
RESOLUTION OF THE INDIO WATER AUTHORITY AUTHORIZING THE ISSUANCE AND
DELIVERY OF ITS INDIO WATER AUTHORITY 2006 WATER REVENUE BONDS,
APPROVING A THIRD AMENDMENT TO LEASE, AN INDENTURE OF TRUST, AN
ESCROW AGREEMENT, A PRELIMINARY OFFICIAL STATEMENT AND A FINAL OFFICIAL
STATEMENT, AND A BOND PURCHASE CONTRACT, AND AUTHORIZING OFFICIAL
ACTIONS AND EXECUTION OF DOCUMENTS RELATED THERETO
WHEREAS, the Authority is a joint exercise of powers authority duly organized and
existing under and pursuant to that certain Joint Exercise of Powers Agreement, dated as of
April 19, 2000, by and between the City of Indio (the "City") and the Redevelopment Agency
of the City of Indio, and under the provisions of Articles 1 through 4 (commencing with
Section 6500) of Chapter 5 of Division 7 of Title 1 of the Government Code of the State of
California (the "Act"), and is authorized pursuant to Article 4 of the Act to borrow money for
the purpose of financing and refinancing capital improvements of the Authority; and
WHEREAS, the City has leased the City's water system to the Authority pursuant to
that certain Lease, dated as of May 22, 2001 (as amended pursuant to the First
Amendment to Lease, dated as of September 17, 2001, the Second Amendment to Lease,
dated as of October 15, 2001, and the Third Amendment to Lease, dated as of October 1,
2006, and as amended, the "Lease"), by and between the Authority and the City; and
WHEREAS, to refinance a Promissory Note, dated November 1, 2001, in the original
principal amount of $5,000,000, issued for the purpose of making a lease payment in
connection with the Lease and to finance certain capital improvements to the water system,
the Authority issued its Indio Water Authority Water Enterprise Revenue Bonds, 2004
Series (the "2004 Bonds") in the aggregate principal amount of $12,000,000; and
WHEREAS, to refund and defease the 2004 Bonds, and to finance additional capital
improvements to the water system, the Authority has determined to issue its Indio Water
Authority 2006 Water Revenue Bonds (the "Bonds") pursuant to an Indenture of Trust (the
"Indenture"), dated as of October 1, 2006, by and among the Authority, the City and Union
Bank of California, N.A., as trustee (the "Trustee");
WHEREAS, the 2004 Bonds will be refunded and defeased pursuant to the 2004
Escrow Deposit and Trust Agreement, dated as of October 1, 2006 (the "Escrow Agreement"),
by and among the Authority, the City and Union Bank of California, N.A., as escrow bank;
and
WHEREAS, in order to extend the term of the Lease for a period not shorter than the
final maturity of the 2006 Bonds, the Authority desires to enter into the Third Amendment to
Lease, dated as of October 1, 2006, by and between the Authority and the City (the "Third
Amendment to Lease"); and
WHEREAS, as evidenced in the proceedings for the issuance of the Bonds, there are
significant public benefits to the Authority and the City from the financing and refinancing of
such capital improvements to the water system, within the meaning of Section 6586 of the
Act, in that such financing and refinancing enhances the delivery of water services by the
water system;
NOW, THEREFORE, THE INDIO WATER AUTHORITY COMMISSION DOES HEREBY
RESOLVE AS FOLLOWS:
Section 1. The Authority hereby approves the issuance of the Bonds in the aggregate
principal amount of not to exceed $70,000,000.
Section 2. The Authority hereby approves the Indenture in substantially the form filed
with the Secretary of the Commission. The President, the Vice President, the Executive
Director and the Treasurer (each, a "Responsible Officer"), are hereby authorized to execute the
Indenture in substantially the form filed with the Secretary, with such revisions, amendments
and completions as may be approved by a Responsible Officer, with the advice of Bond
Counsel, such approval to be conclusively evidenced by the execution and delivery thereof.
Section 3. The Authority hereby approves the Third Amendment to Lease, in
substantially the form filed with the Secretary of the Commission. Any Responsible Officer is
hereby authorized to execute the Third Amendment to Lease in substantially the form filed with
the Secretary, with such revisions, amendments and completions as may be approved by a
Responsible Officer, with the advice of Bond Counsel, such approval to be conclusively
evidenced by the execution and delivery thereof.
Section 4. The Authority hereby approves the Escrow Agreement, in substantially the
form filed with the Secretary of the Commission. Any Responsible Officer is hereby authorized
to execute the Escrow Agreement in substantially the form filed with the Secretary, with such
revisions, amendments and completions as may be approved by a Responsible Officer, with the
advice of Bond Counsel, such approval to be conclusively evidenced by the execution and
delivery thereof.
Section 5. The Authority hereby approves the Preliminary Official Statement relating to
the Bonds, substantially in the form filed with the Secretary of the Commission, with such
revisions, amendments and completions as may be approved by a Responsible Officer with the
advice of Disclosure Counsel, in order to make the Preliminary Official Statement substantially
final as of its date, except for the omission of certain information, as permitted by Section
240.15c2-12(b)(1) of Title 17 of the Code of Federal Regulations ("Rule 15c2-12"), and any
certificate relating to the finality of the Official Statement under Rule 15c2-12. Any Responsible
Officer is authorized and directed to execute and deliver a final Official Statement and
amendments and updates thereto, as appropriate, in substantially the form hereby approved,
with such additions and changes as may be approved by Disclosure Counsel and the
Responsible Officer executing the same, such approval to be conclusively evidenced by the
execution and delivery thereof.
Section 6. The Authority hereby approves the Bond Purchase Contract providing for the
sale of the Bonds to E. J. De La Rosa & Co. Inc., in substantially the form filed with the
Secretary of the Commission. Any Responsible Officer is hereby authorized to execute the
Bond Purchase Contract, in substantially the form filed with the Secretary, with such revisions,
amendments and completions as may be approved by a Responsible Officer, with the advice
of
Bond Counsel, such approval to be conclusively evidenced by the execution and delivery
thereof, provided that, the Bond Purchase Contract shall provide for (i)a maximum true interest
cost on the Bonds not greater than 5.75% and, (ii) a maximum Underwriter's discount on the
Bonds not greater than 0.734%.
Section 7. The President, the Executive Director, the Treasurer, the Secretary, and any
and all other officers of the Authority are hereby authorized and directed, for and in the name
and on behalf of the Authority, to do any and all things and take any and all actions, including
the publication of any notices necessary or desirable in connection with the sale of the Bonds,
procurement of a municipal bond insurance policy and reserve fund surety bond, and execution
and delivery of any and all assignments, certificates, requisitions, agreements, notices,
consents, instruments of conveyance, warrants and other documents, which they, or any of
them, deem necessary or advisable in order to consummate the lawful issuance and sale of the
Bonds and the consummation of the transactions as described herein.
Section 8. The Authority hereby appoints Jones Hall, A Professional Law Corporation,
San Francisco, California, as bond counsel, and any Responsible Officer is hereby authorized
and directed to enter into an agreement with that firm for its services to the Authority in
connection with the issuance, sale and delivery of the Bonds.
Section 9. The Secretary shall certify to the adoption of this Resolution, which shall be
in full force and effect immediately upon its adoption. Notwithstanding the foregoing, such
certification and any of the other duties and responsibilities assigned to the Secretary pursuant
to this Resolution may be performed by an Assistant Secretary with the same force and effect
as if performed by the Secretary hereunder.
PASSED, APPROVED AND ADOPTED this  day of September, 2006, by the
following vote:
AYES:
NOES:
President
ATTEST:
Secretary
ATTACHMENT B
42901-01  JH:ACH:brf  AGENDA DRAFT 09/14/06
THIRD AMENDMENT TO LEASE
This Third Amendment to Lease ("Amendment"), dated as of October 1, 2006, is made
by and between the Indio Water Authority (''Authority") and the City of Indio ("City"), with respect
to the following facts:
RECITALS
A.  The Authority and the City entered into that certain Lease Agreement, dated May
22, 2001 (the "Lease"), pursuant to which the City leased to the Authority substantially all of the
assets of the City used or useful in the provision of water service within the System Boundaries.
Capitalized terms that are used herein without definition and that are defined in the Lease are
used herein as so defined.
B  The Authority and the City entered into that certain First Amendment to Lease,
dated as of September 17, 2001.
C  The Authority and the City entered into that certain Second Amendment to
Lease, dated as of October 15, 2001.
D.  The Authority and the City desire to further amend the Lease, as provided below.
NOW, THEREFORE, in consideration of the mutual covenants and conditions contained
herein, and for other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the Authority and the City hereby agree as follows:
OPERATIVE PROVISIONS
1,  Paragraph 1.1 of the Lease is hereby deleted and the following is inserted into its
place and stead:
1.1 Term. This Lease shall commence at 12:01 a.m. on November 1, 2001
("Commencement Date") and end at midnight 36 years thereafter, unless this Lease is
earlier terminated pursuant to the terms hereof, in which event this Lease shall end on
the date of such termination ("Expiration Date").
2.  The rent payment schedule contained in Paragraph 2.1(a)of the Lease is hereby
deleted and the rent payment schedule attached hereto as Exhibit A is inserted into its place
and stead.
3 .  Except as set forth in this Amendment, all of the terms and conditions of the
Lease, as heretofore amended, shall remain unmodified and in full force and effect.
IN WITNESS WHEREOF, the Authority and the City have caused this Amendment to be
executed as of the day and year first above written.
"Authority"
INDIO WATER AUTHORITY
By:  
President
"City"
The CITY OF INDIO
By:  
Mayor
2
EXIBIT "A"
To
THIRDAMENDMENT TOLEASE
Lease Payment Schedule
2002 10,000,000 (5,000,000 cash plus 5,000,000
promissory note)
2003 1,000,000
2004 1,030,000
2005 1,060,900
2007 1,125,509
2008 1,159,274
2009 1,194,052
2010 1,229,874
2011 1,266,770
2012 1,304,773
2013 1,343,916
2014 1,384,233
2015 1,425,760
2016 1,468,533
2017 1,512,589
2018 1,557,967
2019 1,604,706
2020 1,652,847
2021 1,702,432
2022 1,753,505
2023 1,806,110
2024 1,860,293
2025 1,916,102
2026 1,973,585
2027 2,032,793
2028 2,093,777
2029 2,156,590
2030 2,221,288
inli
.u, i 2,287,927
2032 2,356,565
2033 2,427,262
2034 2,500,080
2035 2,575,082
2036 2,652,334
2037 2,731,904
ATTACHMENT C
42901-01
 
JH:ACH:brf
 
AGENDA DRAFT 09/13/06
INDENTURE OF TRUST
by and among
INDIO WATER AUTHORITY,
CITY OF INDIO
And
UNION BANK OF CALIFORNIA, N.A.
as Trustee
Dated as of October 1, 2006
Relating to
$[Bond Amount]
Indio Water Authority
2006 Water Revenue Bonds
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS; CONTENT OF CERTIFICATES AND OPINIONS
Section 1.01. Definitions  3
Section 1.02. Interpretation  11
ARTICLE II
THE 2006 BONDS
Section 2.01. Authorization of 2006 Bonds  13
Section 2.02. Terms of the 2006 Bonds  13
Section 2.03. Transfer of Bonds  14
Section 2.04. Use of Securities Depository  14
Section 2.05. Exchange of Bonds  15
Section 2.06. Registration Books  15
Section 2.07. Form and Execution of Bonds  15
Section 2.08. Temporary Bonds  16
Section 2.09. Bonds, Mutilated, Lost, Destroyed or Stolen  16
Section 2.10. CUSIP Numbers  17
ARTICLE III
ISSUANCE OF 2006 BONDS AND APPLICATION OF
PROCEEDS
Section 3.01. Issuance and Delivery of the 2006 Bonds  18
Section 3.02. Application of the Proceeds of the 2006 Bonds  18
Section 3.03. Establishment and Application of Costs of Issuance Fund  18
Section 3.04. Validity of Bonds  18
Section 3.05 . Issuance of Additional Bonds  19
Section 3.06. Parity Obligations  20
ARTICLE IV
REDEMPTION OF 2006 BONDS
Section 4.01. Terms of Redemption  21
Section 4.02. Selection of 2006 Bonds for Redemption  22
Section 4.03. Notice of Redemption  22
Section 4.04. Partial Redemption of 2006 Bonds  23
Section 4.05. Effect of Redemption  23
ARTICLE V
REVENUES; FUNDS AND ACCOUNTS; PAYMENT OF
PRINCIPAL AND INTEREST
Section 5.01. Pledge and Assignment; Transfers to Bond Fund  24
Section 5.02. Covenant Regarding Net Revenues__.....  ......  ...... ......  ............................  24
Section 5.03. Creation of Bond Fund and Accounts Therein; Allocation of Net Revenues  25
Section 5.04. Application of Interest Account  25
Section 5.05. Application of Principal Account  25
Section 5.06. Application of Sinking Account  25
Section 5.07. Application of Reserve Account  26
Section 5.08. Application of Redemption Fund  26
Section 5.09. Application of Project Fund  27
Section 5.10. Rates and Charges  27
Section 5.11. Budget and Appropriation of Debt Service Payments  28
Section 5.12. Special Obligation of the Authority; Obligations Absolute  29
Section 5.13. Investments  29
Section 5.14. Valuation of Investments  30
ARTICLE
ii
PARTICULAR COVENANTS
Section 6.01. Punctual Payment; Compliance with Documents  31
Section 6.02. Extension of Payment of Bonds  31
Section 6.03. Against Encumbrances  31
Section 6.04. Power to Issue Bonds and Make Pledge and Assignment  31
Section 6.05. Accounting Records and Financial Statements  32
Section 6.06. Continuing Disclosure  32
Section 6.07. Covenants to Maintain Tax-Exempt Status  32
Section 6.08. Waiver of Laws  33
Section 6.09. Protection of Security and Rights of Owners  33
Section 6.10. Further Assurances  33
Section 6.11. Maintenance, Utilities, Taxes and Assessments  33
Section 6.12. Operation of Water Enterprise  34
Section 6.13. Public Liability and Property Damage Insurance  34
Section 6.14. Casualty Insurance  34
Section 6.16. Eminent Domain  35
Section 6.17. Restriction on Sale of Water Enterprise  35
Section 6.18. Covenant to Maintain Lease  35
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES OF OWNERS
Section 7.01. Events of Default and Acceleration of Maturities  36
Section 7.02. Application of Funds Upon Acceleration  37
Section 7.03. Other Remedies; Rights of Owners and Insurer  37
Section 7.04. Power of Trustee to, Control Proceeding  38
Section 7.05. Appointment of Receivers  38
Section 7.06. Non-Waiver  38
Section 7.07. Rights and Remedies of Owners  39
Section 7.08. Termination of Proceedings  39
ARTICLE VIII
THE TRUSTEE
Section 8.01. Duties, Immunities and Liabilities of Trustee  40
Section 8.02. Merger or Consolidation  41
Section 8.03. Liability of Trustee  41
Section 8.04. Right to Rely on Documents  43
Section 8.05. Preservation and Inspection of Documents  43
Section 8.06. Compensation and Indemnification  43
ARTICLE IX
MODIFICATION OR AMENDMENT OF THIS INDENTURE
Section 9.01. Amendments Permitted  45
Section 9.02. Effect of Supplemental Indenture  46
Section 9.03. Endorsement of Bonds; Preparation of New Bonds  46
Section 9.04. Amendment of Particular Bonds  47
ARTICLE X
DEFEASANCE
Section 10.01. Discharge of Indenture  48
Section 10.02. Discharge of Pledge of Net Revenues  48
Section 10.03. Deposit of Money or Securities with Trustee  49
Section 10.04. Unclaimed Funds  50
ARTICLE XI
BOND INSURANCE
Section 11.01. Amendments Requiring Consent of Insurer  51
Section 11.02. Approval of Any Reorganization  51
Section 11.03. Consent of Insurer Upon Default  51
Section 11.04. Acceleration Rights  51
Section 11.05. Notice to Insurer  51
iii
Section 11.06. Defeasance Provisions  52
Section 11.07. Payment Procedure  52
Section 11.08. Trustee-Related Provisions  54
Section 11.09. Insurer as Third Party Beneficiary  54
Section 11.10. Parties Interested Herein  54
ARTICLE XII
MISCELLANEOUS
Section 12.01. Liability of Authority Limited to Net Revenues  55
Section 12.02. Limitation of Rights to Parties, Owners  55
Section 12.03. Funds and Accounts  55
Section 12.04. Waiver of Notice; Requirement of Mailed Notice  55
Section 12.05. Destruction of Bonds  55
Section 12.06. Severability of Invalid Provisions  55
Section 12.07. Notices  56
Section 12.08. Evidence of Rights of Owners  56
Section 12.09. Disqualified Bonds  57
Section 12.10. Money Held for Particular Bonds  57
Section 12.11. Waiver of Personal Liability  57
Section 12.12. Successor Is Deemed Included in All References to Predecessor  57
Section 12.13. Execution in Several Counterparts  57
Section 12.14. Governing Law  57
Exhibit A  Form of Series A Bond
iv
INDENTURE OF TRUST
This INDENTURE OF TRUST (the "Indenture"), dated as of October 1, 2006, is by
and among the INDIO WATER AUTHORITY, a joint powers authority duly organized and
existing under and by virtue of the laws of the State of California (the "Authority ), the CITY
OF INDIO, a general law city duly organized and existing under the laws of the State of
California (the "City"), and UNION BANK OF CALIFORNIA, N.A., a national banking
association organized and existing under the laws of the United States of America with a
corporate trust office in Los Angeles, California, being qualified to accept and administer
the trusts hereby created (the "Trustee");
WITNESSETH:
WHEREAS, the Authority is a joint exercise of powers authority duly organized and
existing under and pursuant to that certain Joint Exercise of Powers Agreement, dated as of
April 19, 2000, by and between the City of Indio (the "City") and the Redevelopment Agency
of the City of Indio (the "Agency"), and under the provisions of Articles 1 through 4
(commencing with Section 6500) of Chapter 5 of Division 7 of Title 1 of the Government
Code of the State of California (the "Act"), and is authorized pursuant to Article 4 of the Act
(the "Bond Law") to borrow money for the purpose of financing and refinancing capital
improvements of the Authority; and
WHEREAS, the City has leased the City's water system to the Authority pursuant to
that certain Lease, dated as of May 22, 2001 (as amended pursuant to the First
Amendment to Lease, dated as of September 17, 2001, the Second Amendment to Lease,
dated as of October 15, 2001, and the Third Amendment to Lease, dated as of October 1,
2006, and as amended, the "Lease"), by and between the Authority and the City; and
WHEREAS, to refinance a Promissory Note, dated November 1, 2001, in the original
principal amount of $5,000,000, issued for the purpose of making a lease payment in
connection with the Lease and to finance certain capital improvements to the water system,
the Authority issued its Indio Water Authority Water Enterprise Revenue Bonds, 2004
Series (the "2004 Bonds") in the aggregate principal amount of $12,000,000; and
WHEREAS, to refund and defease the 2004 Bonds and to finance additional capital
improvements to the water system, the Authority has determined to issue its Indio Water
Authority 2006 Water Revenue Bonds (the "2006 Bonds") in the aggregate principal amount
of $[Bond Amount] pursuant to this Indenture; and
WHEREAS, the Authority has determined that in order to provide for the
authentication and delivery of the 2006 Bonds, to establish and declare the terms and
conditions upon which the 2006 Bonds are to be issued and secured and to secure the
payment of the principal thereof and interest thereon, the Authority has authorized the
execution and delivery of this Indenture; and
WHEREAS, the Authority hereby certifies that all acts and proceedings required by
law necessary to make the 2006 Bonds, when executed by the Authority, authenticated and
delivered by the Trustee, and duly issued, the valid, binding and legal special obligations of
the Authority, and to constitute this Indenture a valid and binding agreement for the uses
and purposes herein set forth in accordance with its terms, have been done and taken, and
the execution and delivery of this Indenture have been in all respects duly authorized;
NOW, THEREFORE, THIS INDENTURE WITNESSETH, that in order to secure the
payment of the principal of and the interest on all Bonds at any time issued and outstanding
under this Indenture, according to their tenor, and to secure the performance and
observance of all the covenants and conditions therein and herein set forth, and to declare
the terms and conditions upon and subject to which the Bonds are to be issued and
received, and in consideration of the premises and of the mutual covenants herein
contained and of the purchase and acceptance of the Bonds by the owners thereof, and for
other valuable considerations, the receipt whereof is hereby acknowledged, the Authority
does hereby covenant and agree with the Trustee, for the benefit of the respective owners
from time to time of the Bonds, as follows:
ARTICLE
DEFINITIONS; CONTENT OF CERTIFICATES AND OPINIONS
Section 1.01. Definitions. Unless the context otherwise requires, the terms defined
in this Section 1.01 shall, for all purposes of this Indenture and of any indenture
supplemental hereto and of any certificate, opinion or other document herein mentioned,
have the meanings herein specified, to be equally applicable to both the singular and plural
forms of any of the terms herein defined. All capitalized terms used herein which are defined
in the Lease and not defined herein shall have the meanings specified in the Lease.
"Additional Bonds" means bonds or other obligations payable from Net Revenues and
ranking on a parity with the Bonds authorized to be issued under Section 3.05 pursuant to a
Supplemental Indenture.
"Agency" means the Redevelopment Agency of the City of Indio, a public body
corporate and politic organized under the laws of the State, and any successor thereto.
"Agreement" means that certain Joint Exercise of Powers Agreement, dated as of
April 19, 2000, by and between the City and the Agency, as hereafter duly amended and
supplemented from time to time, creating the Authority for the purposes, among other things,
of assisting the City and the Agency in the financing and refinancing of Public Capital
Improvements, as such term is defined in the Bond Law.
"Annual Debt Service" means, for each Bond Year with respect to each of the Bonds,
the sum of (a) the interest payable on the Outstanding Bonds in such Bond Year, and (b) the
principal amount of the Outstanding Bonds scheduled to be paid in such Bond Year,
including from mandatory sinking fund payments.
"Authority" means the Indio Water Authority, a joint powers authority duly organized
and existing under the Agreement and the laws of the State.
"Authorized Denomination" means denominations of $5,000 or any integral multiple
thereof.
"Authorized Representative" means: (a) with respect to the Authority, its President,
Vice President, Executive Director, Treasurer, Secretary or any other person designated as an
Authorized Representative of the Authority by a Written Certificate of the Authority signed by its
President and filed with the City and the Trustee; and (b) with respect to the City, its Mayor, City
Manager, City Clerk, Treasurer, Finance Director or any other person designated as an
Authorized Representative of the City by a Written Certificate of the City signed by its Mayor
or City Manager and filed with the Trustee.
"Bond Counsel" means (a) Jones Hall, A Professional Law Corporation, San Francisco,
California, or (b) any other attorney or firm of attorneys appointed by or acceptable to the
Authority of nationally-recognized experience in the issuance of obligations the interest on which
is excludable from gross income for federal income tax purposes under the Code.
"Bond Fund" means the fund by that name established pursuant to Section 5.03.
"Bond Law" means the Marks-Roos Local Bond Pooling Act of 1985, constituting
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Article 4 (commencing with section 6584) of Chapter 5 of Division 7 of Title I of the
Government Code of the State, as in existence on the Closing Date or as thereafter
amended from time to time.
"Bond Year" means each twelve-month period extending from April 2 in one
calendar year to April 1 of the succeeding calendar year, both dates inclusive, except that
the first Bond Year shall extend from the Closing Date to April 1, 2007 with respect to the
2006 Bonds.
"Bonds" means the 2006 Bonds authorized by, and at any time Outstanding pursuant
to, this Indenture or any Supplemental Indenture, and any Additional Bonds authorized by, and
at any time
Outstanding
pursuant to, this Indenture and any Supplemental Indenture.
"Business Day" means a day which is not a Saturday, Sunday or legal holiday on
which banking institutions in the State of California, or in any state in which the Trust Office is
located, are closed. If any payment hereunder is due on a day which is not a Business Day,
such payment shall be made on the next succeeding Business Day with the same effect as
if made on such previous day.
"City" means the City of Indio, a municipal corporation organized under the laws of
the State.
"Closing Date" means the date of delivery of the Bonds to the Original Purchaser.
"Code" means the Internal Revenue Code of 1986. "Commission" means the
Commission of the Authority
"Costs of Issuance" means all expenses incurred in connection with the authorization,
issuance, sale and delivery of the Bonds and the application of the proceeds of the Bonds,
including but not limited to all compensation, fees and expenses (including but not limited to
fees and expenses for legal counsel) of the Authority, initial fees and expenses of the Trustee
and its counsel, title insurance premiums, municipal bond insurance premiums and other costs
of credit enhancement, appraisal fees, compensation to any financial consultants or
underwriters, legal fees and expenses, filing and recording costs, rating agency fees, costs of
preparation and reproduction of documents and costs of printing.
"Costs of Issuance Fund" means the fund by that name established and held by the
Trustee pursuant to Section 3.03.
"Continuing Disclosure Certificate" means the Continuing Disclosure Certificate
relating to the 2006 Bonds, executed by the Authority as of the Closing Date and
acknowledged by Union Bank of California, N.A., as dissemination agent.
"Debt Service" means, during any period of computation, the amount obtained for
such period by totaling the following amounts: (a) the principal amount of all Outstanding
Serial Bonds coming due and payable by their terms in such period; (b) the minimum
principal amount of all Outstanding Term Bonds scheduled to be redeemed by operation of
mandatory sinking account deposits in such period; and (c) the interest which would be due
during such period on the aggregate principal amount of Bonds which would be Outstanding
in such period if they are retired as scheduled, but deducting and excluding from such
aggregate amount the amount of Bonds no longer Outstanding.
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"DTC" means The Depository Trust Company, New York, New York, and its
successors and assigns.
"Employee Agreement" means that certain Employee Lease Agreement, dated July
17, 2001, by and between the City and the Authority, as hereafter duly amended and
supplemented from time to time.
"Event of Default" means any of the events specified in Section 7.01.
"Federal Securities" means any of the following:
1. Cash (insured at all times by the Federal Deposit Insurance Corporation)
2. Obligations of, or obligations guaranteed as to principal and interest by,
the U.S. or any agency or instrumentality thereof, when such obligations are backed by
the full faith and credit of the U.S. including:
U.S. treasury obligations
All direct or fully guaranteed obligations
Farmers Home Administration
General Services Administration
Guaranteed Title XI financing
Government National Mortgage Association (GNMA)
State and Local Government Series
"Fiscal Year" means any twelve-month period extending from July 1 in one calendar
year to June 30 of the succeeding calendar year, both dates inclusive, or any other twelve-
month period selected and designated by the Authority, as its official fiscal year period.
"Guaranty Agreement" means the Guaranty Agreement, dated as of the Closing Date,
by and between the Authority and the Insurer related to the Reserve Account Surety Bond
issued by the Insurer with respect to the 2006 Bonds, as amended from time to time.
"Guaranteed Investment Contracts" means investment agreements which allow for
withdrawals at such times as required by this Indenture with providers whose unsecured
obligations are rated by Moody's and S&P in one of the two highest rating categories
assigned by such agencies.
"Indenture" means this Indenture of Trust as originally executed or as it may from time
to time be supplemented, modified or amended by any Supplemental Indenture pursuant to
the provisions hereof.
"Independent Accountant" means any certified public accountant or firm of certified
public accountants appointed and paid by the Authority, and who, or each of whom (a) is in
fact independent and not under domination of the Authority; (b) does not have any
substantial interest, direct or indirect, in the Authority, and (c) is not connected with the
Authority as an officer or employee of the Authority but who may be regularly retained to
make annual or other audits of the books of or reports to the Authority.
"Information Services" means Financial Information, Inc.'s "Daily Called Special
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Service," 30 Montgomery Street, 10'11 Floor, Jersey City, New Jersey 07302, Attention:
Editor; Mergent/FIS, Inc., 5250 77 Center Drive, Suite 150, Charlotte, North Carolina 28217,
Attention: Municipal News Reports; and Kenny S&P, 55 Water Street, 45th Floor, New York,
New York 10041, Attention: Notification Department; or, in accordance with then current
guidelines of the Securities and Exchange Commission, such other addresses and/or such
other services providing information with respect to called bonds as the Authority may
designate in a written certificate of the Authority delivered to the Trustee.
"Insurance Policy" means the municipal bond insurance policy issued by the Insurer
guaranteeing the scheduled payment of principal of and interest on the 2006 Bonds when
due.
"Insurer" means  , or any successor thereto or assignee
thereof.
"Interest Account" means the account by that name established in the Bond Fund
pursuant to Section 5.03.
"Interest Payment Date" means April 1 and October 1 of each year, commencing
April 1, 2007.
"Lease" means the Lease, dated May 22, 2001, by and between the Authority and
the City, relating to the lease of the Water Enterprise by the Authority from the City, as
amended from time to time, including as amended by the First Amendment to Lease, dated
as of September 17, 2001, the Second Amendment to Lease, dated as of October 15, 2001,
and the Third Amendment to Lease, dated as of October 1, 2006.
"Letter of Representations" means the letter of the Authority and the Trustee delivered
to and accepted by DTC (or such other applicable Securities Depository) on or prior to the
issuance of the Bonds in book entry form setting forth the basis on which DTC (or such other
applicable Securities Depository) serves as depository for the Bonds issued in book entry
form, as originally executed or as it may be supplemented or revised or replaced by a letter to
a substitute Securities Depository.
"Maximum Annual Debt Service" means, as of the date of any calculation, the largest
Annual Debt Service on the Bonds during the current or any future Bond Year.
"Moody's" means Moody's Investors Service, its successors and assigns.
"Net Revenues" means, for any Fiscal Year, an amount equal to all of the Revenues
received with respect to such Fiscal Year, minus the amount required to pay all Operation
and Maintenance Costs becoming payable with respect to such Fiscal Year.
"Operation and Maintenance Costs" means costs spent or incurred for maintenance
and operation of the Water Enterprise calculated in accordance with generally accepted
accounting principles, including (among other things) the cost of purchasing water, the
reasonable expenses of management and repair and other expenses necessary to maintain
and preserve the Water Enterprise in good repair and working order, and including
administrative costs of the City that are charged directly or apportioned to the Water
Enterprise pursuant to the Reimbursement Agreement and the Employee Agreement,
including but not limited to salaries and wages of employees, payments to any pension
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system, overhead, insurance, taxes (if any), fees of auditors, accountants, attorneys or
engineers and insurance premiums, and including all other reasonable and necessary costs
of the City and the Authority or charges (other than debt service payments) required to be
paid by it to comply with the terms of the Bonds or of any resolution or indenture authorizing
the issuance of Parity Obligations, or of such Parity Obligations, but excluding in all cases
depreciation, replacement and obsolescence charges or reserves therefor and amortization
of intangibles or other bookkeeping entries of a similar nature and all capital charges.
"Original Purchaser" means E. J. De La Rosa & Co., Inc., as the original purchaser of
the Bonds upon their delivery by the Trustee on the Closing Date.
"Outstanding," when used as of any particular time with reference to Bonds, means
(subject to the provisions of Section 12.09) all Bonds theretofore, or thereupon being,
authenticated and delivered by the Trustee under this Indenture except: (a) Bonds
theretofore canceled by the Trustee or surrendered to the Trustee for cancellation; (b) Bonds
with respect to which all liability of the Authority shall have been discharged in accordance
with Section 10.01, including Bonds (or portions thereof) described in Section 12.09; and (c)
Bonds for the transfer or exchange of or in lieu of or in substitution for which other Bonds
shall have been authenticated and delivered by the Trustee pursuant to this Indenture.
"Owner" or "Bondholder," whenever used herein with respect to a Bond, means the
person in whose name the ownership of such Bond is registered on the Registration Books.
"Parity Obligations," means bonds, notes or other obligations issued or incurred by
the Authority that have a lien on the Net Revenues on a parity with the Bonds pursuant to
this Indenture, including Additional Bonds.
"Permitted Investments" means any of the following:
1. Cash (insured at all times by the Federal Deposit Insurance Corporation)
2. Obligations of, or obligations guaranteed as to principal and interest by,
the U.S. or any agency or instrumentality thereof, when such obligations are backed by
the full faith and credit of the U.S. including:
U.S. treasury obligations
All direct or fully guaranteed obligations
Farmers Home Administration
General Services Administration
Guaranteed Title XI financing
Government National Mortgage Association (GNMA)
State and Local Government Series
3. Obligations of any of the following federal agencies which obligations
represent the full faith and credit of the United States of America, including:
• Export-Import Bank
• Rural Economic Community Development Administration
• U.S. Maritime Administration
• Small Business Administration
• U.S. Department of Housing & Urban Development (PHAs)
7
• Federal Housing Administration
• Federal Financing Bank
4.  Obligations of any of the following federal agencies which obligations are
not fully guaranteed by the full faith and credit of the United States of America:
• Senior debt obligations issued by the Federal National
Mortgage Association (FNMA) or Federal Home Loan Mortgage
Corporation (FHLMC)
• Obligations of the Resolution Funding Corporation
(REFCORP)
• Senior debt obligations of the Federal Home Loan Bank
System
Senior debt obligations of other Government Sponsored
Agencies approved by The Insurer
5. U.S. dollar denominated deposit accounts, federal funds and bankers'
acceptances with domestic commercial banks which have a rating on their short term
certificates of deposit on the date of purchase of "P-I" by Moody's and "A-1" or "A-1+" by
S&P and maturing not more than 360 calendar days after the date of purchase. (Ratings
on holding companies are not considered as the rating of the bank);
6. Commercial paper which is rated at the time of purchase in the single
highest classification, "P-1" by Moody's and "A-1+" by S&P and which matures not more
than 270 calendar days after the date of purchase;
7. Investments in a money market fund rated "AAAm" or "AAAm-G" or better
by S&P, including such funds for which the Trustee or an affiliate provides investment
advice or other services;
8. Pre-refunded Municipal Obligations defined as follows: any bonds or
other obligations of any state of the United States of America or of any agency,
instrumentality or local governmental unit of any such state which are not callable at the
option of the obligor prior to maturity or as to which irrevocable instructions have been
given by the obligor to call on the date specified in the notice; and
(A) which are rated, based on an irrevocable escrow account or fund
(the "escrow"), in the highest rating category of Moody's or S&P or any
successors thereto; or
(B) which are fully secured as to principal and interest and redemption
premium, if any, by an escrow consisting only of cash or obligations described in
paragraph 2 above, which escrow may be applied only to the payment of such
principal of and interest and redemption premium, if any, on such bonds or other
obligations on the maturity date or dates thereof or the specified redemption date
or dates pursuant to such irrevocable instructions, as appropriate, and (ii) which
escrow is sufficient, as verified by a nationally recognized independent certified
public accountant, to pay principal of and interest and redemption premium, if
any, on the bonds or other obligations described in this paragraph on the maturity
date or dates specified in the irrevocable instructions referred to above, as
appropriate;
9. Municipal obligations rated "Aaa/AAA" or general obligations of States
with a rating of "A2/A" or higher by both Moody's and S&P;
10. Investment agreements approved in writing by The Insurer Assurance
Corporation (supported by appropriate opinions of counsel);
11. Other forms of investments (including repurchase agreements) approved
in writing by the Insurer; and
12. The Local Agency Investment Fund ("LAIF") of the State of California,
created pursuant to section 16429.1 of the California Government Code.
"Principal" or "Principal Amount" means, as of any date of calculation, the principal
amount of the Bonds.
"Principal Account" means the account by that name established in the Bond Fund
pursuant to Section 5.03.
"Principal Payment Date" means each April 1 of each year, commencing April 1, 20_.
"Project Fund" means the fund by that name established pursuant to Section 5.09.
"Qualified Independent Consultant" means a person or a firm who or which engages in
the business of advising the management of public agencies concerning the operation and
financing of public utilities, including water systems, and which person or firm, by reason of his
or its knowledge and experience, has acquired a reputation as a recognized consultant. Such
Qualified Independent Consultant may include a person or firm rendering professional
engineering or accounting services in addition to his or its occupation as a public utility
consultant and may include any person or firm regularly employed by the Authority or the City
as a consultant to the Authority or the City.
"Qualified Reserve Account Credit Instrument" means an irrevocable standby or direct-
pay letter of credit or surety bond issued by a commercial bank or insurance company,
approved in form and substance by the Insurer and deposited with the Trustee pursuant to this
Indenture, provided that all of the following requirements are met: (i) at all times during the term
of such letter of credit or surety bond, the long-term credit rating of such bank is within the
highest rating category of Moody's and S&P, or the claims paying ability of such insurance
company is rated within the highest rating category of A.M. Best & Company and S&P; (ii) such
letter of credit or surety bond has a term which ends no earlier than the last Interest Payment
Date of the series of Bonds to which the Reserve Requirement applies; (iii) such letter of credit
or surety bond has a stated amount at least equal to the portion of the Reserve Requirement
with respect to which funds are proposed to be released pursuant to this Indenture; and (iv) the
Trustee is authorized pursuant to the terms of such letter of credit or surety bond to draw
thereunder amounts necessary to carry out the purposes specified in this Indenture, including
the replenishment of the Interest Account or the Principal Account.
"Rate Stabilization Fund" means any fund established and held by the Authority or the
City as a fund for the stabilization of rates and charges imposed by the Authority and the City
with respect to the Water Enterprise, which fund is established, held and maintained in
accordance with Section 5.10(c).
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"Record Date" means, with respect to any Interest Payment Date, the fifteenth (15th)
calendar day of the month preceding such Interest Payment Date.
"Redemption Fund" means the fund by that name established pursuant to Section 5.08.
"Registration Books" means the records maintained by the Trustee pursuant to Section
2.06 for the registration and transfer of ownership of the Bonds.
"Reimbursement Agreement" means that certain Reimbursement Agreement, dated
as of July 1, 2001, by and between the City and the Authority, as hereafter duly amended
and supplemented from time to time.
"Reserve Account" means the account by that name in the Bond Fund established
pursuant to Section 5.03.
"Reserve Requirement" means, as of any date of calculation, an amount equal to the
least of: (i) 100% of the Maximum Annual Debt Service for the then current or every
subsequent Bond Year; (ii) 125% of average Annual Debt Service on the Bonds for the then
current and every subsequent Bond Year, and (iii) 10% of the issue price (as defined
pursuant to section 148 of the Code).
"Revenue Fund" means the Revenue Fund held by the Authority.
"Revenues" means all revenues, income, rents, fees, charges, rates and other moneys
and receipts derived or to be derived by the Authority from or attributable to the lease and
operation of the Water Enterprise including, without limiting the generality of the foregoing,
(i) all revenues attributable to the Water Enterprise or to the payment of the costs thereof
received or to be received by the Authority under any contract for service from the Water
Enterprise or any part thereof or any contractual arrangement, with respect to the use of the
Water Enterprise or any portion thereof or the services or capacity thereof, (ii) the proceeds
of any standby, water availability charges or connection fees collected by the Authority, (iii)
the proceeds of any insurance covering business interruption loss relating to the Water
Enterprise, and (iv) interest received on any invested moneys of the Water Enterprise, but
excluding any proceeds of taxes restricted by law to be used by the Authority to pay bonds
hereafter issued and any state and federal grants received by the Authority.
"S&P" means Standard & Poor's, a division of The McGraw-Hill Companies, its
successors and assigns.
"Securities Depositories" means The Depository Trust Company, 55 Water Street,
New York, New York 10041, Fax: (212) 855-7320 or 855-1000, and, in accordance with then
current guidelines of the Securities and Exchange Commission, such other addresses
and/or such other securities depositories as the Authority may designate in a Written
Certificate of the Authority delivered to the Trustee.
"Serial Bonds" means the Bonds not subject to redemption from mandatory sinking
fund payments.
"Sinking Account" means the account by that name in the Bond Fund established
pursuant to Section 5.06.
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"State" means the State of California.
"Supplemental Indenture" means any indenture hereafter duly authorized and entered
into between the Authority and the Trustee, supplementing, modifying or amending this
Indenture; but only if and to the extent that such Supplemental Indenture is specifically
authorized hereunder.
"2004 Bonds" means the Indio Water Authority Water Enterprise Revenue Bonds,
2004 Series, issued in the aggregate principal amount of $12,000,000 pursuant to an
Indenture of Trust, dated as of July 1, 2004, by and between the Authority, the City and the
Trustee.
"2006 Bonds" means the Bonds issued pursuant to Section 2.01.
"2006 Bonds Reserve Account Surety Bond" means the Surety Bond No.
 issued by the Insurer for credit to the 2006 Bonds Subaccount of the Reserve
Account guaranteeing certain payments into the Reserve Account with respect to the 2006
Bonds as provided therein and subject to the limitations set forth therein.
"Tax Regulations" means temporary and permanent regulations promulgated under
or with respect to sections 103 and 141 through 501 inclusive, of the Code.
"Term Bonds" means the Bonds maturing on April 1, 20_and April 1, 20_,
respectively.
"Trustee" means Union Bank of California, N.A., a national banking association
organized and existing under the laws of the United States of America, or its successor, as
Trustee hereunder as provided in Section 8.01.
"Trust Office" means the corporate trust office of the Trustee at the address set forth
in Section 12.07, or such other office designated by the Trustee from time to time and such
office as the Trustee may designate in writing to the Authority from time to time as the place
for transfer, registration, surrender, exchange or payment of the Bonds.
"Water Enterprise" means the City's water system, consisting of the property and
assets described in the Lease, leased by the Authority.
"Written Certificate," "Written Request" and "Written Requisition of the Authority or
the City means, respectively, a written certificate, request or requisition signed in the name of
the Authority or the City by its corresponding Authorized Representative. Any such
instrument and supporting opinions or representations, if any, may, but need not, be
combined in a single instrument with any other instrument, opinion or representation, and
the two or more so combined shall be read and construed as a single instrument.
Section 1.02. Interpretation.
(a)  Unless the context otherwise indicates, words expressed in the singular shall
include the plural and vice versa and the use of the neuter; masculine, or feminine gender is for
convenience only and shall be deemed to include the neuter, masculine or feminine gender, as
appropriate.
11
(b) Headings of articles and sections herein and the table of contents hereof are
solely for convenience of reference, do not constitute a part hereof and shall not affect the
meaning, construction or effect hereof,
(c) All references herein to "Articles," "Sections" and other subdivisions are to the
corresponding Articles, Sections or subdivisions of this Indenture: the words "herein," "hereof,"
"hereby," "hereunder" and other words of similar import refer to this Indenture as a whole and
not to any particular Article, Section or subdivision hereof.
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ARTICLE II
THE 2006 BONDS
Section 2.01. Authorization of 2006 Bonds. The Authority hereby authorizes the
issuance hereunder of the 2006 Bonds, which shall constitute special obligations of the
Authority, for the purpose of refinancing the 2004 Bonds and financing certain capital
improvements to the Water Enterprise. The 2006 Bonds are hereby designated the "Indio
Water Authority 2006 Water Revenue Bonds." The aggregate principal amount of Bonds
initially issued and Outstanding under this Indenture shall equal  Million
Dollars ($[Bond Amount). This Indenture constitutes a continuing agreement with the
Trustee and the Owners from time to time of the 2006 Bonds to secure the full payment of the
principal of and interest on all the 2006 Bonds, subject to the covenants, provisions and
conditions herein contained.
Section 2.02. Terms of the 2006 Bonds. The 2006 Bonds shall be issued in fully
registered form without coupons in Authorized Denominations. The 2006 Bonds shall initially
be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New
York, New York, and shall be evidenced by one 2006 Bond for each of the maturities in the
principal amounts set forth below. DTC is hereby appointed depository for the 2006 Bonds,
and registered ownership may not thereafter be transferred except as set forth in Section
2.04. The 2006 Bonds shall mature on April 1 in the years and in the amounts set forth
below and shall bear interest on each Interest Payment Date at the rates set forth below.
Maturity Date  Principal
(April 1) Amount
 
Interest
Interest on the 2006 Bonds calculated based on a 360-day year of twelve (12) thirty-
day months and shall be payable on each Interest Payment Date, commencing April 1, 2007,
to the person whose name appears on the Registration Books as the Owner thereof as of
the Record Date immediately preceding each such Interest Payment Date, such interest to
be paid by check of the Trustee mailed by first class mail to the Owner at the address of
such Owner as its appears on the Registration Books; provided however, that payment of
interest or principal may be by wire transfer in immediately available funds to an account in
the United States of America to any Owner of 2006 Bonds in the aggregate principal amount
of $1,000,000 or more who shall furnish written wire instructions to the Trustee prior to the
applicable Record Date. Principal of any 2006 Bond shall be paid by check or wire of the
Trustee upon presentation and surrender thereof at the Trust Office. Principal of and interest
on the 2006 Bonds shall be payable in lawful money of the United States of America.
Each 2006 Bond shall be dated the Closing Date and shall bear interest from the
Interest Payment Date next preceding the date of authentication thereof, unless (a) it is
authenticated after a Record Date and on or before the following Interest Payment Date, in
which event it shall bear interest from such Interest Payment Date, or (b) unless it is
authenticated on or before March 15, 2007, in which event it shall bear interest from the
Closing Date; provided, however, that if, as of the date of authentication of any 2006 Bond,
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interest thereon is in default, such 2006 Bond shall bear interest from the Interest Payment
Date to which interest has previously been paid or made available for payment thereon.
Section 2.03. Transfer of Bonds. Subject to Section 2.05, any Bond may, in
accordance with its terms, be transferred on the Registration Books by the person in whose
name it is registered, in person or by his duly authorized attorney, upon surrender of such
Bond for cancellation, accompanied by delivery of a written instrument of transfer, duly
executed in a form acceptable to the Trustee. Transfer of any Bond shall not be permitted by
the Trustee during the period established by the Trustee for selection of Bonds for
redemption or if such Bond has been selected for redemption pursuant to Article IV.
Whenever any Bonds or Bonds shall be surrendered for transfer, the Authority shall execute
and the Trustee shall authenticate and shall deliver a new Bond or Bonds of like tenor,
interest rate, maturity and aggregate principal amount in Authorized Denominations. The
Trustee may require the Owner requesting such transfer to pay any tax or other
governmental charge required to be paid with respect to such transfer.
Section 2.04. Use of Securities Depository.
(a)  The Bonds shall be initially registered as provided in Section 2.02. Registered
ownership of the Bonds, or any portion thereof, may not thereafter be transferred except:
(1)  
to any successor of Cede & Co., as nominee of DTC, or its
nominee, or to any substitute depository designated pursuant to clause (ii) of
this subsection (a) hereof (a "substitute depository"); provided, that any
successor of Cede & Co., as nominee of DTC or a substitute depository, shall
be qualified under any applicable laws to provide the services proposed to be
provided by it;
(ii) to any substitute depository, upon (1) the resignation of DTC or
its successor (or any substitute depository or its successor) from its functions
as depository, or (2) a determination by the Authority to substitute another
depository for DTC (or its successor) because DTC or its successor (or any
substitute depository or its successor) is no longer able to carry out its
functions as depository; provided, that any such substitute depository shall be
qualified under any applicable laws to provide the services proposed to be
provided by it; or
(iii) to any person as provided below, upon (1) the resignation of
DTC or its successor (or substitute depository or its successor) from its
functions as depository, or (2) a determination by the Authority to remove DTC
or its successor (or any substitute depository or its successor) from its
functions as depository.
(iv) in the case of any transfer pursuant to clause (i) or clause (ii) of
subsection (a) hereof, upon receipt of the Outstanding Bonds by the Trustee,
together with a Written Request of the Authority to the Trustee, a new Bond for
each maturity shall be authenticated and delivered in the aggregate principal
amount of the Bonds then Outstanding, registered in the name of such
successor or such substitute depository, or their nominees, as the case may
be, all as specified in such Written Request of the Authority.
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(v) in the case of any transfer pursuant to clause (iii) of subsection
(a) hereof, upon receipt of the Outstanding Bonds by the Trustee, together
with a Written Request of the Authority to the Trustee, new Bonds shall be
authenticated and delivered in such denominations numbered in the manner
determined by the Trustee and registered in the names of such persons as are
requested in such a Written Request of the Authority, subject to the limitations
of Section 2.02 hereof, provided, the Trustee shall not be required to deliver
such Bonds within a period less than sixty (60) days from the date of receipt of
such a Request of the Authority. After any transfer pursuant to this subsection,
the Bonds shall be transferred pursuant to Section 2.03.
the Authority and the Trustee shall be entitled to treat the person in
whose name any Bond is registered as the Owner thereof for all purposes of
this Indenture and any applicable laws, notwithstanding any notice to the
contrary received by the Trustee or the Authority; and the Authority and the
Trustee shall have no responsibility nor shall they have any liability for
transmitting payments to, communication with, notifying, or otherwise dealing
with any beneficial owners of the Bonds, and neither the Authority nor the
Trustee will have any responsibility or obligations, legal or otherwise, to the
beneficial owners or to any other party, including DTC or its successor (or
substitute depository or its successor), except for the Owner of any Bonds.
(vi) so long as the Outstanding Bonds are registered in the name of
Cede & Co. or its registered assigns, the Authority and the Trustee shall
cooperate with Cede & Co., as sole registered Owner, or its registered assigns
in effecting payment of the principal of and interest on the Bonds by arranging
for payment in such manner that funds for such payments are properly
identified and are made immediately available on the date they are due.
(vii) notwithstanding anything to the contrary contained herein, so
long as the Bonds are registered as provided in this Section 2.04, payment of
principal of and interest on the Bonds shall be made in accordance with the
Letter of Representations delivered to DTC with respect to the Bonds.
Section 2.05. Exchange of Bonds. Any Bond may be exchanged at the Trust Office
for a like aggregate principal amount of Bonds of other authorized denominations and of like
maturity. Exchange of any Bond shall not be permitted during the period established by the
Trustee for selection of Bonds for redemption or if such Bond has been selected for
redemption pursuant to Article IV. The Trustee shall require the Owner requesting such
exchange to pay any tax or other governmental charge required to be paid with respect to
such exchange.
Section 2.06. Registration Books. The Trustee will keep or cause to be kept, at the
Trust Office, sufficient records for the registration and transfer of ownership of the Bonds,
which shall at all reasonable times be open to inspection during regular business hours by the
Authority and the Owners with reasonable prior notice; and, upon presentation for such
purpose, the Trustee shall, under such reasonable regulations as it may prescribe, register
or transfer or cause to be registered or transferred, on such records, the ownership of the
Bonds as hereinbefore provided.
Section 2.07. Form and Execution of Bonds. The 2006 Bonds shall be
substantially in the form attached hereto as Exhibit A and hereby made a part hereof. The
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2006 Bonds shall be signed in the name and on behalf of the Authority with the manual or
facsimile signatures of its President or Executive Director and attested with the manual or
facsimile signature of its Secretary or any assistant duly appointed by the Commission, and
shall be delivered to the Trustee for authentication by it. In case any officer of the Authority
who shall have signed any of the 2006 Bonds shall cease to be such officer before the 2006
Bonds so signed shall have been authenticated or delivered by the Trustee or issued by the
Authority, such 2006 Bonds may nevertheless be authenticated, delivered and issued and,
upon such authentication, delivery and issue, shall be as binding upon the Authority as
though the individual who signed the same had continued to be such officer of the Authority.
Also, any 2006 Bond may be signed on behalf of the Authority by any individual who on the
actual date of the execution of such Bond shall be the proper officer although on the
nominal date of such 2006 Bond such individual shall not have been such officer.
Only such of the 2006 Bonds as shall bear thereon a certificate of authentication in
substantially the form set forth in Exhibit A, manually executed by the Trustee, shall be valid
or obligatory for any purpose or entitled to the benefits of this Indenture, and such certificate
of the Trustee shall be conclusive evidence that the 2006 Bonds so authenticated have been
duly authenticated and delivered hereunder and are entitled to the benefits of this Indenture.
Section 2.08. Temporary Bonds. The Bonds may be issued in temporary form
exchangeable for definitive Bonds when ready for delivery. Any temporary Bonds may be
printed, lithographed or typewritten, shall be of such denominations as may be determined by
the Authority, shall be in fully registered form without coupons and may contain such
reference to any of the provisions of this Indenture as may be appropriate. Every temporary
Bond shall be executed by the Authority and authenticated by the Trustee upon the same
conditions and in substantially the same manner as the definitive Bonds. If the Authority
issues temporary Bonds it will execute and deliver definitive Bonds as promptly thereafter as
practicable, and thereupon the temporary Bonds may be surrendered, for cancellation, at
the Trust Office and the Trustee shall authenticate and deliver in exchange for such
temporary Bonds an equal aggregate principal amount of definitive Bonds of authorized
denominations. Until so exchanged, the temporary Bonds shall be entitled to the same
benefits under this Indenture as definitive Bonds authenticated and delivered hereunder.
Section 2.09. Bonds, Mutilated, Lost, Destroyed or Stolen. If any Bond shall become
mutilated, the Authority, at the expense of the Owner of said Bond, shall execute, and the
Trustee shall thereupon authenticate and deliver, a new Bond of like series, tenor, and
Authorized Denomination in exchange and substitution for the Bond so mutilated, but only
upon surrender to the Trustee of the Bond so mutilated. Every mutilated Bond so surrendered to
the Trustee shall be canceled by it and destroyed. If any Bond shall be lost, destroyed or stolen,
evidence of such loss, destruction or theft may be submitted to the Authority and the Trustee
and, if such evidence be satisfactory to them and indemnity for them satisfactory to the
Authority and the Trustee shall be given, the Authority, at the expense of the Owner of such
lost, destroyed or stolen Bond, shall execute, and the Trustee shall thereupon authenticate
and deliver, a new Bond of like series and tenor in lieu of and in substitution for the Bond so
lost, destroyed or stolen (or if any such Bond shall have matured or shall have been called for
redemption, instead of issuing a substitute Bond, the Trustee may pay the same without
surrender thereof) upon receipt of the aforementioned indemnity. The Authority may require
payment by the Owner of a sum not exceeding the actual cost of preparing each new Bond
issued under this Section 2.09 and of the expenses which may be incurred by the Authority and
the Trustee. Any Bond issued under the provisions of this Section 2.09 in lieu of any Bond
alleged to be lost, destroyed or stolen shall constitute an original additional contractual
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obligation on the part of the Authority whether or not the Bond so alleged to be lost, destroyed
or stolen be at any time enforceable by anyone, and shall be entitled to the benefits of this
Indenture with all other Bonds secured by this Indenture.
Section 2.10. CUSIP Numbers. The Trustee and the Authority shall not be liable for
any defect or inaccuracy in the CUSIP number that appears on any Bond or in any
redemption notice. The Trustee may, in its discretion, include in any redemption notice a
statement to the effect that the CUSIP numbers on the Bonds have been assigned by an
independent service and are included in such notice solely for the convenience of the
Owners and that neither the Trustee nor the Authority shall be liable for any inaccuracies in
such numbers.
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ARTICLE III
ISSUANCE OF 2006 BONDS AND APPLICATION OF PROCEEDS
Section 3.01. Issuance and Delivery of the 2006 Bonds. At any time after the
execution of this Indenture, the Authority may execute and the Trustee shall authenticate
and, upon the Written Request of the Authority, deliver 2006 Bonds in the aggregate
principal amount of  Million Dollars ($[Bond Amount]).
Section 3.02. Application of the Proceeds of the 2006 Bonds. The net proceeds
received from the sale of the 2006 Bonds in the amount of $  shall be
deposited in trust with the Trustee, who shall forthwith set aside such proceeds as follows:
(a) The Trustee shall deposit the amount of $  in the Costs
of Issuance Fund, which amount, together with the payment on behalf of the Authority
 
by the Original Purchaser of the Insurance Policy premium of $  and
the 2006 Bonds Reserve Account Surety Bond premium in the amount of
 on the Closing Date, represents a total credit of $  to
the Costs of Issuance Fund on the Closing Date;
(b) The Trustee shall transfer the amount of $  to
Union Bank of California, N.A., as escrow bank under the 2004 Bonds Escrow
Deposit and Trust Agreement, dated as of October 1, 2006, providing for the
refunding and defeasance of the 2004 Bonds; and
(d)  The Trustee shall deposit the remaining balance of such proceeds in
the amount of $  in the 2006 Bonds Subaccount of the Project
Fund.
In addition, the Trustee shall credit the 2006 Bonds Reserve Account Surety Bond to the
2006 Bonds Subaccount of the Reserve Account in satisfaction of the portion of the Reserve
Requirement allocable to the 2006 Bonds.
The Trustee may, in its discretion, establish additional accounts in its books and
records to facilitate the transfer of moneys
Section 3.03. Establishment and Application of Costs of Issuance Fund. The
Trustee shall establish, maintain and hold in trust a separate fund designated as the "Costs
of Issuance Fund." The moneys in the Costs of Issuance Fund shall be used and withdrawn
by the Trustee to pay the Costs of Issuance relating to the 2006 Bonds upon submission of
Written Requisitions of the Authority stating the person to whom payment is to be made, the
amount to be paid, the purpose for which the obligation was incurred and that such payment
is a proper charge against said fund. The Trustee has no obligation at any time to monitor
the applications of any moneys paid pursuant to a Written Requisition of the Authority.
Ninety days after the Closing Date, or upon the earlier Written Request of the Authority, all
amounts remaining in the Costs of Issuance Fund shall be transferred by the Trustee to the
2006 Bonds Subaccount of the Project Fund and the Costs of Issuance Fund shall be
closed.
Section 3.04. Validity of Bonds. The validity of the authorization and issuance of
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the Bonds is not dependent on and shall not be affected in any way by any proceedings
taken by the Authority or the Trustee with respect to or in connection with the Lease. The
recital contained in the Bonds that the same are issued pursuant to the Constitution and
laws of the State shall be conclusive evidence of their validity and of compliance with the
provisions of law in their issuance.
Section 3.05. Issuance of Additional Bonds. In addition to the 2006 Bonds, the
Authority may, by Supplemental Indenture adopted pursuant to Section 9.01, issue Additional
bonds payable from Revenues on a parity with the 2006 Bonds and secured by a lien upon and
pledge of Net Revenues equal to the lien and pledge securing the 2006 Bonds, and the
Authority may issue and the Trustee may authenticate and deliver the Additional Bonds, in such
principal amount and for such lawful purpose or purposes (including refunding of any Bonds
issued hereunder and then Outstanding) as shall be determined by the Authority in said
Supplemental Indenture, but only upon compliance with the following specific conditions, which
are hereby made conditions precedent to the issuance of any Additional Bonds:
(a) The Authority shall not be in default under this Indenture or any Supplemental
Indenture.
(b) The Authority shall deliver to the Trustee a Written Certificate of the Authority
setting forth (i) the estimate of Net Revenues for the next Fiscal Year, (ii) Annual Debt Service
for the next Fiscal Year, including the Debt Service on such Additional Bonds, and
demonstrating that the estimated Net Revenues set forth in (i) above is at least equal to 120%
of Annual Debt Service as set forth in (ii) above. Any of the following adjustments may be made
to the calculation of Net Revenues for such Fiscal Year:
(i) The Authority may add to Net Revenues an allowance for Revenues from any
additions to or improvements or extensions of the Water Enterprise to be constructed
with the proceeds of such Additional Bonds, and also for Net Revenues from any such
additions, improvements or extensions which have been constructed from any source of
funds but which, during all or any part of such Fiscal Year, will not in service, all in an
amount equal to 100% of the estimated additional average annual Net Revenues to be
derived from such additions, improvements and extensions for the first 36-month period
following issuance of such Additional Bonds, all as shown by the certificate or opinion of
a Qualified Independent Consultant, may be added to the Net Revenues for such Fiscal
Year;
(ii) The Authority may add to Net Revenues an allowance for earnings arising from
any increase in the charges made for service from the Water Enterprise which has
become effective prior to the issuance of such Additional Bonds but which, during all or
any part of such Fiscal Year, was not in effect, in an amount equal to 100% of the
amount by which the Net Revenues for the next Fiscal Year would have been increased
if such increase in charges had been in effect during the whole of such Fiscal Year, as
shown by the certificate or opinion of a Qualified Independent Consultant.
(iii) The Authority may add to Net Revenues moneys transferred from the Rate
Stabilization Fund to the Revenue Fund during that Fiscal Year, except that the
calculation of Net Revenues may not include transfers from the Rate Stabilization Fund
to the extent that such additional moneys would be required to cause Net Revenues to
equal or exceed 100% of Annual Debt Service for outstanding Bonds, including the
proposed Additional Bonds, for that Fiscal Year.
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(c)
The Supplemental Indenture providing for the issuance of such Additional Bonds
shall require that the Reserve Account be increased, if and to the extent necessary, promptly
upon the receipt of the proceeds of the sale of such Additional Bonds to an amount at least
equal to the Reserve Requirement; provided, however, that such increase may be provided by
one or more Qualified Reserve Account Credit Instruments. Said deposit may be made from
such proceeds or any other source, as provided in said Supplemental Indenture. In addition,
the Supplemental Indenture may establish a subaccount in the Reserve Account with respect to
such Additional Bonds in order to satisfy the requirements of the Code or of a credit provider.
(d) Such Additional Bonds shall be payable as to principal annually on April 1 of
each year in which principal falls due and shall be payable as to interest semiannually on April 1
and October 1 of each year, provided that the first installment of interest may be payable on
either April 1 or October 1 and shall be for a period of not longer than twelve months as shall be
specified in the Supplemental Indenture providing for the issuance of such Additional Bonds.
(e) The Authority shall deliver to the Trustee a Written Certificate of the Authority
certifying that the conditions precedent to the issuance of such Additional Bonds set forth in
subsections (a), (b), (c) and (d) of this Section 3.05 above have been satisfied.
Section 3.06. Parity Obligations. The Authority may issue or incur Parity Obligations,
other than Additional Bonds (which shall be issued pursuant to Section 3.05) during the term
of the Bonds only if:
(a) no Event of Default has occurred and is continuing under this Indenture and any
Supplemental Indenture;
(b) Net Revenues, calculated in accordance with Section 3.05(b) as shown by the
certificate or opinion of a Qualified Independent Consultant, are at least equal to 120% of
Annual Debt Service for the next Fiscal Year, plus annual debt service on all Parity Obligations
then Outstanding (including the Parity Obligations then proposed to be issued) for the next
Fiscal Year; and
(c)
upon the issuance of such Parity Obligations a reserve fund shall be established
for such Parity Obligations in an amount equal to the reserve requirement with respect to such
Parity Obligations, but only if, and to the extent, a reserve fund is required with respect to such
Parity Obligations.
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ARTICLE IV
REDEMPTION OF 2006 BONDS
Section 4.01. Terms of Redemption.
(a) Mandatory Sinking Account Redemption. The 2006 Bonds maturing April 1,
20  and April 1, 20_are Term Bonds. The Term Bonds maturing on April 1, 20  and
April 1, 20  are subject to mandatory redemption, in part by  lot, from Sinking Account
payments set forth in the following schedule on April 1 in each year, commencing April 1,
20_and April 1, 20 , respectively, at a redemption price equal to the principal amount
thereof to be redeemed (without premium), together with interest accrued thereon to the
date fixed for redemption; provided, however, that if some but not all of the Term Bonds
have been redeemed pursuant to subsections (b) or (c) below, the total amount of Sinking
Account payments to be made subsequent to such redemption shall be reduced in an
amount equal to the principal amount of the Term Bonds so redeemed by reducing each such
future Sinking Account payment on a pro rata basis (as nearly as practicable) in integral
multiples of $5,000, as shall be designated pursuant to written notice filed by the Authority
with the Trustee.
Schedule of Mandatory Sinking Fund Payments
Term Bonds Maturing April 1, 20_
Redemption Date  Principal
(April 1)  Amount
Schedule of Mandatory Sinking Fund Payments
Term Bonds Maturing April 1, 20_
Redemption Date  Principal
(April 1) Amount
In lieu of such redemption, the Trustee may apply amounts in the Sinking Account to
the purchase of Term Bonds at public or private sale, as and when and at such prices
(including brokerage and other charges, but excluding accrued interest, which is payable
from the Interest Account) as may be directed by the Authority, except that the purchase
price (exclusive of accrued interest) may not exceed the redemption price then applicable to
the Term Bonds, as set forth in a Written Request of the Authority. The par amount of Term
Bonds so purchased by the Authority in any twelve-month period immediately preceding any
mandatory Sinking Account payment date in the table above will be credited towards and will
reduce the principal amount of Term Bonds required to be redeemed on the succeeding
Principal Payment Date.
(b) Optional Redemption. The 2006 Bonds maturing on or after April 1, 20
shall be subject to optional redemption, as a whole or in part on any date prior to the maturity
thereof, at the option of the Authority, on or after April 1, 20 , from funds derived by the
Authority from any source, at a redemption price equal to the principal amount of the 2006
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Bonds to be redeemed, plus accrued but unpaid interest to the redemption date, without
premium.
(c)  Special Mandatory Redemption From Insurance or Condemnation Proceeds.
The 2006 Bonds shall be subject to mandatory redemption as a whole or in part on any
date, pro rata by maturity and by lot within a maturity (in a manner determined by the
Trustee) from moneys deposited in the Redemption Fund to the extent insurance proceeds
received with respect to the Water Enterprise are not used to repair, rebuild or replace the
Water Enterprise pursuant to Section 6.14 of this Indenture, or to the extent of condemnation
proceeds received with respect to the Water Enterprise and elected by the Authority to be
used for such purpose pursuant to Section 6.16 of this Indenture, at a redemption price
equal to the principal amount thereof plus interest accrued thereon to the date fixed for
redemption, without premium.
Section 4.02. Selection of 2006 Bonds for Redemption. Whenever provision is
made in Section 4.01 of this Indenture for the redemption of less than all of the 2006
Bonds, the Trustee shall select the 2006 Bonds to be redeemed from all 2006 Bonds or
such given portion thereof not previously called for redemption, pro rata by maturity or, at
the election of the Authority set forth in a Written Request of the Authority, filed with the
Trustee, from such maturities as the Authority shall determine, and by lot within a maturity
in any manner which the Trustee, in its sole discretion, shall deem appropriate and fair. Any
such determination shall be deemed conclusive. For purposes of such selection, the Trustee
shall treat each Bond as consisting of separate $5,000 portions and each such portion shall
be subject to redemption as if such portion were a separate Bond.
Section 4.03. Notice of Redemption. The Authority shall give the Trustee notice of
its determination to redeem any 2006 Bonds in accordance with Section 4.01(b) or (c) not
less than 60 days and no more than 90 days prior to the date fixed for redemption. Notice of
redemption shall be mailed by first class mail, postage prepaid, not less than 30 nor more
than 60 days before any redemption date, to respective Owners of any 2006 Bonds
designated for redemption at their addresses appearing on the Registration Books, and by
first class mail, facsimile or electronic mails, to the Securities Depositories and to the
Information Services. Each notice of redemption shall state the date of the notice, the
redemption date, the place or places of redemption, whether less than all of the 2006 Bonds
(or all 2006 Bonds of a single maturity or series) are to be redeemed, the CUSIP numbers
and (if less than all 2006 Bonds of a maturity are redeemed) Bond numbers of the 2006
Bonds to be redeemed, the maturity or maturities of the 2006 Bonds to be redeemed and in
the case of 2006 Bonds to be redeemed in part only, the respective portions of the principal
amount thereof to be redeemed. Each such notice shall also state that on the redemption
date there will become due and payable on each of said 2006 Bonds the redemption price
thereof, and that from and after such redemption date interest thereon shall cease to accrue,
and shall require that such 2006 Bonds be then surrendered. Neither the failure to receive
any notice nor any defect therein shall affect the proceedinas for such redemption or the
cessation of accrual of interest from and after the redemption date. Notice of redemption of
2006 Bonds shall be given by the Trustee, at the expense of the Authority, for and on
behalf of the Authority.
The Authority has the right to rescind any optional redemption by written notice to the
Trustee on or prior to the date fixed for redemption. Any notice of redemption shall be
cancelled and annulled if for any reason funds are not available on the date fixed for
redemption for the payment in full of the 2006 Bonds then called for redemption, and such
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cancellation shall not constitute an Event of Default hereunder. The Trustee shall mail notice
of rescission of redemption in the same manner notice of redemption was originally
provided.
Section 4.04. Partial Redemption of 2006 Bonds. Upon surrender of any 2006
Bonds redeemed in part only, the Authority shall execute and the Trustee shall authenticate
and deliver to the Owner thereof, at the expense of the Authority, a new Bond or 2006
Bonds of authorized denominations equal in aggregate principal amount to the unredeemed
portion of the 2006 Bonds surrendered.
Section 4.05, Effect of Redemption. Notice of redemption having been duly given
as aforesaid, and moneys for payment of the redemption price of, together with interest
accrued to the date fixed for redemption on, the 2006 Bonds (or portions thereof) so called
for redemption being held by the Trustee, on the redemption date designated in such notice,
the 2006 Bonds (or portions thereof) so called for redemption shall become due and
payable, interest on the 2006 Bonds so called for redemption shall cease to accrue, said
2006 Bonds (or portions thereof) shall cease to be entitled to any benefit or security under this
Indenture, and the Owners of said 2006 Bonds shall have no rights in respect thereof except
to receive payment of the redemption price thereof.
All 2006 Bonds redeemed pursuant to the provisions of this Article shall be canceled
by the Trustee upon surrender thereof and destroyed.
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ARTICLE V
REVENUES; FUNDS AND ACCOUNTS; PAYMENT OF PRINCIPAL AND
INTEREST
Section 5.01. Pledge and Assignment; Transfers to Bond Fund.
(a) Pledge of Net Revenues. All of the Net Revenues and any other
amounts (including the proceeds of the sale of the Bonds) held in any of the funds or
accounts under this Indenture, are hereby irrevocably pledged, charged and assigned
to the punctual payment of the principal of and interest on the Bonds, and except as
otherwise provided herein the Net Revenues and such other funds shall not be used
for any other purpose so long as any of the Bonds remain Outstanding. Such pledge,
charge and assignment shall constitute a first lien on the Net Revenues and such
other moneys for the payment of the principal of and interest on the Bonds in
accordance with the terms hereof. All Net Revenues collected or received by the
Authority shall be deemed to be held, and to have been collected or received, by the
Authority as the agent of the Trustee and shall be paid by the Authority to the Trustee
pursuant hereto.
(b) Deposits Into Revenues Fund; Transfers to Bond Fund. There is
hereby created the Revenue Fund, which is to be held and administered by the
Authority pursuant to this Agreement. The Authority hereby agrees and covenants to
deposit all of the Revenues immediately upon receipt in the Revenue Fund. The
Authority shall, from the moneys in the Revenue Fund, pay all Operation and
Maintenance Costs (including amounts reasonably required to be set aside in
contingency reserves for Operation and Maintenance Costs, the payment of which is
not then immediately required) as they become due and payable. On or before the
fifth Business Day preceding each Interest Payment Date, all remaining moneys in the
Revenue Fund shall be set aside by the Authority in the following respective special
funds in the following order and withdrawn only for the purposes hereinafter
authorized in this Section:
(i)
to the Trustee for deposit into the Bond Fund the amount equal
to (i) the aggregate amount of interest coming due and payable on the Bonds
on the next succeeding Interest Payment Date; plus (ii) one-half of the
aggregate amount of the principal coming due and payable on the next
succeeding Principal Payment Date, which payments shall be made on a parity
basis with any outstanding Parity Obligations; and
(ii) to the Trustee for deposit in the Reserve Account, the amount,
if any, required to restore the balance in the Reserve Account to the Reserve
Requirement, the notice of which deficiency shall have been given by the
Trustee to the Authority pursuant to Section 5.07 hereof.
Amounts remaining in the Revenue Fund immediately after making the transfers
required to be made pursuant to this Section 5.01(b) shall be released to the Authority free and
clear of the lien of this Indenture, to be used by the Authority for any lawful purpose including
but not limited to making lease payments pursuant to the Lease.
Section 5.02. Covenant Regarding Net Revenues. The Authority shall manage,
conserve and apply the Net Revenues on deposit in the Revenue Fund in such a manner
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that all deposits required to be made pursuant to the preceding Section 5.01 will be made at
the times and in the amounts so required.
Section 5.03. Creation of Bond Fund and Accounts Therein; Allocation of Net
Revenues. There are hereby created the following funds and accounts to be held and
administered by the Trustee pursuant to this Indenture: the Bond Fund, and, within the
Bond Fund, the Interest Account and, within the Interest Account, the Principal Account, the
Sinking Account, the Reserve Account and, within the Reserve Account, a 2006
Subaccount. One or more additional subaccounts may be created in the Reserve Account
as may be provided in a Supplemental Indenture providing for the issuance of Additional
Bonds. On or about the fifth Business Day preceding each date on which interest on or
principal of the Bonds becomes due and payable, the Trustee shall transfer from the Bond
Fund and deposit into the following respective accounts (each of which the Trustee shall
establish and maintain within the Bond Fund), the following amounts in the following order
of priority, the requirements of each such account (including the making up of any
deficiencies in any such account resulting from lack of Net Revenues sufficient to make any
earlier required deposit) at the time of deposit to be satisfied before any transfer is made to
any account subsequent in priority:
(a) The Trustee shall deposit in the Interest Account an amount required to cause
the aggregate amount on deposit in the Interest Account to be at least equal to the amount of
interest becoming due and payable on such date on all Bonds then Outstanding.
(b) The Trustee shall deposit in the Principal Account, the aggregate amount of
principal becoming due and payable on the Outstanding Serial Bonds plus, deposit to the
Sinking Account, the aggregate amount of the mandatory Sinking Account payment required to
be paid for Outstanding Term Bonds on the next succeeding Principal Payment Date, until the
balance in said accounts are equal to said respective aggregate amounts of such principal and
mandatory Sinking Account payments.
(c) The Trustee shall deposit in the Reserve Account the amount, if any, required to
restore the balance in the Reserve Account to the Reserve Requirement, the notice of which
deficiency shall have been given by the Trustee to the Authority pursuant to Section 5.07
hereof.
(d) The Trustee shall transfer any remaining amounts in the Bond Fund to the
Authority for any lawful use with respect to the Water Enterprise.
Section 5.04. Application of Interest Account. All amounts in the Interest Account
shall be used and withdrawn by the Trustee solely for the purpose of paying interest on the
Bonds as it becomes due and payable (including accrued interest on any Bonds purchased
or redeemed prior to maturity pursuant to this Indenture).
Section 5.05. Application of Principal Account. All amounts in the Principal Account
shall be used and withdrawn by the Trustee solely to pay the principal amount of the Bonds at
their respective maturity dates.
Section 5.06. Application of Sinking Account. All moneys on deposit in the Sinking
Account shall be used and withdrawn by the Trustee for the sole purpose of redeeming or
purchasing (in lieu of redemption) Term Bonds pursuant to Section 4.01(a).
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Section 5.07. Application of Reserve Account. All amounts in the Reserve Account
shall be used and withdrawn by the Trustee solely for the purpose of (a) paying interest on or
principal of the Bonds, when due and payable to the extent that moneys deposited in the
Interest Account or Principal Account, respectively, are not sufficient for such purpose, (b)
paying the redemption price of Term Bonds to be redeemed pursuant to Section 4.01(a) in the
event that amounts on deposit in the Sinking Account are not sufficient for such purpose, and
(c) making the final payments of principal of and interest on the Bonds. On the date on which all
Bonds shall be retired hereunder or provision made therefor pursuant to Article X, all moneys
then on deposit in the Reserve Account shall be withdrawn by the Trustee and paid to the
Authority for use by the Authority for any lawful purpose. If as of the first (1st) day of the month
preceding any Interest Payment Date there shall be any deficiency in the Reserve Account
(whether due to a payment therefrom or due to the fluctuation in market value of securities
credited thereto, or otherwise), the Trustee shall promptly notify the Authority in writing of the
amount of such deficiency and the Authority shall pay to the Trustee the amount of such
deficiency as provided in Section 5.01(b) hereof. Semiannually, on or before each Interest
Payment Date, the Trustee shall value the Reserve Account at fair market value and any
amounts on deposit in the Reserve Account in excess of the Reserve Requirement shall be
transferred to the Interest Account of the Bond Fund.
The Reserve Requirement may be satisfied by crediting to the Reserve Account and
to any applicable subaccount in the Reserve Account moneys or a Qualified Reserve
Account Credit Instrument or any combination thereof, which in the aggregate make funds
available in the Reserve Account in an amount equal to the Reserve Requirement. Upon
deposit of such Qualified Reserve Account Credit Instrument, the Trustee shall transfer any
excess amounts then on deposit in the Reserve Account in excess of the Reserve
Requirement into a segregated account of the Bond Fund, which monies shall be applied
upon written direction of the Authority either (i) to the payment within one year of the date of
transfer of capital expenditures of the Authority permitted by law, or (ii) to the redemption of
Bonds on the earliest succeeding date on which such redemption is permitted hereby, and
pending such application shall be held either not invested in investment property (as
defined in section 148(b) of the Code), or invested in such property to produce a yield that is
not in excess of the yield on the Bonds; provided, however, that the Authority may by written
direction to the Trustee cause an alternative use of such amounts if the Authority shall first
have obtained a written opinion of nationally recognized bond counsel substantially to the
effect that such alternative use will not adversely affect the exclusion pursuant to section
103 of the Code of interest on the Bonds from the gross income of the owners thereof for
federal income tax purposes.
In any case where the Reserve Account is funded with a combination of cash and a
Qualified Reserve Account Credit Instrument, the Trustee shall deplete all cash balances in
an applicable subaccount before drawing on any Qualified Reserve Account Credit
Instrument credited to such subaccount. With regard to replenishment, any available moneys
provided by the Authority or the City shall be used first to reinstate the Qualified Reserve
Account Credit Instrument and second, to replenish the cash in the Reserve Account. In the
event the Qualified Reserve Account Credit Instrument is drawn upon, the Authority shall
make payment of interest on amounts advanced under the Qualified Reserve Account
Credit Instrument after making any payments pursuant to this subsection.
Section 5.08. Application of Redemption Fund. The Trustee shall establish and
maintain the Redemption Fund, amounts in which shall be used and withdrawn by the
Trustee solely for the purpose of paying the principal of the Bonds to be redeemed
26
pursuant to Section 4.01(b); provided, however, that at any time prior to selection for
redemption of any such Bonds, the Trustee may apply such amounts to the purchase of
Bonds at public or private sale, as and when and at such prices (including brokerage and
other charges, but excluding accrued interest, which is payable from the Interest Account)
as shall be directed pursuant to a Written Request of the Authority, except that the
purchase price (exclusive of accrued interest) may not exceed the redemption price then
applicable to the Bonds.
Section 5.09. Application of Project Fund. The Trustee shall establish and
maintain the Project Fund and within the Project Fund, the 2006 Bonds Subaccount,
amounts in which shall, upon receipt of a Written Request of the City (which may be in the
form of a facsimile promptly confirmed by first class mail thereof), be withdrawn by the
Trustee and used solely for public capital improvements of the Authority and the City,
namely capital projects of the Water Enterprise. Such Written Request of the City shall be
signed by an Authorized Representative of the City and shall include the following
information with respect to each payment to be made: (1) the sequential requisition number,
(2) the name and address of the person, firm, corporation or agency to which payment is
due or has been made, (3) the amount to be paid, (4) identification of the item to which
such payment is to be applied, and (5) that each obligation mentioned therein is a proper
charge against the Project Fund and has not been the basis of any previous withdrawal from
the Project Fund. Investment earnings on money in the Project Fund shall be deposited by
the Trustee, from time to time when available, in the Bond Fund. Upon receipt of a Written
Request of the City (which may be in the form of a facsimile confirmed promptly by first class
mail thereof), money remaining in the Project Fund shall be transferred to the Bond Fund
and used as provided herein or as directed by the City.
One or more additional subaccounts may be created in the Project Fund as may be
provided in a Supplemental Indenture providing for the issuance of Additional Bonds.
Section 5.10. Rates and Charges.
(a) Covenant Regarding Revenues. The Authority and the City shall fix, prescribe,
revise and collect rates, fees and charges for the Water Enterprise as a whole for the
services and improvements furnished by the Water Enterprise during each Fiscal Year that
are at least sufficient, after making allowances for contingencies and error in the estimates,
to yield Revenues that are sufficient to pay the following amounts in the following order of
priority:
(i)
all anticipated Operation and Maintenance Costs of the Water
Enterprise for such Fiscal Year;
(ii) Debt Service payments as they become due and payable
during such Fiscal Year, without preference or priority, except to the extent
such Debt Service payments are payable from the proceeds of the Bonds or
from any other source of legally available funds of the Authority that have been
deposited with the Trustee for such purpose prior to the commencement of
such Fiscal Year;
(iii) the amount, if any, required to restore the balance in the
Reserve Account to the full amount of the Reserve Requirement; and
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(iv)  all other payments required to meet any other obligations of
the Authority that are charges, liens, encumbrances upon, or which are
otherwise payable, from Revenues during such Fiscal Year.
(b) Covenant Regarding Net Revenues. In addition, the Authority and the City shall
fix, prescribe, revise and collect, or cause to be fixed, prescribed, revised and collected,
rates, fees and charges for the services and improvements furnished by the Water
Enterprise during each Fiscal Year which are sufficient to yield Net Revenues for the Water
Enterprise, which are at least equal to 120% of the total Debt Service payments and
payments on Parity Obligations coming due and payable in such Fiscal Year. For purposes
of this paragraph, the amount of Net Revenues for a Fiscal Year will be computed on the basis
that (1) any transfers into the Revenue Fund in that Fiscal Year from the Rate Stabilization
Fund are included in the calculation of Net Revenues, as provided in subsection (c) of this
Section 5.10, and (2) any deposits into the Rate Stabilization Fund in that Fiscal Year are
deducted from the amount of Net Revenues, but only to the extent such deposits are made
from Revenues received by the Authority during that Fiscal Year.
(c) Rate Stabilization Fund. The Authority or the City has the right at any time to
establish a fund to be held by either of them and administered in accordance with this Section
5.10(c), for the purpose of stabilizing the rates and charges imposed by the Authority and the
City with respect to the Water Enterprise. From time to time Authority and the City, or either of
them, may deposit amounts in the Rate Stabilization Fund, from any source of legally available
funds, including but not limited to Net Revenues which are released from the pledge and lien
which secures the Debt Service payments. The Rate Stabilization Fund shall be accounted for
as a separate fund, although amounts credited to it may be commingled with other funds of the
Authority or the City, as applicable.
The Authority or the City, as applicable, may, but is not be required to, withdraw
amounts on deposit in the Rate Stabilization Fund and deposit or cause to be deposited, as the
case may be, such amounts in the Revenue Fund in any Fiscal Year for the purpose of paying
Debt Service payments or payments on Parity Obligations coming due and payable in such
Fiscal Year. Amounts so transferred from the Rate Stabilization Fund to the Revenue Fund in
any Fiscal Year constitute Revenues for that Fiscal Year (except as otherwise provided herein),
and will be applied for the purposes of the Revenue Fund. Amounts on deposit in the Rate
Stabilization Fund are not pledged to and do not otherwise secure Debt Service payments or
payments on Parity Obligations. All interest or other earnings on deposits in the Rate
Stabilization Fund will be retained therein or, at the option of the Authority or the City, be applied
for any other lawful purposes. The Authority and City has the right at any time to withdraw any
or all amounts deposited by the Authority or the City, as applicable, in and remaining on deposit
in the Rate Stabilization Fund and apply such amounts for any other lawful purposes of the
Authority or the City, as applicable.
Section 5.11. Budget and Appropriation of Debt Service Payments. So lona as
any Bonds remain Outstanding, the Authority covenants that it shall adopt and make all
necessary budgets and appropriations of the Debt Service payments from the Net
Revenues. In the event any Debt Service payment requires the adoption by the Authority of
any supplemental budget or appropriation, the Authority shall promptly adopt the same. The
covenants on the part of the Authority contained in this Section 5.11 shall be deemed to be
and shall be construed to be duties imposed by law and it shall be the duty of each and
every public official of the Authority to take such action and do such things as are required
by law in the performance of the official duty of such officials to enable the Authority to carry
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out and perform the covenants and agreements in this Section 5.11.
Section 5.12. Special Obligation of the Authority; Obligations Absolute. The
Authority's obligation to pay the Debt Service payments and any other amounts coming due
and payable hereunder shall be a special obligation of the Authority limited solely to the Net
Revenues. Under no circumstances shall the Authority be required to advance moneys
derived from any source of income other than the Net Revenues and other sources
specifically identified herein for the payment of the Debt Service payments, nor shall any
other funds or property of the Authority be liable for the payment of the Debt Service
payments and any other amounts coming due and payable hereunder.
The obligations of the Authority to make the Debt Service payments from the Net
Revenues and to perform and observe the other agreements contained herein shall be
absolute and unconditional and shall not be subject to any defense or any right of setoff,
counterclaim or recoupment arising out of any breach of the Authority or the Trustee of any
obligation with respect to the Water Enterprise, whether hereunder or otherwise, or out of
indebtedness or liability at any time owing to the Authority by the Trustee. Until such time as
all of the Debt Service payments and all other amounts coming due and payable hereunder
shall have been fully paid or prepaid, the Authority (a) will not suspend or discontinue
payment of any Debt Service payments or such other amounts, and (b) will perform and
observe all other agreements contained in this Indenture, including, without limiting the
generality of the foregoing, the occurrence of any acts or circumstances that may constitute
failure of consideration, eviction or constructive eviction, destruction of or damage to the
Water Enterprise, sale of the Water Enterprise, the taking by eminent domain of title to or
temporary use of any component of the Water Enterprise, commercial frustration of purpose,
any change in the tax law or other laws of the United States of America or the State or any
political subdivision of either thereof or any failure of the Authority or the Trustee to perform
and observe any agreement, whether expressed or implied, or any duty, liability or obligation
arising out of or connected with this Indenture.
Section 5.13. Investments. All moneys in any of the funds or accounts established
with the Trustee pursuant to this Indenture shall be invested by the Trustee solely in
Permitted Investments. Moneys (if any) in the Reserve Account shall be invested in
Permitted Investments maturing, except in the case of Permitted Investments qualifying as
Guaranteed Investment Contracts, no later than five (5) years from the date of investment.
Such investments shall be directed by the Authority pursuant to a Written Request of the
Authority filed with the Trustee at least two (2) Business Days in advance of the making of
such investments. In the absence of any such directions from the Authority, the Trustee shall
invest any such moneys in Permitted Investments described in clause 7 of the definition
thereof. Permitted Investments purchased as an investment of moneys in any fund shall be
deemed to be part of such fund or account.
All interest or gain derived from the investment of amounts in any of the funds or
accounts established hereunder, including the Project Fund, shall be deposited in the Bond
Fund, provided, however, that all earnings on the investment of amounts in the Reserve
Account shall be retained therein to the extent required to maintain the Reserve
Requirement, and, to the extent not so required, such amounts shall be deposited, when
available, in the Bond Fund. For purposes of acquiring any investments hereunder, the
Trustee may commingle funds held by it hereunder, The Trustee, or its affiliate, may act as
principal or agent in the acquisition or disposition of any investment and may impose its
customary charges therefor. The Trustee shall incur no liability for losses arising from any
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investments made pursuant to this Section 5.13.
The Trustee may sell at the best price reasonably obtainable, or present for
prepayment, any Permitted Investment so purchased by the Trustee whenever it shall be
necessary in order to provide moneys to meet any required payment, transfer, withdrawal or
disbursement from the fund to which such Permitted Investment is credited, and the Trustee
shall not be liable or responsible for any loss resulting from any such Permitted Investment.
The Authority acknowledges that to the extent regulations of the Comptroller of the
Currency or other applicable regulatory entity grant the Authority the right to receive
brokerage confirmations of security transactions as they occur, the Authority will not receive
such confirmations to the extent permitted by law. The Trustee will provide to the Authority
periodic cash transaction statements that include detailed information for all investment
transactions made by the Trustee under this Indenture.
The Trustee may make any investments authorized hereunder through the Trustee's
own bond or investment department or trust investment department, or those of its parent or
any affiliate.
The Trustee or any of its affiliates may act as sponsor, advisor or manager in
connection with any investments made by the Trustee hereunder.
Section 5.14. Valuation of Investments. For the purpose of determining the amount
in any fund or account, the value of Permitted Investments credited to such fund or account
shall be valued by the Trustee on or before each Interest Payment Date at the market value
thereof (excluding any accrued interest). The Trustee may utilize computer pricing services
as are available to it in making such valuations. Any deficiency in a fund or account resulting
from a decline in market value shall be restored by the Authority no later than the next
scheduled valuation date. A Qualified Reserve Account Credit Instrument shall be valued at
the maximum amount that can be drawn on such a Qualified Reserve Account Credit
Instrument.
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ARTICLE VI
PARTICULAR COVENANTS
Section 6.01. Punctual Payment; Compliance with Documents. The Authority shall
punctually pay or cause to be paid the principal of and interest on all the Bonds in strict
conformity with the terms of the Bonds and of this Indenture, according to the true intent and
meaning thereof, but only out of Net Revenues and other assets pledged for such payment as
provided in this Indenture, and will faithfully observe and perform all of the conditions, covenants
and requirements of this Indenture. In the event that for any reason the Authority is unable to
perform its covenants and agreements under this Indenture, because of premature
termination of the Lease or otherwise, the City shall, on behalf of the Authority, punctually pay
or cause to be paid the principal of and interest on all the Bonds in strict conformity with the
terms of the Bonds and of this Indenture, according to the true intent and meaning thereof and
hereof, but only out of Net Revenues and other assets pledged for such payment as provided in
this Indenture, and the City will, on behalf of the Authority, faithfully observe and perform all of
the conditions, covenants and requirements of this Indenture.
Section 6.02. Extension of Payment of Bonds. The Authority shall not directly or
indirectly extend or assent to the extension of the maturity of any of the Bonds or the time of
payment of any claims for interest by the purchase of such Bonds or by any other
arrangement, and in case the maturity of any of the Bonds or the time of payment of any
such claims for interest shall be extended, such Bonds or claims for interest shall not be
entitled, in case of any default hereunder, to the benefits of this Indenture, except subject to
the prior payment in full of the principal of all of the Bonds then Outstanding and of all
claims for interest thereon which shall not have been so extended. Nothing in this Section
6.02 shall be deemed to limit the right of the Authority to issue Bonds for the purpose of
refunding any Outstanding Bonds, and such issuance shall not be deemed to constitute an
extension of maturity of the Bonds.
Section 6.03. Against Encumbrances. The Authority shall not create, or permit the
creation of, any pledge, lien, charge or other encumbrance upon the Net Revenues and
other assets pledged or assigned under this Indenture while any of the Bonds are
Outstanding, except the pledge and assignment created by this Indenture with respect to the
Bonds and Parity Obligations. Subject to this limitation, the Authority expressly reserves the
right to enter into one or more other indentures for any of its corporate purposes, and
reserves the right to issue other obligations for such purposes, which are payable on a basis
subordinate to the payment of Debt Service on the Bonds and the payment of Parity
Obligations.
Section 6.04. Power to Issue Bonds and Make Pledge and Assignment. The
Authority is duly authorized pursuant to law to issue the Bonds and to enter into this
Indenture and to pledge and assign the Net Revenues and other assets purported to be
pledged and assigned, respectively, under this Indenture in the manner and to the extent
provided in this Indenture. The Bonds and the provisions of this Indenture are and will be
the legal, valid and binding special obligations of the Authority in accordance with their
terms, and the Authority and the Trustee shall at all times, subject to the provisions of Article
VIII and to the extent permitted by law, use reasonable efforts to defend, preserve and
protect said pledge and assignment of Net Revenues and other assets and all the rights of
the Owners under this Indenture against all claims and demands of all persons
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whomsoever.
Section 6.05. Accounting Records and Financial Statements. The Trustee shall
at all times keep, or cause to be kept, proper books of record and account, prepared in
accordance with industry standards, in which complete and accurate entries shall be made of
all transactions made by it relating to the proceeds of Bonds and all funds and accounts
established pursuant to this Indenture. The Trustee shall, upon the written request of the
holder of any of the Outstanding Bonds, provide a copy of the monthly statements relating to
the Bonds. Such books of record and account shall be available for inspection by the
Authority or the Insurer during business hours and under reasonable circumstances.
The Authority shall at all times keep, or cause to be kept, proper books of record and
account prepared in accordance with industry standards in which complete and accurate
entries shall be made of all transactions made by it relating to Net Revenues and all funds
and accounts established pursuant to this Indenture. The Authority shall cause to be
performed a component audit of the Water Enterprise within 180 days of the end of each
Fiscal Year.
Section 6.06. Continuing Disclosure. The Authority hereby covenants and agrees
that it will comply with and carry out all of the provisions of its Continuing Disclosure
Certificate with respect to the Bonds, as originally executed and as it may be amended from
time to time in accordance with the terms thereof. Notwithstanding any other provision of
this Indenture, failure of the Authority to comply with such Continuing Disclosure Certificate
shall not be considered an Event of Default; however, any Bondholder may take such actions,
as provided in the Continuing Disclosure Certificate, as may be necessary and appropriate to
cause the Authority to comply with its obligations under such Continuing Disclosure
Certificate.
Section 6.07. Covenants to Maintain Tax-Exempt Status. The Authority and the
City covenant as follows in this Section:
(a) Private Business Use Limitation. The Authority and the City shall assure that the
proceeds of the 2006 Bonds are not used in a manner which would cause the 2006 Bonds to
satisfy the private business tests of Section 141(b) of the Code or the private loan financing test
of Section 141(c) of the Code.
(b) Federal Guarantee Prohibition. The Authority and the City may not take any
action or permit or suffer any action to be taken if the result of the same would be to cause the
2006 Bonds to be "federally guaranteed" within the meaning of Section 149(b) of the Code.
(c) No Arbitrage. The Authority and the City may not take, or permit or suffer to be
taken by the Trustee or otherwise, any action with respect to the proceeds of the 2006 Bonds or
of any other obligations which, if such action had been reasonably expected to have been
taken, or had been deliberately and intentionally taken, on the Closing Date, would have caused
the 2006 Bonds to be "arbitrage bonds" within the meaning of Section 148(a) of the Code.
(d) Maintenance of Tax Exemption. The Authority and the City shall take all actions
necessary to assure the exclusion of interest on the 2006 Bonds from the gross income of the
Owners of the 2006 Bonds to the same extent as such interest is permitted to be excluded from
gross income under the Code as in effect on the Closing Date.
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(e)  Rebate of Excess Investment Earnings to United States. The Authority and the
City shall calculate or cause to be calculated all amounts of Excess Investment Earnings which
are required to be rebated to the United States of America under Section 148(f) of the Code, at
the times and in the manner required under the Code. The Authority shall pay when due an
amount equal to Excess Investment Earnings to the United States of America in such amounts,
at such times and in such manner as may be required under the Code. The Authority shall keep
or cause to be kept, and retain or cause to be retained for a period of 6 years following the
retirement of the 2006 Bonds, records of the determinations made under this subsection (e).
Section 6.08. Waiver of Laws. The Authority shall not at any time insist upon or
plead in any manner whatsoever, or claim or take the benefit or advantage of, any stay or
extension law now or at any time hereafter in force that may affect the covenants and
agreements contained in this Indenture or in the Bonds, and all benefit or advantage of any
such law or laws is hereby expressly waived by the Authority to the extent permitted by law.
Section 6.09. Protection of Security and Rights of Owners. The Authority will
preserve and protect the security of the Bonds and the Owners. From and after the date of
issuance of any Bonds, such Bonds shall be incontestable by the Authority.
Section 6.10. Further Assurances. The Authority will adopt, make, execute and
deliver any and all such further resolutions, instruments and assurances as may be
reasonably necessary or proper to carry out the intention or to facilitate the performance of
this Indenture and for the better assuring and confirming unto the Owners of the Bonds of
the rights and benefits provided in this Indenture.
Section 6.11. Maintenance, Utilities, Taxes and Assessments. So long as any
Bonds remain Outstanding, all improvement, repair and maintenance of the Water
Enterprise shall be the responsibility of the Authority, and the Authority shall pay for or
otherwise arrange for the payment of all utility services supplied to the Water Enterprise,
which may include, without limitation, janitor service, security, power, gas, telephone, light,
heating, water and all other utility services, and shall pay for or otherwise arrange for the
payment of the cost of the repair and replacement of the Water Enterprise resulting from
ordinary wear and tear.
The Authority shall also pay or cause to be paid all taxes and assessments of any
type or nature, if any, charged to the Authority affecting the Water Enterprise or its interest
or estate therein; provided, however, that with respect to special assessments or other
governmental charges that may lawfully be paid in installments over a period of years, the
Authority shall be obligated to pay only such installments as are required to be paid so long
as any Bonds remain Outstanding as and when the same become due.
The Authority may, at the Authority's expense and in its name, in good faith contest
any such taxes, assessments, utility and other charges and, in the event of any such
contest, may permit the taxes, assessments or other charges so contested to remain unpaid
during the period of such contest and any appeal therefrom unless the Trustee shall notify
the Authority that, in its opinion, by nonpayment of any such items, the interest of the
Owners of the Bonds hereunder will be materially adversely affected, in which event the
Authority shall promptly pay such taxes, assessments or charges or provide the Trustee with
full security against any loss which may result from nonpayment, in form satisfactory to the
Trustee.
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Section 6.12. Operation of Water Enterprise. The Authority covenants and agrees
and, in the event that for any reason the Authority is unable to perform its covenants and
agreements under this Indenture, because of premature termination of the Lease or
otherwise, the City covenants and agrees, to operate the Water Enterprise in an efficient and
economical manner and to operate, maintain and preserve the Water Enterprise in good
repair and working order. The Authority and the City covenant that, in order to fully preserve
and protect the priority and security of the Bonds, the Authority or the City, as applicable,
shall pay from the Revenues, and discharge all lawful claims for labor, materials and
supplies furnished for or in connection with the Water Enterprise which, if unpaid, may
become a lien or charge upon the Revenue prior or superior to the lien granted hereunder, or
which may otherwise impair the ability of the Authority to pay the Debt Service payments in
accordance herewith.
Section 6.13. Public Liability and Property Damage Insurance. The Authority
shall maintain or cause to be maintained, so long as any Bonds remain Outstanding, but
only if and to the extent available at reasonable cost from reputable insurers, a standard
comprehensive general insurance policy or policies in protection of the Authority, the City,
and their respective members, officers, agents, assignees and employees. Said policy or
policies shall provide for indemnification of said parties against direct or contingent loss or
liability for damages for bodily and personal injury, death or property damage occasioned by
reason of the operation of the Water Enterprise. Said policy or policies shall provide
coverage in such liability limits and shall be subject to such deductibles as shall be
customary with respect to works and property of a like character. Such liability insurance may
be maintained as part of or in conjunction with any other liability insurance coverage carried
by the Authority or the City, and may be maintained in whole or in part in the form of self-
insurance by the Authority or the City, in the form of the participation by the Authority or the
City in a joint powers agency or other program providing pooled insurance. The proceeds of
such liability insurance shall be applied toward extinguishment or satisfaction of the liability
with respect to which such proceeds shall have been paid.
Section 6.14. Casualty Insurance. The Authority shall procure and maintain, or
cause to be procured and maintained, so long as any Bonds remain Outstanding, but only in
the event and to the extent available from reputable insurers at reasonable cost, casualty
insurance against loss or damage to any improvements constituting any part of the Water
Enterprise, covering such hazards as are customarily covered with respect to works and
property of like character. Such insurance may be subject to deductible clauses which are
customary for works and property of a like character. Such insurance may be maintained as
part of or in conjunction with any other casualty insurance carried by the Authority and may
be maintained in whole or in part in the form of self-insurance by the Authority, subject to the
provisions of Section 6.15, or in the form of the participation by the Authority in a joint powers
agency or other program providing pooled insurance. All amounts collected from insurance
against accident to or destruction of any portion of the Water Enterprise shall be used to
repair, rebuild or replace such damaged or destroyed portion of the Water Enterprise, and to
the extent not so applied or to the extent the Authority determines it is not economically
feasible or in the best interests of the Authority to so repair, rebuild or replace such damaged
or destroyed portion of the Water Enterprise, shall be applied to redeem the Bonds pro rata
with other Parity Obligations.
Section 6.15. Insurance Net Proceeds; Form of Policies. The Authority shall pay
or cause to be paid when due the premiums for all insurance policies required by the
Lease. The Authority shall annually on or before December 1 deliver to the Trustee a
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certificate to the effect that the Authority has complied with the requirements of Sections
6.13 and 6.14 hereof. In the event that any insurance required pursuant to Sections 6.13 or
6.14 shall be provided in the form of self-insurance, the Authority shall file with the Trustee
annually, within ninety (90) days following the close of each Fiscal Year, a statement of an
independent actuarial consultant identifying the extent of such self-insurance and stating
the determination that the Authority maintains sufficient reserves with respect thereto. In
the event that any such insurance shall be provided in the form of self-insurance by the
Authority, the Authority shall not be obligated to make any payment with respect to any
insured event except from Revenue or from such reserves.
Section 6.16. Eminent Domain. Any amounts received as awards as a result of
the taking of all or any part of the Water Enterprise by the lawful exercise of eminent domain,
at the election of the Authority (evidenced by a Written Certificate of the Authority filed with
the Trustee and the Authority) shall either (a) be used for the lease, acquisition or
construction of improvements and extension of the Water Enterprise, or (b) be applied to
redeem the Bonds pro rata with other Parity Obligations.
Section 6.17. Restriction on Sale of Water Enterprise. The Authority covenants
that, so long as any Bonds remain Outstanding, the Authority will not sell, lease, encumber
or otherwise dispose of any substantial portion of the Water Enterprise, except, with the
consent of the Insurer, to another public entity, unless the proceeds of such sale, lease,
encumbrance or other disposal shall be adequate, and shall be used, to discharge this
Indenture as provided in Article X hereof. For purposes of this covenant, a "substantial
portion" of the Water Enterprise shall consist of more than five percent (5%) of the book
value of the Water Enterprise. Nothing in this covenant shall be construed to restrict the
sale, lease, encumbrance or otherwise disposition by the Authority of less than a
substantial portion of the Water Enterprise, provided that the Insurer shall have consented
to such sale, lease, encumbrance or otherwise disposition and such sale, lease,
encumbrance or otherwise disposition is determined by the Authority to be necessary or
desirable for the improvement, expansion or repair of the Water Enterprise, and the proceeds
of such sale are used either to fund such improvement, expansion or repair of the Water
Enterprise, or to redeem a portion of the Bonds pursuant to Section 4.01(b) hereof.
Section 6.18. Covenant to Maintain Lease. The Authority and the City covenant
that, so long as any Bonds remain Outstanding, neither party shall cause the Lease to be
terminated, and each party shall do or cause to be done all further acts and things, in each
case, as may be proper or reasonably necessary, to ensure the enforceability thereof.
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ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES OF OWNERS
Section 7.01. Events of Default and Acceleration of Maturities. The following
events shall be Events of Default hereunder:
(a) Default in the due and punctual payment of the principal of any Bond when and
as the same shall become due and payable, whether at maturity as therein expressed, by
proceedings for mandatory sinking fund redemption, by declaration or otherwise. No effect shall
be given to payments made under the Insurance Policy for purposes of this subsection.
(b) Default in the due and punctual payment of any installment of interest on any
Bond when and as such interest installment shall become due and payable. No effect shall be
given to payments made under the Insurance Policy for purposes of this subsection.
(c)
Default by the Authority in the observance of any of the other covenants,
agreements or conditions on its part in this Indenture or in the Bonds contained, if such default
shall have continued for a period of thirty (30) days after written notice thereof, specifying such
default and requiring the same to be remedied, shall have been given to the City and the
Authority by the Trustee or the Insurer; provided, however, that, subject to Section 11.02, if in
the reasonable opinion of the Authority the default stated in the notice (other than a default in
the payment of any fees and expenses owing to the Trustee) can be corrected, but not within
such thirty (30) day period, such default shall not constitute an Event of Default hereunder if the
Authority shall commence to cure such default within such thirty (30) day period and thereafter
diligently and in good faith cure such failure in a reasonable period of time.
(d) The filing by the Authority of a petition or answer seeking reorganization or
arrangement under the Federal bankruptcy laws or any other applicable law of the United States
of America, or if a federal or state court of competent jurisdiction shall approve a petition, filed
with or without the consent of the Authority, seeking reorganization under the Federal
bankruptcy laws or any other applicable law of the United States of America, or if, under the
provisions of any other law for the relief or aid of debtors, any federal or state court of
competent jurisdiction shall assume custody or control of the Authority or of the whole or any
substantial part of its property.
Upon the occurrence and during the continuance of any Event of Default the Trustee
may, and at the written direction of the Owners of a majority in aggregate principal amount of
the Bonds at the time Outstanding, and upon receipt of the prior written consent of the Insurer
(provided the Insurer has not failed to comply with its payment obligations pursuant to the
Insurance Policy), the Trustee shall, declare the principal of all of the Bonds then Outstanding,
and the interest accrued thereon, to be due and payable immediately, and upon any such
declaration the same shall become and shall be immediately due and payable, anything in this
Indenture or in the Bonds contained to the contrary notwithstanding. This provision, however, is
subject to the condition that if, at any time after the principal of the Bonds shall have been so
declared due and payable and before any judgment or decree for the payment of the moneys
due shall have been obtained or entered, the Authority shall deposit with the Trustee a sum
sufficient to pay all of the principal of and interest on the Bonds having come due prior to such
declaration, with interest on such overdue principal and interest calculated at the net effective
rate of interest per annum then borne by the Outstanding Bonds, and the reasonable fees and
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expenses of the Trustee, together with interest thereon at the prime rate of the Trustee then in
effect, and any and all other defaults that have been noticed (other than payment defaults) to
the Trustee (other than in the payment of the principal of and interest on the Bonds having come
due and payable solely by reason of such declaration) shall have been made good or cured to
the satisfaction of the Trustee or provision deemed by the Trustee to be adequate shall have
been made therefor, then, and in every such case, the Trustee or the Owners of a majority in
aggregate principal amount of the Bonds at the time Outstanding may, by written notice to the
Authority and to the Trustee, on behalf of the Owners of all of the Outstanding Bonds, rescind
and annul such declaration and its consequences. However, no such rescission and annulment
shall extend to or shall affect any subsequent default, or shall impair or exhaust any right or
power consequent thereon.
Section 7.02. Application of Funds Upon Acceleration. All amounts received by
the Trustee pursuant to any right given or action taken by the Trustee under the provisions
of this Indenture and all other funds then held by the Trustee hereunder shall be applied by
the Trustee in the following order upon presentation of the several Bonds, and the stamping
thereon of the amount of the payment if only partially paid, or upon the surrender thereof if
fully paid:
First, to the payment of fees, charges and expenses of the Trustee (including
fees and disbursements of its counsel and financial consultants) incurred in and
about the performance of its powers and duties under this Indenture; and
Second, to the payment of the whole amount then owing and unpaid upon the
Bonds for interest and principal, with interest on such overdue amounts to the extent
permitted by law at the net effective rate of interest then borne by the Outstanding
Bonds, and in case such moneys shall be insufficient to pay in full the whole amount
so owing and unpaid upon the Bonds, then to the payment of such interest, principal
and interest on overdue amounts without preference or priority among such interest,
principal and interest on overdue amounts ratably to the aggregate of such interest,
principal and interest on overdue amounts.
Section 7.03. Other Remedies; Rights of Owners and Insurer. Upon the
occurrence of an Event of Default, the Trustee may pursue any available remedy, in addition
to the remedy specified in Section 7.01, at law or in equity to enforce the payment of the
principal of and interest on the Outstanding Bonds, and to enforce any rights of the Trustee
under or with respect to this Indenture. Such available remedies shall include the right to
seek specific performance of the Authority's obligations hereunder.
If an Event of Default shall have occurred and be continuing and if requested so to do
by the Owners of a majority in aggregate principal amount of Outstanding Bonds and
indemnified as provided in Section 8.06, the Trustee shall be obligated to exercise such one
or more of the rights and powers conferred by this Article VII, as the Trustee, being advised
by counsel, shall deem in the interests of the Owners.
No remedy by the terms of this Indenture conferred upon or reserved to the Trustee
(or to the Owners) is intended to be exclusive of any other remedy, but each and every
such remedy shall be cumulative and shall be in addition to any other remedy given to the
Trustee or to the Owners hereunder or now or hereafter existing at law or in equity.
No delay or omission to exercise any right or power accruing upon any Event of
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Default shall impair any such right or power or shall be construed to be a waiver of any
such Event of Default or acquiescence therein; such right or power may be exercised from
time to time as often as may be deemed expedient.
For all purposes of this Indenture, upon the occurrence of any Event of Default, the
Insurer shall be deemed to be the sole Owner of the Bonds insured pursuant to the
Insurance Policy, except with respect to the giving of notice of such Event of Default to the
Owners of the Bonds. The Insurer shall have the right, upon the occurrence of any Event of
Default, to (i) notify the Authority, the Trustee or any receiver or receivers of the Revenue
and other amounts pledged hereunder, of such Event of Default, and (ii) request that the
Trustee or receiver intervene in any related judicial proceedings that affect the Bonds or the
security therefor. The Trustee and the receiver are required to accept such notice from the
Insurer.
Section 7.04. Power of Trustee to, Control Proceeding. In the event that the
Trustee, upon the happening of an Event of Default, shall have taken any action, by judicial
proceedings or otherwise, pursuant to its duties hereunder, whether upon its own discretion
or upon the request of the Owners of a majority in principal amount of the Bonds then
Outstanding, it shall have full power, in the exercise of its discretion for the best interests of
the Owners of the Bonds, with respect to the continuance, discontinuance, withdrawal,
compromise, settlement or other disposal of such action; provided, however, that the
Trustee shall not, unless there no longer continues an Event of Default, discontinue,
withdraw, compromise or settle, or otherwise dispose of any litigation pending at law or in
equity, if at the time there has been filed with it a written request signed by the Owners of a
majority in principal amount of the Outstanding Bonds hereunder opposing such
discontinuance, withdrawal, compromise, settlement or other disposal of such litigation. Any
suit, action or proceeding which any Owner of Bonds shall have the right to bring to enforce
any right or remedy hereunder may be brought by the Trustee for the equal benefit and
protection of all Owners of Bonds similarly situated and the Trustee is hereby appointed
(and the successive respective Owners of the Bonds issued hereunder, by taking and
holding the same, shall be conclusively deemed so to have appointed it) the true and lawful
attorney-in-fact of the respective Owners of the Bonds for the purpose of bringing any such
suit, action or proceeding and to do and perform any and all acts and things for and on
behalf of the respective Owners of the Bonds as a class or classes, as may be necessary
or advisable in the opinion of the Trustee as such attorney-in-fact. Trustee's counsel shall not
be deemed under any circumstances to be counsel to the Owners. Communications
between the Trustee and Trustee's counsel shall deemed confidential and privileged
entitled to all protection under the law.
Section 7.05. Appointment of Receivers. Upon the occurrence of an Event of
Default hereunder, and upon the filing of a suit or other commencement of judicial
proceedings to enforce the rights of the Trustee and of the Owners under this Indenture,
the Trustee shall be entitled, as a matter of right, to the appointment of a receiver or
receivers of the Revenue and other amounts pledged hereunder, pending such
proceedings, with such powers as the court making such appointment shall confer.
Section 7.06. Non-Waiver. Nothing in this Article VII or in any other provision of this
Indenture, or in the Bonds, shall affect or impair the obligation of the Authority, which is
absolute and unconditional, to pay the interest on and principal of the Bonds to the
respective Owners of the Bonds at the respective dates of maturity, as herein provided, out
of the Net Revenues and other moneys herein pledged for such payment.
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A waiver of any default or breach of duty or contract by the Trustee or any Owners
shall not affect any subsequent default or breach of duty or contract, or impair any rights or
remedies on any such subsequent default or breach. No delay or omission of the Trustee or
any Owner of any of the Bonds to exercise any right or power accruing upon any default
shall impair any such right or power or shall be construed to be a waiver of any such default
or an acquiescence therein; and every power and remedy conferred upon the Trustee or
Owners by the Bond Law or by this Article VII may be enforced and exercised from time to
time and as often as shall be deemed expedient by the Trustee or the Owners, as the case
may be.
Section 7.07. Rights and Remedies of Owners. No Owner of any Bond issued
hereunder shall have the right to institute any suit, action or proceeding at law or in equity,
for any remedy under or upon this Indenture unless (a) such Owner shall have previously
given to the Trustee written notice of the occurrence of an Event of Default; (b) the Owners of
a majority in aggregate principal amount of all the Bonds then Outstanding shall have made
written request upon the Trustee to exercise the powers hereinbefore granted or to institute
such action, suit or proceeding in its own name; (c) said Owners shall have tendered to the
Trustee indemnity acceptable to the Trustee in its sole discretion against the costs,
expenses and liabilities to be incurred in compliance with such request; (d) the Trustee shall
have refused or omitted to comply with such request for a period of sixty (60) days after
such written request shall have been received by, and said tender of indemnity shall have
been made to, the Trustee; and (e) the Trustee has not received any inconsistent direction
during such 60-day period from the Owners of a majority in aggregate principal amount of
the Outstanding Bonds.
Such notification, request, tender of indemnity and refusal or omission are hereby
declared, in every case, to be conditions precedent to the exercise by any Owner of Bonds of
any remedy hereunder; it being understood and intended that no one or more Owners of
Bonds shall have any right in any manner whatever by his or their action to enforce any right
under this Indenture, except in the manner herein provided, and that all proceedings at law
or in equity to enforce any provision of this Indenture shall be instituted, had and maintained
in the manner herein provided and for the equal benefit of all Owners of the Outstanding
Bonds.
The right of any Owner of any Bond to receive payment of the principal of and
interest on such Bond as herein provided or to institute suit for the enforcement of any such
payment, shall not be impaired or affected without the written consent of such Owner,
notwithstanding the foregoing provisions of this Section or any other provision of this
Indenture.
Section 7.08. Termination of Proceedings. In case the Trustee shall have
proceeded to enforce any right under this Indenture by the appointment of a receiver or
otherwise, and such proceedings shall have been discontinued or abandoned for any
reason, or shall have been determined adversely, then and in every such case, the
Authority, the Trustee and the Owners shall be restored to their former positions and rights
hereunder, respectively, with regard to the property subject to this Indenture, and all rights,
remedies and powers of the Trustee shall continue as if no such proceedings had been
taken.
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ARTICLE VIII
THE TRUSTEE
Section 8.01. Duties, Immunities and Liabilities of Trustee.
(a) The Trustee shall, prior to an Event of Default, and after the curing or waiver of
all Events of Default which may have occurred, perform such duties and only such duties as are
expressly and specifically set forth in this Indenture and no implied duties or covenants
whatsoever shall be read into this Indenture against the Trustee. The Trustee shall, during the
existence of any Event of Default (which has not been cured or waived), exercise such of the
rights and powers vested in it by this Indenture, and use the same degree of care and skill in its
exercise, as a corporate trustee would exercise or use under the circumstances.
(b) The Authority may remove the Trustee at any time unless an Event of Default
shall have occurred and then be continuing, and the Authority shall remove the Trustee if at any
time requested to do so by the Owners of not less than a majority in aggregate principal amount
of the Bonds then Outstanding or their attorneys duly authorized in writing, or if at any time the
Trustee shall cease to be eligible in accordance with subsection (e) of this Section 8.01, or shall
become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a receiver of the
Trustee or its property shall be appointed, or any public officer shall take control or charge of the
Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation,
in each case by giving written notice of such removal to the Trustee and thereupon shall appoint
a successor Trustee by an instrument in writing. Any such removal shall be made upon at least
thirty (30) days' prior written notice to the Trustee.
(c) The Trustee may at any time resign by giving written notice of such resignation to
the Authority and by giving the Owners notice of such resignation by mail at the respective
addresses shown on the Registration Books. Upon receiving such notice of resignation, the
Authority shall promptly appoint a successor Trustee by an instrument in writing. The Insurer
shall be furnished with written notice of any resignation or removal of the Trustee, and the
appointment of any successor thereto.
(d) Any removal or resignation of the Trustee and appointment of a successor
Trustee shall become effective upon acceptance of appointment by the successor Trustee
pursuant to the terms hereof. If no successor Trustee shall have been appointed and have
accepted appointment within forty-five (45) days of giving notice of removal or notice of
resignation as aforesaid, the Authority shall petition any federal or state court of competent
jurisdiction for the appointment of a successor Trustee, and such court may thereupon, after
such notice (if any) as it may deem proper, appoint such successor Trustee. Any successor
Trustee appointed under this Indenture, shall signify its acceptance of such appointment by
executing and delivering to the Authority and to its predecessor Trustee a written acceptance
thereof, and thereupon such successor Trustee, without any further act, deed or conveyance
shall become vested with all the moneys, estates, properties, rights, powers, trusts, duties and
obligations of such predecessor Trustee, with like effect as if originally named Trustee herein;
but, nevertheless at the Written Request of the Authority or the request of the successor
Trustee, such predecessor Trustee shall execute and deliver any and all instruments of
conveyance or further assurance and do such other things as may reasonably be required for
more fully and certainly vesting in and confirming to such successor Trustee all the right, title
and interest of such predecessor Trustee in and to any property held by it under this Indenture
and shall pay over, transfer, assign and deliver to the successor Trustee any money or other
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property subject to the trusts and conditions herein set forth. Upon request of the successor
Trustee, the Authority shall execute and deliver any and all instruments as may be reasonably
required for more fully and certainly vesting in and confirming to such successor Trustee all
such moneys, estates, properties, rights, powers, trusts, duties and obligations. Upon
acceptance of appointment by a successor Trustee as provided in this subsection, the Authority
shall mail or cause the successor Trustee to mail a notice of the succession of such Trustee to
the trusts hereunder to each rating agency which is then rating the Bonds and to the Owners at
the respective addresses shown on the Registration Books. If the Authority fails to mail such
notice within fifteen (15) days after acceptance of appointment by the successor Trustee, the
successor Trustee shall cause such notice to be mailed at the expense of the Authority.
(e)  Any Trustee appointed under this Indenture shall be a corporation or association
organized and doing business under the laws of any state or the United States of America or the
District of Columbia, authorized under such laws to exercise corporate trust powers, which shall
have (or, in the case of a corporation included in a bank holding company system, the related
bank holding company shall have) a combined capital and surplus of at least Fifty Million Dollars
($50,000,000), and subject to supervision or examination by federal or State agency, so long as
any Bonds are Outstanding. If such corporation publishes a report of condition at least annually
pursuant to law or to the requirements of any supervising or examining agency above referred
to then for the purpose of this subsection (e), the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published. In case at any time the Trustee shall cease to be eligible
in accordance with the provisions of this subsection (e), the Trustee shall resign immediately in
the manner and with the effect specified in this Section 8.01.
Section 8.02. Merger or Consolidation. Any bank or trust company into which the
Trustee may be merged or converted or with which it may be consolidated or any bank or
trust company resulting from any merger, conversion or consolidation to which it shall be a
party or any bank or trust company to which the Trustee may sell or transfer all or
substantially all of its corporate trust business, provided such bank or trust company shall be
eligible under subsection (e) of Section 8.01 shall be the successor to such Trustee, without
the execution or filing of any paper or any further act, anything herein to the contrary
notwithstanding.
Section 8.03. Liability of Trustee.
(a)  The recitals of facts herein and in the Bonds contained shall be taken as
statements of the Authority, and the Trustee shall not and does not assume responsibility or
liability for the correctness of the same, or make any representations as to the validity or
sufficiency of this Indenture or the Bonds, nor shall the Trustee incur any responsibility or
liability in respect thereof, other than as expressly stated herein in connection with the
respective duties or obligations herein or in the Bonds assigned to or imposed upon it and
expressly disclaims any obligation to make any such undertaking. The Trustee shall only be
responsible for the representations contained in its certificate of authentication on the
Bonds. The Trustee shall not be liable in connection with the performance of its duties
hereunder, except for its own gross negligence. The Trustee may become the Owner of
Bonds with the same rights it would have if it were not Trustee, and, to the extent permitted
by law, may act as depository for and permit any of its officers or directors to act as a
member of, or in any other capacity with respect to, any committee formed to protect the
rights of Owners, whether or not such committee shall represent the Owners of a majority in
principal amount of the Bonds then Outstanding.
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(b) The Trustee shall not be liable for any error of judgment made in good faith by
a responsible officer, unless it shall be proved that the Trustee was negligent in ascertaining
the pertinent facts.
(c) The Trustee shall not be liable with respect to any action taken or omitted to
be taken by it in good faith in accordance with the direction of the Owners of not less than a
majority in aggregate principal amount of the Bonds at the time Outstanding relating to the
time, method and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred upon the Trustee under this Indenture.
(d) The Trustee shall not be liable for any action taken by it in good faith and
believed by it to be authorized or within the discretion or rights or powers conferred upon it
by this Indenture.
(e) The Trustee shall not be deemed to have knowledge of any Event of Default
hereunder, or any other event which, with the passage of time, the giving of notice, or both,
would constitute an Event of Default hereunder, other than a payment default unless and until
the trust administrator of this Indenture shall have received written notice thereof at the Trust
Office in accordance with this Indenture. Except as otherwise expressly provided herein, the
Trustee shall not be bound to ascertain or inquire as to the performance or observance by
the Authority of any of the terms, conditions, covenants or agreements herein or of any of
the documents executed in connection with the Bonds, or as to the existence of an Event of
Default or an event which would, with the giving of notice, the passage of time, or both,
constitute an Event of Default. The Trustee shall not be responsible for the validity,
effectiveness or priority of any collateral given to or held by it, nor shall have any duty or
obligation to monitor continuing notice filing requirements, if any.
(f)
No provision of this Indenture shall require the Trustee to expend or risk its
own funds or otherwise incur any financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if it is not assured to its
satisfaction that the repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it; provided, however, that if the Trustee shall advance
any such funds at anytime the Trustee shall be entitled to immediate reimbursement at the
highest rate permitted by law.
(g) The Trustee may execute any of the trusts or powers hereunder or perform
any duties hereunder either directly or through agents or attorneys or receivers and the
Trustee shall not be responsible for any misconduct or negligence on the part of any agent,
receiver or attorney appointed in good faith by it hereunder.
(h) The Trustee shall be under no obligation to exercise any of the rights or
powers vested in it by this Indenture at the request or direction of Owners pursuant to this
Indenture, unless such Owners shall have offered to the Trustee such security or indemnity
acceptable to the Trustee against the costs, expenses and liabilities which might be incurred
by it in compliance with such request or direction. No permissive power, right or remedy
conferred upon the Trustee hereunder shall be construed to impose a duty to exercise such
power, right or remedy; and provided further that in the event the Trustee shall act, the
scope of its obligations and duties thereunder shall not thereby be deemed, under any
circumstances, to be expanded.
(I)  
The Trustee shall not be concerned with or accountable to anyone for the
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subsequent use or application of any moneys which shall be released or withdrawn in
accordance with the provisions hereof.
(j)
The Trustee makes no representation or warranty, expressed or implied as to
the title, value, design, compliance with specifications or legal requirements, quality,
durability, operation, condition, merchantability or fitness for any particular purpose for the
use contemplated by the Authority of the Water Enterprise. In no event shall the Trustee be
liable for incidental, indirect, special or consequential damages in connection with or arising
from this Indenture for the existence, furnishing or use of the Water Enterprise.
(k) The Trustee shall have no responsibility with respect to any information,
statement or recital in any official statement, offering memorandum or other disclosure
material prepared or distributed with respect to the Bonds.
Section 8.04. Right to Rely on Documents. The Trustee shall be protected in
acting upon any notice, direction, requisition, resolution, request, consent, order, certificate,
report, opinion, bonds or other paper or document believed by them to be genuine and to
have been signed or presented by the proper party or parties. The Trustee may consult with
its counsel with regard to legal questions, and the opinion of such counsel or counsel to the
Authority shall be full and complete authorization and protection in respect of any action
taken or suffered by it hereunder in good faith and in accordance therewith.
The Trustee may treat the Owners of the Bonds appearing in the Registration Books
as the absolute owners of the Bonds for all purposes and the Trustee shall not be affected
by any notice to the contrary.
Whenever in the administration of the trusts imposed upon it by this Indenture the
Trustee shall deem it necessary or desirable that a matter be proved or established prior to
taking or suffering any action hereunder, such matter (unless other evidence in respect
thereof be herein specifically prescribed) may be deemed to be conclusively proved and
established by a Written Certificate, Written Request or Written Requisition of the Authority
and such Written Certificate, Written Request or Written Requisition shall be full warrant to
the Trustee for any action taken or suffered in good faith under the provisions of this
Indenture in reliance upon such Written Certificate, Written Request or Written Requisition,
but in its discretion the Trustee may, in lieu thereof, accept other evidence of such matter or
may require such additional evidence as to it may deem reasonable.
Section 8.05. Preservation and Inspection of Documents. All documents
received by the Trustee under the provisions of this Indenture shall be retained in their
respective possession and shall be subject at all reasonable times to the inspection of the
Authority and any Owner, and their agents and representatives duly authorized in writing, at
reasonable hours and under reasonable conditions.
Section 8.06. Compensation and Indemnification. Absent any fee agreement
between the Trustee and the Authority to the contrary, the Authority shall pay to the Trustee
(solely from Revenue) from time to time the compensation for all services rendered under
this Indenture and also all reasonable expenses and disbursements, incurred in and about
the performance of its powers and duties under this Indenture. In the event the Trustee
advances its own funds for the payment of the Bonds or for the protection or benefit of the
Owners of the Bonds, the Authority shall promptly reimburse the Trustee for such advances
with interest at the maximum rate allowed by law.
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The Authority and the City shall indemnify, defend and hold harmless the Trustee and
its officers, directors, agents and employees, against any loss, liability or expense incurred
without gross negligence or willful misconduct on its part, arising out of or in connection
with the acceptance or administration of this trust, including costs and expenses of
defending itself against any claim or liability in connection with the exercise or performance
of any of its powers hereunder. As security for the performance of the obligations of the
Authority under this Section 8.06, the Trustee shall have a lien prior to the lien of the Bonds
upon all property and funds held or collected by the Trustee as such, except funds held in
trust for the payment of principal of or interest on particular Bonds. The rights of the Trustee
and the obligations of the Authority under this Section 8.06 shall survive the resignation or
removal of the Trustee or the discharge of the Bonds and this Indenture.
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ARTICLE IX
MODIFICATION OR AMENDMENT OF THIS INDENTURE
Section 9.01. Amendments Permitted.
(a) This Indenture and the rights and obligations of the Authority and of the
Owners of the Bonds and of the Trustee may be modified or amended from time to time and
at any time, upon receipt of the prior written consent of the Insurer, by an indenture or
indentures supplemental hereto, which the Authority and the Trustee may enter into when
the written consent of the Owners of a majority in aggregate principal amount of all Bonds
then Outstanding, exclusive of Bonds disqualified as provided in this Indenture, shall have
been filed with the Trustee. No such modification or amendment shall (i) extend the fixed
maturity of any Bonds, or reduce the amount of principal thereof or extend the time of
payment, or change the method of computing the rate of interest thereon, or extend the
time of payment of interest thereon, without the consent of the Owner of each Bond so
affected, or (ii) reduce the aforesaid percentage of Bonds the consent of the Owners of
which is required to effect any such modification or amendment, or permit the creation of
any lien on the Net Revenues and other assets pledged under this Indenture prior to or on
a parity with the lien created by this Indenture except as permitted herein, or deprive the
Owners of the Bonds of the lien created by this Indenture on such Net Revenues and other
assets (except as expressly provided in this Indenture), without the consent of the Owners
of all of the Bonds then Outstanding, or (iii) modify any of the rights or obligations of the
Trustee hereunder without its written consent thereto. It shall not be necessary for the
consent of the Owners to approve the particular form of any Supplemental Indenture, but it
shall be sufficient if such consent shall approve the substance thereof.
(b) This Indenture and the rights and obligations of the Authority, of the Trustee
and the Owners of the Bonds may also be modified or amended from time to time and at
any time by a Supplemental Indenture, which the Authority and the Trustee may enter into
without the consent of any Owners, including, without limitation, for any one or more of the
following purposes:
(i) add to the covenants and agreements of the Authority in this Indenture
contained, other covenants and agreements thereafter to be observed, to pledge
or assign additional security for the Bonds (or any portion thereof), or to limit or
surrender any right or power herein reserved to or conferred upon the Authority;
(ii) make such provisions for the purpose of curing any ambiguity,
inconsistency or omission, or of curing or correcting any defective provision,
contained in this Indenture, or in regard to matters or questions arising under this
Indenture, as the Authority may deem necessary or desirable, provided that such
modification or amendment does not materially adversely affect the interests of
the Owners, in the opinion of Bond Counsel, and the Insurer has given its prior
written consent;
(iii) to modify, amend or supplement this Indenture in such manner as to
permit the qualification hereof under the Trust Indenture Act of 1939, as
amended, or any similar federal statute hereafter in effect, and to add such other
terms, conditions and provisions as may be permitted by said act or similar
federal statute;
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(iv) modify, amend or supplement this Indenture in such manner as to cause
interest on the Bonds to remain excludable from gross income under the Code;
(v) to provide for the issuance of Additional Bonds, and to provide the terms and
conditions under which such Additional Bonds may be issued, subject to and in
accordance with the provisions of Section 3.05; or
(vi) to comply with the requirements of a provider of a Qualified Reserve
Account Credit Instrument.
(c) The Trustee may in its discretion, but shall not be obligated to, enter into any
such Supplemental Indenture authorized by subsections (a) or (b) of this Section 9.01 which
affects the Trustee's own rights, duties or immunities under this Indenture or otherwise.
(d) Prior to the Trustee entering into any Supplemental Indenture hereunder,
there shall be delivered to the Trustee an opinion of Bond Counsel stating, in substance,
that such Supplemental Indenture has been adopted in compliance with the requirements of
this Indenture and that the adoption of such Supplemental Indenture will not, in and of itself,
adversely affect the exclusion from gross income for purposes of federal income taxation of
interest on the Bonds.
(e) Notice of any modification hereof or amendment hereto (other than pursuant
to subsections (b)(v) or (b)(vi)) shall be given by the Authority to each rating agency which
then maintains a rating on the Bonds and the Insurer, at least fifteen (15) days prior to the
effective date of the related Supplemental Indenture.
Section 9.02. Effect of Supplemental Indenture. Upon the execution of any
Supplemental Indenture pursuant to this Article IX, this Indenture shall be deemed to be
modified and amended in accordance therewith, and the respective rights, duties and
obligations under this Indenture of the Authority, the Trustee and all Owners of Bonds
Outstanding shall thereafter be determined, exercised and enforced hereunder subject in all
respects to such modification and amendment, and all the terms and conditions of any such
Supplemental Indenture shall be deemed to be part of the terms and conditions of this
Indenture for any and all purposes.
Section 9.03. Endorsement of Bonds; Preparation of New Bonds. Bonds
delivered after the execution of any Supplemental Indenture pursuant to this Article may,
and if the Authority so determines shall, bear a notation by endorsement or otherwise in form
approved by the Authority and the Trustee as to any modification or amendment provided
for in such Supplemental Indenture, and, in that case, upon demand on the Owner of any
Bonds Outstanding at the time of such execution and presentation of his Bonds for the
purpose at the Trust Office or at such additional offices as the Trustee may select and
designate for that purpose, a suitable notation shall be made on such Bonds. If the
Supplemental Indenture shall so provide, new Bonds so modified as to conform, in the
opinion of the Authority and the Trustee, to any modification or amendment contained in
such Supplemental Indenture, shall be prepared and executed by the Authority and
authenticated by the Trustee, and upon demand on the Owners of any Bonds then
Outstanding shall be exchanged at the Trust Office, without cost to any Owner, for Bonds
then Outstanding, upon surrender for cancellation of such Bonds, in equal aggregate
principal amount of the same series and maturity.
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Section 9.04. Amendment of Particular Bonds. The provisions of this Article IX
shall not prevent any Owner from accepting any amendment as to the particular Bonds held
by him.
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ARTICLE X
DEFEASANCE
Section 10.01. Discharge of Indenture. Any portion or all of the Outstanding Bonds
may be paid by the Authority in any of the following ways, provided that the Authority also
pays or causes to be paid any other sums payable hereunder by the Authority with respect
to such Bonds:
(a) by paying or causing to be paid the principal of and interest on such Bonds,
as and when the same become due and payable;
(b) by depositing with the Trustee, in trust, at or before maturity, money or non-
callable Federal Securities in the necessary amount (as provided in Section 10.03) to pay or
redeem such Bonds; or
(c) by delivering such Bonds to the Trustee for cancellation.
If the Authority shall also pay or cause to be paid all other sums payable hereunder,
then and in that case, at the election of the Authority (evidenced by a Written Certificate of
the Authority, filed with the Trustee, signifying the intention of the Authority to discharge
such Bonds and this Indenture with respect to such Bonds), and notwithstanding that any of
such Bonds shall not have been surrendered for payment; this Indenture and the pledge of
Net Revenues and other assets made under this Indenture with respect to such Bonds and
all covenants, agreements and other obligations of the Authority under this Indenture with
respect to such Bonds shall cease, terminate, become void and be completely discharged
and satisfied. In such event, upon the Written Request of the Authority, the Trustee shall be
authorized to take such actions and execute and deliver to the Authority all such instruments
as may be necessary or desirable to evidence such discharge and satisfaction, including,
without limitation, selection by lot of Bonds of any maturity of the Bonds that the Authority has
determined to pay and discharge in part. In the event all Outstanding Bonds are paid as
provided in this Section 10.01, the Trustee shall pay over, transfer, assign or deliver to the
Authority all moneys or securities or other property held by it pursuant to this Indenture
which are not required for the payment or redemption of any Bonds not theretofore
surrendered for such payment or redemption and after payment of amounts due to the
Trustee under this Indenture.
Notwithstanding anything herein to the contrary, in the event that the principal and/or
interest due on the Bonds shall be paid by the Insurer pursuant to the Insurance Policy, the
Bonds shall remain Outstanding for all purposes, not be defeased or otherwise satisfied and
not be considered paid by the Authority, and the assignment and pledge of the trust estate
and all covenants, agreements and other obligations of the Authority to the registered
owners of the Bonds shall continue to exist and shall run to the benefit of the Insurer, and
the Insurer shall be subrogated to the rights of such registered owners of the Bonds. The
Authority's obligation to pay such amounts shall survive payment in full of the Bonds.
Section 10.02. Discharge of Pledge of Net Revenues. Upon the deposit with the
Trustee, in trust, at or before maturity, of money or non-callable Federal Securities in the
necessary amount (as provided in Section 10.03) to pay or redeem any Outstanding Bonds
(whether upon or prior to the maturity or the redemption date of such Bonds), provided that,
48
if such Bonds are to be redeemed prior to maturity, notice of such redemption shall have
been given as provided in Article IV or provision satisfactory to the Trustee shall have been
made for the giving of such notice, then the pledge of Net Revenues in respect of such
Bonds shall cease, terminate and be completely discharged, and the Owners thereof shall
thereafter be entitled only to payment out of such money or securities deposited with the
Trustee as aforesaid for their payment, subject, however, to the provisions of Section 10.04.
The Authority may at any time surrender to the Trustee for cancellation by it any
Bonds previously issued and delivered, which the Authority may have acquired in any
manner whatsoever, and such Bonds, upon such surrender and cancellation shall be
deemed to be paid and retired.
Section 10.03. Deposit of Money or Securities with Trustee. Whenever in this
Indenture it is provided or permitted that there be deposited with or held in trust by the
Trustee money or noncallable Federal Securities in the necessary amount to pay or redeem
any Bonds, the money or non-callable Federal Securities so to be deposited or held may
include money or non-callable Federal Securities held by the Trustee in the funds and
accounts established pursuant to this Indenture and shall be (unless the Insurer otherwise
approves):
(a) lawful money of the United States of America in an amount equal to the
principal amount of such Bonds and all unpaid interest thereon to maturity, except that, in
the case of Bonds which are to be redeemed prior to maturity and in respect of which
notice of such redemption shall have been given as provided in Article IV or provision
satisfactory to the Trustee shall have been made for the giving of such notice, the amount
to be deposited or held shall be the principal amount of such Bonds, all unpaid interest and
premium, if any, thereon to the redemption date; or
(b) non-callable Federal Securities, the principal of and interest on which when
due will, in the written opinion of an Independent Accountant filed with the Authority and
the Trustee, provide money sufficient to pay the principal of and interest and premium, if
any, on the Bonds to be paid, as such principal and interest become due, provided that in
the case of Bonds which are to be redeemed prior to the maturity thereof, notice of such
redemption shall have been given as provided in Article IV or provision satisfactory to the
Trustee shall have been made for the giving of such notice; provided, in each case, that (i)
the Trustee shall have been irrevocably instructed (by the terms of this Indenture or by
Written Request of the Authority) to apply such money to the payment of such principal of
and interest and premium, if any, on such Bonds, and (ii) the Authority shall have delivered
to the Trustee an opinion of Bond Counsel to the effect that such Bonds have been
discharged in accordance with this Indenture (which opinion may rely upon and assume
the accuracy of the Independent Accountant's opinion referred to above).
In the event of an advance refunding to pay or redeem any Bonds, the Authority
shall cause to be delivered a verification report of an independent nationally recognized
certified public accountant. If a forward supply contract is employed in connection with the
refunding, (i) such verification report shall expressly state that the adequacy of the escrow
to accomplish the refunding relies solely on the initial escrowed investments and the
maturing principal thereof and interest income thereon and does not assume performance
under or compliance with the forward supply contract, and (ii) the applicable escrow
agreement shall provide that in the event of any discrepancy or difference between the
terms of the forward supply contract and the escrow agreement (or this Indenture, if no
49
separate escrow agreement is utilized), the terms of the escrow agreement or this Indenture,
if applicable, shall be controlling.
Section 10.04. Unclaimed Funds. Notwithstanding any provisions of this Indenture,
and subject to applicable provisions of State law, any moneys held by the Trustee in trust for
the payment of the principal of, or interest on, any Bonds and remaining unclaimed for two (2)
years after the principal of such Bonds has become due and payable (whether at maturity or
upon call for redemption or by acceleration as provided in this Indenture), if such moneys
were so held at such date, or two (2) years after the date of deposit of such moneys if
deposited after said date when such Bonds became due and payable, shall be repaid to the
Authority free from the trusts created by this Indenture and at the request of the Trustee an
indemnification agreement acceptable to the Authority and the Trustee indemnifying the
Trustee with respect to claims of Owners of Bonds which have not yet been paid, and all
liability of the Trustee with respect to such moneys shall thereupon cease; provided,
however, that before the repayment of such moneys to the Authority as aforesaid, the
Trustee shall (at the cost of the Authority) first mail to the Owners of Bonds which have not
yet been paid, at the addresses shown on the Registration Books, a notice, in such form as
may be deemed appropriate by the Trustee with respect to the Bonds so payable and not
presented and with respect to the provisions relating to the repayment to the Authority of the
moneys held for the payment thereof.
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ARTICLE XI
BOND INSURANCE
Section 11.01. Amendments Requiring Consent of Insurer. Any provision of this
Indenture expressly recognizing or granting rights in or to the Insurer may not be amended in
any manner which adversely affects the rights of the Insurer hereunder without the prior
written consent of the Insurer. The Insurer reserves the right to charge the Authority a fee
for any consent or amendment to this Indenture while the Insurance Policy is outstanding.
Unless otherwise provided in this Article XI, the Insurer's consent shall be required in
addition to consent of the registered owners of the Bonds, when required, for the following
purposes: (i) execution and delivery of any Supplemental Indenture; (ii) removal of the
Trustee and selection and appointment of any successor trustee; and (iii) initiation or
approval of any action not described in (i) or (ii) above which requires consent of the
registered owners of the Bonds. Notwithstanding any other provision of this Indenture, the
Insurer shall have the right, in lieu of Owners, to consent on behalf of such owners to any
Supplemental Indenture that requires Owners' consent.
Section 11.02. Approval of Any Reorganization. Any reorganization or liquidation
plan with respect to the Authority must be acceptable to the Insurer. In the event of any
reorganization or liquidation, the Insurer shall have the right to vote on behalf of all Owners
who hold the Bonds absent a default by the Insurer under the Insurance Policy.
Section 11.03. Consent of Insurer Upon Default. Notwithstanding any other
provisions of this Indenture, upon the occurrence and continuance of an Event of Default,
the Insurer shall be entitled to control and direct the enforcement of all rights and remedies
granted to the Owners or the Trustee for the benefit of the Owners under this Indenture
including, without limitation, (i) the right to accelerate the principal of the Bonds as
described in this Indenture, and (ii) the right to annul any declaration of acceleration, and the
Insurer shall also be entitled to approve all waivers of Events of Default.
Section 11.04. Acceleration Rights. Upon the occurrence of an Event of Default,
the Trustee may, with the consent of the Insurer, and shall, at the direction of the Insurer or
25% of the Owners with the consent of the Insurer, by written notice to the Authority and
the Insurer, declare the principal of the Bonds to be immediately due and payable,
whereupon that portion of the principal of the Bonds thereby coming due and the interest
thereon accrued to the date of payment shall, without further action, become and be
immediately due and payable, anything in this Indenture or in the Bonds to the contrary
notwithstanding.
Section 11.05. Notice to Insurer.
(a) While the Insurance Policy is in effect, the Authority or the Trustee, as
appropriate, shall furnish to the Insurer (to the attention of the Surveillance Department,
unless otherwise indicated):
(i)  as soon as they are available, a copy of any financial statement, audit
and/or annual report of the Authority;
51
(ii) such additional information as the Insurer may reasonably request;
(iii) a copy of any notice to be given to the registered owners of the Bonds,
including, without limitation, notice of any redemption or defeasance of the Bonds,
and any certificate rendered pursuant to this Indenture relating to the security for the
Bonds; and
(iv) to the extent that the Authority has entered into a continuing disclosure
agreement with respect to the Bonds, the Insurer shall be included as party to be
notified.
(b) The Trustee or the Authority, as appropriate, shall notify the Insurer (to the
attention of the General Counsel Office) of any failure of the Authority to provide relevant
notices, certificates, etc.
(c) Notwithstanding any other provision of this Indenture, the Trustee or the
Authority, as appropriate, shall immediately notify the Insurer (to the attention of the
General Counsel Office) if at any time there are insufficient moneys to make any payments
of principal and/or interest on the Bonds as required and immediately upon the occurrence
of any Event of Default hereunder.
(d) The Authority will permit the Insurer to discuss the affairs, finances and accounts
of the Authority or any information the Insurer may reasonably request regarding the
security for the Bonds with appropriate officers of the Authority. The Trustee or the
Authority, as appropriate, will permit the Insurer to have access to and to make copies of all
books and records relating to the Bonds at any reasonable time.
Section 11.06. Defeasance Provisions. Notwithstanding any other provision of
this Indenture, in the event that the principal and/or interest due on the Bonds is paid by the
Insurer pursuant to the Insurance Policy, the Bonds shall remain Outstanding for all
purposes, not be defeased or otherwise satisfied and not be considered paid by the
Authority, and the assignment and pledge of the Net Revenues and any other amounts
pledged under this Indenture, and all covenants, agreements and other obligations of the
Authority under this Indenture to the registered owners of the Bonds shall continue to exist
and shall run to the benefit of the Insurer, and the Insurer shall be subrogated to the rights
of such registered owners of the Bonds.
Section 11.07. Payment Procedure. As long as the Insurance Policy shall be in
full force and effect, the Authority and the Trustee agree to comply with the following
provisions:
(a)  At least one (1) business day prior to all Interest Payment Dates the Trustee
will determine whether there will be sufficient funds in the applicable funds and accounts to
pay the principal of or interest on the Bonds on such Interest Payment Date. If the Trustee
determines that there will be insufficient funds in such funds or accounts, the Trustee shall
so notify the Insurer. Such notice shall specify the amount of the anticipated deficiency, the
Bonds to which such deficiency is applicable and whether such Bonds will be deficient as to
principal or interest, or both. If the Trustee has not so notified the Insurer at least one (1)
business day prior to an Interest Payment Date, the Insurer will make payments of principal
or interest due with respect to the Bonds on or before the first (16`) business day next
52
following the date on which the Insurer shall have received notice of nonpayment from the
Trustee.
(b) The Trustee shall, after giving notice to the Insurer provided in (a) above,
make available to the Insurer and, at the Insurer's direction, to The Bank of New York, in
New York, New York, as insurance trustee for the Insurer or any successor insurance trustee
(the "Insurance Trustee"), the registration books of the Authority maintained by the Trustee
and all records relating to the funds and accounts maintained under this Indenture.
(c) The Trustee shall provide the Insurer and the Insurance Trustee with a list of
registered owners of Bonds entitled to receive principal or interest payments from the
Insurer under the terms of the Insurance Policy, and shall make arrangements with the
Insurance Trustee (i) to mail checks or drafts to the registered owners of the Bonds entitled to
receive full or partial interest payments from the Insurer and (ii) to pay principal upon the
Bonds surrendered to the Insurance Trustee by the registered owners of the Bonds entitled
to receive full or partial principal payments from the Insurer.
(d) The Trustee shall, at the time it provides notice to the Insurer pursuant to (a)
above, notify registered owners of the Bonds entitled to receive the payment of principal or
interest thereon from the Insurer (i) as to the fact of such entitlement, (ii) that the Insurer
will remit to them all or a part of the interest payments next coming due upon proof of the
entitlement of the registered owners of the Bonds to interest payments and delivery to the
Insurance Trustee, in form satisfactory to the Insurance Trustee, of an appropriate
assignment of the right to payment of the registered owners of the Bonds, (iii) that should
they be entitled to receive full payment of principal from the Insurer, they must surrender their
Bonds (along with an appropriate instrument of assignment in form satisfactory to the
Insurance Trustee to permit ownership of such Bonds to be registered in the name of the
Insurer) for payment to the Insurance Trustee, and not the Trustee, and (iv) that should
they be entitled to receive partial payment of principal from the Insurer, they must surrender
their Bonds for payment thereon first to the Trustee who shall note on such Bonds the
portion of the principal paid by the Trustee, and then, along with an appropriate instrument
of assignment in form satisfactory to the Insurance Trustee, to the Insurance Trustee, which
will then pay the unpaid portion of principal.
(e) In the event that the Trustee has notice that any payment of principal of or
interest on a Bond which has become Due for Payment and which is made to a Owner or
on behalf of the Authority has been deemed a preferential transfer and theretofore
recovered from its registered owner pursuant to the United States Bankruptcy Code by a
trustee in bankruptcy in accordance with the final, nonappealable order of a court having
competent jurisdiction, the Trustee shall, at the time the Insurer is notified pursuant to (a)
above, notify all registered owners of the Bonds that in the event that any registered owner's
payment is so recovered, such registered owner will be entitled to payment from the Insurer
to the extent of such recovery if sufficient funds are not otherwise available, and the
Trustee shall furnish to the Insurer its records evidencing the payments of principal of and
interest on Bonds which have been made by the Trustee and subsequently recovered from
registered owners of Bonds and the dates on which such payments were made.
(f)
In addition to those rights granted the Insurer under this Indenture, the Insurer
shall, to the extent it makes payment of principal of or interest on the Bonds, become
subrogated to the rights of the recipients of such payments in accordance with the terms of
the Financial Guaranty Insurance Policy, and to evidence such subrogation (i)in the case of
53
subrogation as to claims for past due interest, the Trustee shall note the Insurer's rights as
subrogee on the registration books or the Authority maintained by the Trustee upon receipt
from the Insurer of proof of the payment of interest thereon to the registered owners of the
Bonds, and (ii) in the case of subrogation as to claims for past due principal, the Trustee
shall note the Insurer's rights as subrogee on the registration books or the Authority
maintained by the Trustee upon surrender of the Bonds by the registered owners thereof
together with proof of the payment of principal thereof.
Section 11.08. Trustee-Related Provisions. The Trustee may be removed at any
time, at the request of the Insurer, for any breach of the trust set forth in this Indenture. The
Trustee shall provide to the Insurer prior written notice of any Trustee resignation.
Notwithstanding any other provision of this Indenture, in determining whether the
rights of the Owners will be adversely affected by any action taken pursuant to the terms
and provisions of this Indenture, the Trustee shall consider the effect on the Owners as if
there were no Insurance Policy.
Notwithstanding any other provision of this Indenture, no removal, resignation or
termination of the Trustee shall take effect until a successor, acceptable to the Insurer,
shall be appointed.
Section 11.09. Insurer as Third Party Beneficiary. To the extent that this Indenture
confers upon or gives or grants to the Insurer any right, remedy or claim under or by reason
of this Indenture, the Insurer is hereby explicitly recognized as being a third-party
beneficiary hereunder and may enforce any such right, remedy or claim conferred, given or
granted under this Indenture.
Section 11.10. Parties Interested Herein. Nothing in this Indenture expressed or
implied is intended or shall be construed to confer upon, or to give or grant to, any person or
entity, other than the Authority, the Trustee, the Insurer, and the registered owners of the
Bonds, any right, remedy or claim under or by reason of this Indenture or any covenant,
condition or stipulation in this Indenture, and any covenant, condition or stipulation hereof,
all covenants, stipulations, promises and agreements in this Indenture contained by and on
behalf of the Authority shall be for the sole and exclusive benefit of the Authority, the
Trustee, the Insurer, and the registered owners of the Bonds.
54
ARTICLE XII
MISCELLANEOUS
Section 12.01. Liability of Authority Limited to Net Revenues. Notwithstanding
anything in this Indenture or in the Bonds contained, the Authority shall not be required to
advance any moneys derived from any source other than the Bonds or Net Revenues and
other assets pledged under this Indenture for any of the purposes in this Indenture
mentioned, whether for the payment of the principal of or interest on the Bonds or for any
other purpose of this Indenture. Nevertheless, the Authority may, but shall not be required
to, advance for any of the purposes hereof any funds of the Authority that may be made
available to it for such purposes.
Section 12.02. Limitation of Rights to Parties, Owners. Nothing in this Indenture
or in the Bonds expressed or implied is intended or shall be construed to give to any person
other than the Authority, the Trustee and the Owners of the Bonds, any legal or equitable
right, remedy or claim under or in respect of this Indenture or any covenant, condition or
provision therein or herein contained; and all such covenants, conditions and provisions are
and shall be held to be for the sole and exclusive benefit of the Authority, the Trustee and
the Owners of the Bonds.
Section 12.03. Funds and Accounts. Any fund or account required by this
Indenture to be established and maintained by the Trustee may be established and
maintained in the accounting records of the Trustee, either as a fund or an account, and
may, for the purposes of such records, any audits thereof and any reports or statements
with respect thereto, be treated either as a fund or as an account; but all such records with
respect to all such funds and accounts shall at all times be maintained in accordance with
industry standards to the extent practicable, and with due regard for the requirements of
Section 6.05 and for the protection of the security of the Bonds and the rights of every
Owner thereof. The Trustee may establish such funds and accounts as it deems necessary
or appropriate to perform its obligations hereunder.
Section 12.04. Waiver of Notice; Requirement of Mailed Notice. Whenever in this
Indenture the giving of notice by mail or otherwise is required, the giving of such notice may
be waived in writing by the person entitled to receive such notice and in any such case the
giving or receipt of such notice shall not be a condition precedent to the validity of any
action taken in reliance upon such waiver. Whenever in this Indenture any notice shall be
required to be given by mail, such requirement shall be satisfied by the deposit of such
notice in the United States mail, postage prepaid, by first class mail.
Section 12.05. Destruction of Bonds. Whenever in this Indenture provision is made
for the cancellation by the Trustee and the delivery to the Authority of any Bonds, the Trustee
shall, in lieu of such cancellation and delivery, destroy such Bonds as may be allowed by
law, and, upon written request of the Authority, deliver a certificate of such destruction to
the Authority,
Section 12.06. Severability of Invalid Provisions. If any one or more of the
provisions contained in this Indenture or in the Bonds shall for any reason be held to be
invalid, illegal or unenforceable in any respect, then such provision or provisions shall be
deemed severable from the remaining provisions contained in this Indenture and such
55
invalidity, illegality or unenforceability shall not affect any other provision of this Indenture,
and this Indenture shall be construed as if such invalid or illegal or unenforceable provision
had never been contained herein. The Authority hereby declares that it would have entered
into this Indenture and each and every other Section, paragraph, sentence, clause or phrase
hereof and authorized the issuance of the Bonds pursuant thereto irrespective of the fact that
any one or more Sections, paragraphs, sentences, clauses or phrases of this Indenture may
be held illegal, invalid or unenforceable.
Section 12.07. Notices. All written notices to be given under this Indenture shall be
given by first class mail or personal delivery to the party entitled thereto at its address set
forth below, or at such address as the party may provide to the other party in writing from
time to time. Notice shall be effective either (a) upon transmission by facsimile transmission
or other form of telecommunication, confirmed by the recipient (b) 48 hours after deposit in
the United States mail, postage prepaid, or (c) in the case of personal delivery to any
person, upon actual receipt. The Authority or the Trustee may, by written notice to the other
parties, from time to time modify the address or number to which communications are to be
given hereunder.
If to the Authority:
If to the Trustee:
Indio Water Authority
100 Civic Center Mall
India, California 92202
Attention: Executive Director
Union Bank of California, N.A.
120 S. San Pedro Street,
Suite 400
Los Angeles, California 90012
Attention: Corporate Trust Department
Section 12.08. Evidence of Rights of Owners. Any request, consent or other
instrument required or permitted by this Indenture to be signed and executed by Owners may
be in any number of concurrent instruments of substantially similar tenor and shall be
signed or executed by such Owners in person or by an agent or agents duly appointed in
writing. Proof of the execution of any such request, consent or other instrument or of a
writing appointing any such agent, or of the holding by any person of Bonds transferable by
delivery, shall be sufficient for any purpose of this Indenture and shall be conclusive in favor
of the Trustee and the Authority if made in the manner provided in this Indenture.
The fact and date of the execution by any person of any such request, consent or
other instrument or writing may be proved by the certificate of any notary public or other
officer of any jurisdiction, authorized by the laws thereof to take acknowledgments of
deeds, certifying that the person signing such request, consent or other instrument
acknowledged to him the execution thereof, or by an affidavit of a witness of such execution
duly sworn to before such notary public or other officer.
The ownership of Bonds shall be proved by the Registration Books.
Any request, consent, or other instrument or writing of the Owner of any Bond shall
bind every future Owner of the same Bond and the Owner of every Bond issued in exchange
therefor or in lieu thereof, in respect of anything done or suffered to be done by the Trustee
or the Authority in accordance therewith or reliance thereon.
56
Section 12.09. Disqualified Bonds. In determining whether the Owners of the
requisite aggregate principal amount of Bonds have concurred in any demand, request,
direction, consent or waiver under this Indenture, unless all outstanding Bonds are then so
owned or held, Bonds which are known by the Trustee to be owned or held by or for the
account of the Authority or by any other obligor on the Bonds, or by any person directly or
indirectly controlling or controlled by, or under direct or indirect common control with, the
Authority or any other obligor on the Bonds, shall be disregarded and deemed not to be
Outstanding for the purpose of any such determination. Bonds so owned that have been
pledged in good faith may be regarded as Outstanding for the purposes of this Section 12.09
if the pledgee shall certify to the Trustee the pledgee's right to vote such Bonds and that the
pledgee is not a person directly or indirectly controlling or controlled by, or under direct or
indirect common control with, the Authority or any other obligor on the Bonds. In case of a
dispute as to such right, any decision by the Trustee taken upon the advice of counsel shall
be full protection to the Trustee. Upon request of the Trustee, the Authority shall specify to
the Trustee those Bonds which are disqualified pursuant to this Section 12.09.
Section 12.10. Money Held for Particular Bonds. The money held by the Trustee
for the payment of the interest or principal due on any date with respect to particular Bonds
(or portions of Bonds in the case of Bonds redeemed in part only) shall, on and after such
date and pending such payment, be set aside on its books and held in trust by it for the
Owners of the Bonds entitled thereto, subject, however, to the provisions of Section 10.04
hereof, but without any liability for interest thereon.
Section 12.11. Waiver of Personal Liability. No member, officer, agent or
employee of the Authority shall be individually or personally liable for the payment of the
principal of or interest on the Bonds or be subject to any personal liability or accountability
by reason of the issuance thereof; but nothing herein contained shall relieve any such
member, officer, agent or employee from the performance of any official duty provided by
law or by this Indenture.
Section 12.12. Successor Is Deemed Included in All References to
Predecessor. Whenever in this Indenture either the Authority or the Trustee is named or
referred to, such reference shall be deemed to include the successors or assigns thereof,
and all the covenants and agreements in this Indenture contained by or on behalf of the
Authority or the Trustee shall bind and inure to the benefit of the respective successors and
assigns thereof whether so expressed or not.
Section 12.13. Execution in Several Counterparts. This Indenture may be
executed in any number of counterparts and each of such counterparts shall for all purposes
be deemed to be an original; and all such counterparts, or as many of them as the Authority
and the Trustee shall preserve undestroyed, shall together constitute but one and the same
instrument.
Section 12.14. Governing Law. This Indenture shall be governed by and construed
in accordance with the laws of the State.
57
IN WITNESS WHEREOF, the Indio Water Authority and the City of Indio have caused this
Indenture to be signed in their name by its Executive Director and Mayor, respectively, and Union
Bank of California, N.A., in token of its acceptance of the trusts created hereunder, has caused this
Indenture to be signed in its corporate name by its officer thereunto duly authorized, all as of the
day and year first above written.
INDIO WATER AUTHORITY
By:  
Executive Director
CITY OF INDIO
By:  
Mayor
UNION BANK OF CALIFORNIA, N.A., as
Trustee
By:  
Authorized Signatory
58
EXHIBIT A
FORM OF 2006 BOND
R-
UNITED STATES OF AMERICA
STATE OF CALIFORNIA
COUNTY OF RIVERSIDE
Indio Water Authority
2006 Water Revenue Bonds
NEITHER THIS BOND NOR THE PAYMENT OF THE PRINCIPAL OR ANY PART
THEREOF NOR ANY INTEREST THEREON CONSTITUTES A DEBT, LIABILITY OR
OBLIGATION OF THE CITY, THE INDIO REDEVELOPMENT AGENCY (THE "AGENCY"),
THE COUNTY OF RIVERSIDE, THE STATE OF CALIFORNIA, OR ANY OF ITS
POLITICAL SUBDIVISIONS, OTHER THAN THE AUTHORITY AND NEITHER THE CITY,
THE AGENCY, SAID COUNTY, SAID STATE, NOR ANY OF ITS POLITICAL
SUBDIVISIONS, IS LIABLE HEREON NOR IN ANY EVENT SHALL THIS BOND BE
PAYABLE OUT OF ANY FUNDS OR PROPERTIES OF THE AUTHORITY OTHER THAN
THE NET REVENUES.
INTEREST RATE  MATURITY DATE  DATED DATE  CUSIP
April 1, 2 0_ (Closing Date)
REGISTERED OWNER: CEDE & CO.
PRINCIPAL AMOUNT:  DOLLARS
The Indio Water Authority, a joint powers authority, duly organized and existing under
the laws of the State of California (the "Authority"), for value received, hereby promises to
pay to the Registered Owner specified above or registered assigns (the "Registered
Owner"), on the Maturity Date specified above (subject to any right of prior redemption
hereinafter provided for), the Principal Amount specified above, in lawful money of the
United States of America, and to pay interest thereon in like lawful money from the Interest
Payment Date (as hereinafter defined) next preceding the date of authentication of this Bond
unless (i) this Bond is authenticated on or before an Interest Payment Date and after the
close of business on the fifteenth day of the month preceding such Interest Payment Date, in
which event it shall bear interest from such Interest Payment Date, or (ii) this Bond is
authenticated on or before March 15, 2007, in which event it shall bear interest from the
Dated Date specified above; provided, however, that if at the time of authentication of this
Bond, interest is in default on this Bond, this Bond shall bear interest from the Interest
Payment Date to which interest has previously been paid or made available for payment on
this Bond, at the Interest Rate per annum specified above, payable semiannually on April 1
and October 1, in each year, commencing April 1, 2007 (collectively, the "Interest Payment
Dates"), calculated on the basis of a 360-day year composed of twelve 30-day months.
Principal hereof are payable upon presentation and surrender hereof at the corporate trust
office (the "Trust Office") of Union Bank of California, N.A. (the "Trustee"). Interest hereon is
A-1
payable by check of the Trustee mailed by first class mail to the Registered Owner hereof at
the Registered Owner's address as it appears on the registration books of the Trustee as of
the close of business on the fifteenth day of the month preceding each Interest Payment
Date (a "Record Date"), or, upon written request filed with the Trustee prior to such Record
Date by a Registered Owner of at least $1,000,000 in aggregate principal amount of Bonds,
by wire transfer in immediately available funds to an account in the United States of America
designated by such Registered Owner in such written request.
This Bond is one of a duly authorized issue of bonds of the Authority designated as
the "Indio Water Authority 2006 Water Revenue Bonds (the "Bonds"), in an aggregate
principal amount of $  all of like tenor and date (except for such variation,
if any, as may be required to designate varying numbers, maturities, interest rates or
redemption provisions) and all issued pursuant to the provisions of Article 4 (commencing
with section 6584) of Chapter 5 of Division 7 of Title 1 of the California Government Code
(the "Bond Law"), and pursuant to an Indenture of Trust, dated as of October 1, 2006, by
and among the Authority, the City of Indio and the Trustee (the "Indenture"), authorizing the
issuance of the Bonds. Reference is hereby made to the Indenture (copies of which are on
file at the office of the Authority) and all supplements thereto for a description of the terms on
which the Bonds are issued, the provisions with regard to the nature and extent of the Net
Revenues (as defined in the Indenture, and the rights thereunder of the owners of the
Bonds and the rights, duties and immunities of the Trustee and the rights and obligations of
the Authority thereunder, to all of the provisions of which the Registered Owner of this Bond,
by acceptance hereof, assents and agrees.
The Bonds have been issued by the Authority to finance additional facilities of the
Water Enterprise and to refund and defease certain bonds of the Authority.
This Bond and the interest hereon and all other Bonds and the interest thereon (to
the extent set forth in the Indenture) are special obligations of the Authority, and are
payable from, and are secured by a charge and lien on the Net Revenues (as defined in the
Indenture). As and to the extent set forth in the Indenture, all of the Net Revenues are
exclusively and irrevocably pledged in accordance with the terms hereof and the provisions
of the Indenture, to the payment of the principal of and interest on the Bonds on a parity with
any Additional Bonds or Parity Obligations ( as such terms are defined in the Indenture)
issued or incurred by the Authority under the Indenture.
The rights and obligations of the Authority and the owners of the Bonds may be
modified or amended at any time in the manner, to the extent and upon the terms provided
in the Indenture, but no such modification or amendment shall extend the fixed maturity of
any Bonds, or reduce the amount of principal thereof, or extend the time of payment, or
change the method of computing the rate of interest thereon, or extend the time of payment
of interest thereon, without the consent of the owner of each Bond so affected.
The Bonds maturing on April 1, 20  and April 1, 20  are Term Bonds and are
subject to mandatory redemption, in part by lot, from Sinking Account payments set forth in
the following schedule on April 1 in each year, commencing April 1, 20  and April 1, 20__
respectively, at a redemption price equal to the principal amount thereof to be redeemed
(without premium), together with. interest accrued thereon to the date fixed for redemption;
provided, however, that if some but not all of the Term Bonds have been redeemed pursuant
to optional or special mandatory redemption, the total amount of Sinking Account payments
A-2
to be made subsequent to such redemption shall be reduced in an amount equal to the
principal amount of the Term Bonds so redeemed by reducing each such future Sinking
Account payment on a pro rata basis (as nearly as practicable) in integral multiples of
$5,000, as shall be designated pursuant to written notice filed by the Authority with the
Trustee.
Schedule of Mandatory Sinking Fund Payments
Term Bond Maturing April 1, 20_
Redemption Date
 
Principal
(April 1)
 
Amount
Schedule of Mandatory Sinking Fund Payments
Term Bond Maturing April 1, 20
Redemption Date
 
Principal
(Argil 1)
 
Amount
The Bonds maturing on or after April 1, 20_shall be subject to optional redemption,
as a whole or in part on any date prior to the maturity thereof, at the option of the Authority,
on or after April 1, 20_, from funds derived by the Authority from any source, at a
redemption price equal to the principal amount of the Bonds to be redeemed, plus accrued
but unpaid interest to the redemption date, without premium.
The Bonds are subject to mandatory redemption as a whole, or in part, on any date,
pro rata by maturity and by lot within a maturity, (in a manner determined by the Trustee)
from moneys deposited in the Redemption Fund to the extent insurance proceeds received
with respect to the Water Enterprise are not used to repair, rebuild or replace the Water
Enterprise pursuant to the Indenture, or to the extent of condemnation proceeds received
with respect to the Water Enterprise and elected by the Authority to be used for such
purpose pursuant to the Indenture, at a redemption price equal to the principal amount
thereof plus interest accrued thereon to the date fixed for redemption, without premium
As provided in the Indenture, notice of redemption shall be mailed by the Trustee by
first class mail not less than thirty (30) nor more than sixty (60) days prior to the redemption
date to the respective owners of any Bonds designated for redemption at their addresses
appearing on the registration books of the Trustee, but neither failure to receive such notice
nor any defect in the notice so mailed shall affect the sufficiency of the proceedings for
redemption or the cessation of accrual of interest thereon from and after the date fixed for
redemption.
If this Bond is called for redemption and payment is duly provided therefor as
specified in the Indenture, interest shall cease to accrue hereon from and after the date
fixed for redemption.
If an Event of Default (as defined in the Indenture) shall occur, the principal of all
Bonds may be declared due and payable upon the conditions, in the manner and with the
effect provided in the Indenture, but such declaration and its consequences may be
rescinded and annulled as further provided in the Indenture.
A-3
This Bond is transferable by the Registered Owner hereof, in person or by his
attorney duly authorized in writing, at the Trust Office, but only in the manner, subject to the
limitations and upon payment of the charges provided in the Indenture, and upon surrender
and cancellation of this Bond. Upon registration of such transfer, a new Bond or Bonds, of
authorized denomination or denominations, for the same aggregate principal amount and of
the same maturity will be issued to the transferee in exchange herefor. This Bond may be
exchanged at the Trust Office for Bonds of the same tenor, aggregate principal amount,
interest rate and maturity, of other authorized denominations. Transfer or exchange of this
Bond will not be permitted during the period established by the Trustee for selection of Bonds
for redemption or if this Bond has been selected for redemption.
The Authority and the Trustee may treat the Registered Owner hereof as the
absolute owner hereof for all purposes, and the Authority and the Trustee shall not be
affected by any notice to the contrary.
It is hereby certified that all of the things, conditions and acts required to exist, to
have happened or to have been performed precedent to and in the issuance of this Bond do
exist, have happened or have been performed in due and regular time, form and manner as
required by the Bond Law and the laws of the State of California and that the amount of this
Bond, together with all other indebtedness of the Authority, does not exceed any limit
prescribed by the Bond Law or any laws of the State of California, and is not in excess of the
amount of Bonds permitted to be issued under the Indenture.
This Bond shall not be entitled to any benefit under the Indenture or become valid or
obligatory for any purpose until the Trustee's Certificate of Authentication hereon endorsed
shall have been manually signed by the Trustee.
Capitalized terms used and not defined herein shall have the meanings ascribed to
them in the Indenture.
IN WITNESS WHEREOF, the Indio Water Authority has caused this Bond to be
executed in its name and on its behalf with the manual signature of its President and
attested to by the manual signature of its Secretary, all as of the Dated Date specified
above.
INDIO WATER AUTHORITY
By:  
President
Attest:
Secretary
A-4
CERTIFICATE OF AUTHENTICATION
This is one of the Bonds described in the within-mentioned Indenture.
Dated:  , 2006  UNION BANK OF CALIFORNIA, N.A.
By:  Authorized Signatory
STATEMENT OF INSURANCE
[To Come]
A-6
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face of this Bond,
shall be construed as though they were written out in full according to applicable laws or
regulations.
TEN COM -- as tenants in common  UNIF GIFT MIN ACT  Custodian
TEN ENT -- as tenants by the entireties  (Cust) - (Minor)
under Uniform Gifts to Minors
JT TEN -- as joint tenants with right of  Act  
survivorship and not as tenants in common  (State)
ADDITIONAL ABBREVIATIONS MAY ALSO BE USED
THOUGH NOT IN THE LIST ABOVE
(FORM OF ASSIGNMENT)
For value received, the undersigned do(es) hereby sell, assign and transfer unto
(Name, Address and I ax Identincation or Social Security Number of Assignee)
the within Bond and does hereby irrevocably constitute and appoint attorney, to transfer the
same on the registration books of the Trustee, with full power of substitution in the
premises.
Dated: Signature Guaranteed:
Note: Signature(s) must be guaranteed by an
eligible guarantor.
Note: The signature(s) on this Assignment
must correspond with the name(s) as written
cro  the face of the within Bond in every
particular without alteration or enlargement or
any change whatsoever.
A-7
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PRELIMINARY OFFICIAL STATEMENT DATED  , 2006
NEW ISSUE - FULL BOOK-ENTRY  INSURED RATING: Standard & Poor's: "AAA"
UNDERLYING RATING:  
See "RATINGS"
In the opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, subject, however to
certain qualifications described herein, under existing law, the interest on the 2006 Bonds is excluded from gross income for federal
income tax purposes and such interest is not an item of tax preference for purposes of the federal alternative minimum tax imposed
on individuals and corporations, although for the purpose of computing the alternative minimum tax imposed on certain corporations,
such interest is taken into account in determining certain income and earnings. In the further opinion of Bond Counsel, the interest
on the 2006 Bonds is exempt from California personal income taxes. See "TAX MATTERS."
INDIO WATER AUTHORITY
2006 Water Revenue Bonds
Dated: Date of Delivery  Due: April 1, as shown on inside cover
Authority for Issuance. The bonds captioned above (the "2006 Bonds") are being issued by the Indio Water Authority (the
"Authority") under a resolution adopted by the Commission of the Authority on  , 2006, and a resolution adopted by the
City Council of the City of Indio (the "City") on  , 2006. The 2006 Bonds are issued under an Indenture of Trust dated as of
October 1, 2006 (the "Indenture"), by and among the Authority, the City and Union Bank of California, NA., as trustee (the
"Trustee"). See "THE 2006 BONDS — Authority for Issuance."
Security for the 2006 Bonds. The 2006 Bonds are special obligations of the Authority, payable solely from "Net Revenues" of
the Authority's water utility enterprise (the "Water Enterprise "), and amounts on deposit in the funds and accounts established under
the Indenture as and to the extent provided in the Indenture. See "SECURITY FOR THE.2006 BONDS."
Use of Proceeds. The 2006 Bonds are being issued to provide funds to (i) acquire and construct certain facilities for and
improvements to the Water Enterprise, and finance certain related costs, (ii) to refund on an advance basis an outstanding series of
water revenue bonds of the Authority captioned "$12,000,000 Indio Water Authority Water Enterprise Revenue Bonds, 2004 Series"
(the "2004 Bonds"), (iii) provide a reserve account for the 2006 Bonds, (iv) pay the costs of issuing the 2006 Bonds. See
"FINANCING PLAN."
Parity Debt. The 2006 Bonds are being issued in part to defease and refund the 2004 Bonds, which are the sole outstanding
debt of the Authority payable from Net Revenues. Additional series of bonds and other parity obligations may be issued in the future
that are payable from Net Revenues on a parity with the 2006 Bonds, subject to the conditions contained in the Indenture. See
"SECURITY FOR THE 2006 BONDS."
Bond Terms; Book-Entry Only. The 2006 Bonds will bear interest at the rates shown on the inside cover, payable
semiannually on April 1 and October 1 of each year, commencing on April 1, 2007, and will be issued in fully registered form without
coupons in the denomination of $5,000 or any integral multiple of $5,000. The 2006 Bonds will be issued in book-entry only form,
initially registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ("DTC").
Purchasers of the 2006 Bonds will not receive certificates representing their interests in the 2006 Bonds. Payments of the principal
of, premium, if any, and interest on the 2006 Bonds will be made to DTC, which is obligated in turn to remit such principal, premium,
if any, and interest to its DTC Participants for subsequent disbursement to the beneficial owners of the 2006 Bonds. See "THE 2006
BONDS — General Provisions."
Redemption. The 2006 Bonds are subject to optional redemption, special mandatory redemption from insurance or
condemnation proceeds, and mandatory sinking fund redemption prior to maturity. See "THE 2006 BONDS —
Redemption."
Municipal Bond Insurance. The scheduled payment of principal of and interest on the 2006 Bonds when due will be
guaranteed under an insurance policy to be issued concurrently with the delivery of the 2006 Bonds by
[INSURER LOGO]
NEITHER THE FULL FAITH AND CREDIT NOR THE TAXING POWER OF THE AUTHORITY IS PLEDGED TO THE
PAYMENT OF THE 2006 BONDS OR INTEREST THEREON. THE 2006 BONDS ARE NOT SECURED BY A LEGAL OR
EQUITABLE PLEDGE OF, OR CHARGE, OR LIEN, OR ENCUMBRANCE UPON, ANY OF THE PROPERTY OF THE AUTHORITY
OR ANY OF ITS INCOME OR RECEIPTS, EXCEPT THE NET REVENUES OF THE WATER ENTERPRISE AND AMOUNTS ON
DEPOSIT IN THE FUNDS AND ACCOUNTS ESTABLISHED UNDER THE INDENTURE AS AND TO THE EXTENT PROVIDED IN
THE INDENTURE.
MATURITY SCHEDULE
(see inside cover)
THIS COVER PAGE CONTAINS CERTAIN INFORMATION FOR QUICK REFERENCE ONLY. IT IS NOT A SUMMARY OF
THIS ISSUE OF BONDS. INVESTORS MUST READ THE ENTIRE OFFICIAL STATEMENT TO OBTAIN INFORMATION
ESSENTIAL TO THE MAKING OF AN INFORMED INVESTMENT DECISION WITH RESPECT TO THE PURCHASE OF THE
2006 BONDS. INVESTMENT IN THE 2006 BONDS INVOLVES RISKS THAT MAY NOT BE APPROPRIATE FOR SOME
INVESTORS. SEE "BOND OWNERS' RISKS."
The 2006 Bonds are offered when, as and if issued and accepted by the Underwriter, subject to approval as to their legality by
Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel. Certain legal matters will also be passed
upon for the Authority by Jones Hall, as Disclosure Counsel. Certain legal matters will be passed upon for the Authority and the City
by the City Attorney of the City of Indio. It is anticipated that the 2006 Bonds, in book-entry only form, will be available through the
facilities of DTC in New York, New York, on or about  , 2006.
E. J. De La Rosa & Co., Inc.
The date of this Official Statement is:
 
2006
* Preliminary; subject to change.
MATURITY SCHEDULE*
 Serial Bonds
(Base CUSIPt:  
Maturity  Principal  Interest
(April 1)  Amount  Rate  Yield  Price  CUSIPt
$  _% Term Bond due April 1, 20_, Price: _% CUSIPt No.
t Copyright 2006, American Bankers Association. CUSIP data herein are provided by Standard & Poor's CUSIP Service Bureau, a
division of The McGraw-Hill Companies, Inc., and are provided for convenience of reference only. The inclusion of CUSIP data in
this Official Statement is not intended to create a database and does not serve in any way as a substitute for the CUSIP Service
Bureau. Neither the Authority nor the Underwriter assumes any responsibility for the accuracy of these CUSIP data.
* Preliminary; subject to change
INDIO WATER AUTHORITY
Authority Commission
Gene Gilbert, President
Ben Godfrey, Vice President
Lupe Ramos Watson, Commissioner
Melanie Fesmire, Commissioner
Bertha Bastidas, Commissioner
Michael Wilson, Commissioner
Richard Friestad, Commissioner
Jerry Barba, Commissioner
Steve Sanchez, Commissioner
City and Authority Staff
Glenn Southard, City Manager/ Authority Executive Director
Cynthia Hernandez, City Clerk/ Authority Secretary
Michael Busch, City Director of Finance/Authority Treasurer
Sharon Ellis, City Treasurer
Jim Smith, Director of Public Works
Gary Lewis, General Services Manager
Kelly Smith, Fiscal Officer
Edward Z. Kotkin, City Attorney
Bond Counsel and Disclosure Counsel
Jones Hall, A Professional Law Corporation
San Francisco, California
Verification Agent
Trustee and Escrow Agent
Union Bank of California, N.A.
Los Angeles, California
GENERAL INFORMATION ABOUT THIS OFFICIAL STATEMENT
No Offering May Be Made Except by this Official Statement. No dealer, broker, salesperson or other person has
been authorized to give any information or to make any representations with respect to the 2006 Bonds other than as
contained in this Official Statement, and if given or made, such other information or representation must not be relied
upon as having been authorized.
No Unlawful Offers or Solicitations. This Official Statement does not constitute an offer to sell or the solicitation of
an offer to buy in any state in which such offer or solicitation is not authorized or in which the person making such
offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such offer or solicitation.
Effective Date. This Official Statement speaks only as of its date, and the information and expressions of opinion
contained in this Official Statement are subject to change without notice. Neither the delivery of this Official
Statement nor any sale of the 2006 Bonds will, under any circumstances, create any implication that there has been
no change in the affairs of the Authority or the Water Enterprise since the date of this Official Statement.
Use of this Official Statement. This Official Statement is submitted in connection with the sale of the 2006 Bonds
referred to herein and may not be reproduced or used, in whole or in part, for any other purpose. This Official
Statement is not a contract with the purchasers of the 2006 Bonds.
Preparation of this Official Statement. The information contained in this Official Statement has been obtained from
sources that are believed to be reliable, but this information is not guaranteed as to accuracy or completeness.
The Underwriter has provided the following sentence for inclusion in this Official Statement: The Underwriter has
reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors
under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter
does not guarantee the accuracy or completeness of such information.
Document References and Summaries. All references to and summaries of the Indenture or other documents
contained in this Official Statement are subject to the provisions of those documents and do not purport to be
complete statements of those documents.
Stabilization of and Changes to Offering Prices. The Underwriter may overallot or take other steps that stabilize
or maintain the market price of the 2006 Bonds at a level above that which might otherwise prevail in the open
market. If commenced, the Underwriter may discontinue such market stabilization at any time. The Underwriter may
offer and sell the 2006 Bonds to certain dealers, dealer banks and banks acting as agent at prices lower than the
public offering prices stated on the cover page of this Official Statement, and those public offering prices may be
changed from time to time by the Underwriter.
Bonds are Exempt from Securities Laws Registration. The issuance and sale of the 2006 Bonds have not been
registered under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, in
reliance upon exemptions for the issuance and sale of municipal securities provided under Section 3(a)(2) of the
Securities Act of 1933 and Section 3(a)(12) of the Securities Exchange Act of 1934.
Estimates and Projections. Certain statements included or incorporated by reference in this Official Statement
constitute "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform
Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the
United States Securities Act of 1933, as amended. Such statements are generally identifiable by the terminology
used such as "plan," "expect," "estimate," "budget" or other similar words.
THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED IN SUCH FORWARD-
LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS
WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS DESCRIBED TO BE
MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED
OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THE AUTHORITY DOES NOT PLAN TO ISSUE
ANY UPDATES OR REVISIONS TO THOSE FORWARD-LOOKING STATEMENTS IF OR WHEN ITS
EXPECTATIONS, OR EVENTS, CONDITIONS OR CIRCUMSTANCES ON WHICH SUCH STATEMENTS ARE
BASED OCCUR.
No Representation or Warranty by Bond Insurer. Other than with respect to information concerning
 (the "Bond Insurer") contained under the caption "Municipal Bond Insurance" and APPENDIX
G herein, none of the information in this Official Statement has been supplied or verified by the Bond Insurer and the
Bond Insurer makes no representation or warranty, express or implied, as to (i) the accuracy or completeness of such
information; (ii) the validity of the 2006 Bonds; or (iii) the tax exempt status of the interest on the 2006 Bonds.
REGIONAL MAP
TABLE OF CONTENTS
Pacie Page

1
3
3
3
4
5
5
5
6
7
10
10
11
12
12
12
13
14
14
15
17
17
17
19
20
20
20
20
22
22
22
INTRODUCTION
FINANCING PLAN
The Project
Refunding Plan
Estimated Sources and Uses of Funds
THE 2006 BONDS
Authority for Issuance
General Bond Terms
Redemption of 2006 Bonds
General Redemption Terms
DEBT SERVICE SCHEDULES
SECURITY FOR THE 2006 BONDS
Pledge of Net Revenues
Allocation of Revenues
Covenant Regarding Net Revenues
Covenants of the Authority and the City
Regarding Punctual Payment
Bond Fund
Reserve Account
Rate Covenants
Rate Stabilization Fund
Issuance of Additional Bonds
Issuance of Parity Obligations
Eminent Domain Proceeds
Casualty Insurance
MUNICIPAL BOND INSURANCE
THE AUTHORITY
General
Lease of Water Enterprise
Management and Staffing
THE WATER ENTERPRISE
The Authority's Water Supply Sources and
Water Rights
Reliability of Water Supply
Historic Water Production  24
Water Quality  24
Water Production and Distribution Facilities 25
Service Area and Customer Base  25
Water Rates and Billing  26
Comparison of Rates and Charges  28
Billing Procedure; Collections History  28
Historic Operating Results and Debt Service
Coverage  28
Projected Operating Results and Debt Service
Coverage
 
31
Capital Improvement Plan
 
32
Investment of Authority Funds
 
33
Retirement Plan
 
34
BOND OWNERS' RISKS
 
36
Net Revenues; Rate Covenant  36
Authority Expenses  36
Limitations on Remedies Available to Bond
Owners  36
Seismic and Environmental Considerations 37
Loss of Tax-Exemption on 2006 Bonds  37
Proposition 218
 
37
Environmental Regulation
 
40
Secondary Market for Bonds
 
40
Future Parity Obligations
 
40
TAX MATTERS
 
41
CERTAIN LEGAL MATTERS
 
41
ABSENCE OF LITIGATION
 
42
VERIFICATION OF MATHEMATICAL
COMPUTATIONS
 
42
RATINGS
 
42
CONTINUING DISCLOSURE
 
43
UNDERWRITING
 
43
PROFESSIONAL FEES
 
44
SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE
AUDITED FINANCIAL STATEMENTS OF THE CITY OF INDIO AND THE AUTHORITY FOR
THE FISCAL YEAR ENDED JUNE 30, 2005
FORM OF CONTINUING DISCLOSURE CERTIFICATE
GENERAL INFORMATION REGARDING THE CITY OF INDIO AND RIVERSIDE COUNTY
FORM OF OPINION OF BOND COUNSEL
DTC AND THE BOOK-ENTRY ONLY SYSTEM
SPECIMEN MUNICIPAL BOND INSURANCE POLICY AND DEBT SERVICE RESERVE
SURETY
APPENDIX A:
APPENDIX B:
APPENDIX C:
APPENDIX D:
APPENDIX E:
APPENDIX F:
APPENDIX G:
OFFICIAL STATEMENT
INDIO WATER AUTHORITY
2006 Water Revenue Bonds,
INTRODUCTION
This introduction is not a summary of this Official Statement. It is only a brief description
of and guide to, and is qualified by, more complete and detailed information contained in the
entire Official Statement, including the cover page and appendices hereto, and the documents
summarized or described herein. A full review should be made of the entire Official Statement.
Capitalized terms used but not defined in this Official Statement have the meanings
given in the Indenture (as defined below). See "APPENDIX A — Summary of Certain Provisions
of the Indenture."
Authority for Issuance. The bonds captioned above (the "2006 Bonds") are being
issued by the Indio Water Authority (the "Authority") under the Marks-Roos Local Bond Pooling
Act of 1985, as amended, constituting Article 4 (commencing with Section 6584), of Chapter 5,
Division 7, Title 1 of the California Government Code (the "Bond Law"), a resolution adopted by
the Commission of the Authority on  , 2006, and a resolution adopted by the City
Council of the City of Indio (the "City") on  , 2006.
The 2006 Bonds are issued under an Indenture of Trust dated as of October 1, 2006
(the "Indenture"), by and among the Authority, the City and Union Bank of California, N.A., as
trustee (the "Trustee").
See "THE 2006 BONDS — Authority for Issuance" and "THE AUTHORITY."
Purpose of the 2006 Bonds. The 2006 Bonds are being issued to provide funds to (i) acquire
and construct certain facilities for and improvements to the Water Enterprise, and finance
certain related costs, (ii) to refund on an advance basis an outstanding series of water revenue
bonds of the Authority captioned "$12,000,000 Indio Water Authority Water Enterprise Revenue
Bonds, 2004 Series" (the "2004 Bonds"), (iii) provide a reserve account for the 2006 Bonds, (iv)
pay the costs of issuing the 2006 Bonds. See "FINANCING PLAN."
Security for the 2006 Bonds. The 2006 Bonds are special obligations of the Authority,
payable solely from "Net Revenues" of the Authority's water utility enterprise (the "Water
Enterprise "), and amounts on deposit in the funds and accounts established under the
* Preliminary; subject to change.
1
Indenture as and to the extent provided in the Indenture. See "SECURITY FOR THE 2006
BONDS." "Net Revenues" are generally defined in the Indenture as all of the "Revenues"
derived by the Authority from or attributable to the lease and operation of the Water Enterprise,
minus the amount required to pay all "Operation and Maintenance Costs" of the Water
Enterprise. See "SECURITY FOR THE 2006 BONDS."
Parity Debt. The 2006 Bonds are being issued in part to defease and refund the 2004
Bonds, which are the sole outstanding debt of the Authority payable from Net Revenues.
Additional series of bonds and other parity obligations may be issued in the future that are
payable from Net Revenues on a parity with the 2006 Bonds, subject to the conditions
contained in the Indenture. See "SECURITY FOR THE 2006 BONDS."
Rate Covenant. Under the Indenture, the Authority and the City are generally required
to fix, prescribe, revise and collect rates, fees and charges for the services and improvements
furnished by the Water Enterprise during each Fiscal Year that are sufficient to yield Net
Revenues for the Water Enterprise at least equal to 120% of the total Debt Service payments
and payments on Parity Obligations coming due and payable in that See "SECURITY FOR
THE 2006 BONDS — Rate Covenants."
Reserve Account. Under the Indenture, a portion of the 2006 Bond proceeds will be
used to establish a debt service reserve (the "2006 Reserve Account") for the 2006 Bonds. The
2006 Series A Reserve Account will be held and maintained by the Trustee. [It is anticipated
that the 2006 Series A Reserve Account will be funded with a debt service reserve surety bond.]
See "SECURITY FOR THE 2006 BONDS — Reserve Account."
Municipal Bond Insurance.  Concurrently with issuance of the 2006 Bonds,
 (the "Bond Insurer"), will issue its Municipal Bond Insurance Policy (the
"Policy") for the 2006 Bonds. See "MUNICIPAL BOND INSURANCE" and "APPENDIX G —
Specimen Municipal Bond Insurance Policy [and Debt Service Reserve Surety]."
Risks of Investment. The 2006 Bonds are repayable only from certain money available
to the Authority from the Water Enterprise. For a discussion of some of the risks associated
with the purchase of the 2006 Bonds, see "BOND OWNERS' RISKS."
THE 2006 BONDS ARE NOT SECURED BY A LEGAL OR EQUITABLE PLEDGE OF,
OR CHARGE, OR LIEN, OR ENCUMBRANCE UPON, ANY OF THE PROPERTY OF THE
AUTHORITY OR ANY OF ITS INCOME OR RECEIPTS, EXCEPT THE NET REVENUES OF
THE WATER ENTERPRISE AND AMOUNTS ON DEPOSIT IN THE FUNDS AND ACCOUNTS
ESTABLISHED UNDER THE INDENTURE AS AND TO THE EXTENT PROVIDED IN THE
INDENTURE.
2
FINANCING PLAN
The Project
The Authority intends to use the proceeds of the 2006 Bonds to finance the cost of the
"Project," which is anticipated to consist of certain capital improvements to the Water Enterprise,
which may include the addition of new reservoirs and wells to meet anticipated demand.
In addition, the Authority may use the proceeds of the 2006 Bonds to finance other
capital projects relating to the Water Enterprise and approved by the Commission.
Refunding Plan
The Authority will apply a portion of the proceeds from the sale of the 2006 Bonds to
establish an irrevocable escrow to refund and legally defease, on an advance basis, the 2004
Bonds, which are currently outstanding in the principal amount of $11,800,000.
A portion of the proceeds of the 2006 Bonds will be deposited with the Trustee, acting as
escrow agent (the "Escrow Agent") under the 2004 Bonds Escrow Deposit and Trust Agreement
dated as of October 1, 2006 (the "Escrow Agreement"), by and between the Authority and the
Escrow Agent.
The amounts deposited from the proceeds of the 2006 Bonds, together with certain
other available moneys, will be held by the Escrow Agent under the Escrow Agreement and
invested in United States Treasury Securities—State and Local Government Series (SLGS), the
principal of and interest on which, when received, will be sufficient to pay the principal of and
interest on the 2004 Bonds to and including April 1, 2014, and to pay the redemption price
(including redemption premium) of the 2004 Bonds on April 1, 2014, by optional redemption on
that date. See "VERIFICATION OF MATHEMATICAL COMPUTATIONS."
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Estimated Sources and Uses of Funds
The estimated sources and uses of funds relating to the 2006 Bonds are as follows:
Sources:
Principal Amount
Plus Original Issue Premium / Less Original Issue Discount
Less Underwriter's Discount
TOTAL SOURCES
Uses:
Deposit to Cost of Issuance Fund [1]
Transfer to Escrow Fund [2]
Deposit to Project Fund [3]
TOTAL USES
[1] Represents funds to be used to pay Costs of Issuance, which include legal fees, bond
insurance premium and debt service reserve surety premium, printing costs, rating
agency fees and other expenses relating to the issuance of the 2006 Bonds.
[2] Will be used to defease and refund the 2004 Bonds. See "— Refunding Plan" above.
[3]
Represents funds to be used to finance the costs of the Project. See "— The Project"
above.
THE 2006 BONDS
Authority for Issuance
The 2006 Bonds are being issued under the Indenture, the Bond Law, a resolution
adopted by the Commission of the Authority on  , 2006, and a resolution adopted by
the City Council of the City on  , 2006 (collectively, the "Resolutions"). Under the
Resolutions and the Indenture, the Authority and the City have authorized the issuance of the
2006 Bonds in a maximum principal amount of $70,000,000.
General Bond Terms
Bond Terms. The 2006 Bonds will be dated their date of delivery and issued in fully
registered form without coupons in denominations of $5,000 or any integral multiple of $5,000.
The 2006 Bonds will mature in the amounts and on the dates, and bear interest at the rates per
annum, set forth on the inside cover page of this Official Statement.
Payments of Interest. Interest on the 2006 Bonds will be payable on April 1 and
October 1 of each year to maturity, beginning April 1, 2007 (each an "Interest Payment Date").
Book-Entry Only System. The 2006 Bonds will be executed, sold, and delivered in fully
registered form, without coupons. The 2006 Bonds will be registered in the name of Cede &
Co., as nominee of the Depository Trust Company ("DTC"), New York, New York, as the initial
securities depository for the 2006 Bonds. Ownership interests in the 2006 Bonds may be
purchased in book-entry form only. Purchasers of the 2006 Bonds will not receive physical
bonds representing their ownership interests in the 2006 Bonds purchased.
Principal and interest payments with respect to the 2006 Bonds are payable directly to
DTC by the Trustee. Upon receipt of payments of principal and interest, DTC will in turn
distribute such payments to its Participant for subsequent disbursement to the beneficial owners
of the 2006 Bonds. See "APPENDIX F — DTC and the Book-Entry Only System."
So long as the 2006 Bonds are registered in the name of Cede & Co., as nominee of
DTC, references in this Official Statement to the "owners" mean Cede & Co., and not the
purchasers or Beneficial Owners of the 2006 Bonds. See "APPENDIX F — DTC and the Book-
Entry Only System."
Calculation of Interest. Interest on the 2006 Bonds will be calculated based on a 360-
day year comprised of twelve 30-day months.
Each 2006 Bond will bear interest from the Interest Payment Date next preceding its
date of authentication, unless (a) it is authenticated after a Record Date and on or before the
following Interest Payment Date, in which event it will bear interest from such Interest Payment
Date, or (b) unless it is authenticated on or before March 15, 2007, in which event it will bear
interest from the Closing Date; provided, however, that if, as of the date of authentication of any
2006 Bond, interest thereon is in default, such 2006 Bond will bear interest from the Interest
Payment Date to which interest has previously been paid or made available for payment
thereon.
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Redemption of 2006 Bonds
Optional Redemption. * The 2006 Bonds maturing on or after April 1, 20_are subject
to optional redemption, as a whole or in part on any date prior to the maturity thereof, at the
option of the Authority, on or after April 1, 20_, from funds derived by the Authority from any
source, at a redemption price equal to the principal amount of the 2006 Bonds to be redeemed,
plus accrued but unpaid interest to the redemption date, without premium.
Special Mandatory Redemption from Net Proceeds of Insurance or Condemnation.
The 2006 Bonds are subject to mandatory redemption as a whole or in part on any date, pro
rata by maturity and by lot within a maturity (in a manner determined by the Trustee) from
moneys deposited in the Redemption Fund to the extent insurance proceeds received with
respect to the Water Enterprise are not used to repair, rebuild or replace the Water Enterprise
under the Indenture, or to the extent of condemnation proceeds received with respect to the
Water Enterprise and elected by the Authority to be used for such purpose under the Indenture,
at a redemption price equal to the principal amount thereof plus interest accrued thereon to the
date fixed for redemption, without premium.
Mandatory Sinking Fund Redemption. The 2006 Bonds maturing April 1, 20 and
April 1, 20_are Term Bonds. The Term Bonds maturing on April 1, 20_and April 1, 20 are
subject to mandatory redemption, in part by lot, from Sinking Account payments set forth in the
following schedule on April 1 in each year, commencing April 1, 20_and April 1, 20_,
respectively, at a redemption price equal to the principal amount thereof to be redeemed
(without premium), together with interest accrued thereon to the date fixed for redemption;
provided, however, that if some but not all of the Term Bonds have been redeemed through
optional redemption or special mandatory redemption from net proceeds of insurance or
condemnation as described above, the total amount of Sinking Account payments to be made
subsequent to such redemption will be reduced in an amount equal to the principal amount of
the Term Bonds so redeemed by reducing each such future Sinking Account payment on a pro
rata basis (as nearly as practicable) in integral multiples of $5,000, as designated in a written
notice filed by the Authority with the Trustee.
20 Term Bond
Sinking Fund
Redemption Date
(April 1) Sinking Payments

(maturity)


Preliminary; subject to change.

20 Term Bond
Sinking Fund
Redemption Date
(April 1) Sinking Payments

(maturity)
Purchase in Lieu of Mandatory Sinking Fund Redemption. In lieu of mandatory
sinking fund redemption, the Trustee may apply amounts in the Sinking Account to the purchase
of Term Bonds at public or private sale, as and when and at such prices (including brokerage
and other charges, but excluding accrued interest, which is payable from the Interest Account)
as may be directed by the Authority, except that the purchase price (exclusive of accrued
interest) may not exceed the redemption price then applicable to the Term Bonds, as set forth in
a Written Request of the Authority.
The par amount of Term Bonds so purchased by the Authority in any twelve-month
period immediately preceding any mandatory Sinking Account payment date in the table above
will be credited towards and will reduce the principal amount of Term Bonds required to be
redeemed on the succeeding Principal Payment Date.
General Redemption Terms
Selection of 2006 Bonds for Redemption. Whenever provision is made in the
Indenture for the redemption of less than all of the 2006 Bonds, the Trustee will select the 2006
Bonds to be redeemed from all 2006 Bonds (or such given portion thereof not previously called
for redemption), pro rata by maturity or, at the election of the Authority set forth in a Written
Request of the Authority, filed with the Trustee, from such maturities as the Authority
determines, and by lot within a maturity in any manner which the Trustee, in its sole discretion,
deems appropriate and fair. Any such determination shall be deemed conclusive. For purposes
of such selection, the Trustee will treat each 2006 Bond as consisting of separate $5,000
portions and each such portion will be subject to redemption as if such portion were a separate
Bond.
Notice of Redemption. Notice of redemption will be mailed by first class mail, postage
prepaid, not less than 30 nor more than 60 days before any redemption date, to respective
Owners of any 2006 Bonds designated for redemption at their addresses appearing on the
Registration Books, and by first class mail, facsimile or electronic mails, to the Securities
Depositories and to the Information Services.
Neither the failure to receive any redemption notice nor any defect therein will affect the
proceedings for redemption or the cessation of accrual of interest from and after the redemption
date.
However, while the 2006 Bonds are subject to DTC's book-entry system, the Trustee will
be required to give notice of redemption only to DTC as provided in the letter of representations
executed by the Authority and received and accepted by DTC. DTC and the Participants will
have sole responsibility for providing any such notice of redemption to the beneficial owners of
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the 2006 Bonds to be redeemed. Any failure of DTC to notify any Participant, or any failure of
Participants to notify the Beneficial Owner of any 2006 Bonds to be redeemed, of a notice of
redemption or its content or effect will not affect the validity of the notice of redemption, or alter
the effect of redemption set forth in the Indenture.
Cancellation of Redemption Notice. The Authority has the right to rescind any optional
redemption by written notice to the Trustee on or prior to the date fixed for redemption. Any
notice of redemption will be cancelled and annulled if for any reason funds are not available on
the date fixed for redemption for the payment in full of the 2006 Bonds then called for
redemption, and such cancellation will not constitute an Event of Default under the Indenture.
The Trustee will mail notice of rescission of redemption in the same manner notice of
redemption was originally provided.
Effect of Redemption. If notice of redemption is duly given as set forth in the
Indenture, and moneys for payment of the redemption price of, together with interest accrued to
the date fixed for redemption on, the 2006 Bonds (or portions thereof) so called for redemption
are held by the Trustee, on the redemption date designated in the redemption notice, the 2006
Bonds (or portions thereof) so called for redemption will become due and payable, interest on
the 2006 Bonds so called for redemption will cease to accrue, the 2006 Bonds (or portions
thereof) called for redemption will cease to be entitled to any benefit or security under the
Indenture, and the Owners of the 2006 Bonds called for redemption will have no rights in
respect thereof except to receive payment of the redemption price thereof.
DEBT SERVICE SCHEDULES
The table below sets forth debt service requirements payable from Net Revenues of the
Water Enterprise, consisting of the debt service on the 2006 Bonds.
Bond Year
Ending
April 1  Principal  Interest  Total
Total
SECURITY FOR THE 2006 BONDS
This section provides summaries of the security for the 2006 Bonds, and certain
provisions of the Indenture. See "APPENDIX A — Summary of Certain Provisions of the
Indenture" for a more complete summary of the Indenture. Capitalized terms used but not
defined in this section have the meanings given in APPENDIX A.
Pledge of Net Revenues
General. The 2006 Bonds are special obligations of the Authority, payable solely from
Net Revenues of the Authority's Water Enterprise and from amounts on deposit in the funds and
accounts established under the Indenture as and to the extent provided in the Indenture.
Under the Indenture, all of the Net Revenues and any other amounts (including the
proceeds of the sale of the 2006 Bonds) held in any of the funds or accounts under the
Indenture, are irrevocably pledged, charged and assigned to the punctual payment of the
principal of and interest on the 2006 Bonds and any Additional Bonds, and except as otherwise
provided in the Indenture, the Net Revenues and such other funds may not be used for any
other purpose so long as any of the 2006 Bonds or any Additional Bonds remain Outstanding.
This pledge, charge and assignment constitutes a first lien on the Net Revenues and
such other moneys for the payment of the principal of and interest on the 2006 Bonds and any
Additional Bonds in accordance with the terms of the Indenture.
All Net Revenues collected or received by the Authority will be deemed to be held, and
to have been collected or received, by the Authority as the agent of the Trustee and will be paid
by the Authority to the Trustee pursuant to the Indenture.
Limited Obligation of the Authority. NEITHER THE FULL FAITH AND CREDIT NOR
THE TAXING POWER OF THE AUTHORITY IS PLEDGED TO THE PAYMENT OF THE 2006
BONDS OR INTEREST THEREON. THE 2006 BONDS ARE NOT SECURED BY A LEGAL
OR EQUITABLE PLEDGE OF, OR CHARGE, OR LIEN, OR ENCUMBRANCE UPON, ANY OF
THE PROPERTY OF THE AUTHORITY OR ANY OF ITS INCOME OR RECEIPTS, EXCEPT
THE NET REVENUES OF THE WATER ENTERPRISE AND THE AMOUNTS ON DEPOSIT
UNDER THE INDENTURE TO THE EXTENT PROVIDED IN THE INDENTURE.
Net Revenues. The Indenture defines "Net Revenues" for any Fiscal Year as an
amount equal to all of the "Revenues" received with respect to such Fiscal Year, minus the
amount required to pay all "Operation and Maintenance Costs" becoming payable with respect
to that Fiscal Year.
Revenues. The Indenture defines "Revenues" as all revenues, income, rents, fees,
charges, rates and other moneys and receipts derived or to be derived by the Authority from or
attributable to the lease and operation of the Water Enterprise including, without limiting the
generality of the foregoing,
(i) all revenues attributable to the Water Enterprise or to the payment of the costs
thereof received or to be received by the Authority under any contract for service from
the Water Enterprise or any part thereof or any contractual arrangement, with respect to
the use of the Water Enterprise or any portion thereof or the services or capacity thereof,
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(ii) the proceeds of any standby, water availability charges or connection fees
collected by the Authority,
(iii) the proceeds of any insurance covering business interruption loss relating to
the Water Enterprise, and
(iv) interest received on any invested moneys of the Water Enterprise.
"Revenues" exclude any proceeds of taxes restricted by law to be used by the Authority
to pay bonds hereafter issued and any state and federal grants received by the Authority.
Operation and Maintenance Costs.  The Indenture defines "Operation and
Maintenance Costs" as costs spent or incurred for maintenance and operation of the Water
Enterprise calculated in accordance with generally accepted accounting principles, including
(among other things) the cost of purchasing water, the reasonable expenses of management
and repair and other expenses necessary to maintain and preserve the Water Enterprise in
good repair and working order, and including administrative costs of the City that are charged
directly or apportioned to the Water Enterprise pursuant to the Reimbursement Agreement and
the Employee Agreement (as those terms are defined in the Indenture), including but not limited
to salaries and wages of employees, payments to any pension system, overhead, insurance,
taxes (if any), fees of auditors, accountants, attorneys or engineers and insurance premiums,
and including all other reasonable and necessary costs of the City and the Authority or charges
(other than debt service payments) required to be paid by it to comply with the terms of the 2006
Bonds and any Additional Bonds, or of any resolution or indenture authorizing the issuance of
Parity Obligations, or of such Parity Obligations.
"Operation and Maintenance Costs" exclude in all cases depreciation, replacement and
obsolescence charges or reserves therefor, amortization of intangibles or other bookkeeping
entries of a similar nature, and all capital charges.
Allocation of Revenues
Under the indenture, the Authority will covenant to deposit all of the Revenues
immediately upon receipt in the Revenue Fund.
The Authority will, from the moneys in the Revenue Fund, pay all Operation and
Maintenance Costs (including amounts reasonably required to be set aside in contingency
reserves for Operation and Maintenance Costs, the payment of which is not then immediately
required) as they become due and payable.
On or before the fifth Business Day preceding each Interest Payment Date, all remaining
moneys in the Revenue Fund will be set aside by the Authority in the following respective
special funds in the following order and withdrawn only for the purposes described below:
(I)  
to the Trustee for deposit into the Bond Fund the amount equal to (i) the
aggregate amount of interest coming due and payable on the 2006 Bonds and any
Additional Bonds on the next succeeding Interest Payment Date; plus (ii) one-half of the
aggregate amount of the principal coming due and payable on the next succeeding
Principal Payment Date, which payments will be made on a parity basis with any
outstanding Parity Obligations; and
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(ii)  to the Trustee for deposit in the Reserve Account, the amount, if any,
required to restore the balance in the Reserve Account to the Reserve Requirement.
Amounts remaining in the Revenue Fund immediately after making these transfers will
be released to the Authority free and clear of the lien of the Indenture, to be used by the
Authority for any lawful purpose, including but not limited to making lease payments under the
Lease.
Covenant Regarding Net Revenues
Under the indenture, the Authority will agree to manage, conserve and apply the Net
Revenues on deposit in the Revenue Fund in such a manner that all deposits required to be
made under the Indenture as described above will be made at the times and in the amounts so
required.
Covenants of the Authority and the City Regarding Punctual Payment
Under the Indenture the Authority agrees to punctually pay or cause to be paid the
principal of and interest on all the 2006 Bonds and any Additional Bonds in strict conformity with
the terms of the 2006 Bonds and any Additional Bonds and of the Indenture, according to the
true intent and meaning thereof, but only out of Net Revenues and other assets pledged for
such payment as provided in the Indenture, and will faithfully observe and perform all of the
conditions, covenants and requirements of the Indenture.
If for any reason the Authority is unable to perform its covenants and agreements under
the Indenture, because of premature termination of the Lease or otherwise, the City agrees, on
behalf of the Authority, to punctually pay or cause to be paid the principal of and interest on all
the 2006 Bonds and any Additional Bonds in strict conformity with the terms of the 2006 Bonds
and any Additional Bonds and of the Indenture, according to the true intent and meaning
thereof, but only out of Net Revenues and other assets pledged for such payment as provided in
the Indenture, and the City will, on behalf of the Authority, faithfully observe and perform all of
the conditions, covenants and requirements of the Indenture.
Bond Fund
On or about the fifth Business Day preceding each date on which interest on or principal
of the 2006 Bonds and any Additional Bonds becomes due and payable, the Trustee will
transfer from the Bond Fund and deposit into the following respective accounts (each of which
the Trustee will establish and maintain within the Bond Fund), the following amounts in the
following order of priority, the requirements of each such account (including the making up of
any deficiencies in any such account resulting from lack of Net Revenues sufficient to make any
earlier required deposit) at the time of deposit to be satisfied before any transfer is made to any
account subsequent in priority:
(a) Interest. The Trustee will deposit in the Interest Account an amount required to
cause the aggregate amount on deposit in the Interest Account to be at least equal to the
amount of interest becoming due and payable on such date on all 2006 Bonds and Additional
Bonds then Outstanding.
(b) Principal. The Trustee will deposit in the Principal Account, the aggregate
amount of principal becoming due and payable on the Outstanding Serial Bonds plus, deposit to
the Sinking Account, the aggregate amount of the mandatory Sinking Account payment required
12
to be paid for Outstanding Term Bonds on the next succeeding Principal Payment Date, until
the balance in those accounts are equal to the respective aggregate amounts of such principal
and mandatory Sinking Account payments.
(c) Reserve Replenishment. The Trustee will deposit in the Reserve Account the
amount, if any, required to restore the balance in the Reserve Account to the Reserve
Requirement.
(d) Excess. The Trustee will transfer any remaining amounts in the Bond Fund to
the Authority for any lawful use with respect to the Water Enterprise.
Reserve Account
Establishment. Under the Indenture, a Reserve Account will be established to secure
the 2006 Bonds. Within the Reserve Account, the Trustee will establish a 2006 Bonds
Subaccount.
At the Closing, the Trustee will credit a reserve fund surety (the "2006 Bonds Reserve
Account Surety Bond") to the 2006 Bonds Subaccount of the Reserve Account in satisfaction of
the Reserve Requirement allocable to the 2006 Bonds. The 2006 Bonds Reserve Account
Surety Bond will be issued in an amount equal to the "Reserve Requirement" for the 2006
Bonds.
Reserve Requirement. The "Reserve Requirement" is defined in the Indenture, as of
any date of calculation, as an amount equal to the least of: (i) 100% of the Maximum Annual
Debt Service for the then current or every subsequent Bond Year, (ii) 125% of average Annual
Debt Service on the Bonds for the then current and every subsequent Bond Year, and (iii) 10%
of the issue price (as defined pursuant to section 148 of the Code).
Application of Reserve Account. All amounts in the Reserve Account will be used and
withdrawn by the Trustee solely for the following purposes:
(a) paying interest on or principal of the 2006 Bonds and any Additional Bonds,
when due and payable to the extent that moneys deposited in the Interest Account or
Principal Account, respectively, are not sufficient for that purpose,
(b) paying the redemption price of Term Bonds to be redeemed through
mandatory sinking fund redemption if amounts on deposit in the Sinking Account are not
sufficient for that purpose, and
(c) making the final payments of principal of and interest on the 2006 Bonds and
any Additional Bonds.
On the date on which all 2006 Bonds and any Additional Bonds are retired under the
Indenture, all moneys then on deposit in the Reserve Account will be withdrawn by the Trustee
and paid to the Authority for use by the Authority for any lawful purpose.
If as of the first day of the month preceding any Interest Payment Date there is any
deficiency in the Reserve Account (whether due to a payment therefrom or due to the fluctuation
in market value of securities credited thereto, or otherwise), the Trustee will promptly notify the
Authority in writing of the amount of such deficiency and the Authority will pay to the Trustee the
amount of such deficiency as provided in the Indenture.
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Semiannually, on or before each Interest Payment Date, the Trustee will value the
Reserve Account at fair market value and any amounts on deposit in the Reserve Account in
excess of the Reserve Requirement will be transferred to the Interest Account of the Bond
Fund.
Rate Covenants
The Authority will make the following covenants in the Indenture with respect to charges
for the Water Enterprise:
Sum Sufficient. The Authority and the City are required to fix, prescribe, revise and
collect rates, fees and charges for the Water Enterprise as a whole for the services and
improvements furnished by the Water Enterprise during each Fiscal Year that are at least
sufficient, after making allowances for contingencies and error in the estimates, to yield
Revenues that are sufficient to pay the following amounts in the following order of priority:
(i) all anticipated Operation and Maintenance Costs of the Water
Enterprise for such Fiscal Year;
(ii) Debt Service payments as they become due and payable during
such Fiscal Year, without preference or priority, except to the extent such Debt
Service payments are payable from the proceeds of the Bonds or from any other
source of legally available funds of the Authority that have been deposited with
the Trustee for such purpose prior to the commencement of such Fiscal Year;
(iii) the amount, if any, required to restore the balance in the Reserve
Account to the full amount of the Reserve Requirement; and
(iv) all other payments required to meet any other obligations of the
Authority that are charges, liens, encumbrances upon, or which are otherwise
payable, from Revenues during such Fiscal Year.
Coverage Test. In addition, the Authority and the City are required to fix, prescribe,
revise and collect (or cause to be fixed, prescribed, revised and collected) rates, fees and
charges for the services and improvements furnished by the Water Enterprise during each
Fiscal Year that are sufficient to yield Net Revenues for the Water Enterprise at least equal to
120% of the total Debt Service payments and payments on Parity Obligations coming due and
payable in that Fiscal Year.
For purposes of this covenant, the amount of Net Revenues for a Fiscal Year will be
computed on the basis that (1)any transfers into the Revenue Fund in that Fiscal Year from the
Rate Stabilization Fund are included in the calculation of Net Revenues, as described below,
and (2) any deposits into the Rate Stabilization Fund in that Fiscal Year are deducted from the
amount of Net Revenues, but only to the extent such deposits are made from Revenues
received by the Authority during that Fiscal Year.
Rate Stabilization Fund
Establishment and Funding. Under the Indenture, the Authority or the City has the
right at any time to establish a fund to be held by either of them and administered in accordance
14
with the Indenture for the purpose of stabilizing the rates and charges imposed by the Authority
and the City with respect to the Water Enterprise.
From time to time Authority and the City, or either of them, may deposit amounts in the
Rate Stabilization Fund, from any source of legally available funds, including but not limited to
Net Revenues which are released from the pledge and lien which secures the Debt Service
payments.
The Rate Stabilization Fund will be accounted for as a separate fund, although amounts
credited to it may be commingled with other funds of the Authority or the City, as applicable.
Application. The Authority or the City, as applicable, may, but are not be required to,
withdraw amounts on deposit in the Rate Stabilization Fund and deposit or cause to be
deposited, as the case may be, such amounts in the Revenue Fund in any Fiscal Year for the
purpose of paying Debt Service payments or payments on Parity Obligations coming due and
payable in such Fiscal Year.
Amounts so transferred from the Rate Stabilization Fund to the Revenue Fund in any
Fiscal Year constitute Revenues for that Fiscal Year (except as otherwise provided in the
Indenture), and will be applied for the purposes of the Revenue Fund. Amounts on deposit in
the Rate Stabilization Fund are not pledged to and do not otherwise secure Debt Service
payments or payments on Parity Obligations.
All interest or other earnings on deposits in the Rate Stabilization Fund will be retained
therein or, at the option of the Authority or the City, be applied for any other lawful purposes.
The Authority and City has the right at any time to withdraw any or all amounts deposited by the
Authority or the City, as applicable, in and remaining on deposit in the Rate Stabilization Fund
and apply such amounts for any other lawful purposes of the Authority or the City, as applicable.
Issuance of Additional Bonds
In addition to the 2006 Bonds, the Authority may, by Supplemental Indenture, issue
Additional bonds payable from Revenues on a parity with the 2006 Bonds and secured by a lien
upon and pledge of Net Revenues equal to the lien and pledge securing the 2006 Bonds.
The Authority may issue and the Trustee may authenticate and deliver the Additional
Bonds, in such principal amount and for such lawful purpose or purposes (including refunding of
any Bonds issued hereunder and then Outstanding) as may be determined by the Authority in
the Supplemental Indenture, but only upon compliance with the specific conditions set forth in
the Indenture, which are conditions precedent to the issuance of any Additional Bonds, as
follows:
(a) The Authority may not be in default under the Indenture or any
Supplemental Indenture.
(b) The Authority must deliver to the Trustee a Written Certificate of the
Authority setting forth
(i) the estimate of Net Revenues for the next Fiscal Year and
(ii) Annual Debt Service, including the Debt Service on such Additional
Bonds, for the next Fiscal Year,
15
which demonstrates that the estimated Net Revenues set forth in (i) above is at
least equal to 120% of Annual Debt Service as set forth in (ii) above.
Any of the following adjustments may be made to the calculation of Net
Revenues for such Fiscal Year:
(i) The Authority may add to Net Revenues an allowance for Revenues
from any additions to or improvements or extensions of the Water Enterprise to
be constructed with the proceeds of such Additional Bonds, and also for Net
Revenues from any such additions, improvements or extensions which have
been constructed from any source of funds but which, during all or any part of
such Fiscal Year, will not be in service, all in an amount equal to 100% of the
estimated additional average annual Net Revenues to be derived from such
additions, improvements and extensions for the first 36-month period following
issuance of such Additional Bonds, all as shown by the certificate or opinion of a
Qualified Independent Consultant, may be added to the Net Revenues for such
Fiscal Year.
(ii) The Authority may add to Net Revenues an allowance for earnings
arising from any increase in the charges made for service from the Water
Enterprise which has become effective prior to the issuance of such Additional
Bonds but which, during all or any part of such Fiscal Year, was not in effect, in
an amount equal to 100% of the amount by which the Net Revenues for the next
Fiscal Year would have been increased if such increase in charges had been in
effect during the whole of such Fiscal Year, as shown by the certificate or opinion
of a Qualified Independent Consultant.
(iii) The Authority may add to Net Revenues moneys transferred from the
Rate Stabilization Fund to the Revenue Fund during that Fiscal Year, except that
the calculation of Net Revenues may not include transfers from the Rate
Stabilization Fund to the extent that such additional moneys would be required to
cause Net Revenues to equal or exceed 100% of Maximum Annual Debt Service
for outstanding Bonds, including the proposed Additional Bonds, for that Fiscal
Year.
(c) The Supplemental Indenture providing for the issuance of such Additional
Bonds must require that the Reserve Account be increased, if and to the extent
necessary, promptly upon the receipt of the proceeds of the sale of such Additional
Bonds to an amount at least equal to the Reserve Requirement; provided, however, that
this increase may be provided by one or more Qualified Reserve Account Credit
Instruments. This deposit may be made from such proceeds or any other source, as
provided in the Supplemental Indenture. In addition, the Supplemental Indenture may
establish a subaccount in the Reserve Account with respect to such Additional Bonds in
order to satisfy the requirements of the Code or of a credit provider.
(d) Such Additional Bonds must be payable as to principal annually on April 1
of each year in which principal falls due and must be payable as to interest semiannually
on April 1 and October 1 of each year, provided that the first installment of interest may
be payable on either April 1 or October 1 and must be for a period of not longer than
twelve months as specified in the Supplemental Indenture.
16
(e) The Authority must deliver to the Trustee a Written Certificate of the Authority
certifying that the conditions precedent to the issuance of such Additional Bonds described in
subsections (a), (b), (c) and (d) above have been satisfied.
Issuance of Parity Obligations
The Authority may issue or incur Parity Obligations, other than Additional Bonds (which
must be issued as described above) during the term of the Bonds only if:
(a) no Event of Default has occurred and is continuing under the Indenture and any
Supplemental Indenture;
(b) Net Revenues, calculated in accordance with subsection (b) above regarding the
issuance of Additional Bonds, as shown by the certificate or opinion of a Qualified Independent
Consultant, are at least equal to 120% of Annual Debt Service for the next Fiscal Year, plus
annual debt service on all Parity Obligations then Outstanding (including the Parity Obligations
then proposed to be issued) for the next Fiscal Year; and
(c) upon the issuance of such Parity Obligations a reserve fund must be established
for such Parity Obligations in an amount equal to the reserve requirement with respect to such
Parity Obligations, but only if and to the extent that a reserve fund is required with respect to
those Parity Obligations.
Eminent Domain Proceeds
Any amounts received as awards as a result of the taking of all or any part of the Water
Enterprise by the lawful exercise of eminent domain, at the election of the Authority (evidenced
by a Written Certificate of the Authority filed with the Trustee and the Authority) must either (a)
be used for the lease, acquisition or construction of improvements and extension of the Water
Enterprise, or (b) be applied to redeem the 2006 Bonds and any Additional Bonds on a pro rata
basis with any Parity Obligations.
Casualty Insurance
Under the Indenture the Authority is required to procure and maintain, or cause to be
procured and maintained, so long as any Bonds remain Outstanding, but only in the event and
to the extent available from reputable insurers at reasonable cost, casualty insurance against
loss or damage to any improvements constituting any part of the Water Enterprise, covering
such hazards as are customarily covered with respect to works and property of like character.
This insurance may be subject to deductible clauses which are customary for works and
property of a like character. This insurance may be maintained as part of or in conjunction with
any other casualty insurance carried by the Authority and may be maintained in whole or in part
in the form of self-insurance by the Authority, subject to the provisions of the Indenture, or in the
form of the participation by the Authority in a joint powers agency or other program providing
pooled insurance.
All amounts collected from insurance against accident to or destruction of any portion of
the Water Enterprise must be used to repair, rebuild or replace such damaged or destroyed
portion of the Water Enterprise, and to the extent not so applied or to the extent the Authority
determines it is not economically feasible or in the best interests of the Authority to so repair,
17
rebuild or replace such damaged or destroyed portion of the Water Enterprise, must be applied
to redeem the 2006 Bonds and any Additional Bonds pro rata with other Parity Obligations.
18
MUNICIPAL BOND INSURANCE
The following information has been furnished by the Bond Insurer for use in this Official
Statement. No representation is made by the Authority, the City or the Underwriter as to the
accuracy or completeness of this information, or the absence of material adverse changes
therein at any time subsequent to the date hereof. Reference is made to APPENDIX G for a
specimen of the Bond Insurer's Policy.
[TO COME]
19
THE AUTHORITY
General
Formation. The Authority is a joint exercise of powers authority organized and existing
under and by virtue of the Joint Exercise of Powers Act, constituting Articles 1 through 4
(commencing with Section 6500) of Chapter 5, Division 7, Title 1 of the Government Code of the
State of California (the "Joint Powers Act"). The City and the Redevelopment Agency of the City
of Indio (the "Redevelopment Agency"), formed the Authority by the execution of a joint exercise
of powers agreement dated as of April 19, 2000.
Purposes. The Authority was created for the purpose of, among other things, financing
the acquisition and construction of public capital improvements relating to the water system (the
"Water Enterprise") through the lease, acquisition or construction by the Authority of such capital
improvements. Under the Bond Law, the Authority has the power to issue bonds to pay the
costs of public capital improvements.
Governance. The Authority is governed by a nine member Commission comprised of
the five members of the City Council, three City residents and one resident of a service area
known as "Oasis Palms" in an unincorporated area of Riverside County.
Lease of Water Enterprise
Water Enterprise Lease. In May 2001, the City leased all of the assets of the Water
Enterprise to the Authority under a Lease Agreement dated as of May 22, 2001, as amended by
a First Amendment to Lease dated as of September 17, 2001, as amended by a Second
Amendment to Lease dated as of October 15, 2001, and as subsequently amended by a Third
Amendment to Lease dated as of October 1, 2006 (as amended, the "Lease").
The term of the Lease commenced on November 1, 2001, and currently terminates at
midnight 36 years thereafter, or on November 1, 2037. The City and the Authority will covenant
in the Indenture that, so long as any Bonds remain Outstanding, neither party will cause the
Lease to be terminated, and each party will do or cause to be done all further acts and things, in
each case, as may be proper or reasonably necessary, to ensure the enforceability thereof.
Management and Staffing
Employee Lease Agreement. The City and the Authority also entered into an
Employee Lease Agreement dated July 17, 2001, under which certain City employees staff,
operate and administer the Water Enterprise on behalf of the Authority in return for payments
made by the Authority to the City.
Staffing. The Water Enterprise is currently operated and administered by 11 full-time
equivalent customer service staff, 9.7 full-time equivalent administrative staff, and 19 operations
and maintenance staff.
The operating and maintenance staff perform most of the preventive maintenance and
repairs on the equipment and facilities with very little of this work being contracted out. The
utility does not have its own laboratory, so water quality samples are tested at an independent
laboratory. Under the Employee Lease Agreement, the City also charges the Authority for
certain costs associated with the City's internal service funds costs for insurance and
equipment.
20
WATER SYSTEM MAP
21
THE WATER ENTERPRISE
The Authority's Water Supply Sources and Water Rights
The Authority obtains all water delivered by the Water Enterprise from deep aquifers in
the Coachella Valley Groundwater Basin (the "Groundwater Basin"). The Authority possesses
non-adjudicated water rights to this groundwater, which means that the Authority may use and
sell water from the Groundwater Basin, but may not sell its rights to this water. Other agencies
also have water rights to the water in the Groundwater Basin.
The Groundwater Basin is managed by the Coachella Valley Water District, which was
formed in 1918 under the County Water District Act and is currently a multi-faceted agency that
provides irrigation water and agricultural drainage, domestic (drinking) water service, sanitation
and recycling, regional stormwater protection, and water conservation. In addition to having the
powers of a county water district and a storm water district, the Coachella Valley Water District
has special legislative power to levy and collect water replenishment assessments for the
purpose of replenishing ground water supplies within its boundaries.
Reliability of Water Supply
2002 Water Management Plan. In September 2002 the Coachella Valley Water District
prepared a water management plan called the "Coachella Valley Final Water Management
Plan" (the "Water Management Plan") that addresses all areas of water management for the
entire Coachella Valley. The Water Management Plan sets goals for improving all areas of
water management, including conserving urban, golf course, and agricultural water, controlling
the continuing overdraft of the groundwater basin, maintaining water quality, and searching for
firm supplies of imported water.
The description of the Groundwater Basin and its current and projected hydrologic
conditions are derived from the Water Management Plan.
For purposes of the Water Management Plan, the Coachella Valley was divided into the
Upper Valley and the Lower Valley, which includes the service area of the Water Enterprise.
Water in the Lower Valley is supplied primarily by groundwater and canal water (i.e., Colorado
River water supplied via the Coachella Branch of the All American Canal), with a very small
amount of recycled fish farm effluent for agricultural uses.
The Water Management Plan sets forth the following projected population increases for
the entire Coachella Valley region:
2000 2020 2035
Projected Population 285,000 414,000 529,000
Percentage Increase 31% 46%
Growth was projected to be more rapid in the Lower Valley, where the population was
projected to nearly double by 2035.
22
The Water Management Plan also sets forth the following water demand projections for
the entire Coachella Valley region, expressed in acre-feet per year. The projected increases in
water demand were attributed to population growth and increased golf course use, as well as
some additional agricultural use.
Protected Water Demand 1999 2035 % Increase
Urban Uses 310,000 514,000 66%
Agricultural Uses 359,000 377,000
5%
Total 669,000 891,000 33%
Upper Valley 224,200 352,300 36%
Lower Valley 444,700 538,300 17%
Total 668,900 890,600 33%
The Water Management Plan stated that demand for groundwater has annually
exceeded the limited natural recharge of the Groundwater Basin, a condition known as
"overdraft." The Coachella Valley Water District estimates that the Groundwater Basin's
cumulative overdraft [TO BE CONFIRMED] was approximately 5,000,000 acre-feet in 2002.
This cumulative overdraft occurred over the past 70 years. The total capacity of the
Groundwater Basin was estimated to be approximately 30,000,000 acre-feet.
This overdraft condition has caused groundwater levels to decrease more than 60 feet in
portions of the Lower Valley, and has raised concerns about water quality degradation and land
subsidence. Continued overdraft will have serious consequences for the Coachella Valley. The
immediate and direct effect will be increased groundwater pumping costs for all water users.
Continued decline of groundwater levels could result in a substantial and possibly irreversible
degradation of water quality in the groundwater basin.
The Water Management Plan identified four proposed alternative management
scenarios for evaluation, including pumping restriction by adjudication, and selected the
preferred alternative that incorporated the following:
• Urban, golf course, and agricultural conservation measures.
• Groundwater recharge in the Upper and Lower Valleys.
• Numerous source substitution elements.
The average annual implementation costs for the preferred alternative through the
planning period (associated with conservation activities) set forth in the Water Management
Plan ranged from approximately $30 million to $50 million. The total capital cost associated with
groundwater recharge and source substitution elements in the preferred alternative was
estimated at $180 million. The financing mechanisms considered by the Water Management
Plan included increased water rates, replenishment assessments, assessment districts, general
property taxes, financing by agencies outside the Coachella Valley Water District, grants and
developer fees.
23
The following table shows the estimated potential economic effects on several different
types of user groups within the Coachella Valley as set forth in the Water Management Plan.
Water User Group
Domestic Water Users (District Wide)
Canal Water Users (Lower Valley only)
Lower Valley Groundwater Users
Upper Valley Groundwater Users
Property Owners
Developer Fees
Range of Effects
$0.05 to $0.20 per hundred cubic feet
$0 to $5 per acre foot
$10 to $40 per acre foot
$0 to $25 per acre foot
$0 to $0.20 per $100 taxable value
$0 to $2,000 per unit
The implementation of the Water Management Plan may result in increased costs to the
Water Enterprise, which would reduce the Net Revenues and could require substantial
increases in rates or charges. Such rate increases could increase the likelihood of nonpayment
by water users, and could also decrease demand for water. Furthermore, if the Water
Management Plan is not effective in reversing the overdraft condition of the Groundwater Basin,
more drastic measures such as pumping restrictions may be implemented in the future.
[PLEASE UPDATE ON STATUS OF IMPLEMENTATION OF THE MEASURES
CALLED FOR IN THE WATER MANAGEMENT PLAN]
Revision to Water Management Plan. [PLEASE DESCRIBE ANY PLANNED
UPDATES]
Historic Water Production
The table below shows a seven-year history of groundwater pumped by the Water
Enterprise.
Table 1
Historic Annual Pumping
(hundred cubic feet)(CCF)
Fiscal Year
Total Ground
Water Pumped
1998-99 4,544,269
1999-00 4,856,279
2000-01 5,095,042
2001-02 8,465,616
2002-03 8,098,337
2003-04 9,114,757
2004-05 9,068,031
Source: The Authority
Water Quality
The Authority complies with the Federal Safe Drinking Water Act and the California
Department of Health Services standards. Water samples are collected weekly from the system
and sent to state and federal certified laboratories for complete analysis to ensure the safety of
the water supply. Sodium hypochlorite solution is used and a chlorine residual of approximately
0.2 ppm is maintained through the distribution system. [PLEASE UPDATE AS NEEDED]
24
Water Production and Distribution Facilities
The Water Enterprise consists of four (4) production facilities, eight (8) independent
production wells, a transmission system and a distribution network. The infrastructure is well
maintained and has been built incrementally over the past fifty years.
Reservoirs. The production facilities consist of four 2 million-gallon reservoirs each with
three production wells and a booster pump station to pressurize the distribution system.
Reservoir No. 1 and Reservoir No. 2 were both originally constructed in 1957, Reservoir No. 3
was built in 1977 and Reservoir No. 4 was constructed in 1997. The reservoirs are aboveground
steel storage tanks that are fed directly from the production wells. At Reservoir No. 4, the
production wells can bypass the reservoir and pump directly into the transmission/distribution
system.
The City owns approximately 16.7 acres of real property used for reservoir sites, well
sites and other facilities, which is also leased to the Authority under the Lease.
The Authority intends to construct an additional 20 million gallons of reservoir capacity
along with the associated transmission lines and booster pump stations with proceeds of the
Bonds.
Pumps. The Water Enterprise uses production pumps and booster pumps fueled by
natural gas and electricity. The booster pump stations at each of the four production facilities
have a capacity of 6,000 gallons per minute, while the production pumps at the wells have a
capacity ranging from 1,500 to 3,000 gallons per minute. The operating staff performs regular
preventive maintenance at the reservoir sites and the facilities and equipment are considered to
be in good condition. The maximum system pumping capacity of the system has been
estimated to be 60 million gallons per day with an average day demand of 20.5 million gallons
per day and a maximum day demand of 27 million gallons per day.
Transmission and Distribution. The transmission and distribution network consists of
approximately 950,000 linear feet (180 miles) of pipe ranging in diameter from 4 inches to 24
inches. Approximately 52 percent of the piping is asbestos cement pipe with the remainder
being ductile iron at 44 percent or PVC at 4 percent.
The operating staff has a regular preventive maintenance program for the transmission
and distribution system that consists of turning valves and flushing mains at least once every
three years.
The transmission system has one pressure zone with an operating pressure of 65 to 90
pounds per square inch (psi), The system has a telemetry system that provides for alarms and
has full Supervisory Control and Data Acquisition (SCADA) capability.
Service Area and Customer Base
General. The majority of the Water Enterprise customers are residential, with the
remaining customers representing commercial and other users, The Water Enterprise does not
supply water for agricultural irrigation purposes. The Authority does not currently sell water to
other municipalities, but there are three interconnections within the City to other utilities for
emergency purposes.
25
In addition to supplying all City residents, the Authority provides water to customers in an
unincorporated portion of Riverside County called Oasis Palms, a residential community of
approximately 475 to 495 households.
See APPENDIX D for background and demographic data regarding the City and the
County.
Number of Accounts. The table below shows a six-year history of the number of water
meters served by the Water Enterprise.
Table 2
Number of Water Meters
1999-00 2000-01 2001-02 2002-03 2003-04 2004-05
2004-05
% of Total
Residential 9,848 10,319 10,693 10,893 12,949 14,444 85.81%
Commercial/Other 2,239 2,351 2,353 2,353 2,361 2,388 14.19%
Total Meters 12,087 12,670 13,046 13,246 15,310 16,832 100.00%
Source: The Authority
Largest Customers. The table below shows the ten largest customers of the Water
Enterprise for Fiscal Year 2004-05.
Table 3
Ten Largest Customers
Customer Business Type
Usage
(CCF)
% of Water
System
Consumption
2004-05
Water Sales
Revenue
'Yo of Total
2004-05
Water Sales
Revenue
Cabazon Indian Reservation Casino 96,058 1.10%
$121,103
1.94%
Indio Housing Authority Apartments 66,753 0.70%
43,496
0.70%
Pueblo Del Sol Mobile Home 49,665 0.50%
32,847
0.53%
ACDW Properties Inc. Apartments 49,484 0.50%
31,885
0.51%
Rancho Casa Blanca Mobile Home 48,574 0.50%
33,748
0.54%
Desert Sand USD - Indio High School 47,714 0.50%
33,226
0.53%
Desert Air HOA RV 41,860 0.50%
27,690
0.44%
JFK Hospital Hospital 39,175 0.42%
26,299
0.42%
Casa Monroe Apts Apartments 36,785 0.40%
24,999
0.40%
Riverside County - Juvenile Hall Government 36.592 0.40%
24,422
0.39%
Totals: 512,660 5.60%
$399,714
6.41%
Source: The Authority
Water Rates and Billing
History of Water Rate Increases.
Resolutions/Ordinances  Effective New Rate
26
Date
Resolution 5070
Resolution 5354
Ordinance 1052
Ordinance 2001-1
Ordinance 2001-1
Resolution 2005-27
.42 up to 100 units and .35 after 100 units, Oasis Palms .55 up to 100 units
1-Jul-87  and .35 after 100 units
1-Nov-89 .46 for City, Oasis Palms .55 up to 100 units, .35 after 100 units
1-Oct-90 .52 per hundred cubic feet
1-Nov-01 .60 per hundred cubic feet
1-Jul-02  .63 per hundred cubic feet
1-Jul-05  .71 per hundred cubic feet
Current Water Rate Structure. The water rate structure utilizes a monthly minimum
fee, based upon the size of the meter connection plus a consumption rate of $0.71 per hundred
cubic feet (748 gallons) of water consumed.
The table below shows the current water rates charged by the Water Enterprise, which
became effective as of July 1, 2006.
Table 4
Water Rates and Charges
Fiscal Year 2006/07
Minimum Service  Maximum Quantity
Meter Size  Charge  Charge (11
5/8"
$  5.70 $0.71
3/4" 5.70 0.71
1" 12.78 0.71
1-1/2" 21.00 0.71
2" 27.69 0.71
3" 54.67 0.71
4" 84.49 0.71
6" 189.57 0.71
8" 253.47 0.71
[1]  Per hundred cubic feet.
Source: The Authority
The Water Enterprise also charges minimum rates for single service to multiple units,
which is as shown in the table above for the size of meter, plus the following multiples: 84 per
unit for apartments, mobile home parks, and office buildings; $2.13 per unit for recreational
vehicle parks; and $1,42 per unit for hotels and motels. In addition, the service area of Oasis
Palms is charged 1.5 times the rate for a comparable meter shown in the table above.
Capital Facility Fees. The Authority charges the development impact fees set forth on
the table below. These fees are collected by the City and transferred to the Authority.
Water Impact Fee Per Meter Size
Meter Size  Water Impact Fee
5/8-3/4  $4,355
2  7,403
1 1/2  13,064
2  23,080
3  46,596
4  72,724
27
6  74,683
8  75,642
Comparison of Rates and Charges
The following table lists certain water suppliers in the Coachella Valley region and their
average monthly residential water service charges (based on the water rates for a standard 5/8-
inch residential meter).
Table 5
Comparison of Average Monthly Residential Bills
Fiscal Year 2006-07
Base and Use Rate
Monthly Consumption Rate by Cubic Feet
1,000  2,000  3,000
City of Coachella  $8.62 plus .63 $14.92 $21.22 $27.52
Indio Water Authority  5.70 + 0.71 12.80 19.90 27.00
Coachella Valley Water District  6.00 plus .72 13.20 20.40 27.60
Desert Water Agency
Zone A  5.00 plus .77 13.25 21.50 29.75
Zone B 13.79 22.58 31.37
Zone C 16.20 27.40 38.60
Mission Springs Water Agency  5.50 plus .92 14.70 23.90 33.10
Average Residential Bill [1] $14.34 $22.83 $31.32
Minimum Residential Bill 13.20 20.40 27.60
Maximum Residential Bill 16.20 27.40 38.60
[1]  Average does not include the Authority.
Source: The Authority.
Billing Procedure; Collections History
Ail Water Enterprise customers are billed monthly. Payments are due and payable on
the date rendered and become delinquent 30 days thereafter. The late charge assessed is
$64.00. For the past 20 years, the rate of delinquencies has been an average of 1%, and the
rate of bad debt write-offs for unpaid bills has averaged less than 1%.
Historic Operating Results and Debt Service Coverage
Audited Financial Statements. The information set forth in this section has been
derived by the Authority from its audited financial statements. The most recent audited financial
statements of the Authority for the Fiscal Year ended June 30, 2005, are included in the audited
financial statement of the City, which were prepared by the City and audited by Conrad and
Associates, LLP, and are included as APPENDIX B.
The audit reports state the financial statements were examined in accordance with
generally accepted auditing standards and contain opinions that the financial statements
present fairly the financial position of the various funds maintained by the Authority. For a
description of the various funds and the Authority's significant accounting policies, see
APPENDIX B.
28
The financial statements should be read in their entirety. The Authority has not
requested nor did the Authority obtain permission from the auditor to include the audited
financial statements as an appendix to this Official Statement. Accordingly, the auditor has not
performed any post-audit review of the financial condition or operations of the Authority or the
Water Enterprise. In addition, the auditor has not reviewed this Official Statement.
29
Historic Operating Results. The following table sets forth a summary of the statement
of revenues, expenses and changes in fund net assets of the Authority for the last five Fiscal
Years, and has been derived by the Authority from its audited financial statements for the Fiscal
Years indicated.
Table 6
City of Indio and Indio Water Authority
Statement of Revenues, Expenses and
Changes in Fund Net Assets
(Fiscal Years Ended June 30)
2001 2002 2003 2004 2005
Operating revenues:
Charges for services $4,401,581 $4,420,330 $6,162,467 $6,470,225 $5,531,076
Meter and service fees 368,434
Other 20,000 333,255
Total operating revenues $4,401,581 $4,440,330 $6,162,467 $6,470,225 $6,232,765
Operating expenses:
Personnel services $1,306,410 - $64,839 $1,359,258 $1,515,314
Contractual services 536,538 1,441,028 207,828 244,858 401,405
Materials and supplies 314,481 1,184,122 294,400 432,401 322,463
Repairs and maintenance 109,865 111,053 188,609 164,319 968,011
Rents and leases - 1,005,246 1,030,482 1,062,049
Utilities 618,438 - 1,000,594 1,076,753 1,103,604
Depreciation [1] 500,400 548,896 573,452 625,709 3,313,822
Other - 12,166
Capital outlay 93,697
Mobile equipment charges 50,000
Lease payment 77,049
Total operating expenses $3,606,878 $3,285,099 $3,334,968 $4,933,780 $8,698,834
Operating income (loss) 794,703 1,155,231 2,827,499 1,536,445 (2,466,069)
Non-operating revenues (expenses)
Investment income 631,382 63,315 153,648 108,894 295,843
Interest expense (174,236) (261,898) (298,489) (679,819)
Miscellaneous (10,550) 457,258
Gain on sale of assets (63,962)
Total non-operating revenues
(expenses) $631,382 ($110,921) ($172,212) ($200,145) $73,282
Income (loss) before
operating transfers 1,426,085 1,044,310 2,655,287 1,336,300 (2,392,787)
Operating transfers:
Transfers to City of Indio (655,664)
Capital contributions 1,805,148
Operating transfers in 1,556,463
Operating transfers out (1,011,611)
Transfer to primary government [2] (10,977,948) (1,682,163)
Total operating transfers ($1,011,611) ($10,977,948) ($125,700) $1,149,484 $2,756,233
Net income (loss) [3] 414,474 (9,933,638) 2,529,587 2,485,784 363,446
Retained earnings at beginning of year, as
restated/fund balances [3][4] 14,246,435 14,660,909 15,369,735 17,899,322 144,038,435
Retained earnings/fund balances at end
of year [3][4] $14,660,909 $4,727,271 $17,899,322 $20,385,106 $144,401,881
[1] Increase due to restatement of Net Assets based n an inventory of Authority owned and maintained capital assets.
[2] Transfers to primary government include Contributed Capital of $10,642,464 and internal service fund of $355,484. The transfer of assets
represents the initial assets the City constructed before forming the Authority.
[3]
Does not reflect GASB No. 34 terminology for fiscal years ending prior to June 30, 2003. GASB No. 34 applies to fiscal years ending
June 30, 2003 and thereafter.
[4] Net assets at beginning of Fiscal Year 2005 were restated by $123,653,329 to reflect unrecorded capital assets net of accumulated
depreciation. This was due to an independent valuation of all fixed asset inventory and to comply with annual financial statement
reporting requirements. This inventory is in conjunction GASB Statement 34 infrastructure valuation compliance.
Source: City of Indio Financial Report and The Authority.
30
Projected Operating Results and Debt Service Coverage
Estimated projected operating results (on a cash basis) for the Authority for the current
and next four Fiscal Years are set forth below. Certain assumptions have been made by the
Authority in the development of the projections. Many of these assumptions are reflected in the
footnotes accompanying the projections. While the Authority believes its assumptions are
reasonable, there can be no assurance that the assumed conditions will in fact occur. The
Authority's projections may be affected (favorably or unfavorably) by unforeseen future events.
Therefore, the results projected below cannot be assured.
Table 7
Projected Revenues, Expenses and
Debt Service Coverage
(Fiscal Year Ending June 30)
Adopted Water Rate Increases [1]
Operating Revenues:
2006-07 2007-08 2008-09 2009-10 2010-11
27% 23% 21% 9% -0-
Water Utility Payments [2] $9,181,069 $11,268,845 $13,995,867 $15,760,189 $16,232,995
Other/Miscellaneous Fees [3] 1,561,174 2,343,150 2,835,212 3,090,381 3,090,381
Project Fund Interest Earnings* [4] 1,195,380 1,307,750 610,283 48.435
Total Operating Revenues: 11,937,623 14,919,745 17,441,362 18,899,005 19,323,376
Total Operating Expenses [5][6] 7,845,476 8,686,712 9,144,798 9,944,289 10,498,890
Net Revenues 4,092,147 6,233,033 8,296,564 8,954,716 8,824,486
Debt Service
Debt Service-2004 Bonds [7] 273,972 -0- -0- -0- -0-
Debt Service-2006 Bonds* 1,485,276 3,163,903 3,163,903 4,263,903 4,262,253
Total Debt Service* 1,759,248 3,163,903 3,163,903 4,263,903 4,262,253
Debt Service Coverage Ratio* 2.33 1.97 2.62 2.10 2.07
Net Income After Debt Service $2,332,899 $3,069,131 $5,132,662 $4,690,814 $4,562,234
[1]
[2]
[3]
[4]
[5]
[6]
[7]
Source:
Preliminary; subject to change.
Represent the water rates adopted by the Authority on June 29, 2006. Adopted rates are effective as of July 1 of each
fiscal year.
Assumes that Fiscal Year 2005-06 consumption amounts will grow by 3% each year, based on a 3% population growth
factor. Over the last five years, average annual population growth has been over 8%.
Includes projected meter revenues assuming the Fiscal Year 2005-06 number of meters in the system and a 3%
population growth factor for subsequent years.
Assumes an initial deposit into the Project Fund equal to $52,310,000, and that this amount will be drawn down in equal
monthly installments over three years. The assumed investment rate is 4.0%.
Assumes an annual inflationary factor of 5.00% from Fiscal Year 2008-09 through FY 2010-11. Exceptions to this growth
assumption include Water Replenishment Fee Charges and Personnel Services. The growth in Water Replenishment
Fee charges is linked to the projected connection growth rate estimated to be 30% annually. Personnel Services
expenses are projected to grow by 10% in FY 2007-08, and by 5% thereafter.
Excludes depreciation & replacement expenses, as well the Authority's subordinate lease obligation.
The 2004 Bonds will be defeased and refunded with a portion of the proceeds of the 2006 Bonds. See "FINANCING
PLAN."
The Authority.
31
Capital Improvement Plan
General. The City Council adopted a Water Master Plan identifying system
improvements necessary to sustain projected growth and detailing a multi-year improvement
program in June 2000 (the "Capital Improvement Program"), and a supplementary Water
Modeling System in December 2005 consisting of projected capital improvements for the Water
Enterprise. The capital improvements described below constitute a portion of the anticipated
projects contained in the Capital Improvement Program.
The capital improvements to the Water System shown in the tables below represent a
combination of capital improvements to replace facilities whose age has exceeded the expected
useful life, and improvements and new infrastructure designated to substantially meet the long-
term needs of the Water Enterprise for the next 20 to 30 years. Other capital repair and
replacement projects will continue on an annual basis indefinitely.
Projected Water System Capital Improvements. The table below projects the capital
improvements to the Water Enterprise anticipated to be funded by the Authority over the next
five years, based on the current Capital Improvement Program.
Table 8
Capital Improvement Program Summary
Three-Year Projections
Operations
FY 2006-07
Operations
FY 2007-08
Operations
FY 2008-09
Project & Impact
Bond
& Impact Bond & Impact Bond
Category Fees 111
Proceeds 121
Total Fees 111 Proceeds 121 Total Fees 111 Proceeds 121 Total
Reservoirs $11,700,000 $3,800,000 $15,500,000 $21,500,000 $11,000,000 $32,500,000 $10,830,000 $4,520,000 $15,350,000
Wells and
Boosters 2,685,000 3,515,000 6,200,000 5,965,000 7,285,000 13,250,000 3,500,000 3,500,000 7,000,000
Pipeline
Improvements 5,420,000 300,000 5,720,000 1,984,000 636,000 2,620,000 450,000 4,415,000 4,865,000
System
Administration 543,500 241,500 785,000 232,500 97,500 330,000 232,500 97,500 330,000
Capital
Equipment &
Improvements 17,500 3,096,000 3,113,500 2,015,000 2,015,000 - 1,390,000 1,390,000
Other
Improvements 1,600,000 6,400,000 8,000,000
Totals $21,966,000 $17,352,500 $39,318,500 $29,681,500 $21,033,500 $50,715,000 $15,012,500 $13,922,500 $28,935,000
Represents proiected revenues from the Authority's Fund 010 (Operations) and Fund 310 (Development Impact Fees).
Represents projected proceeds of the Bonds and anticipated Additional Bonds. See "SECURITY FOR THE 2006 BONDS
— Issuance of Additional Bonds."
The Authority
I1]
j2j
Source:
32
Three-Year Totals
Operations
& Impact
Bond
Project Category Fees 01
Proceeds 121
Total
Reservoirs 44,030,000 19,320,000 63,350,000
Wells and Boosters 12,150,000 14,300,000 26,450,000
Pipeline
Improvements 7,854,000 5,351,000 13,205,000
System
Administration 1,008,500 436,500 1,445,000
Capital Equipment &
Improvements 17,500 6,501,000 6,518,500
Other Improvements 1,600,000 6,400,000 8,000,000
Totals $66,660,000 $52,308,500 $118,968,500
11]
121
Source:
Represents projected revenues from the Authority's Fund 010 (Operations) and Fund 310
(Development Impact Fees).
Represents projected proceeds of the Bonds and anticipated Additional Bonds. See
"SECURITY FOR THE 2006 BONDS — Issuance of Additional Bonds."
The Authority

Investment of Authority Funds
General. The Authority will deposit all Revenues of the Water System into the Revenue
Fund, which will be held by the Authority and invested in accordance with the City of Indio
Investment Policy. The other funds and accounts established and held under the Indenture are
required to be invested in certain "Permitted Investments" (as defined in the Indenture).
Objectives and Authorized Investment instruments. In accordance with State law,
the primary objectives, in priority, are safety of principal, liquidity, and return on investment.
Under the City's Investment Policy, funds of the City, the Authority and other City
agencies may be invested in any instrument allowable under current legislation of the State of
California (Government Code Section 53600 et seq.) so long as the investment is appropriate
when investment objectives and policies are taken into consideration.
Allowable investment Instruments may include:
Treasury Obligations (Bills, Notes, and Bonds)
Government Agency Securities
Local Agency Investment Fund (California State Pool)
Certificates of Deposit
Commercial Paper
Repurchase Agreement
Money Market Funds (bond reserves held by trustee only)
Banker's Acceptances
Interest Bearing Checking Accounts
General Demand Checking Accounts
Under the Investment Policy, prohibited investments include inverse floaters, range
notes, or interest only strips that are derived from a pool of mortgages, as well as any security
that could result in zero interest accrual if held to maturity. However, the City and the Authority
may hold prohibited instruments until their maturity dates.
33
This section contains only a summary of the City's Investment Policy, a detailed
description of which is available from the Treasurer.
Risks Related to Investments. All investments, including the investments permitted
under the City's Investment Policy and the Permitted Investments under the Indenture, contain a
certain degree of risk. Such risks include, but are not limited to, a lower rate of return than
expected and loss or delayed receipt of principal. The occurrence of these events with respect
to amounts held under the Indenture, or other amounts held by the Authority, could have a
material adverse affect on the Authority's finances. For a description of the Authority's
investments at June 30, 2005, see APPENDIX B.
The City's Investment Policy may be changed at any time by the City Council (subject to
the State law provisions relating to authorized investments) and as the California Government
Code may be amended from time to time. There can be no assurance, therefore, that the State
law or the Investment Policy will not be amended in the future to allow for investments which are
currently not permitted under State law or the Investment Policy or that the objectives of the City
or the Authority with respect to investments or its investment holdings will not change.
Retirement Plan
The following description of the Authority's retirement plan is derived from the Authority's
2005 audited financial statements.
Defined Benefit Plan. The City contributes to the California Public Employees
Retirement System (PERS), an agent multiple-employer public employee defined benefit
pension plan. PERS provides retirement, disability benefits, and death benefits to plan
members and beneficiaries. PERS acts as a common investment and administrative agent for
participating public entities within the State of California. Copies of PERS' annual financial
report may be obtained from its executive office at 400 "P" Street, Sacramento, California
95814.
Participants are required to contribute 7% of their annual covered salary. The City
makes the contributions required of City employees on their behalf and for their account.
Benefit provisions and all other requirements are established by state statute and town contract
with employee bargaining groups.
Under GASB 27, an employer reports an annual pension cost (APC) equal to the annual
required contribution (ARC) plus an adjustment for the cumulative difference between the APC
and the employer's actual plan contributions for the year. The cumulative difference is called
the net pension obligation (NPO). The ARC for the period July 1, 2004 to June 30, 2005 has
been determined by an actuarial valuation of the plan as of June 30, 2002. The contribution
rate indicated for the period is 7.102% of payroll for the safety plan and 0.000% of payroll for the
miscellaneous plan. In order to calculate the dollar value of the ARC for inclusion in financial
statements prepared as of June 30, 2005, this contribution rate would be multiplied by the
payroll of covered employees that was actually paid during the period July 1, 2004 to June 30,
2005.
A summary of principle assumptions and methods used to determine the ARC is shown
below.
Valuation Date  June 30, 2002
Actuarial Cost Method  Entry Age Actuarial Cost Method
34
Amortization Method
Average Remaining Period
Asset Valuation Method
Actuarial Assumptions
Investment Rate of Return
Projected Salary Increases
Inflation
Payroll Growth
Individual Salary Growth
Level Percent of Payroll
22 Years as of the Valuation Date
3 Year Smoothed Market
8.25% (net of administrative expenses)
4.27% to 11.59% depending on Age
Service, and type of employment
3.50%
3.75%
A merit scale varying by duration of
employment coupled with an assumed
annual inflation component of 3.50% and
an annual production growth of 0.25%.
Initial unfunded liabilities are amortized over a closed period that depends on the plan's
date of entry into CaIPERS. Subsequent plan amendments are amortized as a level percentage
of pay over a closed 20-year period. Gains and losses that occur in the operation of the plan
are amortized over a rolling period, which results in an amortization of 10% of unamortized
gains and losses each year. If the plan's accrued liability exceeds the actuarial value of plan
assets, then the amortization period may not be lower than the payment calculated over a 30
year amortization period.
For the safety plan and the miscellaneous plan, the City was overfunded for the year
ended June 30, 2005. Amortization periods are not determined for overfunded plans.
Post Retirement Health Care Benefits. In addition to providing pension benefits, the
City provides certain health care benefits for retired employees. Some employees may become
eligible for those benefits if they reach normal retirement age while working for the City for five
years. The cost of retiree health care benefits is recognized as an expense as claims are paid.
For fiscal year 2004-05, those costs totaled $598,565 for 105 such employees.
35
BOND OWNERS' RISKS
The following describes certain special considerations and risk factors affecting the
payment of and security for the 2006 Bonds. The following discussion is not meant to be an
exhaustive list of the risks associated with the purchase of any 2006 Bonds and the order
presented does not necessarily reflect the relative importance of the various risks. Potential
investors in the 2006 Bonds are advised to consider the following special factors along with all
other information in this Official Statement in evaluating the 2006 Bonds. There can be no
assurance that other considerations will not materialize in the future.
Net Revenues; Rate Covenant
Net Revenues are dependent upon the demand for water sales, which can be affected
by population factors and more stringent drinking water regulations. There can be no assurance
that water service demand will be consistent with the levels contemplated in this Official
Statement. A decrease in the demand for water could require an increase in rates or charges in
order to comply with the rate covenant contained in the Indenture. The Authority's ability to
meet its rate covenant is dependent upon its capacity to increase rates without driving down
demand to a level insufficient to meet debt service on the 2006 Bonds and any Additional
Bonds.
Authority Expenses
There can be no assurance that expenses of the Authority will be consistent with the
levels contemplated in this Official Statement. Changes in technology, changes in quality
standards, increases in the cost of operation or other expenses could require substantial
increases in rates or charges in order to comply with the rate covenant in the Indenture. Such
rate increases could drive down demand for water and related services or otherwise increase
the possibility of nonpayment of the Bonds.
Limitations on Remedies Available to Bond Owners
The ability of the Authority or the City to comply with its covenants under the Indenture,
including the covenants regarding water rates, and to generate Net Revenues sufficient to pay
principal of and interest on the Bonds may be adversely affected by actions and events outside
of the control of the Authority and the City, and may be adversely affected by actions taken (or
not taken) by voters, property owners, taxpayers or payers of assessments, fees and charges.
Furthermore, any remedies available to the owners of the Bonds upon the occurrence of an
event of default under the Indenture 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.
In addition to the limitations on Bondholder remedies contained in the Indenture, the
rights and obligations under the Bonds and the indenture may be subject to the following: the
United States Bankruptcy Code and applicable bankruptcy, insolvency, reorganization,
moratorium, or similar laws relating to or affecting the enforcement of creditors' rights generally,
now or hereafter in effect; usual equity principles which may limit the specific enforcement under
State law of certain remedies; the exercise by the United States of America of the powers
delegated to it by the Federal Constitution; and the reasonable and necessary exercise, in
certain exceptional situations, of the police power inherent in the sovereignty of the State of
California and its governmental bodies in the interest of serving a significant and legitimate
36
public purpose. Bankruptcy proceedings, or the exercise of powers by the federal or state
government, if initiated, could subject the Owners of the Bonds to judicial discretion and
interpretation of their rights in bankruptcy or otherwise, and consequently may entail risks of
delay, limitation or modification of their rights.
Seismic and Environmental Considerations
The Authority is located in a seismically active area of California. If there were to be an
occurrence of severe seismic activity in the area of the Authority, there could be an interruption
in the service provided by the Water Enterprise, resulting in a temporary reduction in the amount
of Net Revenues available to pay debt service when due on the Bonds.
Other environmental conditions, such as flooding, landslides or wildfires, could affect or
interrupt the service provided by the Water Enterprise, resulting in a temporary reduction in the
amount of Net Revenues available to pay debt service when due on the Bonds.
Loss of Tax-Exemption on 2006 Bonds
As discussed under the caption "TAX MATTERS," interest on the 2006 Bonds could
become includable in gross income for purposes of federal income taxation retroactive to the
date the 2006 Bonds were issued, as a result of future acts or omissions of the Authority in
violation of its covenants in the Indenture. Should such an event of taxability occur, the 2006
Bonds are not subject to special redemption and will remain Outstanding until maturity or until
redeemed under other provisions set forth in the Indenture.
Proposition 218
General. On November 5, 1996, California voters approved Proposition 218, the so-
called "Right to Vote on Taxes Act." Proposition 218 added Articles XIIIC and XIIID to the State
Constitution, which affect the ability of public agencies to levy and collect both existing and
future taxes, assessments, and property-related fees and charges. Proposition 218, which
generally became effective on November 6, 1996, changed, among other things, the procedure
for the imposition of any new or increased property-related "fee" or "charge," which is defined as
"any levy other than an ad valorem tax, a special tax or an assessment, imposed by a [public
agency] upon a parcel or upon a person as an incident of property ownership, including user
fees or charges for a property related service" (and referred to in this section as a "property-
related fee or charge").
Specifically, under Article XIIID, before a public agency may impose or increase any
property-related fee or charge, the entity must give written notice to the record owner of each
parcel of land affected by that fee or charge. The public agency must then hold a hearing upon
the proposed imposition or increase at least 45 days after the written notice is mailed, and, if a
majority of the property owners of the identified parcels present written protests against the
proposal, the public agency may not impose or increase the property-related fee or charge
(referred to in this section as the "property-owner protest procedure").
Further, under Article XIIID, revenues derived from a property-related fee or charge may
not exceed the funds required to provide the "property-related service" and the public agency
may not use such fee or charge for any purpose other than that for which it imposed the fee or
charge. The amount of a property-related fee or charge may not exceed the proportional cost of
the service attributable to the parcel, and no property-related fee or charge may be imposed for
37
a service unless that service is actually used by, or is immediately available to, the owner of the
property in question:
In addition, Article XIIIC states that "the initiative power shall not be prohibited or
otherwise limited in matters of reducing or repealing any local tax, assessment, fee or charge.
The power of initiative to affect local taxes, assessments, fees and charges shall be applicable
to all local governments and neither the Legislature nor any local government charter shall
impose a signature requirement higher than that applicable to statewide statutory initiatives."
Judicial Interpretation of Proposition 218. After Proposition 218 was enacted in 1996,
appellate court cases and an Attorney General opinion initially indicated that fees and charges
levied for water and wastewater services based on consumption or usage would not be
considered property-related fees and charges, and thus not subject to the requirements of
Article XIIID. However, three recent cases have held that certain types of water and wastewater
charges could be subject to the requirements of Proposition 218 under certain circumstances.
In Richmond v. Shasta Community Services District (2004) 32 Cal.4th 409, 9 Cal. Rptr.
3rd 121, the California Supreme Court addressed the applicability of the notice, hearing and
protest provisions of Article XIIID to water connection fees charged to new development. In
Richmond, the Court held that the Shasta Community Services District's connection charges
were not subject to Proposition 218 because they were triggered by voluntary decisions to
develop property. The fees in question were not imposed on property owners simply because
they owned their properties within the Shasta Community Services District. Thus, the fees
could be avoided by property owners. However, the Court also indicated in dictum that a fee for
ongoing water service through an existing connection could, under certain circumstances,
constitute a property-related fee and charge, with the result that a public agency imposing such
a fee or charge must comply with the property-owner protest procedure of Article XIIID.
In Howard Jarvis Taxpayers Association v. City of Fresno (2005), 127 Cal. App.4th 914,
26 Cal. Rptr.3d 153, the California Court of Appeal, Fifth District, concluded that fees for water,
sewer and trash charged by the City of Fresno to its own utility enterprises in lieu of property
taxes (which privately owned utilities would have paid the city) are property-related fees subject
to Article XIIID.
On July 24, 2006 the California Supreme Court, in Bighorn-Desert View Water Agency v.
Verjil (2006) 39 Cal.4th 205, 138 P.3rd 220, 46 Cal. Rptr.3d 73, addressed the validity of a local
voter initiative measure that would have (a) reduced a water agency's rates for water
consumption (and other water charges), and (b) required the water agency to obtain voter
approval before increasing any existing water rate, fee, or charge, or imposing any new water
rate, fee, or charge. The court adopted the position indicated by its statement in Richmond that
a public water agency's charges for ongoing water delivery are "property-related fees and
charges" within the meaning of Article XIIID, and went on to hold that charges for ongoing water
delivery are also "fees" within the meaning of Article XIIIC's mandate that the initiative power of
the electorate cannot be prohibited or limited in matters of reducing or repealing any local tax,
assessment, fee or charge. Therefore, the court held, Article XIIIC authorizes local voters to
adopt an initiative measure that would reduce or repeal a public agency's water rates and other
water delivery charges. (However, the court ultimately ruled in favor of the water agency and
held that the entire initiative measure was invalid on the grounds that the second part of the
initiative measure, which would have subjected future water rate increases to prior voter
approval, was not supported by Article XIIIC and was therefore invalid.)
38
The court in Bighorn specifically noted that it was not holding that the initiative power is
free of all limitations; the court stated that it was not determining whether the electorate's
initiative power is subject to the statutory provision requiring that water service charges be set at
a level that will pay for operating expenses, provide for repairs and depreciation of works,
provide a reasonable surplus for improvements, extensions, and enlargements, pay the interest
on any bonded debt, and provide a sinking or other fund for the payment of the principal of such
debt as it may become due (such as Government Code Section 54515).
Current Practice Regarding Rates and Charges. The Authority's practice in
implementing increases in water rates and charges has been to follow the notice and public
hearing procedures of Government Code Section 54354.5 or Section 66016. On June 26,
2006, the Authority adopted new rates pursuant to § 54354.5, under which the Authority
published of notice of a public hearing in a newspaper of general circulation for 2 weeks, once
per week, and subsequently held a public hearing at the time specified in the notice. The
published notice included a copy of the draft resolution setting forth the proposed rates. At the
conclusion of the public hearing, the Authority determined that the proposed rates and charges
are not discriminatory or excessive, and will be sufficient under Section 54515 and the
covenants of any outstanding revenue bonds, and will be in compliance with law.
Because the charges for water service provided by the Authority are metered and
calculated based on the consumption of water, and because property owners may avoid having
to pay any charges if they do not consume water provided by the Authority, the Authority did not
follow the property owner protest procedure of Article XIIID. The California Attorney General in
1997 had concluded that tiered water rates based upon usage were not property-related fees as
defined in Article XIIID. Furthermore, in Howard Jarvis Taxpayers Association v. City of Los
Angeles, (2000) 85 Cal. App.4th 79, 101 Cal. Rptr.2d 905, the California Court of Appeal, 2nd
District, concluded that metered utility fees are not property-related or subject to Article XIIID.
However, based on the California Supreme Court's ruling in Bighorn, the Authority in the future
will be required to follow the property owner protest procedures of Article XIIID, § 6, in addition
to Government Code §§ 54354.5 or 66016.
As to the existing rates adopted June 26, 2006, the statute of limitation for challenging
the adoption of the rates is 120 days (see, Regents of the University of California v. City and
County of San Francisco, (2004) 115 Cal. App.4th 1109, 9 Cal. Rptr.3d 728 (applying
Government Code Section 66022 to water and sewer charges)). However, Proposition 218
does not specify a statute of limitations for bringing an action to challenge the adoption of a fee
or charge that is subject to its property-owner protest procedures, and no court has determined
the applicable statute of limitations for actions brought to review fees or charges under
Proposition 218. Code of Civil Procedure Section 343 establishes a 4-year statute for actions
where relief is not otherwise provided for, which may be held applicable for actions brought to
challenge rate-setting procedures under Proposition 218.  In addition, in Howard Jarvis
Taxpayers Association v. City of La Habra, (2001) 25 Cal. 4th 809, 107 Cal. Rptr. 2d 369, the
California Supreme Court held that although the statute of limitations for challenging a tax
adopted without voter approval in violation of the voter-approval requirements of Proposition 62
is the three-year statute of Code of Civil Procedure Section 338, a new cause of action arises
each time the tax is collected, It is therefore possible that a court may apply a similar reasoning
for fees or charges adopted without the property owner protest procedure of Proposition 218.
Conclusion. It is not possible to predict how courts will further interpret Article XIIIC and
Article XIIID in future judicial decisions, and what, if any, further implementing legislation will be
enacted.
39
Under the Bighorn case, local voters could adopt an initiative measure that reduces or
repeals the Authority's rates and charges, though it is not clear whether (and California courts
have not decided whether) any such reduction or repeal by initiative would be enforceable in a
situation in which such rates and charges are pledged to the repayment of bonds or other
indebtedness.
There can be no assurance that the courts will not further interpret, or the voters will not
amend, Article XIIIC and Article XIIID to limit the ability of local agencies to impose, levy, charge
and collect increased fees and charges for water or to call into question previously adopted
water rate increases.
Environmental Regulation
The kind and degree of water treatment is regulated, to a large extent, by the federal
government and the State of California. Treatment standards set forth in federal and state law
control the operations of the Water Enterprise and mandate its use of technology. If the federal
government, acting through the Environmental Protection Agency, or the State of California,
acting through the Department of Health Services, or additional federal or state legislation,
should impose stricter water quality standards upon the Water Enterprise (either on purchased
water or on groundwater), or if any of the Authority's collector wells were to be considered to be
under the influence of surface water (and therefore subject to regulations regarding surface
water), the Authority's expenses could increase accordingly and rates and charges would have
to be increased to offset those expenses.
It is not possible to predict the direction which federal or state regulation will take with
respect to drinking water quality standards, although it is likely that both will impose more
stringent standards with attendant higher costs.
Secondary Market for Bonds
There can be no guarantee that there will be a secondary market for the 2006 Bonds or,
if a secondary market exists, that any 2006 Bonds can be sold for any particular price.
Occasionally, because of general market conditions or because of adverse history or economic
prospects connected with a particular issue, secondary marketing practices in connection with a
particular issue are suspended or terminated. Additionally, prices of issues for which a market
is being made will depend upon then-prevailing circumstances. Such prices could be
substantially different from the original purchase price.
Future Parity Obligations
As described in "SECURITY FOR THE 2006 BONDS" above, the Indenture permits the
Authority to issue Additional Bonds and Parity Obligations, its obligations under which would be
payable on a parity with the payment of debt service of the 2006 Bonds. In the event of a
decline in Net Revenues available to pay debt service on the 2006 Bonds, the existence of
Additional Bonds or Parity Obligations could adversely affect the Authority's ability to pay debt
service on the 2006 Bonds.
40
TAX MATTERS
In the opinion of Jones Hall, A Professional Law Corporation, San Francisco, California,
Bond Counsel, subject, however to the qualifications set forth below, under existing law, the
interest on the 2006 Bonds is excluded from gross income for federal income tax purposes and
such interest is not an item of tax preference for purposes of the federal alternative minimum tax
imposed on individuals and corporations, provided, however, that, for the purpose of computing
the alternative minimum tax imposed on corporations (as defined for federal income tax
purposes), such interest is taken into account in determining certain income and earnings.
The opinions set forth in the preceding paragraph are subject to the condition that the
Authority comply with all requirements of the Internal Revenue Code of 1986 (the "Code") that
must be satisfied subsequent to the issuance of the 2006 Bonds in order that such interest be,
or continue to be, excluded from gross income for federal income tax purposes. The Authority
has covenanted to comply with each such requirement. Failure to comply with certain-of-such
requirements may cause the inclusion of such interest in gross income for federal income tax
purposes to be retroactive to the date of issuance of the 2006 Bonds.
If the initial offering price to the public (excluding bond houses and brokers) at which a
2006 Bond is sold is less than the amount payable at maturity thereof, then such difference
constitutes "original issue discount" for purposes of federal income taxes and State of California
personal income taxes. If the initial offering price to the public (excluding bond houses and
brokers) at which each 2006 Bond is sold is greater than the amount payable at maturity
thereof, then such difference constitutes "original issue premium" for purposes of federal income
taxes and State of California personal income taxes. De minimis original issue discount and
original issue premium is disregarded. Owners of 2006 Bonds with original issue discount or
original issue premium, including purchasers who do not purchase in the original offering,
should consult their own tax advisors with respect to federal income tax and State of California
personal income tax consequences of owning such 2006 Bonds.
In the further opinion of Bond Counsel, interest on the 2006 Bonds is exempt from
California personal income taxes.
Owners of the 2006 Bonds should also be aware that the ownership or disposition of, or
the accrual or receipt of interest on, the 2006 Bonds may have federal or state tax
consequences other than as described above. Bond Counsel expresses no opinion regarding
any federal or state tax consequences arising with respect to the 2006 Bonds other than as
expressly described above.
CERTAIN LEGAL MATTERS
Jones Hall, A Professional Law Corporation, Bond Counsel, will render an opinion with
respect to the validity of the 2006 Bonds, the form of which opinion is set forth in APPENDIX E.
Certain legal matters will also be passed upon for the Authority and the City by Jones Hall, as
Disclosure Counsel. Certain legal matters will be passed upon for the Authority and the City by
the City Attorney.
41
ABSENCE OF LITIGATION
No litigation is pending or threatened concerning the validity of the 2006 Bonds. The
Authority is not aware of any litigation pending or threatened questioning the political existence
of the Authority or contesting the Authority's power to fix water rates and charges, or the power
of the Commission or in any way questioning or affecting:
(i) the proceedings under which the 2006 Bonds are to be issued;
(ii) the validity of any provision of the 2006 Bonds or the Indenture;
(iii) the pledge of Net Revenues by the Authority under the Indenture; or
(iv) the titles to office of the present members of the Commission.
There is no litigation pending, with service of process having been accomplished,
against the Authority which if determined adversely to the Authority would, in the opinion of the
Authority, materially impair the ability of the Authority to pay principal of and interest on the 2006
Bonds as they become due.
VERIFICATION OF MATHEMATICAL COMPUTATIONS
Upon delivery of the 2006 Bonds,  , of  
(the "Verification Agent"), will deliver a report stating that it has reviewed and confirmed the
mathematical accuracy of certain computations relating to the adequacy of the securities
deposited with the Escrow Agent, and the interest thereon to pay, when due, the principal of and
interest on the 2004 Bonds to and including April 1, 2014, and to pay the redemption price
(including redemption premium) of the 2004 Bonds upon their call and redemption on April 1,
2014.
RATINGS
Standard & Poor's ("S&P") has assigned its municipal bond rating of "AAA" to the 2006
Bonds with the understanding that, upon delivery of the 2006 Bonds, the Bond Insurer will issue
its policy insuring the payment of principal and interest represented by the 2006 Bonds.
In addition,  has assigned an underlying rating of "
 
" to the 2006
Bonds without regard to the anticipated issuance of the Policy by the Bond Insurer.
These ratings reflect only the views of such organizations and any desired explanation of
the significance of such ratings should be obtained from the respective rating agencies.
Generally, a rating agency bases its ratings on the information and materials furnished to it and
on investigations, studies and assumptions of its own. There is no assurance that such ratings
will continue for any given period of time or that such ratings will not be revised downward or
withdrawn entirely by the rating agencies, if in the judgment of such rating agencies,
circumstances so warrant. Any downward revision or withdrawal of such ratings may have an
adverse effect on the market price of the 2006 Bonds.
42
CONTINUING DISCLOSURE
The Authority will covenant for the benefit of owners of the 2006 Bonds to provide
certain financial information and operating data relating to the Authority and the Water
Enterprise by not later than nine months after the end of the Authority's fiscal year, or March 31
of each year based on the Authority's current fiscal year-end of June 30), commencing March
31, 2007 with the report for the 2005-06 fiscal year (the "Annual Report") and to provide notices
of the occurrence of certain enumerated events, if material.
These covenants have been made in order to assist the Underwriter in complying with
Securities Exchange Commission Rule 15c2-12(b)(5) (the "Rule"). The specific nature of the
information to be contained in the Annual Report or the notices of material events by the
Authority is set forth in "APPENDIX C — Form of Continuing Disclosure Certificate."
The Authority has not previously defaulted on any obligation to provide an annual report
in accordance with the Rule with respect to any bond issue of the Authority.
UNDERWRITING
E. J. De La Rosa & Co., Inc. (the "Underwriter"), has entered into a Bond Purchase
Agreement with the Authority under which it will purchase the 2006 Bonds at a price equal to
 (equal to the par amount of the 2006 Bonds, less an Underwriter's
discount of $  , and less a net original issue discount of $  ).
The Underwriter will be obligated to take and pay for all of the 2006 Bonds if any are
taken. The Underwriter intends to offer the 2006 Bonds to the public at the offering prices set
forth on the inside cover page of this Official Statement. After the initial public offering, the
public offering price may be varied from time to time by the Underwriter.
43
PROFESSIONAL FEES
In connection with the issuance of the 2006 Bonds, fees payable to the following
professionals involved in the offering are contingent upon the issuance and delivery of the 2006
Bonds: Jones Hall, A Professional Law Corporation, as Bond Counsel and Disclosure Counsel;
the Underwriter; and Union Bank of California, as Trustee.
EXECUTION
The execution of this Official Statement and its delivery have been authorized by the
Commission of the Authority and the City Council of the City.
INDIO WATER AUTHORITY
Michael Busch
Treasurer
CITY OF INDIO
Michael Busch
Finance Director
44
APPENDIX A
SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE
A-1
APPENDIX B
AUDITED FINANCIAL STATEMENTS OF THE CITY OF INDIO AND THE
AUTHORITY
FOR FISCAL YEAR ENDED JUNE 30, 2005
B-1
APPENDIX C
FORM OF CONTINUING DISCLOSURE CERTIFICATE
INDIO WATER AUTHORITY
2006 Water Revenue Bonds
This Continuing Disclosure Certificate (this "Disclosure Certificate") is executed and
delivered by the Indio Water Authority (the "Authority") in connection with the issuance by the
Authority of the bonds captioned above (the "Bonds"). The Bonds are being issued under an
Indenture of Trust dated as of October 1, 2006 (the "Indenture"), by and between the Authority
and Union Bank of California, N.A., as trustee (the "Trustee"). The Authority hereby covenants
and agrees as follows:
Section 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being
executed and delivered by the Authority for the benefit of the holders and beneficial owners of
the Bonds and in order to assist the Participating Underwriter in complying with S.E.C. Rule
15c2-12(b)(5).
Section 2, Definitions. In addition to the definitions set forth above and in the Indenture,
which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined
in this Section, the following capitalized terms shall have the following meanings:
"Annual Report" means any Annual Report provided by the Authority pursuant to, and as
described in, Sections 3 and 4 of this Disclosure Certificate.
"Annual Report Date" means the date that is nine months after the end of the District's
fiscal year (currently March 31 based on the District's fiscal year end of June 30).
"Central Post Office" means the Internet-based filing system currently located at
www.DisclosureUSA.org, or any similar filing system approved by the Securities and Exchange
Commission.
"Dissemination Agent" means Union Bank of California, N.A., or any successor
Dissemination Agent designated in writing by the Authority and which has filed with the Authority
a written acceptance of such designation.
"Listed Events' means any of the events listed in Section 5(a) of this Disclosure
Certificate.
"National Repository" means any Nationally Recognized Municipal Securities Information
Repository for purposes of the Rule. Information on the National Repositories as of a particular
date is available on the Securities and Exchange Commission's Internet site at www.sec.gov.
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"Official Statement" means the final official statement executed by the Authority in
connection with the issuance of the Bonds.
"Participating Underwriter" means E. J. De La Rosa & Co., Inc., the original underwriter
of the Bonds required to comply with the Rule in connection with offering of the Bonds.
"Repository" means each National Repository and each State Repository, if any.
"Rule" means Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as the same may be amended from time to time.
"State Repository' means any public or private repository or entity designated by the
State of California as a state repository for the purpose of the Rule and recognized as such by
the Securities and Exchange Commission. As of the date of this Disclosure Certificate, there is
no State Repository.
Section 3. Provision of Annual Reports.
(a)  The Authority shall, or shall cause the Dissemination Agent to, not later than the
Annual Report Date, commencing March 31, 2007 with the report for the 2005-06 fiscal year,
provide to each Repository an Annual Report that is consistent with the requirements of
Section 4 of this Disclosure Certificate. Not later than 15 Business Days prior to the Annual
Report Date, the Authority shall provide the Annual Report to the Dissemination Agent (if other
than the Authority). The Annual Report may be submitted as a single document or as separate
documents comprising a package, and may include by reference other information as provided
in Section 4 of this Disclosure Certificate; provided that the audited financial statements of the
Authority may be submitted separately from the balance of the Annual Report, and later than the
date required above for the filing of the Annual Report if not available by that date. The audited
financial statements of the Authority may be included within or constitute a portion of the audited
financial statements of the City of Indio. If the Authority's fiscal year changes, it shall give
notice of such change in the same manner as for a Listed Event under Section 5(c).
(b)  If the Authority does not provide, or cause the Dissemination Agent to provide, an
Annual Report to the Repositories by the Annual Report Date as required in subsection (a)
above, the Dissemination Agent shall send a notice to the Municipal Securities Rulemaking
Board and the appropriate State Repository, if any, in substantially the form attached hereto as
Exhibit A, with a copy to the Trustee (if different than the Dissemination Agent). In lieu of filing
the notice with each Repository, the Authority or the Dissemination Agent may file the notice
with the Central Post Office.
(c)  The Dissemination Agent shall:
(i)
determine each year prior to the Annual Report Date the name and
address of each National Repository and each State Repository, if any; and
(ii) if the Dissemination Agent is other than the Authority, file a report with the
Authority certifying that the Annual Report has been provided pursuant to this Disclosure
Certificate, stating the date it was provided and listing all the Repositories to which it was
provided.
(d) In lieu of filing the Annual Report with each Repository, the Authority or the
Dissemination Agent may file the Annual Report with the Central Post Office.
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Section 4. Content of Annual Reports, The Authority's Annual Report shall contain or
incorporate by reference the following:
(a) Audited Financial Statements of the Authority, which shall include financial
statements of the Authority's municipal water enterprise (the "Water Enterprise") prepared in
accordance with Generally Accepted Accounting Principles as promulgated to apply to
governmental entities from time to time by the Governmental Accounting Standards Board. If
the Authority's audited financial statements are not available by the Report Date, the Annual
Report shall contain unaudited financial statements in a format similar to the financial
statements contained in the final Official Statement, and the audited financial statements shall
be filed in the same manner as the Annual Report when they become available.
(b) Unless otherwise provided in the audited financial statements filed on or prior to the
Report Date, financial information and operating data with respect to the Authority and the
Water Enterprise for the preceding fiscal year, in the form of updates to the following tables
contained in the Official Statement:
(i) Table 1, entitled "Historic Annual Pumping."
(ii) Table 2, entitled "Number of Water Meters."
(iii) Table 3, entitled "Ten Largest Customers."
(iv) Table 4, entitled "Water Rates and Charges."
(v) Table 5, entitled "Comparison of Average Monthly Residential Bills."
(vi) Table 6, entitled "Statement of Revenues, Expenses and Changes in
Fund Net Assets."
(vii) Table 7, entitled "Projected Revenues, Expenses and Debt Service
Coverage."
(c) Any or all of the items listed in subsections (a) and (b) above may be included by
specific reference to other documents, including official statements of debt issues of the
Authority or related public entities, which have been submitted to each of the Repositories or the
Securities and Exchange Commission. If the document included by reference is a final official
statement, it must be available from the Municipal Securities Rulemaking Board. The Authority
shall clearly identify each such other document so included by reference.
(d) In addition to any of the information expressly required to be provided under this
Disclosure Certificate, the Authority shall provide such further material information, if any, as
may be necessary to make the specifically required statements, in the light of the circumstances
under which they are made, not misleading.
C-3
Section 5. Reporting of Significant Events.
(a)  The Authority shall give, or cause to be given, notice of the occurrence of any of
the following events with respect to the Bonds, if material:
(1) Principal and interest payment delinquencies.
(2) Non-payment related defaults.
(3) Unscheduled draws on debt service reserves reflecting financial difficulties.
(4) Unscheduled draws on credit enhancements reflecting financial difficulties.
(5) Substitution of credit or liquidity providers, or their failure to perform.
(6) Adverse tax opinions or events affecting the tax-exempt status of the security.
(7) Modifications to rights of security holders.
(8) Contingent or unscheduled bond calls.
(9) Defeasances.
(10) Release, substitution, or sale of property securing repayment of the securities.
(11) Rating changes.
(b)  Whenever the Authority obtains knowledge of the occurrence of a Listed Event,
the Authority shall as soon as possible determine if such event would be material under
applicable Federal securities law.
(c)  If the Authority determines that knowledge of the occurrence of a Listed Event
would be material under applicable Federal securities law, the Authority shall, or shall cause the
Dissemination Agent to, promptly file a notice of such occurrence with the Municipal Securities
Rulemaking Board and each State Repository, if any, with a copy to the Trustee (if different than
the Dissemination Agent). Notwithstanding the foregoing, notice of Listed Events described in
subsections (a)(8) and (9) need not be given under this subsection any earlier than the notice (if
any) of the underlying event is given to holders of affected Bonds pursuant to the Indenture.
(d) In lieu of filing the notice of the occurrence of a Listed Event with each Repository,
the Authority or the Dissemination Agent may file the notice of the occurrence of a Listed Event
with the Central Post Office.
Section 6. Termination of Reporting Obligation. The Authority's obligations under this
Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in
full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the
Authority shall give notice of such termination in the same manner as for a Listed Event under
Section 5(c).
Section 7. Dissemination Agent. The Authority may, from time to time, appoint or
engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure
Certificate, and may discharge any such Agent, with or without appointing a successor
C-4
Dissemination Agent. The initial Dissemination Agent will be The Bank of New York Trust
Company, N.A.
Section 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure
Certificate, the Authority may amend this Disclosure Certificate, and any provision of this
Disclosure Certificate may be waived, provided that the following conditions are satisfied:
(a) if the amendment or waiver relates to the provisions of Sections 3(a), 4 or 5(a), it
may only be made in connection with a change in circumstances that arises from a change in
legal requirements, change in law, or change in the identity, nature, or status of an obligated
person with respect to the Bonds, or type of business conducted;
(b) the undertakings herein, as proposed to be amended or waived, would, in the
opinion of nationally recognized bond counsel, have complied with the requirements of the Rule
at the time of the primary offering of the Bonds, after taking into account any amendments or
interpretations of the Rule, as well as any change in circumstances; and
(c) the proposed amendment or waiver either (i) is approved by holders of the Bonds
in the manner provided in the Indenture for amendments to the Indenture with the consent of
holders, or (ii) does not, in the opinion of the Trustee or nationally recognized bond counsel,
materially impair the interests of the holders or beneficial owners of the Bonds.
If the annual financial information or operating data to be provided in the Annual Report
is amended pursuant to the provisions hereof, the first annual financial information filed
pursuant hereto containing the amended operating data or financial information shall explain, in
narrative form, the reasons for the amendment and the impact of the change in the type of
operating data or financial information being provided.
If an amendment is made to the undertaking specifying the accounting principles to be
followed in preparing financial statements, the annual financial information for the year in which
the change is made shall present a comparison between the financial statements or information
prepared on the basis of the new accounting principles and those prepared on the basis of the
former accounting principles. The comparison shall include a qualitative discussion of the
differences in the accounting principles and the impact of the change in the accounting
principles on the presentation of the financial information, in order to provide information to
investors to enable them to evaluate the ability of the Authority to meet its obligations. To the
extent reasonably feasible, the comparison shall be quantitative. A notice of the change in the
accounting principles shall be sent to the Repositories in the same manner as for a Listed Event
under Section 5(c).
(d) The Dissemination Agent shall not be obligated to enter into any such
amendment that modifies or increases its duties or obligations hereunder.
Section 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed
to prevent the Authority from disseminating any other information, using the means of
dissemination set forth in this Disclosure Certificate or any other means of communication, or
including any other information in any Annual Report or notice of occurrence of a Listed Event,
in addition to that which is required by this Disclosure Certificate. If the Authority chooses to
include any information in any Annual Report or notice of occurrence of a Listed Event in
addition to that which is specifically required by this Disclosure Certificate, the Authority shall
have no obligation under this Disclosure Certificate to update such information or include it in
any future Annual Report or notice of occurrence of a Listed Event.
C-5
Section 10. Default. In the event of a failure of the Authority to comply with any
provision of this Disclosure Certificate, the Participating Underwriter or any holder or beneficial
owner of the Bonds may take such actions as may be necessary and appropriate, including
seeking mandate or specific performance by court order, to cause the Authority to comply with
its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall
not be deemed an Event of Default under the Indenture, and the sole remedy under this
Disclosure Certificate in the event of any failure of the Authority to comply with this Disclosure
Certificate shall be an action to compel performance.
Section 11. Duties, Immunities and Liabilities of Dissemination Agent.
(a) The Dissemination Agent shall have only such duties as are specifically set forth
in this Disclosure Certificate, and the Authority agrees to indemnify and save the Dissemination
Agent, its officers, directors, employees and agents, harmless against any loss, expense and
liabilities which it may incur arising out of or in the exercise or performance of its powers and
duties hereunder, including the costs and expenses (including attorneys fees) of defending
against any claim of liability, but excluding liabilities due to the Dissemination Agent's
negligence or willful misconduct. The Dissemination Agent shall have no duty or obligation to
review any information provided to it hereunder and shall not be deemed to be acting in any
fiduciary capacity for the Authority, the Trustee, the Bond owners or any other party. The
obligations of the Authority under this Section shall survive resignation or removal of the
Dissemination Agent and payment of the Bonds.
(b) The Dissemination Agent may conclusively rely upon the Annual Report provided
to it by the Authority as constituting the Annual Report required of the Authority in accordance
with this Disclosure Certificate and shall have no duty or obligation to review such Annual
Report. The Dissemination Agent shall have no duty to prepare the Annual Report nor shall the
Dissemination Agent be responsible for filing any Annual Report not provided to it by the District
in a timely manner in a form suitable for filing with the Repositories. In accepting the
appointment under this Disclosure Certificate, the Dissemination Agent is not acting in a
fiduciary capacity to the Holders or Beneficial Owners of the Bonds, the Authority, the
Participating Underwriters or any other party or person. No provision of this Disclosure
Certificate shall require the Dissemination Agent to risk or advance or expend its own funds or
incur any financial liability. The Dissemination Agent shall be entitled to compensation for its
services as Dissemination Agent and reimbursement for its out-of-pocket expenses, attorney's
fees, costs and advances made or incurred in the performance of its duties under the Bonds
and this Agreement in accordance with its written fee schedule provided to the District, as such
fee schedule may be amended from time to time in writing. Any company succeeding to all or
substantially all of the Dissemination Agent's corporate trust business shall be the successor to
the Dissemination Agent hereunder without the execution or filing of any paper or any further
act.
C-6
Section 12. Notices. Any notice or communications to be among any of the parties to
this Disclosure Certificate may be given as follows:
To the Issuer:
To the Dissemination Agent
and Trustee
Indio Water Authority
100 Civic Center Mall
Indio, California 92202
Attention: Executive Director
Fax: (760) 342-6597
Union Bank of California, N.A.
120 S. San Pedro Street, Suite 400
Los Angeles, California 90012
Attention: Corporate Trust Department
Fax: 213-972-5694
Any person may, by written notice to the other persons listed above, designate a
different address or telephone number(s) to which subsequent notices or communications
should be sent.
Section 13. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of
the Authority, the Trustee, the Dissemination Agent, the Participating Underwriter and holders
and beneficial owners from time to time of the Bonds, and shall create no rights in any other
person or entity.
Section 14.  Counterparts. This Disclosure Certificate may be executed in several
counterparts, each of which shall be regarded as an original, and all of which shall constitute
one and the same instrument.
Date:  , 2006
INDIO WATER AUTHORITY
By:
Title:
AGREED AND ACCEPTED:
Union Bank of California, N.A.,
as Dissemination Agent
By:  
Title:
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EXHIBIT A
NOTICE OF FAILURE TO FILE ANNUAL REPORT
Name of Issuer:  Indio Water Authority
Name of Bond Issue:  Indio Water Authority 2006 Water Revenue Bonds
Date of Issuance:  , 2006
NOTICE IS HEREBY GIVEN that the Authority has not provided an Annual Report with
respect to the above-named Bonds as required by the Indenture of Trust dated as of October 1,
2006 between the Authority and Union Bank of California, N.A. The Authority anticipates that
the Annual Report will be filed by  
Dated:  
ISSUER:
Indio Water Authority
By:  
Its:
cc: Dissemination Agent
C-8
APPENDIX D
GENERAL INFORMATION REGARDING
THE CITY OF INDIO AND RIVERSIDE COUNTY
The following information concerning the City of Indio and Riverside County is included
only for the purpose of supplying general information regarding the community. The Bonds are
not a debt of the City, the County, the State or any of its political subdivisions, and neither the
City, the County, the State nor any of its political subdivisions is liable therefor.
General Description and Background
City of Indio. In 1893, Indio became one of 12 townships in the County of Riverside and
was incorporated in 1930. The City of Indio, which encompasses 24.8 square mile, is a general
law city with a council-manager form of municipal government. The City Council is composed of
a Mayor and four members elected bi-annually at large to four-year alternating terms with the
mayor rotating on an annual basis. Positions of City Manager and City Attorney are filled by
appointments of the City Council. Indio is the geographic mid-point of both Riverside County
and the Coachella Valley.
The area is known as both a desert resort and a major agricultural area. Indio is about
75 miles north of the California-Baja California Mexican border, 120 miles east of the center of
the Los Angeles metropolitan complex, and 30 miles southeast of Palm Springs. It is the
halfway point for all the weekly Southern Californians who make the weekend and holiday trips
to the Colorado River and the Glamis Off-Road recreational facilities. Indio's neighboring
communities are La Quinta to the west, unincorporated areas of Riverside County to the south,
the City of Coachella to the east and unincorporated Riverside County land to the north. Home
of the National Date Festival, Shalimar Sports Center's satellite off-track wagering facility and
international polo matches, Indio welcomes tens of thousands of visitors each year.
Coachella Valley. The Coachella Valley is an irrigated agricultural and recreational
desert valley in southern California east of Los Angeles. The valley extends for approximately
45 miles in Riverside County, southeast from the San Bernardino Mountains to the Salton Sea.
It is approximately 15 miles wide along most of its length, bounded on the west by the San
Jacinto Mountains and the Santa Rosa Mountains and on the north and east by the Little San
Bernardino Mountains. The San Andreas Fault crosses the valley from the Chocolate Mountains
in the southeast corner and along the centerline of the Little San Bernardinos. The fault is easily
visible along its northern length as a strip of greenery against an otherwise bare mountain.
Cities that lie in the Coachella Valley include Cathedral City, Coachella, Desert hot Springs,
Indian Wells, Indio, La Quinta, Palm Desert, Palm Springs and Rancho Mirage.
City Services
The City of Indio provides a broad range of services to its citizens which include police
protection, water service, trash collection, street construction and maintenance, parks and
recreation, planning and zoning, housing and community development, building inspection and
general and administrative support services. It cooperates with Riverside County in the
provision of fire protection and with Coachella Valley Water District for flood control. The Indio
Police Department operates from one station and has approximately 49 sworn officers serving
the community. The City maintains five parks and the Coachella Valley Recreation District
operates a 39,000 square foot comprehensive recreational facility in the City.
D-1
Population
The following sets forth population estimates for cities in the Coachella Valley as of
January 1, for the years 1980, 1990; and 2002 through 2006:
CITIES IN THE COACHELLA VALLEY, RIVERSIDE COUNTY
Estimated Population
1980 (1) 1990(11 2002 2003 2004 2005 2006
Cathedral City -- 30,085 45,688 47,897 49,447 50,957 51,081
Coachella 9,129 16,896 24,427 27,117 28,144 30,964 35,207
Desert Hot Springs 5,941 11,668 16,985 17,398 18,000 19,507 22,011
Indian Wells 1,394 2,647 4,375 4,452 4,512 4,810 4,865
Indio 21,611 36,793 52,495 55,141 60,167 66,539 71,654
La Quinta -- 11,215 28,887 30,844 33,099 36,377 38,340
Palm Desert 11,081 23,252 43,119 44,479 45,604 49,595 49,539
Palm Springs 32,359 40,181 43,971 44,552 45,033 46,000 46,437
Rancho Mirage 6,281 9,778 14,429 15,153 15,787 16,520 16,672
Riverside County 633,923 1,170,413 1,653,847 1,726,321 1,807,624 1,888,311 1,953,330
(1)  From U.S. Census.
Source: State Department of Finance estimates (as of January 1).
Commerce
Total taxable sales reported during the first two quarters of 2005 in the City of Indio were
reported to be $391,929,000, a 9.3% increase over the total taxable sales of $358,750,000
reported during the first two quarters of 2004. The table below shows the number of
establishments selling merchandise subject to sales tax and the valuation of taxable
transactions within the City for the last five years for which data is available. Annual figures for
2005 are not yet available.
CITY OF INDIO
Taxable Retail Sales
Number of Permits and Valuation of Taxable Transactions
(Dollars in thousands)
Retail Stores:
2000 2001 2002 2003 2004
Apparel stores $ 8,090 $ 7,651 $ 7,380 $ 7,599 $ 7,928
General merchandise stores 51,256 51,293 48,720 50,580 48,294
Food stores 34,011 36,761 39,208 43,369 44,248
Eating and drinking places 42,343 42,707 39,710 43,666 51,714
Home furnishings and appliances 22,404 27,503 30,794 35,800
Bldg. Matl. and farm implements 46,344 43,136 40,158 54,461 95,870
Auto dealers and auto supplies 130,246 185,893 191,899 206,886 251,537
Service stations 29,073 27,255 27,889 33,789 41,701
Other Retail Stores 21,350 22.320 24,383 28.047 85,925
Retail Store Totals 385,117 444,519 450,141 504,197 627,217
All Other Outlets 88,664 87,167 85,985 85,130 110,127
TOTAL ALL OUTLETS $473,781 $531,686 $536,126 $589,327 $737,344
Source: California State Board of Equalization, Taxable Sales in California (Sales & Use Tax).
D-2
Total taxable sales during the first two quarters of 2005 in the County were reported to
be $13,516,512,000, an 11.64% increase over the total taxable sales of $12,107,280,000
reported during the first two quarters of 2004. The table below shows the number of
establishments selling merchandise subject to sales tax and the valuation of taxable
transactions within the County for the last five years for which data is available. Annual figures
for 2005 are not yet available.
COUNTY OF RIVERSIDE
Taxable Retail Sales
Number of Permits and Valuation of Taxable Transactions
(Dollars in thousands)
Retail Stores  Total All Outlets
Number
of Permits
Taxable
Transactions
Number
of Permits
Taxable
Transactions
2000 15,771 $12,190,474 35,153 $16,979,449
2001 16,785 13,173,281 36,292 18,231,555
2002 17,646 14,250,733 38,767 19,498,994
2003 18,300 16,030,952 40,833 21,709,135
2004 20,642 18,715,949 42,826 25,237,148
Source: California State Board of Equalization, Taxable Sales in California (Sales & Use Tax).
D-3
Employment and Industry
The following table shows the average annual estimated numbers of wage and salary
workers by industry in Riverside County. The data does not include proprietors, the self-
employed, unpaid volunteers or family workers, domestic workers in households, and persons in
labor management disputes.
RIVERSIDE COUNTY
Civilian Labor Force, Employment and Unemployment
(Annual Averages)
2001 2002 2003 2004 2005
Civilian Labor Force (1)
709,900 748,700 780,500 820,800 848,700
Employment
671,200 701,100 731,000 773,700 805,800
Unemployment
38,700 47,600 49,500 47,100 42,900
Unemployment Rate
5.5% 6.4% 6.3% 5.7% 5.1%
Wage and Salary Employment: (2)
Agriculture
16,700 16,200 16,200 15,100 15,100
Natural Resources and Mining
500 500 500 500 500
Construction
53,400 55,000 60,800 70,400 77,600
Manufacturing
50,600 49,800 50,000 50,900 51,700
Wholesale Trade
15,000 16,300 16,300 16,800 18,300
Retail Trade
62,400 66,200 70,000 76,300 81,500
Transportation, Warehousing and Utilities
10,500 10,800 12,300 13,600 15,100
Information
6,300 6,600 6,600 7,000 7,500
Finance and Insurance
9,300 9,900 11,400 12,200 12,500
Real Estate and Rental and Leasing
7,600 7,600 8,100 8,600 9,400
Professional and Business Services
42,500 46,500 52,000 54,000 57,500
Educational and Health Services
45,300 49,600 50,700 51,900 52,900
Leisure and Hospitality
57,300 59,200 60,600 64,500 67,700
Other Services
17,700 18,200 18,000 17,900 19,000
Federal Government
6,300 6,300 6,400 6,600 6,800
State Government
13,300 13,800 13,900 13,900 14,100
Local Government
69,700 76,400 76,000 77,200 82,300
Total All Industries
484,300 508,900 529,600 557,400 589,500
(1) Labor force data is by place of residence; includes self-employed individuals, unpaid family workers,
household domestic workers, and workers on strike.
(2) Industry employment is by place of work; excludes self-employed individuals, unpaid family workers,
household domestic workers, and workers on strike.
Source: State of California Employment Development Department.
D-4
Major Employers
The major employers located within the City of Indio are listed below.
CITY OF INDIO
Major Employers
No. of
Employer Name
 
Employees
 
Product/Service
County of Riverside
 
900
 
County government
Fantasy Springs Casino
 
525
 
Casino
John F. Kennedy Memorial Hospital
 
445
 
Medical Hospital
City of Indio
 
226
 
City government
Sears Roebuck & Company
 
142
 
Department store
Desert Orthopedic Center
 
115
 
Physical therapy
Super Saver Food
 
100
 
Grocery store
Dimare Company
 
100
 
Farm produce
Granite Construction
 
100
 
Concrete
GTE
 
100
 
Telephone service
City of Indio Comprehensive Annual Financial Report Year ended June 30, 2005
The following table lists the largest employers within the County:
COUNTY OF RIVERSIDE
Major Employers As of June 2006
No. of
Employer Name Location Employees Industry
County of Riverside Riverside 17,942 County government
University of California Riverside Riverside 6,856 College/university
Stater Bros. Markets Colton 6,000 Grocery retailer
Pechanga Resort & Casino Temecula 4,600 Casino/resort
March Air Reserve Base March ARB 3,901 Government/military
Riverside Unified School District Riverside 3,869 Education
Kaiser Permanente Riverside Riverside 3,025 Healthcare
Guidant Corp. Temecula 3,000 Medical device manufacturer
Temecula Valley Unified School District Temecula 2,551 School district
Morongo Casino, Resort & Spa Cabazon 2,500 Gaming
Hemet Unified School District Hemet 2,473 School district
City of Indio Riverside 2,470 City
Fleetwood Enterprises Inc. Riverside 2,452 RV/home manufacturer
Riverside Community College District Riverside 2,356 Higher education
Alvord Unified School District Riverside 2,000 School district
Riverside County Office of Education Riverside 2,000 Education
Riverside Community Hospital Riverside 1,511 Hospital
La Quinta Resort & Club/PGA West La Quinta 1,450 Resort
Corona Regional Medical Center Corona 1,011 Healthcare/hospital
The Press-Enterprise Riverside 972 Printing and publishing
Fender Corona 880 Musical instrument manufacturing
City of Corona Corona 868 Local government
Perris Union High School District Perris 584 School district
Source: Riverside County Economic Development Agency, Demographics Unit
D-5
Construction Activity
The following is a five year summary of the valuation of building permits issued in the
City and the County.
CITY OF INDIO
Building Permit Valuation
(Valuation in Thousands of Dollars)
Permit Valuation
2001 2002 2003 2004 2005
New Single-family $ 74,309.2 $144,499.2 $230,490.2 $394,347.5 $373,156.9
New Multi-family 2,421.0 2,250.3 0.0 44,330.1 0,0
Res. Alterations/Additions 1,419.9 1,593.0 2.879.4 11,412.6 17 313.8
Total Residential 78,150.1 148,342.5 233,369.6 450,090.2 390,470.7
New Commercial 15,965.1 5,262.7 9,100.2 8,092.1 29,810.5
New Industrial 0.0 3,499.0 0.0 9,175.6 1,070.0
New Other 1,711.5 2,292.4 8,878.6 10,554.3 24,299.0
Corn. Alterations/Additions 2,836.8 1,502.3 2.177.4 3,920.1 7,482.0
Total Nonresidential 20.513.4 12,556.4 20,156.3 31,742.1 62,661.6
New Dwelling Units
Single Family 554 1,088 1,672 2,557 2,375
Multiple Family 35 22 0 507 0
TOTAL 589 1,121 1,672 3,064 2,375
Source: Construction Industry Research Board, Building Permit Summary
COUNTY OF RIVERSIDE
Building Permit Valuation
(Valuation in Thousands of Dollars)
2001 2002 2003 2004 2005
Permit Valuation
New Single-family $3,051,190.4 $3,670,371.4 $4,665,675.7 $5,997,513.2 $6,243,791.7
New Multi-family 174,628.0 165,413.0 406,483.0 404,615.9 407,432.1
Res. Alterations/Additions 70,849.7 87,842.9 106,855.8 135,176.6 164,312.5
Total Residential 3,296,668.2 3,923,627.4 5,179,014.5 6,537,305.6 6,815,536.3
New Commercial 287,068.6 297,963.6 360,707.4 580,057.8 552,666.9
New Industrial 74,766.3 80,881.6 112,706.6 203,311.9 120,367.6
New Other 152,854.0 187,510.6 261,793.6 334,001.0 344,703.2
Corn. Alterations/Additions 143,351.7 174,785.7 173,165.5 222,495.5 274,337.7
Total Nonresidential 658,040.6 741,141.5 908,373.1 1,339,866.1 1,292,075.4
New Dwelling Units
Single Family 16,556 20,591 25,137 29,478 29,994
Multiple Family 2,458 2,073 5,224 4,748 4,140
TOTAL 19,014 22,664 30,361 34,226 34,134
Source: Construction Industry Research Board, Building Permit Summary
Effective Buying Income
"Effective Buying Income" is defined as personal income less personal tax and nontax
payments, a number often referred to as "disposable" or "after-tax" income. Personal income is
the aggregate of wages and salaries, other labor-related income (such as employer
contributions to private pension funds), proprietor's income, rental income (which includes
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imputed rental income of owner-occupants of non-farm dwellings), dividends paid by
corporations, interest income from all sources, and transfer payments (such as pensions and
welfare assistance). Deducted from this total are personal taxes (federal, state and local),
nontax payments (fines, fees, penalties, etc.) and personal contributions to social insurance.
According to U.S. government definitions, the resultant figure is commonly known as
"disposable personal income." Annual figures are not yet available for 2005.
COUNTY OF RIVERSIDE
Effective Buying Income
2000 through 2004
Year Area
Total Effective
Buying Income
(000's Omitted)
Median Household
Effective Buying
Income
2000 City of Indio $3,735,911 $37,395
Riverside County 25,144,120 39,293
California 652,190,282 44,464
United States 5,230,824,904 39,129
2001 City of Indio $3,636,701 $37,231
Riverside County 23,617,301 37,480
California 650,521,407 43,532
United States 5,303,481,498 38,365
2002 City of Indio $3,874,905 $37,406
Riverside County 25,180,040 38,691
California 647,879,427 42,484
United States 5,340,682,818 38,035
2003 City of Indio $4,135,550 $37,794
Riverside County 27,623,743 39,321
California 674,721,020 42,924
United States 5,466,880,008 38,201
2004 City of Indio $4,303,175 $38,787
Riverside County 29,468,208 40,275
California 705,108,410 43,915
United States 5,692,909,567 39,324
Source: Sales & Marketing Management Sun/6.y of Buying Power
Transportation
Interstate 10 connects Indio with Los Angeles, San Diego and Phoenix, Arizona. State
Highways 86 and 111 provide access to neighboring communities and Palm Springs.
Commercial rail service to Indio is provided by Southern Pacific Railroad. Air cargo and
passenger flight services are provided at the Palm Springs Airport and at nearby Bermuda
Dunes and Thermal Airports.
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APPENDIX E
FORM OF OPINION OF BOND COUNSEL
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APPENDIX F
DTC AND THE BOOK-ENTRY ONLY SYSTEM
The following description of the Depository Trust Company ("DTC'), the procedures and
record keeping with respect to beneficial ownership interests in the Bonds, payment of principal,
interest and other payments on the Bonds to DTC Participants or Beneficial Owners,
confirmation and transfer of beneficial ownership interest in the Bonds and other related
transactions by and between DTC, the DTC Participants and the Beneficial Owners is based
solely on information provided by DTC. Accordingly, no representations can be made
concerning these matters and neither the DTC Participants nor the Beneficial Owners should
rely on the foregoing information with respect to such matters, but should instead confirm the
same with DTC or the DTC Participants, as the case may be.
Neither the issuer of the Bonds (the "Issuer") nor the trustee, fiscal agent or paying agent
appointed with respect to the Bonds (the "Agent") take any responsibility for the information
contained in this Appendix.
No assurances can be given that DTC, DTC Participants or Indirect Participants will
distribute to the Beneficial Owners (a) payments of interest, principal or premium, if any, with
respect to the Bonds, (b) certificates representing ownership interest in or other confirmation or
ownership interest in the Bonds, or (c) redemption or other notices sent to DTC or Cede & Co.,
its nominee, as the registered owner of the Bonds, or that they will so do on a timely basis, or
that DTC, DTC Participants or DTC Indirect Participants will act in the manner described in this
Appendix. The current "Rules" applicable to DTC are on file with the Securities and Exchange
Commission and the current "Procedures" of DTC to be followed in dealing with DTC
Participants are on file with DTC.
1. The Depository Trust Company ("DTC"), New York, NY, will act as securities
depository for the securities (the "Bonds"). The Bonds will be issued as fully-registered
securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other
name as may be requested by an authorized representative of DTC. One fully-registered Bond
certificate will be issued for the Bonds, in the aggregate principal amount of such issue, and will
be deposited with DTC. If, however, the aggregate principal amount of any issue exceeds $500
million, one certificate will be issued with respect to each $500 million of principal amount and
an additional certificate will be issued with respect to any remaining principal amount of such
issue.
2. DTC, the world's largest depository, is a limited-purpose trust company organized
under the New York Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds
and provides asset servicing for over 2.2 million issues of U.S. and non-U.S. equity, corporate
and municipal debt issues, and money market instrument from over 100 countries that DTC's
participants ("Direct Participants") deposit with DTC. DTC also facilitates the post-trade
settlement among Direct Participants of sales and other securities transactions in deposited
securities through electronic computerized book-entry transfers and pledges between Direct
Participants' accounts. This eliminates the need for physical movement of securities certificates.
Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust
companies, clearing corporations, and certain other organizations. DTC is a wholly-owned
subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC, in turn, is owned
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by a number of Direct Participants of DTC and Members of the National Securities Clearing
Corporation, Fixed Income Clearing Corporation, and Emerging Markets Clearing Corporation
(NSCC, FICC, and EMCC, also subsidiaries of DTCC), as well as by the New York Stock
Exchange, Inc., the American Stock Exchange LLC, and the National Association of Securities
Dealers, Inc. Access to the DTC system is also available to others such as both U.S. and non-
U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that
clear through or maintain a custodial relationship with a Direct Participant, either directly or
indirectly ("Indirect Participants"). DTC has Standard & Poor's highest rating: AAA. The DTC
Rules applicable to its Participants are on file with the Securities and Exchange Commission.
More information about DTC can be found at www.dtcc.com and www.dtc.org.
3. Purchases of Bonds under the DTC system must be made by or through Direct
Participants, which will receive a credit for the Bonds on DTC's records. The ownership interest
of each actual purchaser of each Bond ("Beneficial Owner") is in turn to be recorded on the
Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation
from DTC of their purchase. Beneficial Owners are, however, expected to receive written
confirmations providing details of the transaction, as well as periodic statements of their
holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into
the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries
made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners.
Beneficial Owners will not receive certificates representing their ownership interests in Bonds,
except in the event that use of the book-entry system for the Bonds is discontinued.
4. To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC
are registered in the name of DTC's partnership nominee, Cede & Co. or such other name as
may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and
their registration in the name of Cede & Co. or such other nominee do not effect any change in
beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds;
DTC's records reflect only the identity of the Direct Participants to whose accounts such Bonds
are credited, which may or may not be the Beneficial Owners. The Direct and Indirect
Participants will remain responsible for keeping account of their holdings on behalf of their
customers.
5. Conveyance of notices and other communications by DTC to Direct Participants, by
Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to
Beneficial Owners will be governed by arrangements among them, subject to any statutory or
regulatory requirements as may be in effect from time to time. Beneficial Owners of Bonds may
wish to take certain steps to augment transmission to them of notices of significant events with
respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the
security documents. For example, Beneficial Owners of Bonds may wish to ascertain that the
nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to
Beneficial Owners, in the alternative, Beneficial Owners may wish to provide their names and
addresses to the registrar and request that copies of the notices be provided directly to them.
6. Redemption notices shall be sent to DTC. If less than all of the Bonds within an issue
are being redeemed, DTC's practice is to determine by lot the amount of the interest of each
Direct Participant in such issue to be redeemed.
7. Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or vote with
respect to the Bonds unless authorized by a Direct Participant in accordance with DTC's
Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to Issuer as soon as
possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting
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rights to those Direct Participants to whose accounts the Bonds are credited on the record date
(identified in a listing attached to the Omnibus Proxy).
8. Redemption proceeds, distributions, and interest payments on the Bonds will be made
to Cede & Co., or such other nominee as may be requested by an authorized representative of
DTC. DTC's practice is to credit Direct Participants' accounts, upon DTC's receipt of funds and
corresponding detail information from Issuer or Agent on payable date in accordance with their
respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners
will be governed by standing instructions and customary practices, as is the case with securities
held for the accounts of customers in bearer form or registered in "street name," and will be the
responsibility of such Participant and not of DTC nor its nominee, Agent, or Issuer, subject to
any statutory or regulatory requirements as may be in effect from time to time. Payment of
redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other
nominee as may be requested by an authorized representative of DTC) is the responsibility of
Issuer or Agent, disbursement of such payments to Direct Participants will be the responsibility
of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility
of Direct and Indirect Participants.
9. DTC may discontinue providing its services as securities depository with respect to
the Bonds at any time by giving reasonable notice to Issuer or Agent. Under such
circumstances, in the event that a successor securities depository is not obtained, Bond
certificates are required to be printed and delivered.
10. Issuer may decide to discontinue use of the system of book-entry-only transfers
through DTC (or a successor securities depository). In that event, Bond certificates will be
printed and delivered to DTC.
11. The information in this section concerning DTC and DTC's book-entry system has
been obtained from sources that Issuer believes to be reliable, but Issuer takes no responsibility
for the accuracy thereof.
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APPENDIX G
SPECIMEN MUNICIPAL BOND INSURANCE POLICY
[AND DEBT SERVICE RESERVE SURETY]
G-1
Al I ACHMENT E
42901-01  JH:SRF  AGENDA DRAFT 9/13/06
INDIO WATER AUTHORITY
2006 Water Revenue Bonds
BOND PURCHASE CONTRACT
 , 2006
Indio Water Authority
100 Civic Center Mall
Indio, California 92202
City of Indio
100 Civic Center Mall
Indio, California 92202
Ladies and Gentlemen:
E. J. De La Rosa & Co., Inc. (the "Underwriter") offers to enter into this Bond Purchase
Contract (this "Purchase Contract") with the Indio Water Authority (the "Authority") and the City
of Indio (the "City"). This offer is made subject to the Authority's and the City's acceptance by
execution of this Purchase Contract and delivery of the same to the Underwriter on or before
11:59 p.m. on the date hereof, and, if not so accepted, will be subject to withdrawal by the
Underwriter upon notice delivered to the Authority and the City at any time prior to such
acceptance. Upon the Authority's and the City's acceptance hereof, the Purchase Contract will
be binding upon the Authority, the City and the Underwriter.
Capitalized terms used in this Purchase Contract and not otherwise defined herein shall
have the respective meanings set forth for such terms in the Indenture (defined below).
Section 1. Purchase and Sale. Upon the terms and conditions and upon the basis of
the representations set forth in this Purchase Contract, the Underwriter agrees to purchase from
the Authority, and the Authority agrees to sell and deliver to the Underwriter, all (but not less
than all) of the bonds captioned above (the "Bonds") at a purchase price of
 (being an amount equal to the principal amount of the Bonds
($  
), plus an original issue premium of $  , less an
underwriter's discount of $  . The obligations of the Underwriter to purchase,
accept delivery of and pay for the Bonds shall be conditioned on the sale and delivery of all of
the Bonds by the Authority to the Underwriter at Closing.
Section 2. Bond Terms; Authorizing Instruments. (a) The Bonds shall be dated their
date of delivery and shall mature and bear interest as shown on Exhibit A attached hereto. The
Bonds shall be as described in, and shall be issued and secured under, an Indenture of Trust,
dated as of October 1, 2006 (the "Indenture"), by and among the Authority, the City and Union
Bank of California, N.A., Los Angeles, California, as trustee (the "Trustee"). The Bonds are
payable and subject to prepayment as provided in the Indenture and as described in the Official
Statement. The Bonds are payable from and secured by the Authority's pledge of "Net
Revenues" under and as defined in the Indenture.
(b) A portion of the proceeds of the sale of the Bonds will be used to refund and defease
on an advance basis the outstanding bonds of the Authority captioned "Indio Water Authority
Water Enterprise Revenue Bonds, 2004 Series" (the "2004 Bonds") under the 2004 Escrow
Deposit and Trust Agreement, dated as of October 1, 2006 (the "Escrow Agreement"), by and
among the Authority, the City and Union Bank of California, N.A., as escrow bank.
(c) In connection with the issuance of the Bonds, the Authority and the City are entering
into a Third Amendment to Lease dated as of October 1, 2006 (the "Third Amendment to
Lease"), by and between the Authority and the City, which amends the Lease, dated as of
May 22, 2001 (as amended pursuant to the First Amendment to Lease, dated as of
September 17, 2001, the Second Amendment to Lease, dated as of October 15, 2001),
under which the City has leased the City's water system to the Authority.
(d) Timely payment of interest on and principal of the Bonds will be guaranteed by a
municipal bond insurance policy (the "Bond Insurance Policy") issued by
 (the "Bond Insurer") simultaneously with the execution and delivery of
the Bonds.
Section 3. Public Offering. The Underwriter agrees to make an initial bona fide public
offering of all of the Bonds, at not in excess of the initial public offering yields or prices set forth
on Exhibit A attached hereto. Following the initial public offering of the Bonds, the offering
prices may be changed from time to time by the Underwriter.
Section 4. Official Statement; Continuing Disclosure. (a) The Authority has
delivered to the Underwriter the Preliminary Official Statement dated  
2006 (the "Preliminary Official Statement") and will deliver to the Underwriter the final Official
Statement dated the date of this Purchase Contract (as amended and supplemented from time
to time pursuant to Section 5(i) of this Purchase Contract, the "Official Statement").
(b) The Authority hereby authorizes the use of the Official Statement and the information
contained therein by the Underwriter in connection with the public offering and the sale of the
Bonds. The Authority consents to the use by the Underwriter prior to the date hereof of the
Preliminary Official Statement in connection with the public offering of the Bonds. The
Underwriter hereby agrees that they will not send any confirmation requesting payment for the
purchase of any Bonds unless the confirmation is accompanied by or preceded by the delivery
of a copy of the Official Statement. The Underwriter agrees to: (1) provide the Authority with
final pricing information on the Bonds on a timely basis prior to the Closing and (2) take any and
all other actions necessary to comply with applicable Securities and Exchange Commission
rules and MSRB rules governing the offering, sale and delivery of the Bonds to ultimate
purchasers.
In connection with issuance of the Bonds, and in order to assist the Underwriter
with complying with the provisions of Securities and Exchange Commission Rule 15c2-12 ("Rule
15c2-12"), the Authority will execute a continuing disclosure certificate countersigned by Union
Bank of California, N.A., as dissemination agent (the "Continuing Disclosure Certificate"), under
which the Authority will undertake to provide certain financial and operating data as required by
Rule 15c2-12. The form of the Continuing Disclosure Certificate will be attached as an
appendix to the Preliminary and Final Official Statements.
Section 5. Representations, Warranties and Covenants of the Authority. The
Authority hereby represents, warrants and agrees with the Underwriter that:
(a) The commission (the "Commission") of the Authority has taken official action by
resolution (the "Authority Resolution") adopted by a majority of the members of the Commission
at a meeting duly called, noticed and conducted, at which a quorum was present and acting
throughout, authorizing the execution, delivery and due performance of the Indenture, the
Escrow Agreement, the Third Amendment to Lease, the Continuing Disclosure Certificate and
this Purchase Agreement (collectively, the "Authority Agreements") and the Official Statement
and the taking of any and all such action as may be required on the part of the Authority to carry
out, give effect to and consummate the transactions contemplated hereby.
(b) The Authority is a joint exercise of powers authority duly organized and existing
under the laws of the State of California (the "State") and has all necessary power and authority
to adopt the Authority Resolution, to enter into and perform its duties under the Authority
Agreements and, when executed and delivered by the respective parties thereto, the Authority
Agreements will each constitute legal, valid and binding obligation of the Authority enforceable
in accordance with its respective terms.
(c) By all necessary official action, the Authority has duly authorized the preparation
and delivery of the Preliminary Official Statement and the preparation, execution and delivery of
the Official Statement, has duly authorized and approved the execution and delivery of., and the
performance of its obligations under, the Bonds and the Authority Agreements, and the
consummation by it of all other transactions contemplated by the Authority Resolution, the
Authority Agreements, the Preliminary Official Statement and the Official Statement. When
executed and delivered by their respective parties, the Authority Agreements (assuming due
authorization, execution and delivery by and enforceability against the other parties thereto) will
be in full force and effect and each will constitute legal, valid and binding agreements or
obligations of the Authority, enforceable in accordance with their respective terms, except as
enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws or equitable principles relating to or limiting creditors rights generally, the
application of equitable principles, the exercise of judicial discretion and the limitations on legal
remedies against public entities in the State.
(d) At the time of the Authority's acceptance hereof and at all times subsequent
thereto up to and including the time of the Closing, the information and statements in the Official
Statement do not and will not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(e) As of the date hereof, there is no action, suit, proceeding or investigation before
or by any court, public board or body pending against the Authority or, to the best knowledge of
the Authority, threatened, wherein an unfavorable decision, ruling or finding would: (i) affect the
creation, organization, existence or powers of the Authority, or the titles of its members or
officers; (ii) in any way question or affect the validity or enforceability of Authority Agreements,
or (iii) in any way question or affect the Purchase Contract or the transactions contemplated by
the Purchase Contract, the Official Statement, or any other agreement or instrument to which
the Authority is a party relating to the Bonds.
(f)
There is no consent, approval, authorization or other order of, or filing or
registration with, or certification by, any regulatory authority having jurisdiction over the Authority
required for the execution and delivery of this Purchase Contract or the consummation by the
Authority of the other transactions contemplated by the Official Statement or the Authority
Agreements.
(g) Any certificate signed by any official of the Authority authorized to do so shall be
deemed a representation and warranty by the Authority to the Underwriter as to the statements
made therein.
(h) Except as previously disclosed to the Underwriter, the Authority is not in default,
and at no time has the Authority defaulted in any material respect, on any bond, note or other
obligation for borrowed money or any agreement under which any such obligation is or was
outstanding.
(i)
(1) Except as disclosed in the Official Statement or otherwise disclosed in writing
to the Underwriter, there has not been any materially adverse change in the financial condition
of the Authority since June 30, 2006 and there has been no occurrence, circumstance or
combination thereof which is reasonably expected to result in any such materially adverse
change.
(2) ,  
If any event occurs of which the Authority has knowledge between the
date of this Purchase Contract and the date of the Closing that might or would cause the
Official Statement, as then supplemented or amended, to contain an untrue statement of
a material fact or to omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances under which
they were made, not misleading, the Authority shall notify the Underwriter and, if in the
opinion of the Underwriter, such event requires the preparation and publication of a
supplement or amendment to the Official Statement, the Authority will cooperate with the
Underwriter in causing the Official Statement to be amended or supplemented in a form
and in a manner approved by the Underwriter. All expenses thereby incurred will be
paid by the Authority, and the Underwriter will file, or cause to be filed, the amended or
supplemented Official Statement with a nationally recognized securities information
repository.
(3) After the Closing, the Authority will not participate in the issuance of any
amendment of or supplement to the Official Statement to which, after being furnished
with a copy, the Underwriter reasonably objects in writing or which is disapproved by
Underwriter's Counsel. If any event relating to or affecting the Authority occurs as a
result of which it is necessary, in the opinion of the Underwriter, to amend or supplement
-4-
the Official Statement in order to make the Official Statement not misleading in the light
of the circumstances existing at the time it is delivered to a purchaser, the Authority will
use its best efforts to assist the Underwriter in preparing (at the expense of the Authority
for 90 days after the date of the Closing, and thereafter at the expense of the
Underwriter) a reasonable number of copies of an amendment of or supplement to the
Official Statement (in form and substance satisfactory to the Underwriter) which will
amend or supplement the Official Statement so that it will not contain an untrue
statement of a material fact or omit to state a material fact necessary in order to make
the statements therein, in the light of the circumstances existing at the time the Official
Statement is delivered to a purchaser, not misleading. For the purposes of this
subsection, the Authority will furnish such information with respect to itself as the
Underwriter may from time to time reasonably request.
0)  
Except as disclosed in the Official Statement or otherwise disclosed in writing to
the Underwriter, the Authority has not previously failed to comply in all material respects with
any undertakings under Rule 15c2-12.
Section 6. Representations, Warranties and Covenants of the City. The City
hereby represents, warrants and agrees with the Underwriter that:
(a) The city council (the "City Council") of the City has taken official action by
Resolution (the "City Resolution") adopted by a majority of the members of the City Council at
meetings duly called, noticed and conducted, at which a quorum was present and acting
throughout, authorizing the execution, delivery and due performance of the Indenture, the
Escrow Agreement, the Third Amendment to Lease and this Purchase Agreement (collectively,
the "City Agreements") and the Official Statement and the taking of any and all such action as
may be required on the part of the City to carry out, give effect to and consummate the
transactions contemplated hereby.
(b) The City is a municipal corporation duly organized and existing under the laws of
the State of California (the "State") and has all necessary power and authority to adopt the City
Resolution, to enter into and perform its duties under the City Agreements and, when executed
and delivered by the respective parties thereto, the City Agreements will each constitute legal,
valid and binding obligation of the City enforceable in accordance with its respective terms.
(c) By all necessary official action, the City has duly adopted the City Resolution,
has duly authorized the preparation and delivery of the Preliminary Official Statement and the
preparation, execution and delivery of the Official Statement, has duly authorized and approved
the execution and delivery of, and the performance of its obligations under, the City
Agreements, and the consummation by it of all other transactions contemplated by the City
Resolution, the City Agreements, the Preliminary Official Statement and the Official Statement.
When executed and delivered by their respective parties, the City Agreements (assuming due
authorization, execution and delivery by and enforceability against the other parties thereto) will
be in full force and effect and each will constitute legal, valid and binding agreements or
obligations of the City, enforceable in accordance with their respective terms, except as
enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws or equitable principles relating to or limiting creditors rights generally, the
application of equitable principles, the exercise of judicial discretion and the limitations on legal
remedies against public entities in the State.
(d) At the time of the City's acceptance hereof and at all times subsequent thereto up
to and including the time of the Closing, the information and statements in the Official Statement
do not and will not contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(e) As of the date hereof, there is no action, suit, proceeding or investigation before
or by any court, public board or body pending against the City or, to the best knowledge of the
City, threatened, wherein an unfavorable decision, ruling or finding would: (i) affect the creation,
organization, existence or powers of the City, or the titles of its members or officers; (ii) in any
way question or affect the validity or enforceability of City Agreements, or (iii) in any way
question or affect the Purchase Contract or the transactions contemplated by the Purchase
Contract, the Official Statement, or any other agreement or instrument to which the City is a
party relating to the Bonds.
(f)
There is no consent, approval, authorization or other order of, or filing or
registration with, or certification by, any regulatory authority having jurisdiction over the City
required for the execution and delivery of this Purchase Contract or the consummation by the
City of the other transactions contemplated by the Official Statement or the City Agreements.
(g) Any certificate signed by any official of the City authorized to do so shall be
deemed a representation and warranty by the City to the Underwriter as to the statements made
therein.
(h) Except as previously disclosed to the Underwriter, the City is not in default, and
at no time has the City defaulted in any material respect, on any bond, note or other obligation
for borrowed money or any agreement under which any such obligation is or was outstanding.
(i) (1) Except as disclosed in the Official Statement or otherwise disclosed in writing
to the Underwriter, there has not been any materially adverse change in the financial condition
of the City since June 30, 2006 and there has been no occurrence, circumstance or combination
thereof which is reasonably expected to result in any such materially adverse change.
(2) If any event occurs of which the City has knowledge between the date of this
Purchase Contract and the date of the Closing that might or would cause the Official
Statement, as then supplemented or amended, to contain an untrue statement of a
material fact or to omit to state a material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances under which they were
made, not misleading, the City shall notify the Underwriter and, if in the opinion of the
Underwriter, such event requires the preparation and publication of a supplement or
amendment to the Official Statement, the City will cooperate with the Underwriter in
causing the Official Statement to be amended or supplemented in a form and in a
manner approved by the Underwriter. All expenses thereby incurred will be paid by the
City, and the Underwriter will file, or cause to be filed, the amended or supplemented
Official Statement with a nationally recognized securities information repository.
(3) After the Closing, the City will not participate in the issuance of any
amendment of or supplement to the Official Statement to which, after being furnished
with a copy, the Underwriter reasonably objects in writing or which is disapproved by
Underwriter's Counsel. If any event relating to or affecting the City occurs as a result of
which it is necessary, in the opinion of the Underwriter, to amend or supplement the
Official Statement in order to make the Official Statement not misleading in the light of
the circumstances existing at the time it is delivered to a purchaser, the City will use its
best efforts to assist the Underwriter in preparing (at the expense of the City for 90 days
after the date of the Closing, and thereafter at the expense of the Underwriter) a
reasonable number of copies of an amendment of or supplement to the Official
Statement (in form and substance satisfactory to the Underwriter) which will amend or
supplement the Official Statement so that it will not contain an untrue statement of a
material fact or omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances existing at the time the Official Statement is
delivered to a purchaser, not misleading. For the purposes of this subsection, the City
will furnish such information with respect to itself as the Underwriter may from time to
time reasonably request.
Q)
 
Except as disclosed in the Official Statement or otherwise disclosed in writing to
the Underwriter, the City has not previously failed to comply in all material respects with any
undertakings under Rule 15c2-12.
Section 7.  The Closing.  (a)  At 8:00 A.M., San Francisco time, on
 , 2006, or on such earlier or later time or date as may be agreed upon
by the Underwriter, the Authority and the City (the "Closing"), the Authority shall deliver or cause
to be delivered to the Underwriter, at a location or locations to be designated by the Underwriter
in New York, New York, the duly executed Bonds (delivered through the book-entry system of
The Depository Trust Company). Prior to the Closing, the Authority shall deliver, at the offices
of Bond Counsel in San Francisco, California, or such other place as are mutually agreed upon
by the Underwriter and the Authority, the other documents described in this Purchase Contract.
On the date of the Closing, the Underwriter shall pay the purchase price of the Bonds as set
forth in Section 1 of this Purchase Contract in immediately available funds to the order of the
Trustee.
(b) The Bonds shall be issued in fully registered form and shall be prepared and
delivered as one Bond for each maturity registered in the name of a nominee of The Depository
Trust Company ("DTC"). It is anticipated that CUSIP identification numbers will be inserted on
the Bonds, but neither the failure to provide such numbers nor any error with respect thereto
shall constitute a cause for failure or refusal by the Underwriter to accept delivery of the Bonds
in accordance with the terms of this Purchase Contract.
Section 8. Conditions to Underwriter's Obligations. The Underwriter has entered
into this Purchase Contract in reliance upon the representations and warranties of the Authority
and the City contained herein and to be contained in the documents and instruments to be
delivered on the date of the Closing, and upon the performance by the Authority and the City of
their respective obligations to be performed hereunder and under such documents and
instruments to be delivered at or prior to the date of the Closing. The Underwriter's obligations
under this Purchase Contract are and shall also be subject to the following conditions:
(a) The representations and warranties of the Authority and the City contained in this
Agreement shall be true and correct in all material respects on the date of this Purchase
Contract and on and as of the date of the Closing as if made on the date of the Closing;
(b) As of the date of the Closing, the Official Statement may not have been
amended, modified or supplemented, except in any case as may have been agreed to by the
Underwriter;
(c) (i) As of the date of the Closing, the Authority Resolution, the City Resolution, the
Authority Agreements and the City Agreements shall be in full force and effect, and shall not
have been amended, modified or supplemented, except as may have been agreed to by the
City and Underwriter, (ii) the Authority shall perform or have performed all of its obligations
required under or specified in the Authority Resolution, the Authority Agreements and this
Purchase Contract to be performed at or prior to the date of the Closing; and (iii) the City shall
perform or have performed all of its obligations required under or specified in the City
Resolution, the City Agreements and this Purchase Contract to be performed at or prior to the
date of the Closing;
(d) As of the date of the Closing, all necessary official action of the Authority relating
to the Authority Agreements, the Authority Resolution and the Official Statement, and all
necessary official action of the City relating to the City Agreements, the City Resolution, and the
Official Statement, shall have been taken and shall be in full force and effect and shall not have
been amended, modified or supplemented in any material respect;
(e) Subsequent to the date of this Purchase Contract, up to and including the date of
the Closing, there shall not have occurred any change in or particularly affecting the Authority,
the City, or the City's Water System, as these matters are described in the Official Statement,
which in the reasonable professional judgment of the Underwriter materially impairs the
investment quality of the Bonds;
As of or prior to the date of the Closing, the Underwriter shall have received each
of the following documents:
(1) Certified copies of the Authority Resolution and the City Resolution.
(2) Duly executed copies of the Indenture, the Escrow Agreement, the Third
Amendment to Lease, the Continuing Disclosure Certificate and this Purchase
Agreement.
(3) The Bond Insurance Policy executed on behalf of the Bond Insurer by its
duly authorized officer.
(4) The Preliminary Official Statement and the Official Statement, with the
Official Statement duly executed on behalf of the Authority and the City.
(5) An approving opinion of Bond Counsel, dated as of the Closing, as to the
validity of the Bonds and the exclusion of interest on the Bonds from federal gross
income and State income taxation, addressed to the Authority and the City substantially
in the form attached as an appendix to the Official Statement, and a reliance letter with
respect thereto addressed to the Underwriter.
(6)  A supplemental opinion of Bond Counsel, addressed to the Underwriter,
to the effect that:
(i)
The Purchase Contract has been duly executed and delivered by
the Authority and the City and is valid and binding upon the Authority and the
City, subject to laws relating to bankruptcy, insolvency, reorganization or
creditors' rights generally and to the application of equitable principles;
(ii) The Bonds are exempt from registration pursuant to the Securities
Act of 1933, as amended (the "Securities Act"), and the Indenture is exempt from
qualification pursuant to the Trust Indenture Act of 1939, as amended; and
(iii) The statements contained in the Official Statement on the cover
and under the headings "INTRODUCTION," "THE 2006 BONDS," "SECURITY
FOR THE 2006 BONDS" and "TAX MATTERS," and in "APPENDIX A —
Summary of Certain Provisions of the Indenture" and "APPENDIX E — Form of
Opinion of Bond Counsel," insofar as such statements purport to describe certain
provisions of the Bonds, or to state legal conclusions and the opinion of Bond
Counsel regarding the tax-exempt nature of the Bonds, present a fair and
accurate summary of the provisions thereof.
(7)  The opinion of Jones Hall, as Disclosure Counsel, addressed to the
Authority, the City and the Underwriter, to the effect that, based upon the information
made available to them in the course of their participation in the preparation of the
Official Statement and without passing on and without assuming any responsibility for
the accuracy, completeness and fairness of the statements in the Official Statement, and
having made no independent investigation or verification thereof, no facts have come to
their attention that lead them to believe that, as of the date of the Closing, the Official
Statement (except for the appendices thereto, any financial or statistical data or
forecasts, numbers, charts, estimates, projections, assumptions or expressions of
opinion, information about the Bond Insurer or its Bond Insurance Policy, or any
information about The Depository Trust Company or its book-entry only system, as to
which no opinion or view need be expressed) contains any untrue statement of a
material fact or omits to state any material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances under which they were
made, not misleading.
(8)  An opinion of the City Attorney, dated as of the Closing addressed to the
Authority, the City and the Underwriter, in form and substance acceptable to the
Underwriter, to the effect that:
(i)  The City is a municipal corporation organized and validly existing
under the laws of the State of California with full legal right, power and authority
to perform all of its obligations under this Purchase Contract, and the City
Agreements (as defined in the Bond Purchase Contract). The City has duly
authorized, executed and delivered the City Agreements and the other
documents relating to the Bonds to which it is a party, and assuming due
authorization, execution and delivery by the other parties thereto, as necessary,
the City Agreements constitute legal, valid and binding agreements of the City
enforceable against the City in accordance with their terms, except as the
enforceability thereof may be limited by bankruptcy, moratorium, insolvency,
equitable remedies and other laws affecting creditors' rights or remedies.
(ii) To the best of the City Attorney's knowledge, there is no action, suit or
proceeding before or by any court, public board or body pending or threatened
wherein an unfavorable decision, ruling or finding would (a) affect the creation,
organization, existence or powers of the City or the titles of its officers to their
respective offices, (b) in any way question or affect the validity or enforceability of
the City Agreements, (c) find illegal, invalid or unenforceable the City
Agreements or the transactions contemplated thereby, or any other agreement or
instrument related to the issuance of the Bonds to which the City is a party, or (d)
have a material adverse effect on the making of Debt Service payments from the
Net Revenues pledged to secure the Bonds under the Indenture.
(iii) The execution and delivery of the City Agreements and the other
instruments contemplated by any of such documents to which the City is a party,
and compliance with the provisions of each thereof, will not conflict with or
constitute a breach of or default under any applicable law or administrative rule
or regulation of the State of California, the United States or any department,
division, aaency or instrumentality of either thereof, or any applicable court or
administrative decree or order or any loan agreement, note, resolution, indenture,
contract, agreement or other instrument to which the City is a party or is
otherwise subject or bound in a manner which would materially adversely affect
the City's performance under the City Agreements.
(iv) All approvals, consents, authorizations, elections and orders of or
filings or registrations with any governmental authority, board, agency or
commission having jurisdiction which would constitute a condition precedent to,
or the absence of which would materially adversely affect, the performance by
the City of its obligations under the City Agreements have been obtained and are
in full force and effect.
(v)The Authority is a joint exercise of powers authority organized and
validly existing under the laws of the State of California with full legal right, power
and authority to perform all of its obligations under this Purchase Contract and
the Authority Agreements (as defined in the Bond Purchase Contract). The
Authority has duly authorized, executed and delivered the Official Statement (as
defined in the Bond Purchase Contract), the Authority Agreements and the other
documents relating to the Bonds to which it is a party, and assuming due
authorization, execution and delivery by the other parties thereto, as necessary,
the Authority Agreements constitute legal, valid and binding agreements of the
Authority enforceable against the Authority in accordance with their terms, except
as the enforceability thereof may be limited by bankruptcy, moratorium,
insolvency, equitable remedies and other laws affecting creditors' rights or
remedies.
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(vi) The execution and delivery by the Authority of the Authority
Agreements, the Official Statement and the other instruments contemplated by
any of such documents to which the Authority is a party, and compliance with the
provisions of each thereof, will not conflict with or constitute a breach of or default
under any applicable law or administrative rule or regulation of the State of
California, the United States or any department, division, agency or
instrumentality of either thereof, or any applicable court or administrative decree
or order or any loan agreement, note, resolution, indenture, contract, agreement
or other instrument to which the Authority is a party or is otherwise subject or
bound in a manner which would materially adversely affect the Authority's
performance under the Authority Agreements.
(vii) To the best of the City Attorney's knowledge, there is no action, suit
or proceeding before or by any court, public board or body pending or threatened
wherein an unfavorable decision, ruling or finding would (a) affect the creation,
organization, existence or powers of the Authority or the titles of its officers to
their respective offices, (b) in any way question or affect the validity or
enforceability of the Authority Agreements, or (c) find illegal, invalid or
unenforceable the Authority Agreements or the transactions contemplated
thereby, or any other agreement or instrument related to the issuance of the
Bonds to which the Authority is a party.
(viii) All approvals, consents, authorizations, elections and orders of or
filings or registrations with any governmental authority, board, agency or
commission having jurisdiction which would constitute a condition precedent to,
or the absence of which would materially adversely affect, the performance by
the Authority of its obligations under the Authority Agreements have been
obtained and are in full force and effect.
(ix) The Authority has duly and validly adopted the current ordinance
setting water rates for the Water Enterprise in accordance with all applicable laws
and regulations.
(9) An executed certificate of the Authority and the City, dated as of the date of
the Preliminary Official Statement, in the form attached as Exhibit B.
(10) An executed closing certificate of the Authority, dated as of the Closing, in
the form attached as Exhibit C.
(11) An executed closing certificate of the City, dated as of the Closing, in the
form attached as Exhibit D.
(12) The opinion of counsel of the Trustee, dated as of the Closing, addressed
to the Authority, the City and the Underwriter to the effect that:
(i) 
The Trustee is a national banking association duly organized,
validly existing and in good standing under the laws of the State, having full
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powers and authority and being qualified to enter into, accept and administer the
trust created under the Indenture and to enter into the Indenture.
(ii) The performance by the Trustee of the duties required under the
Indenture and the Escrow Agreement have been duly authorized by all
necessary corporate action on the part of the Trustee, and under present law do
not contravene any law or government regulation or order presently binding on
the Trustee or contravene any law or governmental regulation or order presently
binding on the Trustee or the articles of association/articles of
incorporation/charter, as applicable, or the bylaws of the Trustee or contravene
any provision of or constitute a default under any indenture, contract or other
instrument to which the Trustee is a party or by which the Trustee is bound;
(iii) The Indenture and the Escrow Agreement have been duly
authorized, executed and delivered by the Trustee, and, assuming due
authorization, execution and delivery by the other parties thereto, the Indenture
constitutes a legal, valid and binding agreement of the Trustee enforceable in
accordance with its terms, subject to laws relating in bankruptcy, insolvency or
other laws affecting the enforcement of creditors' rights generally and the
application of equitable principles if equitable remedies are sought.
(13) A certificate or certificates, dated as of the Closing, in form and substance
acceptable to the Underwriter, of an authorized officer of officers of the Trustee to the
effect that the Trustee has accepted the duties imposed by the Indenture and the
Escrow Agreement and is authorized to carry out such duties.
(14) An Arbitrage Certificate duly signed on behalf of the Authority.
(15) Evidence of required filings with the California Debt and Investment
Advisory Commission.
(16) A copy of the executed Blanket Issuer Letter of Representations by and
between the City and DTC relating to the book-entry system.
(17) Such additional legal opinions, certificates, proceedings, instruments and
other documents as the Underwriter or Bond Counsel may reasonably request to
evidence compliance by the Authority and the City with legal requirements, the truth and
accuracy, as of the date of the Closing, of the representations of the Authority and the
City herein contained and of the Official Statement and the due performance or
satisfaction by the Authority and the City at or prior to such time of all agreements then
to be performed and all conditions then to be satisfied by the Authority and the City.
All of the opinions, letters, certificates, instruments and other documents mentioned in
this rurchase Contract shall be deemed to be in compliance with the provisions of this
Purchase Contract if, but only if, they are in form and substance satisfactory to the Underwriter.
If the Authority and the City are unable to satisfy the conditions to the obligations of the
Underwriter to purchase, to accept delivery of and to pay for the Bonds contained in this
Purchase Contract or if the obligations of the Underwriter to purchase, to accept delivery of and
to pay for the Bonds shall be terminated for any reason permitted by this Purchase Contract,
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this Purchase Contract shall terminate and neither the Underwriter, the Authority nor the City
shall be under further obligations hereunder, except that the respective obligations of the
Authority, the City and the Underwriter set forth in Section 11 of this Purchase Contract shall
continue in full force and effect.
Section 9. Conditions to Authority's and City's Obligations. The performance by
the Authority and the City of their respective obligations under this Purchase Agreement are
conditioned upon: (i) the performance by the Underwriter of its obligations hereunder and (ii)
receipt by the Authority and the City of opinions addressed to the Authority and the City, and
receipt by the Underwriter of opinions addressed to the Underwriter, and the delivery of
certificates being delivered on the date of the Closing by persons and entities other than the
Authority and the City.
Section 10. Termination Events. The Underwriter shall have the right to terminate the
Underwriter's obligations under this Purchase Contract to purchase, to accept delivery of and to
pay for the Bonds by notifying the Authority and the City of its election to do so if, after the
execution hereof and prior to the Closing, any of the following events occurs:
(1) the marketability of the Bonds or the market price thereof, in the opinion of the
Underwriter, has been materially and adversely affected by any decision issued by a
court of the United States (including the United States Tax Court) or of the State of
California, by any ruling or regulation (final, temporary or proposed) issued by or on
behalf of the Department of the Treasury of the United States, the Internal Revenue
Service, or other governmental agency of the United States, or any governmental
agency of the State of California, or by a tentative decision or announcement by any
member of the House Ways and Means Committee, the Senate Finance Committee, or
the Conference Committee with respect to contemplated legislation or by legislation
enacted by, pending in, or favorably reported to either the House of Representatives or
either House of the Legislature of the State of California, or formally proposed to the
Congress of the United States by the President of the United States or to the Legislature
of the State of California by the Governor of the State of California in an executive
communication, affecting the tax status of the Authority or the City, its property or
income, its bonds (including the Bonds) or the interest thereon or any tax exemption
granted or authorized by the Internal Revenue Code of 1986, as amended;
(2) the United States becomes engaged in hostilities that result in a declaration of
war or a national emergency, or any other outbreak of hostilities occurs, or a local,
national or international calamity or crisis occurs, financial or otherwise, the effect of
such outbreak, calamity or crisis being such as, in the reasonable opinion of the
Underwriter, would affect materially and adversely the ability of the Underwriter to
market the Bonds;
(3) there occurs a general suspension of trading on the New York Stock
Exchange or the declaration of a general banking moratorium by the United States, New
York State or California State authorities;
(4)a stop order, ruling, regulation or official statement by, or on behalf of, the
Securities and Exchange Commission is issued or made to the effect that the issuance,
offering or sale of the Bonds is or would be in violation of any provision of the Securities
-13-
Act of 1933, as then in effect, or of the Securities Exchange Act of 1934, as then in
effect, or of the Trust Indenture Act of 1939, as then in effect;
(5) legislation is enacted by the House of Representatives or the Senate of the
Congress of the United States of America, or a decision by a court of the United States
of America is rendered, or a ruling or regulation by or on behalf of the Securities and
Exchange Commission or other governmental agency having jurisdiction of the subject
matter is made or proposed to the effect that the Bonds are not exempt from registration,
qualification or other similar requirements of the Securities Act of 1933, as then in effect,
or of the Trust Indenture Act of 1939, as then in effect;
(6) in the reasonable judgment of the Underwriter, the market price of the Bonds,
or the market price generally of obligations of the general character of the Bonds, might
be materially and adversely affected because additional material restrictions not in force
as of the date hereof is imposed upon trading in securities generally by any
governmental authority or by any national securities exchange;
(7) the Comptroller of the Currency, The New York Stock Exchange, or other
national securities exchange, or any governmental authority, imposes, as to the Bonds
or obligations of the general character of the Bonds, any material restrictions not now in
force, or increase materially those now in force, with respect to the extension of credit
by, or the charge to the net capital requirements of, or financial responsibility
requirements of the Underwriter;
(8) a general banking moratorium is established by federal, New York or State
authorities;
(9) any legislation, ordinance, rule or regulation is introduced in or be enacted by
any governmental body, department or agency in the State or a decision of a court of
competent jurisdiction within the State is rendered, which, in the opinion of the
Underwriter, after consultation with the Authority and the City, materially adversely
affects the market price of the Bonds;
(10) any federal or California court, authority or regulatory body takes action
materially and adversely affecting the collection of Revenues under the Indenture; or
(11) an event occurs which in the opinion of the Underwriter requires a
supplement or amendment to the Official Statement.
Section 11. Payment of Expenses. (a) The Underwriter shall be under no obligation
to pay, and the City shall pay the following expenses incident to the performance of the
Authority's and the City's obligations hereunder:
(i) the fees and disbursements of Bond Counsel and Disclosure Counsel;
(ii) the cost of printing and delivering the Bonds, the Preliminary Official
Statement and the Official Statement (and any amendment or supplement prepared
pursuant to Section 4 of this Purchase Contract);
-14-
(iii) the fees and disbursements of accountants, advisers and of any other
experts or consultants retained by the Authority or the City; and
(iv) any other expenses and costs of the Authority and the City incident to the
performance of their respective obligations in connection with the authorization, issuance
and sale of the Bonds, including out-of-pocket expenses and regulatory expenses, and
any other expenses agreed to by the parties.
(b) The Underwriter shall pay all expenses incurred by it in connection with the public
offering and distribution of the Bonds including, but not limited to:
(i) all advertising expenses in connection with the offering of the Bonds; and
(ii) all out-of-pocket disbursements and expenses incurred by the Underwriter in
connection with the offering and distribution of the Bonds, except as provided in (a)
above or as otherwise agreed to by the Underwriter and the City.
Section 12. Notices. Any notice or other communication to be given to the Authority or
the City under this Purchase Contract may be given by delivering the same in writing to the
Authority and the City at the addresses set forth on the first page of this Purchase Contract, and
any notice or other communication to be given to the Underwriter under this Purchase Contract
may be given by delivering the same in writing to E. J. De La Rosa & Co., Inc., 90 New
Montgomery Street, Suite 414, San Francisco, California 94105.
Section 13. Survival of Representations, Warranties, Agreements. All of the
Authority's and the City's representations, warranties and agreements contained in this
Purchase Contract shall remain operative and in full force and effect regardless of: (a) any
investigations made by or on behalf of the Underwriter; or (b) delivery of and payment for the
Bonds pursuant to this Purchase Contract. The agreements contained in this Section and in
Section 11 shall survive any termination of this Purchase Contract.
Section 14. Benefit; No Assignment. This Purchase Contract is made solely for the
benefit of the Authority, the City and the Underwriter (including its successors and assigns), and
no other person shall acquire or have any right hereunder or by virtue hereof. The rights and
obligations created by this Purchase Contract are not subject to assignment by the Underwriter,
the Authority or the City without the prior written consent of the other parties hereto.
Section 15. Severability. In the event that any provision of this Purchase Contract is
held invalid or unenforceable by any court of competent jurisdiction, such holding shall not
invalidate or render unenforceable any other provision of this Purchase Contract.
Section 16. Counterparts. This Purchase Contract may be executed in any number of
counterparts, all of which taken together shall constitute one agreement, and any of the parties
hereto may execute the Purchase Contract by signing any such counterpart.
-15-
Section 17. Effectiveness. This Purchase Contract shall become effective upon the
execution of the acceptance hereof by an authorized officer of the Authority and the City, and
shall be valid and enforceable as of the time of such acceptance.
Very truly yours,
E. J. DE LA ROSA & CO., INC.
By:  
Managing Director
Accepted:
CITY OF INDIO
By:  
Finance Director
INDIO WATER AUTHORITY
By:  
Treasurer
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EXHIBIT A
MATURITY SCHEDULE
Principal
Payment Date
(April 1)  Principal  Coupon  Yield  Price
Exhibit A-1
EXHIBIT B
INDIO WATER AUTHORITY
2006 Water Revenue Bonds
15c2-12 CERTIFICATE
The undersigned hereby certifies and represents that he or she is the duly appointed
and acting representative of the City of Indio (the "City") and the Indio Water Authority (the
"Authority"), and is duly authorized to execute and deliver this Certificate and further hereby
certifies and reconfirms on behalf of the City and the Authority as follows:
(1) This Certificate is delivered in connection with the offering and sale of the
bonds captioned above (the "Bonds") in order to enable the underwriter of the Bonds to
comply with Securities and Exchange Commission Rule 15c2-12 under the Securities
Exchange Act of 1934 (the "Rule").
(2) In connection with the offering and sale of the Bonds, there has been
prepared a Preliminary Official Statement, setting forth information concerning the
Bonds, the Authority, the City and the Authority's water system (the "Preliminary Official
Statement").
(3) As used herein, "Permitted Omissions" means the offering price(s),
interest rate(s), selling compensation, aggregate principal amount, principal amount per
maturity, delivery dates, ratings and other terms of the Bonds depending on such
matters, all with respect to the Bonds.
(4) The Preliminary Official Statement is, except for the Permitted Omissions,
deemed final within the meaning of Rule 15c2-12, and the information therein is accurate
and complete except for the Permitted Omissions.
Dated:  2006.
CITY OF INDIO
B •
Finance Director
INDIO WATER AUTHORITY
By:  
Treasurer
Exhibit B-1
EXHIBIT C
INDIO WATER AUTHORITY
2006 Water Revenue Bonds
CLOSING CERTIFICATE OF THE AUTHORITY
The undersigned hereby certifies and represents that he or she is the duly appointed
and acting representative of the Indio Water Authority (the "Authority"), and is duly authorized to
execute and deliver this Certificate and further hereby certifies and reconfirms on behalf of the
Authority as follows:
(i) The representations, warranties and covenants of the Authority contained in
the Bond Purchase Contract dated as of  , 2006, by and among the
Authority, the City of Indio and E. J. De La Rosa & Co., Inc. (the "Purchase Contract"),
are true and correct and in all material respects on and as of the date of the Closing with
the same effect as if made on the date of the Closing.
(ii) The Authority Resolution is in full force and effect at the date of the Closing
and has not been amended, modified or supplemented, except as agreed to by the
Authority and the Underwriter.
(iii) The Authority has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied on or prior to the date of the Closing.
(iv) Subsequent to the date of the Official Statement and on or prior to the date of
such certificate, there has been no material adverse change in the condition (financial or
otherwise) of the authority, the City or the Water Enterprise, whether or not arising in the
ordinary course of the operations of the Authority, as described in the Official Statement.
(v) The Official Statement does not contain any untrue or misleading statement of
a material fact and does not omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they are made, not
misleading.
Capitalized terms used but not defined herein have the meanings given in the Purchase
Contract.
Dated:  , 2006.
INDIO WATER AUTHORITY
By:  
Treasurer
Exhibit C-1
EXHIBIT D
INDIO WATER AUTHORITY
2006 Water Revenue Bonds
CLOSING CERTIFICATE OF THE CITY
The undersigned hereby certifies and represents that he or she is the duly appointed
and acting representative of the City of Indio (the "City"), and is duly authbrized to execute and
deliver this Certificate and further hereby certifies and reconfirms on behalf of the City as
follows:
(i) The representations, warranties and covenants of the City contained in the
Bond Purchase Contract dated as of  , 2006, by and among the City,
the Indio Water Authority and E. J. De La Rosa & Co., Inc. (the "Purchase Contract") are
true and correct and in all material respects on and as of the date of the Closing with the
same effect as if made on the date of the Closing.
(ii) The City Resolution is in full force and effect at the date of the Closing and
has not been amended, modified or supplemented, except as agreed to by the City and
the Underwriter.
(iii) The City has complied with all the agreements and satisfied all the conditions
on its part to be performed or satisfied on or prior to the date of the Closing.
(iv) Subsequent to the date of the Official Statement and on or prior to the date of
such certificate, there has been no material adverse change in the condition (financial or
otherwise) of the City or the Water Enterprise, whether or not arising in the ordinary
course of operations, as described in the Official Statement.
(v) The Official Statement does not contain any untrue or misleading statement of
a material fact and does not omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they are made, not
misleading.
Capitalized terms used but not defined herein have the meanings given in the Purchase
Contract.
Dated:  , 2006.
CITY OF INDIO
By:  
City Manager
Exhibit D-1
Alf 1 ALFIMLN I r
JONES HALL,
A PROFESSIONAL LAW CORPORATION
AGREEMENT FOR LEGAL SERVICES
THIS AGREEMENT FOR LEGAL SERVICES is made and entered into this 18th day of
September, 2006, by and between the INDIO WATER AUTHORITY, Indio, California (the
"Client"), and JONES HALL, A PROFESSIONAL LAW CORPORATION, San Francisco,
California (the "Attorneys") and when, when fully executed, creates an attorney-client
relationship.
WITNESSETH:
WHEREAS, the Client intends to issue water revenue bonds under Article 4 of Chapter
5 of Division 7 of Title 1 of the Government Code of the State of California for the purpose of
financing and refinancing capital improvements of the Authority's water system; and
WHEREAS, the Client has determined that the Attorneys are specially trained and
experienced to provide bond counsel and disclosure counsel services for the issuance of the
Bonds and the Attorneys are willing to provide such services;
WHEREAS, the public interest, economy and general welfare will be served by this
Agreement for Legal Services;
NOW, THEREFORE, IT IS HEREBY AGREED, as follows:
1.  Duties of Attorneys. The Attorneys shall provide legal services in connection
with the Proceedings and the Bonds, which shall include the following:
a. Confer and consult with the Client's officers, administrative staff and
consultants on matters relating to the issuance of the Bonds.
b. Attend meetings of the Client, including Commission meetings and any
administrative meetings at which the Bonds are to be discussed and deemed necessary
by the Attorneys for the proper planning of the proceedings for issuing the Bonds or
when specifically requested by the Client to attend.
c. Prepare any required resolutions, ordinances, notices, instructions and
other legal documents necessary for the issuance of the Bonds.
d. Review legal issues relating to the structure of the Bonds.
e. Subject to the completion of Proceedings to the satisfaction of the
Attorneys, provide the opinion of the Attorneys (the "Bond Opinion") regarding the
validity and binding effect of the Bonds, the source of payment and security for the
Bonds, and the excludability of interest on the Bonds from gross income for federal and
California state income tax purposes.
f. Prepare and coordinate the delivery of the Bonds upon payment therefor
(the "Closing") including all required certificates, opinions, statement, forms and
documents required to evidence the issuance of the Bonds and permit the issuance of
the Bond Opinion (referenced below).
g.
Prepare and provide a complete transcript of the conduct of the
Proceedings necessary to accompany issuance of the Bonds.
h. Attend all meetings of the Client and any administrative meetings at
which the Official Statement is to be discussed, deemed necessary by Attorneys for the
proper exercise of their due diligence with respect to the Official Statement, or when
specifically requested by the Client to attend.
i. In connection with the sale of the Bonds: (i) prepare and review, without
undertaking an independent investigation, an official statement or other disclosure
document for the Bonds; (ii) draft or prepare the continuing certificate or undertaking of
the Client; (iii) prepare and review official notice of sale documents and arrange for
publication of such documents for the Bonds, if the Bonds will be sold through a
competitive sale; and (iv) prepare and review a bond purchase agreement to be entered
into between the client and an underwriter, if the Bonds will be sold through a negotiated
sale.
j. Subject to the completion of proceedings to the satisfaction of Attorneys,
provide a letter of Attorneys addressed to the underwriter and the Client that, although
Attorneys have not undertaken to determine independently or assume any responsibility
for the accuracy, completeness or fairness of the statements contained in the Official
Statement, in the course of Attorneys' participation in the preparation of the Official
Statement, Attorneys have been in contact with representatives of the Client and others,
concerning the contents of the Official Statement and related matters and, based upon
the foregoing, nothing has come to Attorneys' attention to lead Attorneys to believe that
the Official Statement (except for any financial or statistical data or forecasts, numbers,
charts, estimates, assumptions or expressions of opinion included therein, information
relating to The Depository Trust Company and its book-entry system, and information
relating to a bond insurer or credit enhancer, if any, as to which Attorneys need express
no view) as of the date of the Official Statement or the date of the closing contains any
untrue statement of a material fact or omits to state any material fact necessary in order
to make the statements therein, in the light of the circumstances under which they were
made, not misleading.
2.  Compensation.
a.  For the Bond Counsel services set forth under Section 1 (a) through (g)
above, the Attorneys shall be paid as follows for each series of Bonds:
(1) 2% of the principal amount of the Bonds to a principal amount of
$1,000,000 (with a minimum fee of $25,000 in the event of issuance of a
principal amount of less than $1,000,000); plus
(ii) 0.5% of the principal amount of the Bonds in excess of
$1,000,000, but less than or equal to $5,000,000; plus
2
(iv) 0.25% of the principal amount of the Bonds in excess
$5,000,000, but less than or equal to $10,000,000; plus
(v) One-eighth percent (1/8%) of the principal amount of the Bonds in
excess of $10,000,000.
b.  For the Disclosure Counsel services under Section 1 (h) through (j)
above, the flat fee of $40,000.
In addition, Attorneys shall be reimbursed for any costs advanced by Attorneys on
behalf of the Client, including shipping, delivery and courier service, photocopying, official
transcript duplication and travel expenses for travel outside of California, if any, but specifically
excluding travel expense within the state of California; however, such reimbursement shall not
exceed $2,500.
Payment of such fees and expenses shall be entirely contingent, shall be due and
payable upon the delivery of the Bonds and shall be payable solely from the proceeds of the
Bonds and from no other funds of the Client. Payment shall be made upon the date of the
Closing, but not later than 30 days thereafter.
 
3.  Exceptions. The following are excepted from the services to be performed by
the Attorneys under this Agreement:
a. Any services rendered in any litigation, including any validation
proceedings deemed necessary by Attorneys) involving the Client or the Proceedings
relating to the Bonds.
b. Advice and preparation of documentation regarding compliance with
Section 148 of the Internal Revenue Code of 1986, relating to arbitrage limitations and
rebate provisions.
c. Advice and services for all applicable federal securities laws and
continuing disclosure.
d. The preparation of proceedings regarding increases in or adjustments to
the Authority's water rate structure.
Any advice of a substantial nature regarding the servicing of the Bonds.
Such services which Attorneys are willing to render for the Client shall be the subject of
separate agreement by and between the Client and Attorneys.
 
4.  Termination of Agreement. This Agreement for Legal Services may be
terminated at any time by the Client, with or without cause, upon 30 days' written notice to
Attorneys at any time before the Closing. In the event of such termination, all finished and
unfinished documents shall, at the option of the Client, become its property and shall be
delivered by Attorneys. Unless previously terminated, the relationship between the Attorneys
and the Client created by this Agreement shall terminate upon the Closing. Questions about
the Bonds or the assessments that may arise after Closing may be addressed to the Attorneys
and handled on a case by case basis, with fees, if any, to be determined as appropriate at that
time.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date in the first
paragraph above.
CLIENT:
INDIO WATER AUTHORITY
By:  
Title:
ATTORNEYS:
JONES HALL, Professional Law
Corporation
By  
Title:
4
ATTACHMENT G
42901-u1  J9 ACH hit  AGENDA DRAFT 09/13/06
2004BONDS
ESCROW DEPOSIT AND TRUST AGREEMENT
by and among the
INDIO WATER AUTHORITY,
CITY OF INDIO
and
UNION BANK OF CALIFORNIA, N.A.,
as Escrow Bank
Dated as of October 1, 2006
Relating to:
$12,000,000
Indio Water Authority
Water Enterprise Revenue Bonds,
2004Series
TABLE OF CONTENTS
Page
Section 1.  Federal Securities.  1
Section 2.  Appointment of Escrow Bank.  2
Section 3.  Establishment of 2004 Bonds Escrow Fund.  2
Section 4.  Deposit of Funds.  2
Section 5.  Application of Deposit.  2
Section 6.  Instructions as to Application of Deposit, Call and Redemption of 2004 Bonds.  2
Section 7.  Application of Certain Terms of 2004 Bonds Indenture.  3
Section 8.  Remaining Funds.  3
Section 9.  Compensation to Escrow Bank  3
Section 10.  Liabilities and Obligations of Escrow Bank.  3
Section 11.  Amendment.  4
Section 12.  Partial Invalidity  5
Section 13.  Execution in Counterparts.  5
Section 14.  Governing Law.  5
Exhibit A  Schedule of Federal Securities  A-1
Exhibit B  Schedule of 2004 Bonds Debt Service  B-1
Exhibit C  Notice of Deposit  C-1
2004BONDS ESCROW DEPOSIT AND TRUST AGREEMENT
This 2004 BONDS ESCROW DEPOSIT AND TRUST AGREEMENT is dated as of
October 1, 2006 (this "Agreement"), by and between the INDIO WATER AUTHORITY (the
"Authority"), the CITY OF INDIO (the "City") and UNION BANK OF CALIFORNIA, N.A., a
national banking association organized and existing under the laws of the United States of
America, as escrow holder hereunder (the "Escrow Bank") and as trustee with respect to the
hereinafter described 2004 Bonds (hereinafter referred to in such respect as the "2004 Bonds
Trustee"):
WITNESSETH:
WHEREAS, the City leased the City's water system to the Authority pursuant to that
certain Lease, dated as of May 22, 2001 (as amended pursuant to the First Amendment to
Lease, dated as of September 17, 2001, the Second Amendment to Lease, dated as of
October 15, 2001, and the Third Amendment to Lease, dated as of October 1, 2006, and as
amended, the "Lease"), by and between the Authority and the City; and
WHEREAS, to refinance a Promissory Note, dated November 1, 2001, in the original
principal amount of $5,000,000, issued for the purpose of making a lease payment in
connection with the Lease and to finance certain capital improvements to the water system, the
Authority issued its Indio Water Authority Water Enterprise Revenue Bonds, 2004 Series (the
"2004 Bonds") in the aggregate principal amount of $12,000,000, pursuant to the Indenture of
Trust, dated as of July 1, 2004, by and among the Authority, the City and the Escrow Bank, as
2004 Bonds Trustee; and
WHEREAS, to refund and defease the 2004 Bonds and to finance additional capital
improvements to the water system, the Authority has determined to issue its Indio Water
Authority 2006 Water Revenue Bonds (the "2006 Bonds") in the aggregate principal amount of
 pursuant to an Indenture of Trust dated as of October 1, 2006, by and
among the Authority, the City and the Escrow Bank, as trustee (the "Trustee"); and
WHEREAS, the Escrow Bank has full powers to act with respect to the irrevocable
escrow and trust created herein and to perform the duties and obligations to be undertaken
pursuant to this Agreement;
NOW, THEREFORE, in consideration of the above premises and of the mutual promises
and covenants herein contained and for other valuable consideration, the parties hereto do
hereby agree as follows:
Section 1. Federal Securities. Federal Securities (as defined in Section 5 hereof)
means the United States Treasury Securities deposited in the 2004 Bonds Escrow Fund
pursuant to the provisions of this Agreement, which Federal Securities are "Federal Securities"
within the meaning of such term in Section 10.01 and Section 10.03 of the 2004Bonds
Indenture.
Section 2. Appointment of Escrow Bank. The Authority hereby appoints the Escrow
Bank, as escrow holder for all purposes of this Agreement and in accordance with the terms and
provisions of this Agreement, and the Escrow Bank hereby accepts such appointment.
Section 3. Establishment of 2004 Bonds Escrow Fund. The Escrow Bank agrees to
establish and maintain a special trust account designated the "2004 Bonds Escrow Fund,"
which shall be held by the Escrow Bank, as a segregated fund separate and distinct from all
other funds and accounts held by the Escrow Bank, in trust as security for the payment of the
principal of and redemption premium and interest on the 2004 Bonds.
Section 4. Deposit of Funds. Concurrently with the issuance and delivery of the 2006
Bonds, the Authority shall transfer to the Escrow Bank for deposit into the 2004 Bonds Escrow
Fund in immediately available funds from the proceeds of the 2006 Bonds the amount of
 . In addition, the Authority hereby directs the Escrow Bank, as the 2004
Bonds Trustee, to transfer (concurrently with the foregoing transfer) in immediately available
funds from the Bond Fund established by the 2004 Bonds Indenture (the "2004 Bonds Bond
Fund") to the 2004 Bonds Escrow Fund the amount of $  and from the Reserve
Account established by the 2004 Bonds Indenture (the "2004 Bonds Reserve Account") to the
2004 Bonds Escrow Fund the amount of $  
Section 5. Application of Deposit. The total amount of $  
deposited in the 2004 Bonds Escrow Fund pursuant to Section 4 hereof, shall be invested in the
federal securities described in Exhibit A, attached hereto and hereby made a part hereof (the
"Federal Securities"), except that $  shall be held uninvested as cash and the Authority and
the City warrant that the amount deposited in the 2004 Bonds Escrow Fund shall be sufficient
for such purposes. The Authority hereby directs the Escrow Bank to acquire the Federal
Securities for deposit in the 2004 Bonds Escrow Fund.
After the Escrow Bank shall have paid or have made provision for payment of all
principal of and interest and redemption premiums on the 2004 Bonds as provided in Section 6
hereof, the Escrow Bank shall promptly transfer to the Trustee any surplus amounts remaining
in the 2004 Bonds Escrow Fund to be used by the Trustee solely to pay debt service on the
2006 Bonds.
Section 6. Instructions as to Application of Deposit, Call and Redemption of 2004
Bonds. The total amount of Federal Securities and cash held in the 2004 Bonds Escrow Fund
pursuant to Section 5 hereof shall be deemed to be and shall constitute the deposit permitted to
be made by the Authority to pay in full the 2004 Bonds pursuant to Section 10.01 and Section
10.03 of the 2004 Bonds Indenture. In accordance with said Section 10.01, the Authority
hereby irrevocably directs and instructs the Escrow Bank to apply the maturing amounts of the
Federal Securities and cash to pay all principal and interest due and payable on the 2004 Bonds
to and including April 1, 2014, and to pay on April 1, 2014, all principal, interest and redemption
premium due and payable upon call and redemption of the 2004 Bonds maturing on or after
April 1, 2015, prior to maturity on April 1, 2014, the date of early redemption of such 2004
Bonds, all as more particularly set forth in Exhibit B, attached hereto and hereby made a part
hereof. For such purpose of call and redemption prior to maturity, the Authority instructs the
Escrow Bank, as the 2004 Bonds Trustee, and the Escrow Bank, as the 2004 Bonds Trustee,
shall give notice of redemption of the 2004 Bonds, such notice of redemption to be given timely
for redemption of such 2004 Bonds on April 1, 2014, in accordance with the further applicable
provisions of the 2004 Bonds Indenture. This Agreement shall constitute the Written Certificate
and Written Request of the Authority required by Section 10.03 of the 2004 Bonds Indenture.
In addition, the Authority hereby irrevocably instructs the Escrow Bank, as Dissemination
Agent under the Continuing Disclosure Agreement, dated as of July 1, 2004, relating to the
2004 Bonds, to mail, as soon as practicable, a notice to the Municipal Securities Rulemaking
Board of the defeasance of the 2004 Bonds. A form of such "Notice of Defeasance" is attached
hereto as Exhibit C and hereby made a part hereof.
 , certified public accountants, has confirmed, in its report to the
Authority and certain other parties to the proceedings, dated October  , 2006, that the deposit
in the 2004 Bonds Escrow Fund of such Federal Securities, together with interest to accrue
thereon, will be fully sufficient to pay all principal and interest due and payable on the 2004
Bonds to and including April 1, 2014, and to pay on April 1, 2014, all principal, interest and
redemption premium due and payable upon call and redemption of the 2004 Bonds maturing on
or after April 1, 2015, prior to maturity on April 1, 2014, the date of early redemption of such
2004 Bonds.
Section 7. Application of Certain Terms of 2004 Bonds Indenture. All of the terms of the
2004 Bonds Indenture relating to the call and prepayment of the 2004 Bonds prior to maturity
and to the making of payments of principal, interest and early redemption premiums on the 2004
Bonds, as applicable, are incorporated in this Agreement as if set forth in full herein. The
provisions of the 2004 Bonds Indenture relating to the resignation and removal of the 2004
Bonds Trustee are also incorporated in this Agreement as if set forth in full herein and shall be
the procedure to be followed with respect to any resignation or removal of the Escrow Bank
hereunder.
Section 8. Remaining Funds.The Escrow Bank, as 2004 Bonds Trustee, shall transfer
any other amounts remaining in the funds and accounts established by the 2004 Bonds
Indenture, when available, to the Trustee to pay debt service on the 2006 Bonds.
Section 9. Compensation to Escrow Bank. The Authority shall pay or cause the
Authority to pay the Escrow Bank full compensation for its duties under this Agreement,
including out-of-pocket costs such as publication costs, redemption costs and expenses, legal
fees and expenses, which fees and expenses shall include the allocated costs and
disbursements of in-house counsel (to the extent such counsel's services are not redundant of
services provided by external counsel to Escrow Bank) and other costs and expenses relating
hereto and, in addition, fees, costs and expenses relating to the purchase of any Federal
Securities after the date hereof, pursuant to separate agreement between the Authority and the
Escrow Bank. Such compensation shall not affect the right of Escrow Bank, as Trustee for the
2004 Bonds, to compensation for its duties (including but not limited to, exchanges and
transfers of 2004 Bonds), under the 2004 Bonds Indenture. Under no circumstances shall
amounts deposited in the 2004 Bonds Escrow Fund be deemed to be available for said
purposes prior to the payment in full of all of the principal of, interest and early prepayment
premiums on the 2004Bonds in accordance with Section 6 hereof.
Section 10. Liabilities and Obligations of Escrow Bank. The Escrow Bank shall have no
obligation to make any payment or disbursement of any type or incur any financial liability in the
performance of its duties under this Agreement unless the Authority shall have deposited
sufficient funds with the Escrow Bank. The Escrow Bank may rely and shall be protected in
acting upon the written instructions of the Authority or its agents relating to any matter or action
as Escrow Bank under this Agreement. The Escrow Bank shall not be required to act upon any
oral instructions, but may request that such instruction be given in writing.
The Authority covenants to indemnify and hold harmless the Escrow Bank against any
loss, liability or expense, including legal fees and expenses, which fees and expenses shall
include the allocated costs and disbursements of in-house counsel (to the extent such counsel's
services are not redundant of services provided by external counsel to Escrow Bank) in
connection with the performance of any of its duties hereunder, except the Escrow Bank shall
not be indemnified against any loss, liability or expense resulting from its negligence or willful
misconduct. Such indemnification shall survive the termination and discharge of this Agreement
or the removal or resignation of the Escrow Bank.
The Escrow Bank undertakes only such duties as are expressly and specifically set forth
in this Agreement and no implied duties or obligations shall be read into this Agreement against
the Escrow Bank. The Escrow Bank shall not be responsible for any of the recitals or
representations made herein other than that the Escrow Bank is qualified to accept and
administer the trusts created hereunder. The Escrow Bank shall not be liable for the accuracy
of any calculations provided as to the sufficiency of the moneys deposited with it to pay the
principal of, interest and early prepayment premiums on the 2004 Bonds. The Escrow Bank
shall not have any liability hereunder except to the extent of its own negligence or willful
misconduct.  In no event shall the Escrow Bank be liable for any special indirect or
consequential damages. The Escrow Bank may consult with counsel of its own choice and the
opinion of such counsel shall be full and complete authorization to take or suffer any action in
accordance with such opinion of counsel.
Except as otherwise provided in this Agreement, whenever in the administration of this
Agreement the Escrow Bank shall deem it necessary or desirable that a matter be proved or
established prior to taking or suffering any action hereunder, such matter (unless other evidence
in respect thereof be herein specifically prescribed) may, in the absence of negligence or willful
misconduct on the part of the Escrow Bank, be deemed to be conclusively proved and
established by a certificate of any authorized representative of the Authority, and such certificate
shall, in the absence of negligence or willful misconduct on the part of the Escrow Bank, be full
warrant to the Escrow Bank for any action taken or suffered by it under the provisions of this
Agreement upon the faith thereof. The Escrow Bank may conclusively rely, as to the truth and
accuracy of the statements and correctness of the opinions and the calculations provided, and
shall be protected and indemnified, in acting or refraining from acting, upon any written notice,
instruction, request, certificate, document or opinion furnished to the Escrow Bank signed or
presented by the proper party, and it need not investigate any fact or matter stated in such
notice, instruction, request, certificate or opinion.
Any company into which the Escrow Bank may be merged or converted or with which it
may be consolidated or any company resulting from any merger, conversion or consolidation to
which it shall be a party or any company to which the Escrow Bank may sell or transfer all or
substantially all of its corporate trust business shall be the successor to the Escrow Bank
without the execution or filing of any paper or further act, anything herein to the contrary
notwithstanding.
The Escrow Bank shall have no liability or responsibility for any loss resulting from any
investment made in accordance with the provisions of this Escrow Agreement.
Section 11. Amendment. This Agreement may be amended by the parties hereto if
such amendment shall be for the purpose of curing or correcting any ambiguous or defective
provision hereof, but only, in either case, if there first shall have been filed with the Escrow Bank
a written opinion of bond counsel stating that such amendment will not cause interest on the
2004 Bonds or the 2006 Bonds to become includable in gross income for federal tax purposes.
Section 12. Partial Invalidity. If any Section, paragraph, sentence, clause or phrase of
this Agreement shall for any reason be held illegal, invalid or unenforceable, such holding shall
not affect the validity of the remaining portions of this Agreement. The Authority and the Escrow
Bank hereby declare that they would have entered into this Agreement and each and every
other Section, paragraph, sentence, clause or phrase hereof would have been authorized
irrespective of the fact that any one or more Sections, paragraphs, sentences, clauses, or
phrases of this Agreement may be held illegal, invalid or unenforceable.
Section 13. Execution in Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall constitute but one and the
same instrument.
Section 14. Governing Law. This Escrow Agreement shall be governed by and
construed in accordance with the laws of the State of California.
IN WITNESS WHEREOF, the Authority, and the Escrow Bank have each caused this
Agreement to be executed by their duly authorized officers all as of the date first above written.
INDIO WATER AUTHORITY
Executive Director
CITY OF INDIO
Mayor
UNION BANK OF CALIFORNIA, N.A.,
as Escrow Bank
By:  
Authorized Officer
EXHIBIT A
SCHEDULE OF FEDERAL SECURITIES
Type of  Maturity  Par
Security  Date  Amount
 
Rate
[To Come]
A-1
EXHIBIT B
SCHEDULE OF 2004 BONDS DEBT SERVICE
Period  Principal  Redemption
Ending  Principal  Interest  Redeemed  Premium  Total
[To Come]
B-1
EXHIBIT C
NOTICE OF DEFEASANCE
Relating to:
$12,000,000
Indio Water Authority
Water Enterprise Revenue Bonds,
2004Series
WHEREAS, the Indio Water Authority (the "Authority") has previously issued its Indio
Water Authority Water Enterprise Revenue Bonds, 2004 Series, in the aggregate principal
amount of $12,000,000 (the "2004 Bonds") pursuant to an Indenture of Trust (the "2004 Bonds
Indenture"), dated as of July 1, 2004, by and between the Authority and Union Bank of
California, N.A., is successor trustee under the 2004 Bonds Indenture (the "Trustee");
NOTICE IS HEREBY GIVEN that the Authority has determined to issue its
 aggregate principal amount of Indio Water Authority 2006 Water
Revenue Bonds for the purpose, among other things, of providing funds to permit the Authority
to make a deposit with the Trustee, as escrow bank, sufficient to pay when due principal and
interest on the 2004 Bonds maturing to and including April 1, 2014, and to redeem and pay in
full on April 1, 2014, the principal of and redemption premium on all of the 2004 Bonds maturing
on or after April 1, 2015, and moneys will be available for such payment on such dates of
maturity and redemption as required by the provisions of the 2004 Bonds Indenture.
Dated: October , 2006
Union Bank of California, N.A., as Trustee
C-1