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This Preliminary Official Statement and the information contained herein are subject to completion or amendment. Under no circumstance shall this Preliminary Official Statement constitute an
offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such jurisdiction
PRELIMINARY OFFICIAL STATEMENT DATED APRIL 30, 2026
NEW ISSUE — BOOK-ENTRY-ONLY
RATINGS: See “Ratings” herein.
In the opinion of Special Counsel, assuming the accuracy of certain representations and certifications and the continuing compliance with certain
tax covenants, under existing statutes, regulations, rulings and court decisions, the portion of each Purchase Payment made by the City pursuant
to the Purchase Agreement and denominated as and comprising interest pursuant to the Purchase Agreement and received by the owners of the
Obligations (the “Interest Portion”) is excludable from gross income for federal income tax purposes. Further, the Interest Portion is not an item
of tax preference for purposes of the alternative minimum tax imposed on individuals, but in the case of the alternative minimum tax imposed by
Section 55(b)(2) of the Internal Revenue Code of 1986, as amended (the “Code”), on applicable corporations (as defined in Section 59(k) of the
Code), the Interest Portion will not be excluded from the determination of adjusted financial statement income. Special Counsel is further of the
opinion that the Interest Portion is exempt from income taxation under the laws of the State of Arizona so long as the Interest Portion is excludable
from gross income for federal tax income purposes. See “TAX EXEMPTION” herein for a description of certain other federal tax consequences
of ownership of the Obligations.
$206,425,000*
UTILITY SYSTEMS REVENUE REFUNDING OBLIGATIONS, SERIES 2026
Evidencing Proportionate Interests of the Holders Thereof in
Installment Payments of the Purchase Price to be Paid by
CITY OF MESA, ARIZONA,
Pursuant to an Installment Purchase Agreement,
Dated as of June 1, 2026*
Dated: Date of Initial Delivery
Due: July 1, as shown on inside front cover page
The Utility Systems Revenue Refunding Obligations, Series 2026 (the “Obligations”), are being executed and delivered pursuant to a Trust
Agreement, to be dated as of June 1, 2026*, between the City of Mesa, Arizona (the “City”), and UMB Bank n.a., as trustee (the “Trustee”). The
Obligations will be initially issued in book-entry-only, registered form in the name of Cede & Co., as nominee of The Depository Trust Company
(“DTC”). Beneficial interests in the Obligations will be offered for sale in the amount of $5,000 of principal due on a specific maturity date and
integral multiples thereof. The Obligations are being executed and delivered for the purpose of (i) refunding the Bonds Being Refunded (as defined
herein) and (ii) paying the delivery costs of the Obligations. See “PLAN OF REFUNDING” and “SOURCES AND USES OF FUNDS.”
Interest on the Obligations will be payable semiannually on January 1 and July 1 of each year, commencing on July 1, 2026*, until maturity or
redemption prior to maturity, and principal of the Obligations will be payable in accordance with the maturity schedule set forth on the inside front
cover page hereof. So long as the Obligations are in book-entry-only form, principal of and interest on the Obligations will be paid by the Trustee
to DTC for credit to the accounts of the DTC participants and, in turn, to the accounts of the owners of beneficial interests in the Obligations (the
“Beneficial Owners”). See APPENDIX G – “Book-Entry-Only System.”
See Inside Front Cover Page for Maturity Schedule and Additional Information
Certain of the Obligations are subject to redemption prior to their stated maturity dates.* See “THE OBLIGATIONS – Redemption Provisions,”
herein.
The Obligations will evidence undivided proportionate interests of the Holders (as defined herein) thereof in the right to receive certain installments
of the Purchase Price (as defined herein) pursuant to the Installment Purchase Agreement, to be dated as of June 1, 2026* (the “Purchase
Agreement”), between the City and the Trustee in its capacity as seller. Principal and interest with respect to the Purchase Agreement, together
with principal and interest on outstanding Parity Obligations (as defined herein) and with principal and premium, if any, and interest on any
Additional Obligations (as defined in APPENDIX F – “Obligations Documents Summaries”) hereafter executed and delivered, will be payable
solely from the Pledged Revenues (as defined herein) derived by the City from the operation of the City’s water, electrical, natural gas, wastewater
and solid waste systems (collectively, the “System”); provided, however, that the Obligations will be junior in lien to the Bonds (as defined
herein) issued pursuant to the Master Bond Resolution (as defined herein). See “SECURITY FOR AND SOURCE OF PAYMENT OF THE
OBLIGATIONS” herein. The Obligations will not be general obligations of the City and will not constitute an indebtedness of the City
when computing its bonded indebtedness for purposes of debt limitations imposed by constitutional, Charter or statutory provisions, a
charge against the general credit limitations imposed by constitutional, Charter or statutory provisions or against the general credit or
taxing power of the City nor a liability of the City for payment of the Obligations other than from the sources described herein.
The scheduled payment of principal of and interest on the Obligations will be guaranteed under an insurance policy to be issued concurrently with
the delivery of the Obligations by [INSURER]. See “OBLIGATION INSURANCE” and “RISK FACTORS RELATED TO OBLIGATION
INSURANCE” herein.
[INS_LOGO]
The Obligations are offered when, as and if executed and delivered by the Trustee and received by the Underwriter (as defined herein), subject to
the approving opinion of Greenberg Traurig, LLP, Phoenix, Arizona, Special Counsel, as to validity and tax exemption. Certain legal matters will
be passed upon solely for the benefit of the Underwriter by Squire Patton Boggs (US) LLP, Phoenix, Arizona, counsel to the Underwriter. It is
expected that the Obligations will be available for delivery through the facilities of DTC on or about June 4, 2026.*
This cover page contains certain information with respect to the Obligations for convenience of reference only. It is not a summary of all material
information with respect to the Obligations. Investors are advised to read this entire Official Statement and all appendices to obtain information
essential to the making of an informed investment decision with respect to the Obligations.
BofA Securities
* Subject to change.
DRAFT V4
03-11-26
$206,425,000*
UTILITY SYSTEMS REVENUE REFUNDING OBLIGATIONS, SERIES 2026
Evidencing Proportionate Interests of the Holders Thereof in
Installment Payments of the Purchase Price to be Paid by
CITY OF MESA, ARIZONA,
Pursuant to an Installment Purchase Agreement,
Dated as of June 1, 2026*
MATURITY SCHEDULE*
Maturity
(July 1)
Principal
Amount
Interest
Rate
Yield
CUSIP® (a)
(Base No. 590545)
2026
$1,685,000
%
%
2027
140,000
2028
6,800,000
2029
7,100,000
2030
16,625,000
2031
41,190,000
2032
45,510,000
2033
1,130,000
2034
1,190,000
2035
1,270,000
2036
1,060,000
2037
66,500,000
2038
16,225,000
(a)
CUSIP® is a registered trademark of the American Bankers Association. CUSIP Global Services (“CGS”) is
managed on behalf of the American Bankers Association by FactSet Research Systems Inc. Copyright© 2026
CUSIP Global Services. All rights reserved. CUSIP® data herein is provided by CGS. This data is not intended
to create a database and does not serve in any way as a substitute for the CGS database. CUSIP® numbers are
provided for convenience of reference only. None of the City, Special Counsel, Municipal Advisor, Underwriter
(each as defined herein), or their agents or counsel assume responsibility for the accuracy of such numbers.
* Subject to change.
CITY OF MESA
CITY COUNCIL
Mark Freeman, Mayor
Scott Somers, Vice Mayor
Rich Adams, Councilmember
Jenn Duff, Councilmember
Alicia Goforth, Councilmember
Francisco Heredia, Councilmember
Dorean Taylor, Councilmember
CITY ADMINISTRATIVE OFFICERS
Scott Butler, City Manager
Michael Kennington, Deputy City Manager/Chief Financial Officer
Irma Ashworth, Finance Director
Mark Hute, City Treasurer
Holly Moseley, City Clerk
SPECIAL SERVICES
SPECIAL COUNSEL
Greenberg Traurig, LLP
Phoenix, Arizona
MUNICIPAL ADVISOR
Hilltop Securities Inc.
Phoenix, Arizona
TRUSTEE
UMB Bank, n.a.
Phoenix, Arizona
REGARDING THIS OFFICIAL STATEMENT
This Official Statement does not constitute an offering of any security other than the Obligations identified on the cover page
hereof. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, and there shall be no sale
of the Obligations by any person in any jurisdiction in which it is unlawful to make such offer, solicitation, or sale.
The information set forth herein has been provided by the City of Mesa, Arizona (the “City”), the Maricopa County Assessor’s,
Finance and Treasurer’s offices, the State of Arizona Department of Revenue, and other sources which are considered to be
reliable and customarily relied upon in the preparation of similar official statements, but such information is not guaranteed as
to accuracy or completeness and is not to be construed as the promise or guarantee of the City, Hilltop Securities Inc., the City’s
municipal advisor (the “Municipal Advisor”), or BofA Securities, Inc. (the “Underwriter”). The presentation of information,
including tables of utility revenues and expenses, is intended to show recent historical information and is not intended to indicate
future or continuing trends in the financial position or other affairs of the City. No person, including any broker, dealer, or
salesman, has been authorized to give any information or to make any representations other than those contained in this Official
Statement, and, if given or made, such other information or representations must not be relied upon as having been authorized
by the City. All estimates and assumptions contained herein have been based on the latest information available and are believed
to be reliable, but no representations are made that such estimates and assumptions are correct or will be realized. All beliefs,
assumptions, estimates, projections, forecasts and matters of opinion contained herein are forward looking statements which must
be read with an abundance of caution and which may not be realized or may not occur in the future. The information and any
expressions of opinion contained herein are subject to change without notice, and neither the delivery of this Official Statement
nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs
of the City or any of the other parties or matters described herein since the date hereof.
The Obligations will not be registered under the Securities Act of 1933 or the Securities Exchange Act of 1934, both as amended,
in reliance upon the exemptions provided thereunder by Sections 3(a)(2) and 3(a)(12), respectively, pertaining to the issuance
and sale of municipal securities, nor will the Obligations be qualified under the Securities Act of Arizona in reliance upon various
exemptions contained in such act. Neither the Securities and Exchange Commission (the “Commission”) nor any other federal,
state, or other governmental entity or agency will have passed upon the accuracy or adequacy of the Official Statement or
approved these series of securities for sale.
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 a part of, their 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.
The City, the Municipal Advisor, the Underwriter, counsel to the Underwriter and Special Counsel (as defined herein) are not
actuaries, nor have any of them performed any actuarial or other analysis of the City’s unfunded liabilities under the Arizona
State Retirement System, the Arizona Public Safety Personnel Retirement System, or the Elected Officials Retirement Plan.
The City will covenant to provide continuing disclosure as described in this Official Statement under “CONTINUING
SECONDARY MARKET DISCLOSURE” and in APPENDIX I – “Form of Continuing Disclosure Undertaking” pursuant to
Rule 15c2-12 promulgated by the Commission.
A wide variety of information, including financial information, concerning the City is available from publications and websites
of the City and others. Any such information that is inconsistent with the information set forth in this Official Statement should
be disregarded. No such information is a part of, or incorporated into, this Official Statement, except as expressly noted herein.
References to website addresses presented herein are for informational purposes only and may be in the form of a hyperlink
solely for the reader’s convenience. Unless specified otherwise, such websites and the information or links contained therein are
not incorporated into, and are not part of, this Official Statement for purposes of Rule 15c2-12 of the Commission.
THE UNDERWRITER MAY OFFER AND SELL THE OBLIGATIONS TO CERTAIN DEALERS, INSTITUTIONAL
INVESTORS AND OTHERS AT PRICES LOWER THAN THE PUBLIC OFFERING PRICES OR YIELDS STATED ON
THE INSIDE FRONT COVER PAGES HEREOF AND SUCH PUBLIC OFFERING PRICES MAY BE CHANGED FROM
TIME TO TIME BY THE UNDERWRITER.
[INS_LANGUAGE]
TABLE OF CONTENTS
INTRODUCTORY STATEMENT .............................................................................................................................................. 1
THE OBLIGATIONS .................................................................................................................................................................. 1
Authorization and Purpose ....................................................................................................................................................... 1
Other Expected Debt Offerings ................................................................................................................................................ 2
General Provisions ................................................................................................................................................................... 2
Redemption Provisions ............................................................................................................................................................ 2
Optional Redemption ........................................................................................................................................................... 2
Notice of Redemption ........................................................................................................................................................... 2
Effect of Call for Redemption ............................................................................................................................................... 3
Redemption of Less Than All of an Obligation .................................................................................................................... 3
SECURITY FOR AND SOURCES OF PAYMENT OF THE OBLIGATIONS ......................................................................... 3
Security for the Obligations; Obligations Junior to Bonds ....................................................................................................... 3
Source of Purchase Payments; Obligations Junior to Bonds .................................................................................................... 3
Obligation Rate Covenant ........................................................................................................................................................ 4
Debt Service Reserve Account: No Current Funding Requirement ......................................................................................... 5
Repair and Replacement Fund ................................................................................................................................................. 5
Outstanding Bonds ................................................................................................................................................................... 6
Additional Parity Bonds ........................................................................................................................................................... 6
Outstanding Parity Obligations ................................................................................................................................................ 7
Additional Obligations ............................................................................................................................................................. 7
Referendum and Ordinance ...................................................................................................................................................... 7
COMBINED SCHEDULES OF REVENUES AND DEBT SERVICE COVERAGE ................................................................ 8
OBLIGATION INSURANCE ..................................................................................................................................................... 9
RISK FACTORS RELATED TO OBLIGATION INSURANCE ............................................................................................... 9
RISK FACTORS ........................................................................................................................................................................ 10
PLAN OF REFUNDING ........................................................................................................................................................... 14
Bonds Being Refunded .......................................................................................................................................................... 15
VERIFICATION OF MATHEMATICAL COMPUTATIONS ................................................................................................. 16
SOURCES AND USES OF FUNDS ......................................................................................................................................... 16
ESTIMATED DEBT SERVICE REQUIREMENTS AND DEBT SERVICE COVERAGE .................................................... 17
RATINGS .................................................................................................................................................................................. 18
LEGAL MATTERS ................................................................................................................................................................... 18
TAX EXEMPTION .................................................................................................................................................................... 19
General ................................................................................................................................................................................... 19
Original Issue Premium and Original Issue Discount ............................................................................................................ 20
Changes in Federal and State Tax Law .................................................................................................................................. 20
Information Reporting and Backup Withholding ................................................................................................................... 20
UNDERWRITING ..................................................................................................................................................................... 21
LITIGATION ............................................................................................................................................................................. 21
No Litigation Relating to the Obligations .............................................................................................................................. 21
Other Litigation Against the City ........................................................................................................................................... 21
CERTIFICATION CONCERNING OFFICIAL STATEMENT ............................................................................................... 21
CONTINUING SECONDARY MARKET DISCLOSURE ...................................................................................................... 22
MUNICIPAL ADVISOR ........................................................................................................................................................... 23
GENERAL PURPOSE FINANCIAL STATEMENTS .............................................................................................................. 23
ADDITIONAL INFORMATION .............................................................................................................................................. 23
CONCLUDING STATEMENT ................................................................................................................................................. 23
APPENDIX A: City of Mesa, Arizona – General Economic and Demographic Information
APPENDIX B: City of Mesa, Arizona – Financial Data
APPENDIX C: City of Mesa, Arizona – Utility Systems Information
APPENDIX D: City of Mesa, Arizona – Audited General Purpose Financial Statements for the Fiscal Year Ended June 30,
2025
APPENDIX E: Summary of the Master Bond Resolution, As Amended
APPENDIX F: Obligations Documents Summaries
APPENDIX G: Book-Entry-Only System
APPENDIX H: Form of Approving Legal Opinion
APPENDIX I: Form of Continuing Disclosure Undertaking
APPENDIX J: Specimen Municipal Bond Insurance Policy
1
OFFICIAL STATEMENT
$206,425,000*
UTILITY SYSTEMS REVENUE REFUNDING OBLIGATIONS,
SERIES 2026
Evidencing Proportionate Interests of the Holders Thereof in
Installment Payments of the Purchase Price to be Paid by
CITY OF MESA, ARIZONA,
Pursuant to an Installment Purchase Agreement,
Dated as of June 1, 2026*
INTRODUCTORY STATEMENT
This Official Statement, which includes the cover page, inside front cover page and appendices hereto, has been prepared
by the City of Mesa, Arizona (the “City”), in connection with the original execution and delivery of $206,425,000* Utility
Systems Revenue Refunding Obligations, Series 2026 (the “Obligations”), evidencing proportionate interests of the
registered owners of each Obligation (the “Holders”), in certain installment payments (the “Purchase Payments” and
collectively, the “Purchase Price”) to be paid by the City pursuant to an Installment Purchase Agreement, to be dated June
1, 2026* (the “Purchase Agreement”), between UMB Bank, n.a. (the “Trustee”), in its capacity as seller, and the City.
The Obligations will be executed and delivered pursuant to a Trust Agreement, to be dated as of June 1, 2026* (the “Trust
Agreement”), between the City and the Trustee in its capacity as trustee thereunder. Certain information concerning the
authorization, purpose, terms, conditions of sale, security for and sources of payment of the Obligations is set forth in this
Official Statement.
All financial and other information presented in this Official Statement has been provided by the City from its records,
except for information expressly attributed to other sources. The presentation of information, including tables of receipts
from taxes and other sources, is intended to show recent historical information and is not intended to indicate future or
continuing trends in the financial position, results of operations, or other affairs of the City. No representation is made
that past experience, as shown by such financial or other information, will necessarily continue or be repeated in the
future.
Reference to provisions of Arizona law, whether codified in the Arizona Revised Statutes or uncodified, or the Arizona
Constitution, or the Charter of the City (the “Charter”) are references to those provisions in their current form. Those
provisions may be amended, repealed, or supplemented.
Certain words and terms used herein and not otherwise defined herein shall have the meanings ascribed to such words
and terms in APPENDIX E – “Summary of the Master Bond Resolution, As Amended – Definitions.” For certain
provisions of the Purchase Agreement and the Trust Agreement, see also APPENDIX F – “Obligations Documents
Summaries.”
As used in this Official Statement, “debt service” means principal of and interest on the obligations, “County” means
Maricopa County, Arizona, and “State” or “Arizona” means the State of Arizona.
THE OBLIGATIONS
Authorization and Purpose
The Trustee will be authorized to execute and deliver the Obligations pursuant to the provisions of the Trust Agreement
and Purchase Agreement, and a resolution adopted by the City Council of the City on April 6, 2026* (the “Resolution”).
The Obligations are being executed and delivered for the purpose of (i) refunding the Bonds Being Refunded (as defined
herein), and (ii) paying the delivery costs of the Obligations. See “PLAN OF REFUNDING” and “SOURCES AND
USES OF FUNDS” herein.
* Subject to change.
2
Other Expected Debt Offerings
In addition to the Obligations, the City expects to offer $168,100,000* Utility Systems Revenue Obligations, Series 2026A
(the “2026A Obligations”), and $153,735,000* Utility Systems Revenue Obligations, Series 2026B (the “2026B
Obligations”) pursuant to a separate official statement in June 2026. Additionally, the City expects to offer $56,275,000*
General Obligation Bonds, Series 2026 (the “2026 GO Bonds”) pursuant to a separate official statement in May 2026.
The 2026 GO Bonds will not be secured by Pledged Revenues (as defined herein).
General Provisions
The Obligations will be dated the date of initial delivery and will bear interest from such date payable initially on July 1,
2026* and semiannually thereafter on July 1 and January 1 of each year (each an “Interest Payment Date”) until maturity
or prior redemption. The Obligations will mature on the dates and in the principal amounts and will bear interest at the
rates set forth on the inside front cover page of this Official Statement.
Initially, the Obligations will be administered under a book-entry-only system (the “Book-Entry-Only System”) by The
Depository Trust Company (“DTC”), a registered securities depository. Unless and until the Book-Entry-Only System is
discontinued, the Obligations will be registered in the name of Cede & Co., as nominee of DTC. Beneficial interests in
the Obligations will be offered for sale in the amount of $5,000 of principal due on a specific maturity date and integral
multiples thereof, and payments of principal of, and interest on the Obligations will be paid by the Trustee to DTC and,
in turn, through participants in the DTC system. See APPENDIX G – “Book-Entry-Only System.”
SO LONG AS CEDE & CO., AS NOMINEE FOR DTC, IS THE REGISTERED OWNER OF THE OBLIGATIONS,
REFERENCES IN THIS OFFICIAL STATEMENT TO THE REGISTERED OWNERS OF THE OBLIGATIONS,
EXCEPT THOSE UNDER THE HEADING “TAX EXEMPTION” WILL MEAN CEDE & CO. AND WILL NOT
MEAN THE BENEFICIAL OWNERS OF THE OBLIGATIONS.
If the Book-Entry-Only System is discontinued, interest on the Obligations will be payable by check drawn on the Trustee
and mailed on or prior to each Interest Payment Date to the registered owners of the Obligations at the addresses shown
on the registration books of the Trustee (the “Obligation Register”) on the fifteenth (15th) day of the month preceding
each such Interest Payment Date (the “Record Date”). Principal of the Obligations will then be payable at maturity or
upon redemption prior to maturity upon presentation and surrender of the Obligations to the designated corporate trust
office of the Trustee. Additionally, if the Book-Entry-Only System is discontinued, payment of interest may also be made
by wire transfer upon twenty (20) days’ prior written request delivered to the Trustee specifying a wire transfer address
in the continental United States by any owner of at least $1,000,000 aggregate principal amount of the Obligations.
Interest will be computed on the basis of a year comprised of 360 days consisting of 12 months of 30 days each.
Redemption Provisions*
Optional Redemption
The Obligations maturing on or prior to July 1, 20__, will not be subject to call for redemption prior to maturity. The
Obligations maturing on or after July 1, 20__, will be subject to call for redemption prior to maturity, at the option of the
City, in whole or in part, on any date on or after July 1, 20__, in increments of $5,000 of principal amount due on a
specific maturity date, in any order of maturity, all as directed by the City, and by lot within a maturity by payment of the
redemption price equal to the principal amount of the Obligations called for redemption plus accrued interest, if any, on
the Obligations so redeemed from the most recent Interest Payment Date to the date of redemption, but without premium.
Notice of Redemption
So long as the Obligations are held under the Book-Entry-Only System, notices of redemption will be sent to DTC, in the
manner required by DTC. If the Book-Entry-Only System is discontinued, notice of redemption of any Obligation will
be mailed to the registered owner of the Obligation or Obligations being redeemed at the address shown on the Obligation
Register not more than sixty (60) nor less than thirty (30) days prior to the date set for redemption. Failure to properly
give notice of redemption shall not affect the redemption of any Obligation for which notice was properly given. Notice
of redemption may be sent to any securities depository by mail, facsimile transmission, wire transmission or any other
means of transmission of the notice generally accepted by the respective securities depository. Notice of any redemption
will also be sent to the Municipal Securities Rulemaking Board (the “MSRB”), currently through the MSRB’s Electronic
Municipal Market Access system (“EMMA”), in the manner required by the MSRB, but no defect in said further notice
3
or record nor any failure to give all or a portion of such further notice shall in any manner defeat the effectiveness of a
call for redemption if notice thereof is given as prescribed above.
If moneys for the payment of the redemption price and accrued interest are not on deposit with the Trustee to effect such
redemption, such redemption shall be conditional on such moneys being so held on or prior to the date set for redemption
and if not so held by such date the redemption shall be cancelled and be of no force and effect. The notice of redemption
shall describe the conditional nature of the redemption.
Effect of Call for Redemption
Notice of redemption having been given in the manner described above, the Obligations or portions thereof called for
redemption will become due and payable on the redemption date and if an amount of money sufficient to redeem all the
Obligations or portions thereof called for redemption is held in separate accounts by the Trustee, then the Obligations or
portions thereof called for redemption will cease to bear interest from and after such redemption date.
Redemption of Less Than All of an Obligation
The City may redeem an amount which is included in an Obligation in the denomination in excess of, but divisible by,
$5,000. Upon surrender of any Obligation redeemed in part only, the Trustee shall execute and deliver to the registered
owner thereof a new Obligation equal in principal amount to the unredeemed portion of the Obligation surrendered and
of the same maturity.
SECURITY FOR AND SOURCES OF PAYMENT OF THE OBLIGATIONS
Security for the Obligations; Obligations Junior to Bonds
For the amounts payable pursuant to the Purchase Agreement (including the Purchase Price), the Trustee, in its capacity
as seller, will sell and convey to the City, and the City will purchase from the Trustee the portion of the System (as defined
below) financed with the proceeds of the Bonds Being Refunded that remains unacquired and will be acquired pursuant
to the Purchase Agreement (the “Existing Projects”) with the proceeds of the Obligations.
The Obligations represent undivided proportionate interests of the Holders thereof in the right to receive the Purchase
Payments of the Purchase Price to be paid by the City pursuant to the Purchase Agreement, which includes amounts
sufficient to pay when due the principal of and interest on the Obligations. During the term of the Purchase Agreement,
the Purchase Payments will be required to be made regardless of damage to the Existing Projects or commercial frustration
of purpose, without right of set-off or counterclaim, regardless of any contingencies and whether or not the City possesses
or uses its water, electrical, natural gas, wastewater, and solid waste systems (collectively, the “System”). The obligations
of the City to make the Purchase Payments will continue until all of the Purchase Payments and all other amounts due
under the Purchase Agreement have been paid. No security interest will be held by the Trustee for the benefit of the
Holders of the Obligations in any portion of the Existing Projects or the System. Remedies available upon a failure of
the City to make the Purchase Payments when due will be limited and will not include acceleration of the Purchase
Payments or recourse to the Existing Projects or any portion of the System. For a description of events of default and
remedies under the Purchase Agreement, see APPENDIX F – “Obligations Documents Summaries – The Purchase
Agreement – Purchase Events of Default” and “– Remedies on Default by City.” For information concerning the System,
see APPENDIX C – “City of Mesa, Arizona – Utility Systems Information.”
Source of Purchase Payments; Obligations Junior to Bonds
The obligation of the City to make the Purchase Payments under the Purchase Agreement will be payable from and
secured by a junior lien on, pledge of, and security interest in the Pledged Revenues. “Pledged Revenues” are Revenues
of the System remaining after deducting Operating Expenses subject to certain additions or subtractions under certain
circumstances as provided in the Purchase Agreement. “Revenues,” when used with regard to the Obligations, Parity
Obligations (as defined herein) and Additional Obligations, are all income, moneys and receipts derived by the City from
the ownership, use and operation of the System including, without limitation, interest received on, and profits realized
from the sale of, investments made with moneys of the System, but excluding (i) any amounts received that the City is
contractually required to pay out as reimbursement for acquisition, construction or installation of the System, (ii) the
proceeds of the Obligations, Parity Obligations, or any Additional Obligations or the interest received on any proceeds of
Parity Obligations or Additional Obligations placed irrevocably in trust to pay, or provide for the payment of, any
Obligations, Parity Obligations, or Additional Obligations, or (iii) any non-cash capital contributions received by the City
for the use and operation of the System. “Operating Expenses,” when used with regard to the Obligations, Parity
4
Obligations, and Additional Obligations, are the reasonable and necessary costs of operation, maintenance and repair of
the System, including salaries, wages, cost of materials and supplies, insurance, and accumulations to cover periodic
payment of Operating Expenses and other expenditures purchased by the City at large, such as insurance, gasoline and
electrical energy, allocated to the System in the reasonable discretion of the City, but excluding (i) non-cash transactions,
including depreciation or loss on disposal or transfer of assets, (ii) principal and interest requirements on the Obligations,
Parity Obligations, and Additional Obligations, (iii) payments required to be made by the City for deposit into a debt
service reserve account with respect to the Obligations, Parity Obligations, or Additional Obligations, and (iv) any
payments required to be made to satisfy the rebate requirements of Section 148(f) of the Internal Revenue Code of 1986,
as amended (the “Code”), with respect to the Obligations, Parity Obligations, and Additional Obligations. So long as the
Bonds (as defined herein) are Outstanding under the Master Bond Resolution (each as defined herein), “Pledged
Revenues” are Net Revenues (as defined herein) less the payments made by the City pursuant to Section 10(B) of
the Master Bond Resolution to the Bond Fund, the Reserve Fund, the Reimbursement Fund and the Rebate Fund
(each as defined in the Master Bond Resolution). See APPENDIX E – “Summary of the Master Bond Resolution,
As Amended.”
Such lien on, pledge of and security interest in the Pledged Revenues is on a parity with the $610,650,000 principal
amount of Parity Obligations currently outstanding and will be on parity with any Additional Obligations subsequently
issued or incurred under separate documentation in accordance with the Purchase Agreement.
Pursuant to Resolution No. 6362 adopted by the City Council of the City on July 29, 1991, as thereafter supplemented
and amended (collectively, the “Master Bond Resolution”), the City has issued its Bonds (as defined in the Master Bond
Resolution, and such definition is inclusive of Parity Bonds the City may issue in the future) to be outstanding in the
aggregate principal amount of $771,697,065* after the refunding of the Bonds Being Refunded (as defined herein).
Pursuant to the Master Bond Resolution, so long as the Bonds are Outstanding under the Master Bond Resolution,
the City will apply certain revenues of the System first to pay debt service on the Bonds, reimburse Reserve Fund
Guarantors (as defined in the Master Bond Resolution) pertaining to the Bonds, if any, fund a Reserve Fund for
the Bonds, if then required, make payments to satisfy the rebate requirements of the Code with respect to the
Bonds, and fund a Replacement Fund (as described in the Master Bond Resolution), before and prior to making
any of the Purchase Payments.
The pledge of, lien on and security interest in the Pledged Revenues will be irrevocably made in the Purchase Agreement
and created for the prompt and punctual payment of the principal of and interest on the Obligations, the Parity Obligations,
and the Additional Obligations, according to their terms and to make other payments specified. None of the Obligations,
the Parity Obligations, or any of the Additional Obligations will be entitled to priority or distinction over any of the others
in the application of the Pledged Revenues, regardless of the issuance or incurrence of the Obligations, the Parity
Obligations, or any of the Additional Obligations in series or delivery of the Obligations, the Parity Obligations, or any
of the Additional Obligations prior to the delivery of the Obligations, the Parity Obligations, or any of the Additional
Obligations of that series or regardless of the time or times the Obligations, the Parity Obligations, or the Additional
Obligations mature or are called for redemption prior to maturity or otherwise. The Obligations, the Parity Obligations,
and the Additional Obligations will be co-equal as to the pledge of and lien on the Pledged Revenues for the payment
thereof and will share ratably, without preference, priority, or distinction, as to the source or method of payment or security
therefor. See APPENDIX F – “Obligations Documents Summaries.”
Neither the Obligations nor the obligations of the City pursuant to the Purchase Agreement constitute a debt or a pledge
of the full faith and credit of the City, the State, or any political subdivision thereof for constitutional, Charter or statutory
purposes. The Obligations do not obligate the City to levy or pledge any form of ad valorem or other taxes. The
Obligations are a limited, special obligation of the City secured solely by the Pledged Revenues and otherwise as provided
in the Resolution and the Purchase Agreement.
THE PROCEEDS OF THE OBLIGATIONS ARE NOT PLEDGED TO, NOR DO THEY SECURE, PAYMENT OF
THE OBLIGATIONS.
Obligation Rate Covenant
The City has covenanted and agreed in the Purchase Agreement to establish and maintain rates, fees and charges for all
services supplied by the System to provide Pledged Revenues fully sufficient, after making reasonable allowance for
* Subject to change.
5
contingencies and errors in estimates to produce (a) Pledged Revenues in each Fiscal Year (as defined herein) equal to at
least one hundred twenty percent (120%) of the Principal Requirement and the Interest Requirement on all Obligations,
Parity Obligations, and Additional Obligations then Outstanding for the corresponding Bond Year (treating any Variable
Interest Rate Obligations as bearing interest at the Assumed Interest Rate and treating any Obligations, Parity Obligations,
and Additional Obligations then Outstanding subject to mandatory redemption as maturing on their respective mandatory
redemption dates) and (b) Pledged Revenues for the then-current Fiscal Year that, net of the aggregate amounts required
to be deposited to the Obligation Fund during such Fiscal Year, will be sufficient to provide at least one hundred percent
(100%) of the amounts with regard to any Credit Facility due and owing in such Fiscal Year. Until the Bonds are no
longer Outstanding pursuant to the Master Bond Resolution, the City has covenanted and agreed in the Purchase
Agreement to establish and maintain rates, fees and charges for all services supplied by the System to provide (a)
Net Revenues in each Fiscal Year equal to at least one hundred twenty percent (120%) of the Principal
Requirement and the Interest Requirement on all Obligations, Parity Obligations, and Additional Obligations then
Outstanding, plus the principal and interest requirements on all Outstanding Bonds, for the corresponding Bond
Year (treating Variable Interest Rate Obligations or any future Parity Bonds issued as Variable Rate Obligations
(as defined in the Master Bond Resolution) as bearing interest at the Assumed Interest Rate and Obligations,
Parity Obligations, Additional Obligations and Bonds then Outstanding subject to mandatory redemption as
maturing on their respective mandatory redemption dates) and (b) an amount of Pledged Revenues for the then-
current Fiscal Year which, net of the aggregate amounts to be deposited to the Obligation Fund during such Fiscal
Year, will be sufficient to provide at least one hundred percent (100%) of the amounts with regard to any Credit
Facility due and owing in such Fiscal Year.
Debt Service Reserve Account: No Current Funding Requirement
The Trust Agreement establishes the Debt Service Reserve Account within the Obligation Fund for the benefit of the
Obligations, but not the Parity Obligations, or Additional Obligations that may be subsequently issued. The Purchase
Agreement provides that no deposit needs to be made to the Debt Service Reserve Account unless the Pledged Revenues
during any Fiscal Year are less than one hundred seventy five percent (175%) of the Principal Requirement and the Interest
Requirement on all Obligations, Parity Obligations, and Additional Obligations then Outstanding for the corresponding
Bond Year. In such event, the City will deposit, or cause to be deposited, within 180 days following the end of such
Fiscal Year, to the Debt Service Reserve Account moneys, investments, Qualified Reserve Fund Instruments, or any
combination thereof, equal to the Reserve Requirement. Also, on the tenth (10th) day of each month, commencing on the
first day of the month following a payment made on the Obligations from the Debt Service Reserve Account, the City
will deposit an amount equal to one-twelfth (1/12) of the amount which, when added to the balance then in the Debt
Service Reserve Account, equals the Reserve Requirement. The Trust Agreement provides that under certain
circumstances, the amounts in the Debt Service Reserve Account may be released and used by the City for any lawful
purpose. Until the Bonds are no longer Outstanding pursuant to the Master Bond Resolution, if Net Revenues
during any Fiscal Year of the City are less than one hundred seventy-five percent (175%) of the aggregate Principal
Requirement and Interest Requirement on all Obligations, Parity Obligations, and Additional Obligations then
Outstanding plus the principal and interest requirements on all Bonds then Outstanding for the corresponding
Bond Year, then the City will deposit, or cause to be deposited, within 180 days following the end of such Fiscal
Year, to the Debt Service Reserve Account, moneys, investments, Qualified Reserve Fund Instruments or any
combination thereof, equal to the Reserve Requirement.
See APPENDIX F – “Obligations Documents Summaries – the Trust Agreement – Debt Service Reserve Account.”
Repair and Replacement Fund
In accordance with the Purchase Agreement, the City previously established the Repair and Replacement Fund, which is
held by the City. Amounts in the Repair and Replacement Fund will be used (without priority) for: (i) making
extraordinary repairs or replacements to the System which are necessary to keep the System in operating condition and
for the making of which provision has not been made in the annual budget and money is not available as an Operating
Expense, (ii) making debt service payments on the Obligations, Parity Obligations, or Additional Obligations in the event
of a deficiency, (iii) the payment of any sums due and owing to the Holders of the Obligations, Parity Obligations, and
Additional Obligations being refunded which sums cannot for any reason be paid from the income and proceeds of any
Defeasance Obligations held by a Depository Trustee, (iv) the acquisition of water, electrical, natural gas, wastewater and
solid waste properties or facilities deemed necessary by the City to the efficient and economical operation of the System
6
or to extend or improve the System, and (v) otherwise acquiring, constructing and improving the System. The amount
required to fund the Repair and Replacement Fund is equal to two percent of the value of all tangible assets of the System
at the end of the preceding Fiscal Year (the “Repair and Replacement Fund Funding Requirement”). So long as the
Bonds are Outstanding, the City is not required to fund the Repair and Replacement Fund. See APPENDIX F –
“Obligations Documents Summaries – the Trust Agreement – The Purchase Agreement – Utilities; Operation and
Maintenance of the System in a Responsible Manner; Repair and Replacement Fund.”
Outstanding Bonds
As noted above, the City will have outstanding after the refunding of the Bonds Being Refunded $771,697,065* outstanding
principal amount of prior lien Bonds which were issued or incurred pursuant to the Master Bond Resolution and are
payable from and secured by a pledge of and a lien on Net Revenues (as defined in the Master Bond Resolution) which
is prior and senior to the claim of the Obligations, Parity Obligations, and any Additional Obligations issued in accordance
with the Purchase Agreement. The Obligations, Parity Obligations, and any Additional Obligations will be secured by a
pledge of and a lien on Pledged Revenues junior to the claim of the Bonds. For further information on the Bonds, see
APPENDIX B – “City of Mesa, Arizona – Financial Data.”
Additional Parity Bonds
The City presently does not intend to issue additional prior lien Parity Bonds (“Additional Parity Bonds”). However, the
City may issue Additional Parity Bonds in the future under the Master Bond Resolution in compliance with the following
requirements. Additional Parity Bonds may be issued on a parity with the Bonds only if the Net Revenues for the
completed Fiscal Year immediately preceding the issuance of the Additional Parity Bonds have been at least equal to one
hundred twenty percent (120%) of Maximum Annual Debt Service on all Bonds to be outstanding immediately after
issuance of such Additional Parity Bonds and said Net Revenues must also be sufficient to provide an amount of Net
Revenues for the then current Fiscal Year which, net of depreciation and the aggregate amounts required to be deposited
to the Bond Fund during such Fiscal Year, will be sufficient to provide at least one hundred percent (100%) of the City’s
Policy Costs due and owing in such Fiscal Year as shown by a certificate signed by the City’s Deputy City Manager/Chief
Financial Officer. For the purposes of this computation, additional amounts may be added to the Net Revenues of the
preceding Fiscal Year, as follows: (i) if all or part of the proceeds of the Bonds are to be expended for the acquisition of
existing water, wastewater, natural gas, electrical or solid waste (garbage and rubbish) properties for the System, there
may be added to the Net Revenues of such preceding Fiscal Year the net revenues derived from the operation of such
existing water, wastewater, natural gas, electrical or solid waste (garbage and rubbish) system properties during the
immediately preceding Fiscal Year as estimated by an engineer or engineering firm which shall have a wide and favorable
reputation in respect to such matters, and (ii) if during such preceding Fiscal Year, the City shall have increased its System
rates or charges, there may be added to the Net Revenues of such Fiscal Year the increased amount of Net Revenues
which would have been received from the operation of the System during such Fiscal Year had such increase been in
effect throughout such Fiscal Year, such increased amount of Net Revenues to be estimated by an engineer or engineering
firm which shall have a wide and favorable reputation in respect to such matters.
The City may issue Additional Parity Bonds in the future pursuant to existing voted bond authorizations and pursuant to
additional supplemental resolutions. They City may seek additional voter authorization in the future.
The City is authorized to issue $95,918,190 of Additional Parity Bonds, pursuant to voter approval given at special bond
elections held on March 29, 1994 and November 4, 2014. The purposes and amounts of such authorized but unissued
Additional Parity Bonds are set forth below.
Purpose of Utility Systems
Revenue Bond Authorization
1994
2014
Remaining Utility
Systems Revenue Bonds
Authorized But Unissued (a)
Gas System Improvements
$ -
$29,890,000
$29,890,000
Water System Improvements
-
34,780,402
34,780,402
Wastewater System Improvements
-
30,302,788
30,302,788
Electric System Improvements
-
-
-
Solid Waste System Improvements
945,000
-
945,000
$945,000
$94,973,190
$95,918,190
* Subject to change.
7
(a)
Utility Systems Revenue Bonds remaining authorized but unissued from the City’s March 29, 1994 special election
may, at the option of the City, be issued as either general obligation bonds or utility systems revenue bonds.
Outstanding Parity Obligations
The City currently has outstanding $610,650,000 aggregate principal amount comprised of the Utility Systems Revenue
Obligations, Series 2021, the Utility Systems Revenue Obligations, Series 2022A, the Utility Systems Revenue
Obligations, Taxable Series 2022B, the Utility Systems Revenue Refunding Obligations, Series 2022C, the Utility
Systems Revenue Obligations, Series 2023 and the Utility Systems Revenue Obligations, Series 2025 (collectively, the
“Parity Obligations”), which are payable from and secured by a lien on, pledge of and security interest in, the Pledged
Revenues on a parity with the Purchase Payments under the Purchase Agreement and payments required for the payment
of principal of and premium, if any, and interest on any Additional Obligations. The Purchase Agreement permits the
execution and delivery or incurrence of “Additional Obligations” of the City payable from Pledged Revenues on a parity
therewith upon meeting certain conditions as described under the following subheading.
Additional Obligations
Pursuant to the provisions of the Purchase Agreement, the City may, in the future, incur Additional Obligations if there
is not any Trust Agreement Event of Default or Purchase Event of Default upon the incurrence thereof and the Pledged
Revenues for the completed Fiscal Year immediately preceding the incurrence of such Additional Obligations have been
(a) at least equal to one hundred twenty percent (120%) of the Parity Lien Test Debt Service including such Additional
Obligations to be issued and (b) sufficient to provide an amount of the Pledged Revenues for the then-current Fiscal Year
that, net of the aggregate amounts required to be deposited to the debt service funds established for the Additional
Obligations and to the Obligation Fund during such Fiscal Year, will be sufficient to provide at least one hundred percent
(100%) of the amounts with regard to any Credit Facility due and owing in such Fiscal Year. “Parity Lien Test Debt
Service” is the highest aggregate Principal Requirement and Interest Requirement of all Obligations, Parity Obligations,
and Additional Obligations then Outstanding, including the Additional Obligations to be issued, to fall due and payable
in the current or any future Bond Year. So long as the Bonds are Outstanding under the Master Bond Resolution,
clause (a) above is modified to require the Net Revenues for the completed Fiscal Year immediately preceding the
incurrence of such Additional Obligations have been at least equal to one hundred twenty percent (120%) of the
highest aggregate Principal Requirement and Interest Requirement of all Outstanding Obligations, Parity
Obligations, and Additional Obligations, including such Additional Obligations to be incurred, plus the Maximum
Annual Debt Service (as defined in the Master Bond Resolution) on all Outstanding Bonds. For purposes of this
computation, certain amounts will be added to or subtracted from Net Revenues in accordance with the Purchase
Agreement and the Master Bond Resolution. See APPENDIX F – “Obligations Documents Summaries – The
Purchase Agreement – Master Bond Resolution.” Furthermore, the payments required to be made into the various
funds provided in Section 10 of the Master Bond Resolution must be current, and no Additional Obligations may
be incurred without the prior written consent of any Reserve Fund Guarantor (as defined in the Master Bond
Resolution) whose Policy Costs are past due and owing.
Utility Transfer Ordinance
In January of 2020, City staff presented a proposal and ordinance to the City Council to formalize the City’s process of
transferring System revenues to the City’s General Fund (the “Utility Transfer Ordinance”). The City Council adopted
the Utility Transfer Ordinance in March of that year. The Utility Transfer Ordinance amends the City Code to permit (i)
a transfer of System revenues in an amount not to exceed twenty-five percent (25%) of the System revenues to the City’s
General Fund for public safety purposes, and (ii) a transfer of System revenues in an amount not to exceed five percent
(5%) of the System revenues to the City’s General Fund for other general City purposes. Any such transfer in accordance
with the Utility Transfer Ordinance is at the discretion of the City Council. The Utility Transfer Ordinance expressly
states that the amendments to the City Code will not affect, limit, or alter the City’s payment obligations or payment
priorities relating to the City’s utility systems revenue bonds or obligations.
From time to time, there are legislative proposals (and interpretations of such proposals by courts of law and other entities
and individuals) which, if enacted, could alter or amend the property tax system of the State and numerous matters, both
financial and non-financial, impacting the operations of political subdivisions of the State which could have a material
impact on the City and could adversely affect the secondary market value of the Obligations. It cannot be predicted
8
whether or in what form any such proposal might be enacted or whether, if enacted, it would apply to obligations (such
as the Obligations) issued prior to enactment.
COMBINED SCHEDULES OF REVENUES AND DEBT SERVICE COVERAGE
The following table sets forth a record of the combined schedules of annual revenues, expenditures and Net Revenues for
the most recent audited five fiscal years ending June 30 (“Fiscal Year”) for which such information is available – followed
by a statement of utility systems revenue bond debt service requirements and debt service coverage provided by such Net
Revenues for each Fiscal Year (in thousands). Additionally, Pledged Revenues followed by a statement of utility systems
revenue obligation debt service requirements are set forth starting Fiscal Year 2021/22, the first such year there was utility
systems revenue obligation debt service and Pledged Revenues were calculated.
Audited
2020/21
2021/22
2022/23
2023/24
2024/25
System Revenues: (a)
Electric System
$ 34,543
$ 52,348
$ 48,542
$ 51,545
$ 53,750
Gas System
46,880
71,463
79,194
78,844
64,575
Water System
178,747
167,114
178,408
223,010
224,123
Wastewater System
89,814
99,652
99,501
108,559
113,744
Solid Waste System
64,446
65,563
69,641
73,976
79,069
Total System Revenues
$414,430
$456,140
$475,286
$535,934
$535,261
System Expenses: (a)
Electric System
$ 22,849
$ 40,343
$ 36,070
$ 38,291
$ 39,207
Gas System
30,557
35,291
39,938
34,629
33,065
Water System
58,788
60,832
64,500
73,980
78,559
Wastewater System
27,315
29,581
32,017
37,880
39,229
Solid Waste System
38,737
40,554
45,806
49,619
49,226
Total System Expenses
$178,246
$206,601
$218,331
$234,399
$239,286
Net Income Available For
Debt Service
Net Revenues
$236,184
$249,539
$256,955
$301,535
$295,975
Less Payments Required (b)
-
-
-
-
-
Pledged Revenues
$236,184
$249,539
$256,955
$301,535
$295,975
Utility Systems Revenue Debt Service
Bond Requirements (c)(d)
$ 93,075
$102,231
$ 95,980
$ 95,049
$ 93,769
Obligations Requirements (d)
-
666
10,186
20,631
24,786
Total Debt Service Requirements
$ 93,075
$102,897
$106,166
$115,680
$118,555
Approximate Net Revenue Coverage
Bond Debt Service (d)(e)
2.54x
2.44x
2.68x
3.17x
3.16x
Combined Debt Service (d)(f)
2.43x
2.42x
2.61x
2.50x
(a)
System revenues include all income, moneys and receipts derived by the City from the ownership, use and
operation of the System. Such revenues include operating revenues, interest income and other miscellaneous
revenues. System expenses are the reasonable and necessary costs of System operation, maintenance and repair,
but exclude depreciation and debt service expenses. System revenues and expenses indicated in the above schedule
are set forth on a modified accrual basis, recognizing revenues when they become measurable and available and
expenses when incurred.
(b)
Payments required are payments made by the City pursuant to Section 10(B) of the Master Bond Resolution to the
Bond Fund, the Reserve Fund, the Reimbursement Fund and the Rebate Fund. See APPENDIX E – “Summary of
the Master Bond Resolution, As Amended.”
9
(c)
Interest on the City’s Taxable Utility Systems Revenue Bonds, Series 2010 is shown for Fiscal Year 2020/21, were
without reduction of the federal subsidy payments.
These bonds were issued as taxable bonds under the Build America Bond program for which subsidy payments
equal to 35% of the interest payments on such bonds are expected to be made by the federal government. Bonds
issued under the Build America Bonds program have had such subsidy payments reduced due to sequestration
reductions imposed by the federal government, any shortfall in the interest payments caused by the reduction is
required to be paid by the issuer. The City’s remaining Build America Bond program debt was refunded in Fiscal
Year 2020/21.
(d)
Pursuant to the Master Bond Resolution, the Purchase Agreement, and the Parity Obligation Documents, this ratio
is calculated using, as applicable, (i) the current year principal and interest requirements on all outstanding Bonds
and/or (ii) the current year Principal Requirement and Interest Requirement on all Outstanding Obligations, Parity
Obligations and Additional Obligations. From time to time, the City may choose to prepay or defease portions of
the Bonds, the Obligations or the Parity Obligations. Any such prepayment or defeasance is optional and at the
discretion of the City, as opposed to required, and therefore any amounts used to prepay or defease Bonds or Parity
Obligations is not included in the “Bond Requirements” or “Obligations Requirements” information above. See
“SECURITY FOR AND SOURCES OF PAYMENT OF THE OBLIGATIONS – Obligation Rate Covenant” and
APPENDIX E – “Summary of the Master Bond Resolution, As Amended – Rate Covenant.”
(e)
Reflects the ratio of Net Revenues to debt service requirements on outstanding Bonds under the Master Bond
Resolution.
(f)
Reflects the ratio of Net Revenues to combined debt service requirements on the Parity Obligations and outstanding
Bonds under the Master Bond Resolution. So long as the Bonds are Outstanding under the Master Bond Resolution,
certain covenants pertaining to the Obligations and the Parity Obligations are modified to be calculated using Net
Revenues. See “SECURITY FOR AND SOURCES OF PAYMENT OF THE OBLIGATIONS – Obligation Rate
Covenant,” “– Debt Service Reserve Account: No Current Funding Requirement,” and “– Additional Obligations.”
Although Parity Obligations were executed and delivered in Fiscal Year 2020/21, no debt service was payable by
the City until Fiscal Year 2021/22.
The City expects to annually transfer a portion of the Revenues of the System to the City’s General Fund (subject to the
Utility Transfer Ordinance) after providing for payment of the current debt service requirements of all Bonds, any Parity
Bonds, the Obligations, Parity Obligations, and any Additional Obligations. In Fiscal Year 2024/25, such transfer was
approximately $138.1 million. The City expects to continue this practice in the future.
OBLIGATION INSURANCE
[INS_LANGUAGE]
RISK FACTORS RELATED TO OBLIGATION INSURANCE
If the City determines to obtain the Policy for the Obligations, in the event of default of the payment of principal or interest
with respect to any of the Obligations when all or some become due, any Owner of the Obligations on which such principal
or interest was not paid will have a claim under the Policy for such payments.
In the event the Insurer is unable to make payment of principal and interest as such payments become due under the
Policy, any Obligations will be payable solely from the Pledged Revenues as described under “SECURITY FOR AND
SOURCES OF PAYMENT OF THE OBLIGATIONS.” In the event the Insurer becomes obligated to make payments
with respect to any Obligations, no assurance is given that such event will not adversely affect the market price of the
Obligations or the marketability (liquidity) of the Obligations. See “RATINGS” herein.
The long-term ratings on any Obligations would be dependent in part on the financial strength of the Insurer and its claims
paying ability. The Insurer’s financial strength and claims paying ability are predicated upon a number of factors which
could change over time. No assurance is given that the long-term ratings of the Insurer and of the rating or ratings on any
Obligations insured by the Insurer will not be subject to downgrade and such event could adversely affect the market price
or the marketability (liquidity) of such Obligations. Any Obligations would be general obligations of the Insurer and in
an event of default by the Insurer, the remedies available may be limited by applicable bankruptcy law or other similar
laws related to insolvency.
10
None of the City, Special Counsel (as defined herein), Municipal Advisor (as defined herein), Underwriter (as defined
herein) or their agents or counsel, will make any independent investigation of the claims paying ability of the Insurer, and
no assurance or representation regarding the financial strength or projected financial strength of the Insurer will be given.
Thus, when making an investment decision, potential investors should carefully consider the ability of the City to pay
principal and interest with respect to the Obligations and the claims paying ability of the Insurer, particularly over the life
of the investment.
RISK FACTORS
The purchase of the Obligations involves certain investment risks that are discussed throughout this Official Statement.
Accordingly, each prospective purchaser of the Obligations should make an independent evaluation of all the information
presented herein. The following factors, along with all other information in this Official Statement, should be considered
by potential investors in evaluating the Obligations.
Limited Obligations. The Obligations are limited special obligations of the City payable as to both principal and interest
solely from the revenues derived by the City from the Pledged Revenues of the System, junior in lien to the Bonds and
not secured by the System. The Obligations do not constitute an indebtedness or pledge of the general credit of the City
within the meaning of any constitutional, Charter or statutory provisions relating to the incurring of indebtedness, and the
owners of the Obligations shall never have the right to compel any exercise of the taxing power of the City or to demand
a payment of the Obligations or interest thereon out of any funds other than from the Pledged Revenues.
Additional Parity Bonds and Additional Obligations of the City. The City has the capacity to enter into other obligations
which are payable from certain Revenues of the System and which are on a parity with or senior lien basis to the
Obligations. To the extent that Additional Parity Bonds or Additional Obligations are issued or incurred by the City, the
funds available to make the debt service payments on the Obligations may be decreased.
Economic Downturns; Adverse Effects on System Revenues. A number of factors, many of which may be beyond the
control of the City, could have an adverse impact on the level of Pledged Revenues of the System, including adverse
changes in the global and national economies, the Arizona economy, and interest rate levels.
Cybersecurity; Other Safety and Security Risks. Cybersecurity breaches could damage the City's information and security
systems and cause material disruption to its operations. The occurrence of military conflicts and terrorist activities,
including cyber terrorism, could also adversely impact the operations of the System or the finances of the City. The U.S.
Department of Homeland Security has issued warnings and advisories related to active geopolitical conflicts and
adversarial state-aligned threat actors, citing an increased risk of cyberattacks targeting municipalities and critical
infrastructure. The City maintains active security (including information security) and emergency preparedness programs
and has a number of security measures and safeguards in place. However, there can be no assurance that any existing or
additional safety and security measures will prove adequate in the event that military conflicts or terrorist activities,
including cyber terrorism, or acts of malfeasance are directed against the assets of the System or the information
technology systems of the City. The costs of security measures or of remedying damage from security breaches could be
greater than presently anticipated.
Cybersecurity incidents, including unauthorized access, ransomware, denial-of-service attacks, or other malicious
activities, could compromise the City’s information technology systems or operational technology systems, including
those used to monitor and control water and wastewater operations (e.g., SCADA systems), and could result in service
disruption, operational impairment, data loss, regulatory consequences, reputational harm, or financial loss.
Costs of System Operation and Availability of Materials and Commodities. The production of Pledged Revenues from
the System could be materially adversely affected by the costs of operating, maintaining and repairing the System,
including the costs of regulatory compliance, and the availability, price of, and demand for commodities. Pledged
Revenues could also be materially adversely affected by other factors beyond the control of the City, such as strikes,
energy shortages, material shortages, tariffs, inflation, pandemics, drought and other adverse weather conditions, changes
in federal, state or local law (including, but not limited to the Occupational Safety and Health Act, the Commercial Motor
Vehicle Safety Act, the Clean Air Act, the Safe Drinking Water Act, the Clean Water Act, the Arizona Groundwater
Code, and the Natural Gas Pipeline Safety Act), changes in international laws and other contingencies. The recyclable
materials market has a history of changes, and therefore, the City cannot forecast future conditions for this sector. The
major factors affecting recycling market variability include the strength of the United States and international economy.
Economic growth typically results in growing demand for these commodities and economic contraction usually results in
11
waning demand. Another major factor is market supply, as supply of these commodities increase, pricing decreases. In
addition, there are financial risks associated with purchase of wholesale gas and electric energy and associated
transmission capacity, including potential instability of market participants.
Tariffs; Inflation; Labor. On April 2, 2025, President Trump announced new tariffs on several nations. On April 9, 2025,
President Trump announced a 90 day pause on such tariffs, with the exception of tariffs on China. In August 2025,
following conclusion of the 90-day pause, tariffs were imposed by the United States on various countries. The tariff rates
are subject to change and certain tariffs have been subject to additional pauses. On February 20, 2026, the United States
Supreme Court ruled that President Trump’s tariff policies imposed under the International Emergency Economic Powers
Act were unconstitutional. However, the City cannot predict whether President Trump will seek to impose tariffs using
other means. As of the date of this Official Statement, the City is unable to predict the impacts of tariffs, if any, on the
System, whether in the context of operating expenses or availability of materials for capital improvement projects. The
risk of higher costs for the System and particularly for the Electric System and Natural Gas System (each as defined in
APPENDIX C) due to tariffs does exist. This risk would be driven by increases in the cost of materials (meters,
transformers, etc.) or possibly an increase in the cost of solar power driven by tariffs on solar panels. The City maintains
an inventory of needed materials, has current contracts in place and has most of the supply of gas and electric meters
needed for the System’s transition to advanced metering infrastructure (“AMI”) meters. The City also staggers the
System’s power contracts to prevent over-exposure to the markets at any one-time. The City anticipates that the risk to
the Electric System and Natural Gas System is comparable to the risk for similarly situated utilities.
The City is unable to predict if supply chain issues or inflationary cost pressures could potentially impact the operations
and maintenance of the System. The City competes with surrounding cities for a limited supply of skilled labor, which
impacts the City’s ability to recruit and retain staff that work on the System.
Factors Affecting the Utility Industry. The utility industry has been, and in the future may be, affected by a number of
factors which could impact electric, gas, water, wastewater, and solid waste utilities. Such factors include, among others:
(i) effects of compliance with rapidly changing environmental, health, safety, licensing, regulatory and legislative
standards and requirements, (ii) changes resulting from conservation and demand-side management programs on the
timing and use of commodities, (iii) “self” or “co-generation” by certain electric customers, (iv) other changes in actual
demand from projected future requirements, (v) expansion of competition in the utility industry, (vi) natural disasters such
as drought, fires and flooding and (vii) issues relating to issuance of tax-exempt obligations and restrictions thereon, and
(viii) demand for Commercial Driver’s License licensed operators continues to be high and could continue to drive higher
labor costs. The City cannot predict what effects these factors will have on the business, operations, and financial
condition of the System, but they could be significant.
Electric Deregulation, Open Access and Reliability Standards. Beginning in the 1990s, the Arizona legislature adopted
statutes, and the Arizona Corporation Commission (“ACC”) adopted Administrative Rules, which attempted to establish
a framework for competition for the sale of retail electric power in Arizona. However, electric retail competition in
Arizona was effectively stopped in large part due to a 2004 Arizona Court of Appeals decision, Phelps Dodge Corp. v.
Arizona Elec. Power Co-Op, Inc., 83 P.3d 573 (Ariz. Ct. App. 2004), which among other holdings found parts of the
adopted rules to be unconstitutional. In 2022, the State legislature adopted legislation ending deregulation; however,
should deregulation ever be re-initiated and effectively implemented, it may affect the City’s electric utility operations.
The Energy Policy Act of 1992 resulted in fundamental changes in the federal laws and regulations related to the electric
utility industry, particularly in the area of transmission access. However, the City generally is excluded from the
provisions of these laws as it is not a “public utility” as defined therein. Additionally, the City does not have any
transmission service or power supply arrangements that would otherwise make it subject it to open access transmission
service and tariff requirements under the Federal Power Act as amended. However, ongoing efforts to implement a
Regional Transmission Organization/Independent System Operator or Administrator in the western region of the United
States (including Arizona), which the City is statutorily directed to support, may affect the City’s electric utility operations
and associated costs.
Comprehensive energy legislation was also passed in 2005 (the “2005 Energy Policy Act”) which provided in part that
an “electric reliability organization” (“ERO”) should, subject to Federal Energy Regulatory Commission (“FERC”)
approval, develop reliability standards for operation of the bulk electric power system. FERC subsequently certified the
North American Electric Reliability Council (“NERC”) as the nation's ERO and approved various NERC reliability
standards. However, the City exclusively provides local distribution of electric energy to retail customer loads and does
12
not currently operate generation resources, interconnections, transmission lines, or other facilities which would make it
subject to existing reliability standard compliance requirements, consistent with FERC Order 743A issued in 2011.
Natural Gas Transportation Agreements. Natural gas supplies secured by the City are transported via a major pipeline
system owned and operated by the El Paso Natural Gas Company LLC, a Kinder Morgan Company (“EPNG”) under the
terms and conditions of transportation service agreements (“TSAs”). From time to time, the TSAs are subject to
amendment, extension, expiration or renewal as negotiated between the City and EPNG. In early 2025, the City executed
a new TSA with EPNG (for a total of three TSAs) for additional capacity that is to be delivered to the location of the
City’s existing Clausen Gate Station. The Clausen Gate Station is now being expanded to accommodate such additional
capacity by the City and EPNG, with an estimated completion date in the third quarter of 2026. Upon completion of the
gate expansion construction, the additional capacity could be used to accommodate additional natural gas flows into the
City’s Natural Gas System. Notwithstanding the foregoing description of expansion of the City’s Natural Gas System,
although transmission is anticipated to be adequate to accommodate normal growth in the Natural Gas System, constraints
on interstate and regional pipeline transmission capacity have been identified as a potential limiting factor to future growth
of the Natural Gas System. In late 2025, to address future capacity needs, the City joined major electric and natural gas
utilities in Arizona in subscribing to capacity on Energy Transfer’s 516 mile pipeline expansion from Texas to Arizona,
expected to be in service in the fourth quarter of 2029.
Water Supply and Drought Conditions. Water for the City’s System is provided from three general sources: the Salt and
Verde River system, the Colorado River via the Central Arizona Project (“CAP”) canal, and groundwater wells. In
addition, the City holds long-term stored groundwater credits and related groundwater rights in an amount equal to
approximately five times its annual demand, intended to provide drought mitigation and long-term supply reliability. The
City is currently designated with a 100-Year Assured Water Supply by the Arizona Department of Water Resources. The
City has adequate supplies for growth and has engaged in planning and resource management to provide for current and
future availability of water supplies during normal and drought conditions. However, the ability of the City’s System to
operate effectively may still be affected, and potentially may be significantly affected, by the water supply available to
the City, which is situated in a desert environment. In particular, recent conditions on the Colorado River system may be
indicative of future challenges, although most of the City’s CAP water supplies have a relatively high priority in right as
compared to other recipients of CAP water. The City is evaluating and implementing response options based on evolving
conditions on the Colorado River, including actions authorized under its Water Shortage Management Plan as set forth in
the City Code. The initial step, declaring a “Stage One Shortage,” consists of voluntary conservation measures, public
outreach, and increased water reduction efforts at City facilities, and was recently implemented by the City. If the water
supply decreases significantly however, whether by physical limitation, regulatory restrictions, increased water costs or
otherwise, System water sales may be diminished and Pledged Revenues available to pay the debt service may be
adversely affected.
Notwithstanding the foregoing, while the multiple sources of supply available to the City along with the various plants,
wells, reservoirs and other facilities may help to mitigate risk, future water availability, drought, flooding, environmental
conditions and other climate related conditions in Arizona and the other Colorado River Basin states are unpredictable
and subject to change. For example, since January 2022, Arizona has operated under a drought contingency plan and has
received a reduction to its deliveries of Colorado River water as described above. Additional reductions may result from
the federal Colorado River Post 2026 Operations process, including the development of new operational guidelines for
Lake Powell and Lake Mead by the Bureau of Reclamation in coordination with the Colorado River Basin states. The
impacts associated with climate variability, natural disasters, and other “force majeure” events on the City cannot be
predicted, but could be significant.
Additionally, decreasing flows throughout the Colorado River system and ongoing negotiation between Upper Basin and
Lower Basin states about accepting cuts during water shortages have the ability to reduce hydroelectric power generation.
The City’s Electric System receives approximately 15% of its annual energy requirements from the Parker-Davis Project
(sourced from Parker Dam and Davis Dam), and approximately 4% of its annual energy requirements from the Colorado
River Storage Project (which is primarily sourced from Glen Canyon Dam). Loss of hydroelectric generation or shortages
from the Parker-Davis Project is handled through the Western Area Power Administration (“WAPA”) Desert Southwest
Region’s Voluntary Reduction Program, which the City joined in December of 2024. Under the program, the City can
elect to receive cash value in lieu of receiving hydropower if the cash offer is higher than the forward pricing for power,
thus potentially benefiting the City financially. Loss of hydroelectric generation from the Glen Canyon Dam generally
implies that WAPA must source replacement power for these resources from the power markets in the Desert Southwest
Region; a region currently constrained for resource adequacy due to the early retirement of large coal and nuclear
13
generating assets (without in-kind replacement on a firm capacity basis). However, the current federal administration has
announced its policy intention to keep coal plants open and to incentivize new nuclear power generation, which would
increase resources in the region. Furthermore, new markets are moving into the Desert Southwest Region which will
connect the Eastern U.S. power markets to the Western U.S. power markets, thus opening more opportunity for power
trades. Although the City’s allocation of hydroelectric power comprises a minority of its annual energy resources, these
larger market effects due to the loss or reduction of hydropower and the addition of new generation sources and markets
can be compounded to either negatively or positively affect the City’s other power purchase costs, its balancing and
ancillary services costs, and other generation and transmission costs, potentially adversely or positively affecting Pledged
Revenues. As of the date of this Official Statement, the City is unable to predict the potential risks and benefits of the
conditions described above.
Pending Litigation Involving the Water and Wastewater Utility Operations. The City is a claimant in the pending Arizona
General Stream Adjudication (the “Adjudication”), a decades-long judicial proceeding to determine the extent and priority
of water rights in the Salt, Gila, and Little Colorado River systems. The City has participated as a party in the settlement
of the claims of a number of Native American Communities, including the Gila River Indian Community, the White
Mountain Apache Tribe, and the Salt River Pima-Maricopa Indian Community (which borders the City on the north).
Although a number of significant claims have been resolved through these settlements, other claims, including those of
the City and the Salt River Project (whose claims involve, in part areas which receive City service), remain outstanding,
and the future results of the Adjudication could impact City water utility operations.
Like any large municipality, the City is currently involved in multiple lawsuits and annually receives numerous claims
associated with City operations. To date, the City is not involved in any lawsuit related to the City’s System. To the
extent any claims have been filed that are related to the Systems, the claims are being handled in accordance with the
City’s standard procedures. Based on the information currently available to the City, none of the received claims are
reasonably anticipated to exceed the City’s available insurance coverage or materially adversely affect the City.
Notwithstanding the foregoing, the City has received notices of claims related to a wastewater reclamation plant that is
jointly owned and operated by several municipalities, including the City. See the second paragraph under the heading
“LITIGATION – Other Litigation Against the City” for a further description of such notices of claims.
Environmental Issues Associated with PFAS. On February 28, 2022, the City received a Request for Information
(“Request”) from the Environmental Protection Agency (“EPA”) issued under Section 104(e) of the Comprehensive
Environmental Response Compensation and Liability Act (“CERCLA”). The Request sought information regarding
City’s receipt and treatment of wastewater containing per- and poly-fluoroalkyl substances (“PFAS”) at one of the City’s
wastewater reclamation facilities in connection with the South Indian Bend Wash National Priorities List site.
PFAS are a category of synthetic, hydrophobic, and thermally resistant chemicals used in a variety of commercial and
industrial applications including certain firefighting foams, non-stick cookware, and water-resistant apparel. In July 2024,
the EPA finalized its designation of perfluorooctanoic acid (“PFOA”) and perfluorooctanesulfonic acid (“PFOS”)—two
of the most studied PFAS compounds—as hazardous substances under CERCLA. This designation remains in effect as
of January 2026, despite ongoing legal challenges, and authorizes the EPA to hold responsible parties accountable for
cleanup costs.
In April 2024, the EPA finalized National Primary Drinking Water Regulations for six PFAS compounds. These
regulations established enforceable Maximum Contaminant Levels (“MCLs”) for PFOA and PFOS at 4.0 parts per trillion
(ppt), and for PFHxS, PFNA, and HFPO-DA (GenX) at 10 ppt each. Additionally, the EPA adopted a Hazard Index MCL
for mixtures containing two or more of PFHxS, PFNA, HFPO-DA, and PFBS. In May 2025, the EPA announced its
intent to rescind and reconsider the regulatory determinations for PFHxS, PFNA, HFPO-DA, and the Hazard Index MCL
to ensure consistency with the Safe Drinking Water Act process.
Public water systems must complete initial PFAS monitoring by 2027, with compliance actions required by 2029 for
systems exceeding the MCLs. The EPA has extended compliance deadlines for PFOA and PFOS to 2031 and is
developing a federal exemption framework for small and economically challenged systems.
For wastewater utilities, the CERCLA designation for PFOA and PFOS remains in place, creating potential liability risks
for facilities that receive PFAS-contaminated influent. Recognizing utilities as passive receivers, the EPA is pursuing a
“polluter pays” approach and has announced plans to develop effluent limitation guidelines for PFAS manufacturers and
metal finishers. These actions aim to reduce PFAS discharges and mitigate downstream regulatory burdens.
14
Groundwater well production may be reduced under these regulatory requirements, and well operation and maintenance
costs could increase. Additional PFAS-related regulations affecting the utility industry could impact System service costs,
and Pledged Revenues may be adversely affected. The City intends to fully comply with all lawful EPA requests for
information and will continue to monitor regulatory developments to ensure compliance and mitigate financial and
operational risks.
Other Considerations. The Audited General Purpose Financial Statements of the City included in APPENDIX D hereto
are for the Fiscal Year ended June 30, 2025, and may not reflect the current financial positions of the City. Such financial
statements are the most recent audited financial statements for the City.
From time to time, the City has residents that attend City Council meetings where the residents allege various items
including, without limitation, that (i) the rates and fees charged by the City’s System are not just and reasonable, (ii) the
City’s transfer of System revenues to the City’s General Fund is unreasonable, and (iii) the City’s financial statements
inaccurately reflect debt service payments on the City’s outstanding general obligation bonds, utility systems revenue
bonds, and utility systems revenue obligations.
Generally, City staff meets with residents that regularly attend and comment on utility rates to address their questions and
concerns. The City is unable to predict if any residents that make allegations as described above would ever seek further
legal action against the City, including, without limitation, filing a lawsuit against the City regarding rates and fees, the
System, the Pledged Revenues, the Obligations, or otherwise. Generally, the comments of residents do not present a case
or controversy which would adversely affect the issuance, validity or payment of the City’s general obligation bonds,
utility systems revenue bonds or utility systems revenue obligations, including the Obligations.
PLAN OF REFUNDING
A portion of the proceeds of the Obligations will be placed in an irrevocable escrow trust (the “Trust”) with UMB Bank,
n.a. (the “Escrow Trustee”), to be applied to the payment of the principal of and interest due on the Bonds Being Refunded
identified below. Such funds will be used to establish an initial cash balance and to acquire noncallable obligations issued
or guaranteed by the United States of America (the “Government Obligations”), the principal of and interest on which,
when due, together with any cash balance, are calculated to be sufficient to provide moneys to pay the principal of and
interest due on the Bonds Being Refunded. See “VERIFICATION OF MATHEMATICAL COMPUTATIONS.”
The moneys and Government Obligations will be held by the Escrow Trustee in trust for the payment of such principal
of and interest on the Bonds Being Refunded pursuant to the terms of an escrow trust agreement between the City and the
Escrow Trustee.
15
Bonds Being Refunded
The following table sets forth the stated maturity dates, principal amounts outstanding and to be redeemed, redemption
dates, redemption prices, and CUSIP numbers of the City’s Utility Systems Revenue Bonds, Series 2013, Utility Systems
Revenue Bonds, Series 2014, Utility Systems Revenue Bonds, Series 2015, Utility Systems Revenue Bonds, Series 2016
and Utility Systems Revenue Refunding Bonds, Series 2016 (collectively, the “Bonds Being Refunded”):
Refunded Issue *
Maturity
Date
(July 1) *
Principal
Amount
Outstanding *
Amount Being
Redeemed *
Redemption
Date *
Redemption
Price
CUSIP® (a)
(Base No.
590545)
Utility Systems Revenue
2037
$ 47,290,000
$ 47,290,000
06/16/26
100.00
TY5
Bonds, Series 2013
Utility Systems Revenue
2037
20,000,000
20,000,000
06/16/26
100.00
TZ2
Bonds, Series 2014
2038
16,385,000
16,385,000
06/16/26
100.00
UA5
Utility Systems Revenue
2027
1,400,000
1,400,000
06/16/26
100.00
VE6
Bonds, Series 2015
2028
1,450,000
1,450,000
06/16/26
100.00
VF3
2029
1,525,000
1,525,000
06/16/26
100.00
VG1
2030
1,600,000
1,600,000
06/16/26
100.00
VH9
2031
1,700,000
1,700,000
06/16/26
100.00
VJ5
2032
1,775,000
1,775,000
06/16/26
100.00
VK2
2033
1,875,000
1,875,000
06/16/26
100.00
VL0
2034
1,950,000
1,950,000
06/16/26
100.00
VM8
2035
2,050,000
2,050,000
06/16/26
100.00
VN6
Utility Systems Revenue
2028
1,350,000
1,350,000
07/01/26
100.00
WQ8
Bonds, Series 2016
2029
1,400,000
1,400,000
07/01/26
100.00
WR6
2036
1,850,000
1,850,000
07/01/26
100.00
WY1
Utility Systems Revenue
2027
6,750,000
1,800,000
07/01/26
100.00
VY2
Refunding Bonds, Series 2016
2028
7,210,000
7,210,000
07/01/26
100.00
VZ9
2029
7,545,000
7,545,000
07/01/26
100.00
WA3
2030
18,545,000
18,545,000
07/01/26
100.00
WB1
2031
43,170,000
43,170,000
07/01/26
100.00
WC9
2032
44,890,000
44,890,000
07/01/26
100.00
WD7
$231,710,000
$226,760,000
(a)
CUSIP® is a registered trademark of the American Bankers Association. CUSIP Global Services (“CGS”) is
managed on behalf of the American Bankers Association by FactSet Research Systems Inc. Copyright© 2026
CUSIP Global Services. All rights reserved. CUSIP® data herein is provided by CGS. This data is not intended
to create a database and does not serve in any way as a substitute for the CGS database. CUSIP® numbers are
provided for convenience of reference only. None of the City, Special Counsel (as defined herein), the Municipal
Advisor (as defined herein), the Underwriter (as defined herein) or their agents or counsel assume responsibility
for the accuracy of such numbers.
Pursuant to the Master Bond Resolution, upon transfer of funds to the Escrow Trustee and receipt of the verification report
described below under “VERIFICATION OF MATHEMATICAL COMPUTATIONS,” the Bonds Being Refunded shall
no longer be deemed Outstanding under the Master Bond Resolution or secured by Net Revenues.
The City is refunding the Bonds Being Refunded to achieve debt service savings.
* Subject to change.
16
VERIFICATION OF MATHEMATICAL COMPUTATIONS
[Public Finance Partners LLC] will deliver to the City, on or before the settlement date of the Obligations, its verification
report indicating that it has verified the mathematical accuracy of the mathematical computations of the adequacy of the
cash and the maturing principal of and interest on the Government Obligations, to pay, when due, the maturing principal
of, interest on and related call premium requirements, if any, of the Bonds Being Refunded.
[Public Finance Partners LLC] relied on the accuracy, completeness and reliability of all information provided to it by,
and on all decisions and approvals of, the City. In addition, [Public Finance Partners LLC] has relied on any information
provided to it by the City’s retained advisors, consultants, or legal counsel.
SOURCES AND USES OF FUNDS
The proceeds of the Obligations will be applied as follows:
Sources of Funds
Principal Amount of the Obligations
$
206,425,000.00*
[Net] Original Issue Premium [(a)]
Total Sources of Funds
$
Uses of Funds
Deposit to Escrow Trustee
$
Delivery Costs (b)
Total Uses of Funds
$
(a)
[Net original issue premium consists of original issue premium on the Obligations less original issue discount on
the Obligations.]
(b)
Includes the premium on the Policy, if any, compensation of the Underwriter and certain costs incurred by the City
in connection with the execution and delivery of the Obligations.
* Subject to change.
17
ESTIMATED DEBT SERVICE REQUIREMENTS AND DEBT SERVICE COVERAGE
The table below sets forth (i) the annual debt service requirements of the City’s outstanding Bonds and Parity Obligations
net of the Bonds Being Refunded, (ii) the estimated annual debt service requirements of the Obligations, (iii) the estimated
total annual utility systems revenue debt service requirements after execution and delivery of the Obligations, and (iv) the
estimated debt service coverage ratio provided for such total annual debt service requirements based upon the City’s
Fiscal Year 2024/25 Net Revenues.
City of Mesa, Arizona - Schedule of Debt Service Requirements and Debt Service Coverage (a)
Period
Ending
Bonds (b)*
Parity Obligations
Obligations*
Estimated
Combined
Annual
Estimated
Combined
Debt
Service
Coverage
(07-01)
Principal
Interest
Principal
Interest
Principal
Interest (c)
Debt Service *
(d)*
2026
$ 52,347,949 $35,663,223
$ 12,570,000 $31,393,804
$1,685,000
$774,094
$134,434,069
2.20x
2027
51,621,538 28,666,815
13,055,000 29,260,223
$140,000 $10,237,000
132,980,576
2028
48,215,210 26,531,929
11,830,000 28,640,660
6,800,000 10,230,000
132,247,799
2029
45,932,367 24,604,100
15,360,000 28,076,775
7,100,000
9,890,000
130,963,243
2030
35,625,000 22,763,175
15,275,000 27,308,775
16,625,000
9,535,000
127,131,950
2031
23,685,000 21,309,450
15,175,000 26,545,025
41,190,000
8,703,750
136,608,225
2032
23,720,000 20,227,700
15,600,000 25,786,275
45,510,000
6,644,250
137,488,225
2.15x
2033
56,500,000 19,147,988
9,900,000 25,006,275
1,130,000
4,368,750
116,053,013
2034
62,400,000 17,080,313
18,200,000 24,511,275
1,190,000
4,312,250
127,693,838
2035
59,185,000 14,541,313
20,560,000 23,601,275
1,270,000
4,252,750
123,410,338
2036
4,000,000 12,153,638
78,355,000 22,585,625
1,060,000
4,189,250
122,343,513
2037
8,250,000 12,023,638
11,900,000 18,667,875
66,500,000
4,136,250
121,477,763
2038
52,765,000 11,765,700
20,600,000 18,072,875
16,225,000
811,250
120,239,825
2039
63,175,000
9,962,438
29,000,000 17,042,875
119,180,313
2040
56,795,000
7,633,938
28,500,000 15,592,875
108,521,813
2041
47,280,000
5,607,250
30,900,000 14,167,875
97,955,125
2042
36,505,000
3,616,000
34,600,000 12,622,875
87,343,875
2043
24,700,000
1,883,750
39,195,000 10,892,875
76,671,625
2044
14,600,000
747,750
41,600,000
9,116,125
66,063,875
2045
4,395,000
219,750
43,610,000
7,199,125
55,423,875
2046
39,745,000
5,036,425
44,781,425
2047
31,075,000
3,107,175
34,182,175
2048
21,880,000
1,602,425
23,482,425
2049
12,165,000
547,425
12,712,425
Total
$771,697,065
$610,650,000
$206,425,000
$2,389,391,324
(a)
Prepared by the Municipal Advisor. Totals may not add due to rounding.
(b)
Reflects debt service on Bonds, net of the Bonds Being Refunded, secured by Net Revenues of the System which
is prior and senior to the claim of the Obligations and Parity Obligations on the Pledged Revenues.
(c)
The first interest payment on the Obligations is due on July 1, 2026*. Thereafter, interest payments will be made
semiannually on each July 1 and January 1, until maturity or prior redemption. Interest for the Obligations is
estimated at 5.00%.
(d)
Debt Service coverage is computed using the Net Revenues of $295.98 million for Fiscal Year 2024/25. See
“COMBINED SCHEDULES OF REVENUES AND DEBT SERVICE COVERAGE” herein. The Fiscal Year
2024/25 Net Revenues provide coverage for the total estimated annual debt service requirements for the period
ending July 1, 2026, of approximately 2.20x* and approximately 2.15x* for the total estimated annual debt service
requirements for the period ending July 1, 2032, with the estimated Maximum Annual Debt Service payable on all
* Subject to change.
18
Bonds, Obligations, and Parity Obligations to be outstanding immediately after issuance of the Obligations. So
long as the Bonds are Outstanding under the Master Bond Resolution, certain covenants pertaining to the
Obligations and Parity Obligations are modified to be calculated using Net Revenues. See “SECURITY FOR
AND SOURCES OF PAYMENT OF THE OBLIGATIONS – Obligation Rate Covenant,” “– Debt Service
Reserve Account: No Current Funding Requirement,” and “– Additional Obligations.”
RATINGS
Moody’s and S&P have assigned credit ratings of “__” and “__”, respectively, to the Obligations. In addition, S&P is
expected to assign the insured rating of “__”, to the Obligations with the understanding that upon delivery of the
Obligations, the Policy will be issued by the Insurer. Such ratings reflect only the views of Moody’s and S&P. An
explanation of the significance of such ratings may be obtained from Moody’s at One Front Street, Suite 1900, San
Francisco, California 94111, from and S&P at One California Street, 31st Floor, San Francisco, California 94111. Such
ratings may subsequently be revised downward or withdrawn entirely by Moody’s or S&P, if, in their respective judgment,
circumstances so warrant. Any subsequent downward revision or withdrawal of such ratings may have an adverse effect
on the market price and transferability of the Obligations. The City will covenant in its Continuing Disclosure
Undertaking (as defined herein) (see “CONTINUING SECONDARY MARKET DISCLOSURE” below) that it will
cause notices to be filed with the MSRB of any formal change in the ratings relating to the Obligations. A securities
rating is not a recommendation to buy, sell or hold securities, including the Obligations.
LEGAL MATTERS
Legal matters relating to the execution and delivery of the Obligations, the validity of the Obligations under Arizona law
and the tax status of the Obligations (see “TAX EXEMPTION” herein) are subject to the legal opinion of Greenberg
Traurig, LLP, Phoenix, Arizona (“Special Counsel”), whose services as Special Counsel have been retained by the City.
The signed legal opinion of Special Counsel, dated and premised on the law in effect only as of the date of original
delivery of the Obligations, will be delivered to the City at the time of original delivery of the Obligations.
The proposed text of the legal opinion is set forth as APPENDIX H. The legal opinion to be delivered may vary from the
text of APPENDIX H, if necessary, to reflect the facts and law on the date of delivery. The opinion will speak only as of
its date, and subsequent distribution, by recirculation of this Official Statement or otherwise, should not be construed as
a representation that Special Counsel has reviewed or expressed any opinion concerning any matters relating to the
Obligations subsequent to the original delivery of the Obligations.
In rendering its opinion, Special Counsel will rely upon certificates and representations of facts to be contained in the
transcript of proceedings Special Counsel will not have independently verified.
While Special Counsel has reviewed and participated in the preparation of portions of this Official Statement, Special
Counsel has not undertaken an independent investigation to determine, and will express no opinion as to, the accuracy,
completeness or sufficiency of this Official Statement, nor of any other reports, financial information, offering or
disclosure documents or other information pertaining to the City or the Obligations that may be available.
From time to time, there are legislative proposals (and interpretations of such proposals by courts of law and other entities
and individuals) which, if enacted, could alter or amend the property tax system of the State and numerous matters, both
financial and nonfinancial, impacting the operations of municipalities which could have a material impact on the City and
could adversely affect the secondary market value or marketability of the Obligations. It cannot be predicted whether or
in what form any such proposal might be enacted or whether, if enacted, it would apply to obligations (such as the
Obligations) issued prior to enactment.
The legal opinion to be delivered concurrently with the delivery of the Obligations will express the professional judgment
of the attorneys rendering the opinion as to the legal issues explicitly addressed therein dated and speaking only as of the
date of delivery of the Obligations. By rendering a legal opinion, the opinion giver does not become an insurer or
guarantor of that expression of professional judgment, of the transaction opined upon, or of the future performance of
parties to the transaction. Nor does the rendering of an opinion guarantee the outcome of any legal dispute that may arise
out of the transaction.
Certain legal matters will be passed upon solely for the benefit of the Underwriter by Squire Patton Boggs (US) LLP,
Phoenix, Arizona, as counsel to the Underwriter.
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TAX EXEMPTION
General
The Internal Revenue Code of 1986, as amended (the “Code”), includes requirements which the City must continue to
meet after the execution and delivery of the Obligations in order that the portion of each of the Purchase Payments made
by the City pursuant to the Purchase Agreement and denominated as and comprising interest pursuant to the Purchase
Agreement and received by the Owners of the Obligations (the “Interest Portion”) will be and remain excludable from
gross income for federal income tax purposes. The City’s failure to meet these requirements may cause the Interest
Portion to be included in gross income for federal income tax purposes retroactively to the date of execution and delivery
of the Obligations. The City has covenanted in the Purchase Agreement to take the actions required by the Code in order
to maintain the exclusion from gross income for federal income tax purposes of the Interest Portion.
In the opinion of Special Counsel, assuming the accuracy of certain representations and certifications of the City and
continuing compliance by the City with the tax covenants referred to above, under existing statutes, regulations, rulings
and court decisions, the Interest Portion is excludable from gross income of the holders thereof for federal income tax
purposes and is exempt from State income taxation so long as the Interest Portion is excludable from gross income for
federal income tax purposes. The Interest Portion is not an item of tax preference for purposes of the federal alternative
minimum tax imposed on individuals, but in the case of the alternative minimum tax imposed by Section 55(b)(2) of the
Code on applicable corporations (as defined in Section 59(k) of the Code), the Interest Portion is not excluded from the
determination of adjusted financial statement income. Special Counsel will express no opinion as to any other tax
consequences regarding the Interest Portion or the Obligations. Prospective purchasers of the Obligations should consult
with their own tax advisors as to the status of the Interest Portion under the tax laws of any state other than the State.
The above opinion on federal tax matters with respect to the Obligations will be based on and will assume the accuracy
of certain representations and certifications of the City, and compliance with certain covenants of the City to be contained
in the transcript of proceedings and that are intended to evidence and assure the foregoing, including that the Obligations
will be and will remain obligations the interest on which is excludable from gross income for federal income tax purposes.
Special Counsel will not independently verify the accuracy of those certifications and representations. Special Counsel
will express no opinion as to any other consequences regarding the Obligations.
Except as described above, Special Counsel will express no opinion regarding the federal income tax consequences
resulting from the receipt or accrual of the Interest Portion, or the ownership or disposition of the Obligations. Prospective
purchasers of Obligations should be aware that the ownership of Obligations may result in other collateral federal tax
consequences, including (i) the denial of a deduction for interest on indebtedness incurred or continued to purchase or
carry the Obligations, (ii) the reduction of the loss reserve deduction for property and casualty insurance companies by
the applicable statutory percentage of certain items, including the Interest Portion, (iii) the inclusion of the Interest Portion
in the earnings of certain foreign corporations doing business in the United States for purposes of a branch profits tax,
(iv) the inclusion of the Interest Portion in the passive income subject to federal income taxation of certain Subchapter S
corporations with Subchapter C earnings and profits at the close of the taxable year, and (v) the inclusion of the Interest
Portion in the determination of the taxability of certain Social Security and Railroad Retirement benefits to certain
recipients of such benefits, (vi) net gain realized upon the sale or other disposition of property such as the Obligations
generally must be taken into account when computing the Medicare tax with respect to net investment income or
undistributed net investment income, as applicable, imposed on certain high income individuals and specified trusts and
estates and (vii) receipt of certain investment income, including interest on the Obligations, is considered when
determining qualification limits for obtaining the earned income credit provided by Section 32(a) of the Code. The nature
and extent of the other tax consequences described above will depend on the particular tax status and situation of each
owner of the Obligations. Prospective purchasers of the Obligations should consult their own tax advisors as to the impact
of these and any other tax consequences.
Special Counsel’s opinions are based on existing law, which is subject to change. Such opinions are further based on
factual representations made to Special Counsel as of the date thereof. Special Counsel assumes no duty to update or
supplement its opinions to reflect any facts or circumstances that may thereafter come to Special Counsel’s attention, or
to reflect any changes in law that may thereafter occur or become effective. Moreover, Special Counsel’s opinions are
not a guarantee of a particular result and are not binding on the Internal Revenue Service or the courts; rather, such
opinions represent Special Counsel’s professional judgment based on its review of existing law, and in reliance on the
representations and covenants that it deems relevant to such opinion.
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Original Issue Premium and Original Issue Discount
Certain of the Obligations (“Discount Obligations”) may be offered and sold to the public at an original issue discount
(“OID”). OID is the excess of the stated redemption price at maturity (the principal amount) over the “issue price” of a
Discount Obligation determined under Code Section 1273 or 1274 (i.e., for obligations issued for money in a public
offering, the initial offering price to the public (other than to bond houses and brokers) at which a substantial amount of
the obligation of the same maturity is sold pursuant to that offering). For federal income tax purposes, OID accrues to
the owner of a Discount Obligation over the period to maturity based on the constant yield method, compounded
semiannually (or over a shorter permitted compounding interval selected by the owner). The portion of OID that accrues
during the period of ownership of a Discount Obligation (i) is interest excludable from the owner’s gross income for
federal income tax purposes to the same extent, and subject to the same considerations discussed above, as other interest
on the Obligations, and (ii) is added to the owner’s tax basis for purposes of determining gain or loss on the maturity,
redemption, prior sale, or other disposition of that Discount Obligation.
Certain of the Obligations (“Premium Obligations”) may be offered and sold to the public at a price in excess of their
stated redemption price (the principal amount) at maturity (or earlier for certain Premium Obligations callable prior to
maturity). That excess constitutes bond premium. For federal income tax purposes, bond premium is amortized over the
period to maturity of a Premium Obligation, based on the yield to maturity of that Premium Obligation (or, in the case of
a Premium Obligation callable prior to its stated maturity, the amortization period and yield may be required to be
determined on the basis of an earlier call date that results in the lowest yield on that Premium Obligation), compounded
semiannually (or over a shorter permitted compounding interval selected by the owner). No portion of that bond premium
is deductible by the owner of a Premium Obligation. For purposes of determining the owner’s gain or loss on the sale,
redemption (including redemption at maturity), or other disposition of a Premium Obligation, the owner’s tax basis in the
Premium Obligation is reduced by the amount of bond premium that accrues during the period of ownership. As a result,
an owner may realize taxable gain for federal income tax purposes from the sale or other disposition of a Premium
Obligation for an amount equal to or less than the amount paid by the owner for that Premium Obligation.
Owners of Discount Obligations and Premium Obligations should consult their own tax advisors as to the determination
for federal income tax purposes of the amount of OID or bond premium properly accruable or amortizable in any period
with respect to the Discount Obligations or Premium Obligations and as to other federal tax consequences, and the
treatment of OID or bond premium for purposes of state and local taxes on, or based on, income.
Changes in Federal and State Tax Law
From time to time, there are legislative proposals suggested, debated, introduced or pending in congress or in the State
legislature that, if enacted into law, could alter or amend one or more of the federal tax matters, or state tax matters,
respectively, described above including, without limitation, the excludability from gross income of the Interest
Portion, adversely affect the market price or marketability of the Obligations, or otherwise prevent the holders from
realizing the full current benefit of the status of the Interest Portion. It cannot be predicted whether or in what form
any such proposal may be enacted, or whether, if enacted, any such proposal would affect the Obligations.
Prospective purchasers of the Obligations should consult their tax advisors as to the impact of any proposed or
pending legislation.
Information Reporting and Backup Withholding
Interest paid on obligations such as the Obligations is subject to information reporting to the Internal Revenue Service in
a manner similar to interest paid on taxable obligations. This reporting requirement does not affect the excludability of
the Interest Portion from gross income for federal income tax purposes. However, in conjunction with that information
reporting requirement, the Code subjects certain non-corporate owners of the Obligations, under certain circumstances,
to “backup withholding” at the rates set forth in the Code, with respect to payments on the Obligations and proceeds from
the sale of the Obligations. Any amount so withheld would be refunded or allowed as a credit against the federal income
tax of such owner of the Obligations. This withholding generally applies if the owner of the Obligations (i) fails to furnish
the payor such owner’s social security number or other taxpayer identification number (“TIN”), (ii) furnished the payor
an incorrect TIN, (iii) fails to properly report interest, dividends, or other “reportable payments” as defined in the Code,
or (iv) under certain circumstances, fails to provide the payor or such owner’s securities broker with a certified statement,
signed under penalty of perjury, that the TIN provided is correct and that such owner is not subject to backup withholding.
Prospective purchasers of the Obligations may also wish to consult with their tax advisors with respect to the need to
furnish certain taxpayer information in order to avoid backup withholding.
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UNDERWRITING
BofA Securities, Inc. (the “Underwriter”), has agreed to purchase the Obligations at an aggregate purchase price of
$_________ pursuant to a purchase contract (the “Purchase Contract”) entered into by and among the City and the
Underwriter. If the Obligations are sold to produce the prices or yields shown on the inside front cover page hereof, the
Underwriter’s discount will be $________. The Purchase Contract provides that the Underwriter will purchase all of the
Obligations so offered, if any, are purchased. The Underwriter may offer and sell the Obligations to certain dealers
(including dealers depositing Obligations into unit investment trusts) and others at prices lower or yields higher than the
public offering prices stated on the inside front cover page hereof. The initial offering prices or yields set forth on the
inside front cover page may be changed from time to time by the Underwriter.
The Underwriter and its respective affiliates are full service financial institutions engaged in various activities, which may
include sales and trading, commercial and investment banking, advisory, investment management, investment research,
principal investment, hedging, market making, brokerage and other financial and non-financial activities and services. In
the various course of its various business activities, the Underwriter and its respective affiliates, officers, directors and
employees may purchase, sell or hold a broad array of investments and actively trade securities, derivatives, loans,
commodities, currencies, credit default swaps and other financial instruments for their own account and for the accounts
of their customers, and such investment and trading activities may involve or relate to assets, securities and/or instruments
of the City (directly, as collateral securing other obligations or otherwise) and/or persons and entities with relationships
with the City. The Underwriter and its affiliates may also communicate independent investment recommendations,
market color or trading ideas and/or publish or express independent research views in respect of such assets, securities or
instruments and may at any time hold, or recommend to clients that they should acquire, long and/or short positions in
such assets, securities and instruments.
The Underwriter has entered into a distribution agreement with its affiliate Merrill Lynch, Pierce, Fenner & Smith
Incorporated (“Merrill”). As part of this arrangement, the Underwriter may distribute securities to Merrill, which may in
turn distribute such securities to investors through the financial advisor network of Merrill. As part of this arrangement,
the Underwriter may compensate Merrill as a dealer for their selling efforts with respect to the Obligations.
LITIGATION
No Litigation Relating to the Obligations
At the time of delivery of the Obligations, an officer of the City will certify that there is no action, suit, proceeding, inquiry
or investigation, at law or in equity, before or by any court, public board or body, pending, or to the knowledge of the City,
overtly threatened against the City, affecting the existence of the City or the titles of its officers to their respective offices
or seeking to prohibit, restrain or enjoin the execution, sale or delivery of the Obligations or that questions the City’s right
or authority to receive the sources of payment of the Obligations, or in any way contesting or affecting the validity or
enforceability of the Obligations, the Trust Agreement, the Purchase Agreement, the Resolution or the Continuing
Disclosure Undertaking, or contesting in any way the completeness or accuracy of this Official Statement, or any
amendment or supplement thereto, or contesting the power or authority of the City to execute and deliver the Continuing
Disclosure Undertaking, or wherein an unfavorable decision, ruling or finding would materially adversely affect the validity
or enforceability of the Obligations, the Trust Agreement, the Purchase Agreement, the Resolution or the Continuing
Disclosure Undertaking, or have a material adverse effect on the transaction contemplated by this Official Statement.
Other Litigation Against the City
Like any large municipality, the City is currently involved in multiple lawsuits and annually receives numerous claims
associated with City operations. Based on the information currently available to the City, as of the date of this Official
Statement none of the pending lawsuits or received claims are reasonably anticipated to exceed the City’s available
insurance coverage or materially adversely affect the City or the Pledged Revenues.
Notwithstanding the foregoing, the City has received two notices of claims alleging that two elementary school-aged
children suffered damages after alleged exposure to hydrogen sulfide in a classroom while attending school; provided,
however, that as of the date of this Official Statement no lawsuit has been filed against the City in connection with these
notices. The notices of claims allege an amount owed by the City of $53,000,000. The notices state the charter school
attended by the two children is connected to the Town of Gilbert’s wastewater system but is also located near a wastewater
reclamation plant (the “WRP”) that is jointly owned and operated pursuant to an intergovernmental agreement among the
City, the Town of Gilbert, and the Town of Queen Creek. Pursuant to the intergovernmental agreement, the City acts as
the “lead agent” of the WRP and is responsible for, among other things, the operation and maintenance of the WRP.
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Separate from the notices received by the City, the Town of Gilbert and the charter school were named in a lawsuit by the
two children and their parents/stepparent (“Plaintiffs”). In the lawsuit, the Plaintiffs generally allege that the Town of
Gilbert played a role in the children’s exposure to hydrogen sulfide. As of the date of this Official Statement, the City and
the WRP have not been named in the lawsuit. In November 2024 (a week before filing notices of claims with the City),
Plaintiffs amended their complaint in Maricopa County Superior Court, but they did not name the City as an additional
party in that amended complaint. The City is investigating the claimants’ allegations stated in the notices and anticipates
that, if the City or the WRP is added to the lawsuit, the City will defend on the merits. In its capacity as the lead agent of
the WRP, the City also monitors for the presence of gasses in the area surrounding the WRP and no data obtained by the
City from such monitoring indicates amounts of hydrogen sulfide in excess of permitted amounts originating from the
WRP. Other than the proximity of the WRP to the charter school, the notices do not present a factual basis connecting the
alleged presence of hydrogen sulfide in the charter school to the City or the City’s ownership interest in, or operation of,
the WRP. Because of the multiple potential parties alleged in the lawsuit and the notices, the City is unable to determine
whether a lawsuit, if filed against the City, could reasonably be expected to exceed available insurance coverage. Any
potential liability could be allocated among the charter school, the municipal owners of the WRP (including the City), and
other parties. Additionally, the WRP has its own insurance coverage that is expected to provide coverage to the municipal
owners (including the City) if Plaintiffs move forward with a lawsuit against the City. Based on the foregoing, as of the
date of this Official Statement, appropriate officers of the City do not reasonably anticipate that a lawsuit, if filed against
the City in connection with the notices of claims, would materially adversely affect the City.
The City has also received a notice of claim pertaining to an airplane accident in November 2024 where an airplane left
the runway at the City’s Falcon Field Airport facility, crossed into Greenfield Road, and collided with a passing
automobile resulting in the death of several passengers on the airplane and the sole occupant of the automobile. A final
report from the National Transportation Safety Board has not been issued. All the claims, except for one notice of claim,
have agreed to a settlement that is in the process of being finalized. The remaining notice of claim offers to settle these
remaining claims for an aggregate amount equal to $60,000,000. Among other things, the remaining notice alleges
negligence by the City related to the design and construction of certain runway safety areas and runway protection zones.
As of the date of this Official Statement, no lawsuit has been filed against the City in connection with this notice of claim.
On October 30, 2025, the City and the claimants entered into a tolling agreement to allow the parties to participate in a
mediation. As of the date of this Official Statement, the mediation process has not been completed. The City maintains
a $100 million insurance policy for its operations of Falcon Field Airport. If a lawsuit were filed, the City believes it has
a number of meritorious factual and legal defenses and would vigorously defend itself. As of the date of this Official
Statement, appropriate officers of the City do not reasonably anticipate that a lawsuit, if filed against the City in connection
with these notices of claims, would materially adversely affect the City. The City does not anticipate any material adverse
financial impact on Revenues of the System in connection with these notices of claims.
CERTIFICATION CONCERNING OFFICIAL STATEMENT
The closing documents will include a certificate confirming that, to the best knowledge, information and belief of the
City’s Deputy City Manager/Chief Financial Officer, the descriptions and statements contained in this Official Statement
are at the time of execution and delivery of the Obligations, true, correct and complete in all material respects and do not
contain an untrue statement of a material fact, or omit to state a material fact required to be stated therein in order to make
the statements, in light of the circumstances under which they are made, not misleading. In the event this Official
Statement is supplemented or amended, the foregoing confirmation will also encompass such supplements or
amendments.
CONTINUING SECONDARY MARKET DISCLOSURE
The City will covenant for the benefit of holders and Beneficial Owners of the Obligations to provide certain financial
information and operating data relating to the City by not later than February 1 in each year commencing February 1,
2027 (the “Annual Reports”), and to provide notices of the occurrence of certain enumerated events (the “Notices”), as
set forth in APPENDIX I – “Form of Continuing Disclosure Undertaking” (the “Continuing Disclosure Undertaking”).
The Annual Reports and Notices and any other documentation or information required to be filed by such covenants will
be filed by the City with the MSRB, in a format prescribed by the MSRB. Currently the MSRB requires filing through
the MSRB’s EMMA system as described in APPENDIX I – “Form of Continuing Disclosure Undertaking.”
These covenants will be made in order to assist the Underwriter in complying with the Securities and Exchange
Commission Rule 15c2-12 (the “Rule”). The form of the undertaking necessary pursuant to the Rule is included as
APPENDIX I hereto. A failure by the City to comply with these covenants must be reported in accordance with the Rule
and must be considered by any broker, dealer, or municipal securities dealer before recommending the purchase or sale
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of the Obligations in the secondary market. The City’s undertaking to comply with such covenants is payable solely from
Pledged Revenues of the System. Absence of continuing disclosure could adversely affect the Obligations and specifically
their market price and transferability. The City’s Finance Department has instituted written policies and procedures to
ensure timely and proper filing of its Annual Reports and Notices for all of the City’s outstanding obligations.
The presentation of the financial and operating data referenced above has changed over time in the City’s various Official
Statements. Therefore, the presentation of such financial and operating data in the City’s Annual Reports may match the
current presentation of such financial and operating data instead of the presentation of such financial and operating data
when bonds or obligations were originally issued or incurred. Similarly, certain references to financial and operating data
in the City’s prior disclosure undertakings do not specifically identify which data within an Official Statement appendix
the City was to provide in its Annual Reports. In such circumstances, the City has provided data pertaining to the City in
its Annual Reports, for example excise tax collections in the City, and the City’s Annual Reports do not include data not
specifically pertaining to the City, for example excise tax collections in the County or State.
MUNICIPAL ADVISOR
Hilltop Securities Inc. is municipal advisor (“Municipal Advisor”) to the City in connection with the execution and
delivery of the Obligations. The Municipal Advisor’s fee for services rendered with respect to the sale of the Obligations
is contingent upon the issuance and delivery of the Obligations. The Municipal Advisor has not verified and does not
assume any responsibility for the information, covenants and representations contained in any of the legal documents with
respect to the federal income tax status of the Obligations, or the possible impact of any present, pending, or future actions
taken by any legislative or judicial bodies.
GENERAL PURPOSE FINANCIAL STATEMENTS
The City’s Audited General Purpose Financial Statements for the Fiscal Year ended June 30, 2025, a copy of which is
included in APPENDIX D of this Official Statement, have been audited by CliftonLarsonAllen LLP, certified public
accountants, to the extent and for the period indicated in their report thereon. The City is not aware of any facts that
would make such Audited General Purpose Financial Statements misleading. The Audited General Purpose Financial
Statements are for the Fiscal Year ended June 30, 2025, and are not current. The City neither requested nor obtained the
consent of CliftonLarsonAllen LLP to include the report, and CliftonLarsonAllen LLP has performed no procedures
subsequent to rendering its opinion on the financial statements.
ADDITIONAL INFORMATION
Additional information and copies of this Official Statement, the Purchase Agreement and the Trust Agreement may be
obtained from the Deputy City Manager/Chief Financial Officer of the City, 20 East Main Street, Suite 700, Mesa, Arizona
85201.
CONCLUDING STATEMENT
To the extent that any statements made in this Official Statement involve beliefs, assumptions, estimates, projections,
forecasts, or other matters of opinion or estimates, whether or not expressly stated to be such, they are made as such and
not as representations of fact or certainty and no representation is made that any of these statements have been or will be
realized. Such beliefs, assumptions, estimates, projections, forecasts, or other matters of opinion are forward looking
statements which must be read with an abundance of caution. Information set forth in this Official Statement has been
derived from the records of the City and from certain other sources, as referenced, and is believed by the City to be
accurate and reliable. Information other than that obtained from official records of the City has not been independently
confirmed or verified by the City and its accuracy is not guaranteed.
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Neither this Official Statement nor any statements that may have been or that may be made orally or in writing are to be
construed as a part of a contract with the original purchasers or subsequent owners of the Obligations. This Official
Statement has been prepared by the City and executed for and on behalf of the City by its Deputy City
Manager/Chief Financial Officer, as indicated below.
CITY OF MESA, ARIZONA
By:
Deputy City Manager/Chief Financial Officer
A-1
APPENDIX A
CITY OF MESA, ARIZONA
GENERAL ECONOMIC AND DEMOGRAPHIC INFORMATION
General
The City is the third largest city in the State and the 37th largest city in the United States. Founded in 1878 and
incorporated in 1883, the City had an estimated 2025 population of 529,391. The following table illustrates the City’s
population statistics since 1990, along with the population statistics for the County and the State, respectively.
POPULATION STATISTICS
Year
City of Mesa
Maricopa County
State of Arizona
2025 Estimate (a)
529,391
4,787,790
7,718,747
2020 Census
504,258
4,420,568
7,151,502
2010 Census
439,041
3,817,117
6,392,017
2000 Census
396,375
3,072,149
5,130,632
1990 Census
288,091
2,122,101
3,665,228
(a)
Estimate as of July 1, 2025 (published December 2025).
Source: U.S. Census Bureau, Population Division – Annual Estimates of the Resident Population, Arizona Office of
Economic Opportunity – State, County, Place Level Population Estimates for July 1, and U.S. Census Bureau
(2020, 2010, 2000 and 1990) – Census of Population and Housing.
The following table sets forth a record of the City’s geographic area since 1970.
SQUARE MILE STATISTICS
City of Mesa, Arizona
Year
Square
Miles
2020
140.44
2010
133.14
2000
125.00
1990
122.11
1980
66.31
1970
20.80
Municipal Government and Organization
The City operates under a charter form of government with citizens electing a Mayor and six City Councilmembers to set
policy for the City. In 1998, a voter initiative was approved changing the way that City Councilmembers are elected from
an at-large to a district system. Six districts were created in March 2000 with City Councilmembers serving staggered
four-year terms. The Mayor continues to be elected at-large every four years. The Mayor and City Councilmembers are
elected on a non-partisan basis, and the Vice Mayor is a City Councilmember selected by the City Council.
The City Manager, who has full responsibility for carrying out City Council policies and administering City operations,
is appointed by the City Council. The City Manager is responsible for the appointment of City department heads.
Additionally, City employees are hired under merit system procedures as specified in the City Charter. The various
functions of City government and operations are undertaken by City employees working in the various City departments.
A-2
City Administrative Staff
Scott Butler, City Manager. Mr. Butler was appointed by the City Council to serve as City Manager effective June 1,
2025. Prior to being appointed, Mr. Butler served as Assistant City Manager. Under the City’s council-manager form of
government, the City Manager serves as the chief operating officer of the City, one of the fastest-growing cities of the
United States. Mr. Butler implements the policies established by the City Council and coordinates all City departments
and other affairs assigned by the City Charter.
Prior to joining the City in 2005, Mr. Butler served in variety of roles at the local, state and federal level. He served as
policy advisor for the Judiciary Committee of the Georgia House of Representatives and as a media/elected official
outreach liaison for the White House Office of Scheduling and Advance. While serving as a Senior Policy Advisor to the
Georgia Secretary of State, he helped lead the department’s efforts to implement the first statewide electronic voting
system in the nation.
Mr. Butler has a Bachelor of Arts degree in Political Science from the University of Georgia and a Master of Public
Administration degree from Arizona State University.
Michael Kennington, Deputy City Manager/Chief Financial Officer. Mr. Kennington was hired as the City’s Chief
Financial Officer in July 2012 and was promoted to Deputy City Manager/Chief Financial Officer in 2019. He is
responsible for the City’s overall financial policies, strategies, planning, and forecasts. Mr. Kennington has a Master of
Accountancy degree and Master of Business Administration degree from Brigham Young University and is a Certified
Public Accountant.
Economy
The City’s major economic sectors are comprised of manufacturing, non-manufacturing, government, and commercial
activities (including construction and commerce), and tourism.
The following table sets forth unemployment rate averages for the United States, the State, the County and the City for
the current year and most recent five years for which such information is available.
UNEMPLOYMENT RATE AVERAGES
Year
United
States
State of
Arizona (a)
Maricopa
County (a)
City of
Mesa (a)
2026 (b)
2025 (c)
4.3%
4.2%
3.7%
3.6%
2024
4.0
3.6
3.2
3.1
2023
3.6
3.7
3.2
3.2
2022
3.7
3.7
3.3
3.3
2021
5.4
5.0
4.6
4.5
(a)
This table includes restated data: Local Area Unemployment Statistics (“LAUS”) program data is intermittently
revised to incorporate new population controls, updated inputs, re-estimation of models, and adjustment to new
census division and national control totals.
(b)
Data is not seasonally adjusted, is an average through [__], 2026.
(c)
Data is not seasonally adjusted, is preliminary and is an average through November 2025 for the National
Unemployment rate and through September 2025 for LAUS data.
Source: U.S. Department of Labor, Bureau of Labor Statistics– Local Area Unemployment Statistics and National Labor
Force Statistics. Data accessed January 7, 2026.
A-3
Manufacturing and Non-Manufacturing Employment
A list of significant employers located within the City is set forth in the following table.
MAJOR EMPLOYERS
City of Mesa, Arizona
Employer
Description
Approximate
Employment
Mesa Unified School District No. 4
Public Education
7,977
Banner Health
Hospital Network
6,468
City of Mesa
Government
4,919
The Boeing Company
Helicopter Manufacturing and Assembly
4,353
Walmart
Retail
2,988
Maricopa County Community College
Higher Education
1,889
Dexcom
Medical Equipment and Supplies
1,867
Fry’s Food Store
Retail
1,232
Home Depot
Retail
1,132
Maricopa County Government
Government
1,094
Source: City of Mesa, Arizona - Annual Comprehensive Financial Report for Fiscal Year 2024/25.
Mesa Gateway Airport and the Airport/Campus District
Mesa Gateway Airport (formerly known as Williams Gateway Airport, and subsequently Phoenix-Mesa Gateway Airport)
has three runways (10,401 feet, 10,201 feet, and 9,300 feet) and a passenger terminal. Mesa Gateway Airport is a small-
hub commercial airport serving the Mesa metropolitan area with direct service to more than 45 destinations currently
provided by Allegiant Air and Sun Country Airlines.
Mesa Gateway Airport is also developing as an international aerospace center with aircraft maintenance, modification,
testing, and pilot training. Currently more than 60 companies operate on the airport, including manufacturer service
centers for Gulfstream, Cessna and Embraer. In 2021, the Arizona Department of Transportation completed an economic
impact study of the State’s airport system, including Mesa Gateway Airport. According to that study, the airport’s
economic benefit (including all multiplier effects) totaled $1.8 billion, with $829.4 million in economic activity generated
by on-airport activity, creating and supporting 10,224 jobs in the area.
Mesa Gateway Airport is owned and operated by the Mesa Gateway Airport Authority whose members include the City,
Town of Gilbert, Town of Queen Creek, the City of Apache Junction, and the Gila River Indian Community.
Adjacent to Mesa Gateway Airport, the Airport/Campus District serves approximately 8,700 students. The campus
includes five higher education partners - Arizona State University (“ASU”) Polytechnic campus, Chandler-Gilbert
Community College, Embry-Riddle Aeronautical University, Mesa Community College and UND Aerospace (University
of North Dakota, John D. Odegard School of Aerospace Sciences – Phoenix Flight Training Center). The ASU
Polytechnic campus is 600-acres and includes advanced learning labs and classroom space, faculty offices and a 450-seat
auditorium.
State Route 24, a one-mile freeway segment extending access from the existing State Route 202 freeway eastward, was
completed May 2014. This freeway segment lies immediately north of Mesa Gateway Airport and provides freeway
access to the east side of the airport property. Such access is beneficial for the economic development of properties
located on, and adjacent to, Mesa Gateway Airport, as well as future terminal development on the east side.
A-4
Construction
The following tables set forth annual records of building permit values and new housing permits issued within the City.
VALUE OF BUILDING PERMITS
City of Mesa, Arizona
($000’s omitted)
Fiscal Year
Residential
Commercial
Other
Total
2025/26 (a)
$260,782
$ 612,106
$ 51
$ 872,939
2024/25
652,684
2,759,724
548
3,412,956
2023/24
596,590
1,579,275
2,465
2,178,330
2022/23
379,304
2,620,529
3,035
3,002,868
2021/22
894,064
1,348,806
3,112
2,245,982
2020/21
740,870
1,074,928
4,499
1,820,297
(a)
Partial Fiscal Year data from July 1, 2025, through December 31, 2025.
Construction is valued on the basis of estimated cost, not on market price or value of construction at the time the permit
is issued. The date on which the permit is issued is not to be construed as the date of construction.
NEW HOUSING PERMITS
City of Mesa, Arizona
Fiscal Year
Total New
Housing Units
2025/26 (a)
467
2024/25
1,300
2023/24
1,167
2022/23
735
2021/22
2,318
2020/21
2,151
(a)
Partial Fiscal Year data from July 1, 2025, through December 31, 2025.
The date on which the permit is issued is not to be construed as the date of construction.
Retail
The following table sets forth a record of retail sales activity within the City.
TAXABLE RETAIL SALES
City of Mesa, Arizona
Fiscal Year
Retail Sales
2025/26 (a)
$3,646,098,646
2024/25
8,654,798,381
2023/24
8,438,742,187
2022/23
8,483,005,834
2021/22
8,134,561,575
2020/21
7,171,741,191
(a)
Partial Fiscal Year data from July 1, 2025, through November 30, 2025.
A-5
Tourism
The tourism sector is a significant contributor to the City’s economy. The City’s hotels, motels, golf courses, parks and
playgrounds, restaurants and retail shops provide tourists with accommodations and recreational facilities. There are
more than 60 hotels in the City, with all of the major hotel brands represented. The table below contains a listing of
certain hotels located within the City.
HOTELS
City of Mesa, Arizona
Hotel Name
Number of
Sleeping Rooms
Phoenix Marriott Mesa
275
Hilton Phoenix East-Mesa
260
Holiday Inn Mesa
246
Dobson Ranch Inn & Suites
213
Arizona Golf Resort
187
Sheraton Mesa at Wrigleyville West
180
Westgate Painted Mountain
152
Hyatt Place Phoenix-Mesa
152
Marriott Courtyard
149
Best Western Mezona Inn
132
Country Inn and Suites
126
La Quinta (West)
125
Days Hotel Mesa-Gilbert
120
Quality Inn/Suites
119
Source: Mesa Convention and Visitors Bureau.
The City owns and operates the Mesa Convention Center (the “Convention Center”) which offers convention facilities.
The Convention Center is situated on a 17-acre site adjacent to the Phoenix Marriott Mesa. The Convention Center
includes Centennial Hall, which is a multipurpose facility of approximately 15,000 square feet, and the Centennial
Conference Center and the Rendezvous Center, which offer an additional 18,500 square feet of meeting space. The City
operates and maintains 58 parks, including 11 sports complexes and 133 basins covering more than 2,000 acres. In
addition, the City manages 9 aquatic facilities, 2 Major League Baseball Spring Training stadiums and a par 72, 18-hole
championship golf course. The award-winning Mesa Arts Center facility opened in spring of 2005 and is located in the
downtown area of the City. The Mesa Arts Center is a 212,775 square-foot performing arts, visual arts and arts education
facility, the largest and most comprehensive arts center in the State.
Agriculture
Although still a contributor to the economic base, the agricultural sector is no longer a significant factor of the City’s
economy due to the industrial, commercial, and residential development which has occurred over the past 30 years. The
principal products of the City’s remaining agricultural sector are dairy and citrus.
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B-1
APPENDIX B
CITY OF MESA, ARIZONA
FINANCIAL DATA
Current Year Statistics (For Fiscal Year 2025/26)
City of Mesa, Arizona
Total General Obligation Bonds to be Outstanding
$ 512,785,000 *(a)
Total Utility Systems Revenue Bonds to be Outstanding
771,697,065 *(b)
Total Utility Systems Revenue Obligations to be Outstanding
1,138,910,000 *(c)
Total Street and Highway User Revenue Bonds Outstanding
7,660,000 (d)
Total Excise Tax Revenue Obligations Outstanding
43,355,000 (e)
Net Assessed Limited Property Value
5,166,189,909 (f)(g)
Estimated Net Full Cash Value
87,660,089,888 (g)(h)
(a)
Represents all general obligation bonds of the City. See “STATEMENTS OF BONDS OUTSTANDING – General
Obligation Bonds to be Outstanding” in this appendix and “THE OBLIGATIONS – Other Expected Debt
Offerings”.
(b)
Represents all utility systems revenue bonds to be outstanding net of the Bonds Being Refunded by the Obligations.
See “STATEMENTS OF BONDS OUTSTANDING – Utility Systems Revenue Bonds to be Outstanding” in this
appendix.
(c)
Represents all utility systems revenue obligations to be outstanding including the Obligations, the 2026A
Obligations and the 2026B Obligations. See “STATEMENTS OF BONDS OUTSTANDING – Utility Systems
Revenue Obligations to be Outstanding” in this appendix and “THE OBLIGATIONS – Other Expected Debt
Offerings”.
(d)
Represents all street and highway user revenue bonds outstanding. See “STATEMENTS OF BONDS
OUTSTANDING – Street and Highway User Revenue Bonds Outstanding” in this appendix.
(e)
Represents all excise tax revenue obligations outstanding. See “STATEMENTS OF BONDS OUTSTANDING –
Excise Tax Revenue Obligations Outstanding” in this appendix.
(f)
Net of property exempt from taxation; reflects application of applicable assessment ratios.
(g)
The City’s preliminary Fiscal Year 2026/27 Net Assessed Limited Property Value is estimated at $5,457,986,697,
a change of approximately 5.65% from the Fiscal Year 2025/26 Net Assessed Limited Property Value. The City’s
preliminary Fiscal Year 2026/27 estimated net full cash value, as defined in footnote (h), is estimated at
$92,024,768,131, a change of approximately 4.98% from the Fiscal Year 2025/26 estimated net full cash value.
Valuations are not official until approved by the Board of Supervisors of the County on or before the third Monday
in August for each Fiscal Year. Although the final valuations are not expected to differ materially from the
estimated valuations, they are subject to positive or negative adjustments until approved by the Board of
Supervisors.
(h)
Estimated net full cash value is the total market value of the property less unsecured personal property and less
estimated exempt property within the City, as projected by the Arizona Department of Revenue, Division of
Property and Special Taxes.
Source: State and County Abstract of the Assessment Roll, Arizona Department of Revenue.
* Subject to change.
B-2
STATEMENTS OF BONDS OUTSTANDING
General Obligation Bonds to be Outstanding (a)
City of Mesa, Arizona
Issue
Series
Purpose
Original
Amount
Maturity
Date Range
Balance
Outstanding
2012
Various Purpose
$ 27,290,000
7-1-13/32
$ 14,875,000
2013
Various Purpose
59,960,000
7-1-14/33
32,525,000
2014
Various Purpose
37,550,000
7-1-15/34
18,800,000
2015
Various Purpose
13,690,000
7-1-16/35
4,315,000
2016A
Refunding
20,475,000
7-1-17/27
10,485,000
2016B
Refunding
22,935,000
7-1-17/29
10,495,000
2016
Various Purpose
37,700,000
7-1-17/36
23,100,000
2017
Refunding
47,450,000
7-1-17/29
27,025,000
2017
Various Purpose
47,180,000
7-1-18/37
29,630,000
2018
Various Purpose
16,120,000
7-1-19/38
5,525,000
2019
Various Purpose
33,065,000
7-1-20/39
12,965,000
2020
Various Purpose
22,075,000
7-1-21/40
8,825,000
2020
Refunding
23,900,000
7-1-21/30
18,530,000
2021
Various Purpose
19,030,000
7-1-21/41
1,685,000
2021
Refunding
14,495,000
7-1-21/31
10,260,000
2022
Various Purpose
22,620,000
7-1-23/32
8,100,000
2023
Various Purpose
83,340,000
7-1-24/43
68,665,000
2025
Various Purpose
154,265,000
7-1-25/45
150,705,000
Total General Obligation Bonds Outstanding
$456,510,000
Plus the 2026 GO Bonds
56,275,000*
Total General Obligation Bonds to be Outstanding
$512,785,000*
(a)
The City expects to offer the 2026 GO Bonds pursuant to a separate official statement in May 2026.
* Subject to change.
B-3
Utility Systems Revenue Bonds to be Outstanding
City of Mesa, Arizona
Issue
Series
Purpose
Original
Amount
Maturity
Date Range
Balance
Outstanding
2008
Utility Improvement
52,875,000
7-1-23/32
$ 650,000
2009
WIFA Loans
3,758,810
7-1-10/29
667,065
2013
Utility Improvement
47,290,000
7-1-37
47,290,000
2014
Utility Improvement
36,385,000
7-1-37/38
36,385,000
2014
Refunding
102,945,000
7-1-18/30
77,880,000
2015
Utility Improvement
30,220,000
7-1-20/39
23,445,000
2016
Refunding
138,035,000
7-1-25/32
134,660,000
2016
Utility Improvement
90,500,000
7-1-20/40
83,925,000
2017
Refunding
75,435,000
7-1-23/28
43,620,000
2017
Utility Improvement
123,875,000
7-1-21/41
112,050,000
2018
Utility Improvement
112,120,000
7-1-19/42
91,120,000
2019A
Utility Improvement
93,825,000
7-1-20/43
76,730,000
2019B
Refunding
54,225,000
7-1-20/33
41,560,000
2019C
Refunding
79,335,000
7-1-20/35
58,055,000
2020
Utility Improvement
71,070,000
7-1-21/44
60,480,000
2020
Refunding
37,675,000
7-1-34
37,675,000
2021
Utility Improvement
34,685,000
7-1-22/45
27,395,000
2021
Refunding
44,870,000
7-1-35
44,870,000
Total Utility Systems Revenue Bonds Outstanding
$998,457,065
Less the Bonds Being Refunded
(226,760,000) *
Total Utility Systems Revenue Bonds to be Outstanding
$771,697,065 *
Utility Systems Revenue Obligations to be Outstanding (a)
City of Mesa, Arizona
Issue
Series
Purpose
Original
Amount
Maturity
Date Range
Balance
Outstanding
2021
Utility Improvement
$ 14,015,000
7-1-23/45
$ 11,015,000
2022A
Utility Improvement
54,705,000
7-1-29/46
54,705,000
2022B
Utility Improvement
16,075,000
7-1-23/28
7,955,000
2022C
Refunding
57,655,000
7-1-36
57,655,000
2023
Utility Improvement
193,710,000
7-1-24/48
183,855,000
2025
Utility Improvement
295,465,000
7-1-26/49
295,465,000
Total Utility Systems Revenue Obligations Outstanding
$ 610,650,000
Plus the Obligations
206,425,000 *
Plus the 2026A Obligations
168,100,000 *
Plus the 2026B Obligations
153,735,000 *
Total Utility Systems Revenue Obligations to be Outstanding
$1,138,910,000 *
(a)
The City expects to offer the 2026A Obligations and 2026B Obligations pursuant to a separate official statement
in June 2026.
* Subject to change.
B-4
Street and Highway User Revenue Bonds Outstanding
City of Mesa, Arizona
Issue Series
Purpose
Original
Amount
Maturity
Date Range
Balance
Outstanding
2015
Refunding
$17,555,000
7-1-24/27
$7,660,000
Total Street and Highway User Revenue Bonds Outstanding
$7,660,000
Excise Tax Revenue Obligations Outstanding
City of Mesa, Arizona
Issue Series
Purpose
Original
Amount
Maturity
Date Range
Balance
Outstanding
Senior Obligations:
2020
ASU Project
$36,010,000
7-1-21/40
$30,255,000
Subordinate Obligations:
2012
Mesa Gateway Airport Authority
19,220,000
7-1-14/38
13,100,000
Total Excise Tax Revenue Obligations Outstanding
$43,355,000
Other Indebtedness
City of Mesa, Arizona
The City has other obligations which are payable from various City funds, including purchase obligations and other
contractual commitments. For additional information with respect to such obligations, please refer to Note 9 of the City’s
Audited General Purpose Financial Statements for the Fiscal Year Ended June 30, 2025, contained in APPENDIX D of
this Official Statement.
Pensions and Other Post Employment Benefits
City of Mesa, Arizona
All benefitted employees of the City are covered by one of three pension systems. The Arizona State Retirement System
(“ASRS”) is for the benefit of the employees of the state and certain other governmental jurisdictions. All benefited City
employees, except sworn fire and police personnel and the City Council, are included in the plan that is a multiple-
employer cost-sharing defined benefit pension plan. All sworn fire and police personnel participate in the Public Safety
Personnel Retirement System (“PSPRS”) that is an agent multiple-employer defined benefit pension plan. The Mayor
and City Council contribute to the State’s Elected Officials Retirement Plan (“EORP”) that is also a multiple-employer
cost-sharing pension plan. The EORP is not described herein because of its relative insignificance to the City’s financial
statements.
In addition, eligible employees are covered by other post employment benefit plans. All sworn fire and police personnel
participate in the PSPRS that is an agent multiple-employer defined benefit health insurance premium benefit (“OPEB”)
plan. Eligible City employees also participate in the City’s defined benefit medical plan OPEB plan. Eligible City
employees covered by Arizona State Retirement System also participate in the ASRS OPEB plan. The ASRS OPEB plan
is not described below because of its relative insignificance to the financial statements.
At June 30, 2025, the City reported the following unfunded liabilities related to pensions and OPEB for all plans to which
it contributes (in thousands):
Net Pension and OPEB Liabilities
Plan
Governmental
Activities
Business-Type
Activities
ASRS
$ 219,454
$ 55,934
PSPRS-Fire
263,264
-
PSPRS-Police
497,926
-
OPEB-Police
11,073
-
City OPEB
881,607
82,425
Total (a)
$1,873,324
$138,359
(a)
Totals may not add due to rounding.
B-5
For a more detailed description of these plans and the City contributions to the various plans, please refer to Note 16 of
the City’s Audited General Purpose Financial Statements for the Fiscal Year Ended June 30, 2025, contained in
APPENDIX D of this Official Statement.
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C-1
APPENDIX C
CITY OF MESA, ARIZONA
UTILITY SYSTEMS INFORMATION
Electric System
The City Energy Resources Department’s Electric Utility System (“Electric System”) has been in operation since 1917.
The Electric System’s electric service area (“ESA”) covers approximately five and one half square miles including the
downtown business center of the City. As of fiscal year ending June 30 (“Fiscal Year”) 2025, the Electric System served
a total of 18,470 customers comprised of 15,669 residential and 2,801 commercial and other customers. The system
experienced a peak integrated hourly demand in calendar year 2025 of 89.04 megawatts (“MW”s) in August and Fiscal
Year 2024/25 system energy requirements of 333,256 megawatt hours (“MWh”) were metered at the Rogers Substation,
the Electric System’s point of supply.
During Fiscal Year 2024/25, the Electric System’s power and transmission resource scheduling and utilization were
managed through its participation in the Resources Management Services program (“RMS”) administered by the Western
Area Power Administration (“Western”) of the United States Department of Energy. Western provided scheduling,
dispatching and accounting functions and purchased supplemental power, as needed, on a monthly, daily and real-time
basis. The RMS group consists of the active members of the City, Electrical District Number Two (ED-2), the Town of
Fredonia, Arizona, and Aha Macav Power Service. As part of the RMS group, Western pools these entities’ loads and
resources to achieve the benefits of diversity and greater economies of scale in purchased power transactions.
The Electric System is pursuing a large, utility scale solar project that would be located outside of the City’s service
territory. This utility scale solar project has the potential to capture economies of scale, such that the energy purchased
from the project is anticipated to be less expensive than the current energy available through conventional market
purchases (and thereby reducing the overall cost of electricity for the City’s customers). The project also includes a
Battery Energy Storage System (BESS), which will allow the City to dispatch stored energy during peak times and avoid
the purchase of inflated market prices during times of high power demand. Negotiations are ongoing and approaching
completion, and the City expects to add these resources to its portfolio during Fiscal Year 2027/28.
The supply-side resource portfolio of the Electric System for Fiscal Year 2024/25 was comprised of long-term purchased
power agreements and short-term seasonal and daily power market purchases. The Electric System contracts for long-
term power based on the results of competitive requests for proposals, and the executed contracts from the proposal
process are included in the table below. Additionally, the City held its first reverse auction for short-term power purchases
for specific months. The reverse auction allowed the City to set a cap price per MWh, and the counterparties underbid
each other to win the bid and sign a contract. The executed contracts from the reverse auction process are included in the
table below. Furthermore, as a member of RMS, the City has access to the wholesale power supply market and the ability
to engage in ad hoc, short-term firm and non-firm transactions. Power supply resources for the Electric System as of
January 2026 are as follows:
Maximum Contract
MW (a)
Electric Power Resources
Product
Delivery
Point
Start Date
Expiration
Dates
Summer
Winter
Western Area Power Administration
Parker-Davis Project
Hydro
Sep-2028
10.4
8.0
Colorado River Storage Project
Hydro
Sep-2057
4.3
3.4
BP Energy Company
6x16
WW500
Jun-2025
Sep-2026
15.0
0.0
Citigroup Energy Inc.
7x16
PPK
Jul-2025
Aug-2027
10.0
0.0
7x24
Mead
Oct-2026
Oct-2026
0.0
10.0
Constellation Energy Generation, LLC
7x24
Mead
May-2025
Apr-2028
15.0
15.0
C-2
Maximum Contract
MW (a)
Electric Power Resources
Product
Delivery
Point
Start Date
Expiration
Dates
Summer
Winter
Brookfield Renewable Trading and
Marketing LP
6x16
Mead
Jun-2026
Sep-2026
15.0
0.0
7x24
Mead
Jan-2026
Jan-2026
0.0
5.0
7x24
Mead
Feb-2026
Feb-2026
0.0
5.0
7x24
Mead
May-2026
May-2026
0.0
5.0
7x24
Mead
Dec-2026
Dec-2026
0.0
7.0
7x24
Mead
May-2027
May-2027
0.0
10.0
Salt River Project Irrigation &
Electrical District
Firm with
RECs
PPK
Jan-2025
Dec-2034
16.0
14.0
Utility Scale Solar
Solar
ED-5
Dec-2027
Dec-2047
25.0
25.0
BESS
ED-5
Dec-2027
Dec-2047
20.0
20.0
Onyx Solar Group LLC
Solar
ESA
Aug-2025
Oct-2050
2.8
2.8
Solar
ESA
Mar-2022
Dec-2047
806 kW
806 kW
(a)
Summer is considered to be June 1st to September 30th and Winter is considered to be the remainder of the year.
The City’s purchased power and energy resources are contractually transmitted over Western’s Parker-Davis and Pacific-
Intertie transmission systems. Beginning January 1, 2024, with Western’s “One Transmission Rate” (“OTR”) project,
the City was able to reduce its transmission expenses substantially by rolling its point-to-point transmission resources (15
MW from West Wing 500 to Pinnacle Peak 230) into its Network Integrated Transmission Service resources which
eliminated the capacity charges for the point-to-point resources (an annual savings of $302,000). Power is then
transmitted and distributed to the City’s service area through associated distribution transformers and lines. As of January
2026, there were approximately 66 miles of overhead primary and approximately 109 miles of underground primary
distribution lines that distribute power to the City’s end-use customers.
The table below contains information with respect to the City’s Electric System.
Electric System Fees and Charges (a)
Description of Electric Services
Fee/Charge (b)
Fiscal Year 2024/25
Residential Electric Service = E1.1
Monthly Bill Per Meter
May 1 to October 31st
Customer Charge
$19.50
Usage Charge
First 1200 kWh
$0.05231 per kWh
> 1200 kWh
$0.05027 per kWh
November 1 to April 30th
Customer Charge
$16.75
Usage Charge
First 800 kWh
$0.04317 per kWh
> 800 kWh
$0.03478 per kWh
Energy Cost Adjustment Factor (c)
Minimum
$19.50
Non-Residential Service = E3.1
Monthly Bill Per Meter
May 1 to October 31st
Customer Charge (d)
$19.72
C-3
Description of Electric Services
Fee/Charge (b)
Fiscal Year 2024/25
Demand Charge
Generation
First 50 kW
$0.00 per kW
>50 kW
$3.52 per kW
Distribution
First 50 kW
$0.00 per kW
>50 kW
$0.3968 per kW
Energy Cost Adjustment Factor (c)
Distribution
First 15,000 kWh
$0.06491 per kWh
15,001-75,000 kWh
$0.04866 per kWh
>75,000 kWh
$0.02901 per kWh
November 1 to April 30th
Customer Charge (d)
$19.72
Demand Charge
Generation
First 50 kW
$0.00
>50 kW
$3.20 per kW
Distribution
First 50 kW
$0.00
>50 kW
$0.1150 per kW
Energy Cost Adjustment Factor (c)
Distribution
First 15,000 kWh
$0.05375 per kWh
15,001-75,000 kWh
$0.03994 per kWh
>75,000 kWh
$0.02060 per kWh
(a)
The information in this table reflects only certain basic fees and charges of the City’s Electric System and is not a
comprehensive statement of all such fees.
(b)
The City may require special service agreements for consumers requiring large electric loads.
(c)
The Energy Cost Adjustment Factor is a monthly per kilowatt hours (“kWh”) charge that was implemented
November 1, 2004, which allows for the full recovery of the costs of fuel and purchased power. The average Fiscal
Year 2024/25 factor for residential was $0.09907 per kWh and the average Fiscal Year 2024/25 factor for non-
residential was $0.08772 per kWh.
(d)
Monthly Customer Charge for single phase E3.1 customers is $19.72. Monthly Customer Charge for three phase
E3.1 customers is $25.74.
The information above reflects only certain basic fees and charges of the City’s Electric System and is not a
comprehensive statement of all such fees.
Electric System Rate Changes
(2020 – 2026)
Date
Rate Change
January 1, 2026
$1.00 & $5.00
(a)
February 1, 2025
$2.75 & $5.00
(b)
February 1, 2024
$2.25 & $5.00
(c)
January 1, 2023
$0.00
February 1, 2022
$1.50 & $2.50
(d)
January 1, 2021
$1.00
(e)
August 1, 2020
$1.00
(f)
C-4
(a)
For residential customers, the monthly fixed component of rates (Electric System Service Charge) was increased
by $1.00. For commercial customers, the monthly fixed component of rates was increased by $5.00.
(b)
For residential customers, the monthly fixed component of rates (Electric System Service Charge) was increased
by $2.75. For commercial customers, the monthly fixed component of rates was increased by $5.00.
(c)
For residential customers, the monthly fixed component of rates (Electric System Service Charge) was increased
by $2.25. For commercial customers, the monthly fixed component of rates was increased by $5.00.
(d)
For residential customers, the monthly fixed component of rates (Electric System Service Charge) was increased
by $1.50. For commercial customers, the monthly fixed component of rates was increased by $2.50.
(e)
For residential and commercial customers, the monthly fixed component of rates (Electric System Service Charge)
was increased by $1.00.
(f)
For residential customers only, the monthly fixed component of rates (Electric System Service Charge) was
increased by $1.00.
Electric System Customers
(Fiscal Years 2020/21 - 2024/25) (a)
Fiscal Year
Residential
Customers
Commercial
Customers
Other
Customers
Total
Customers
2024/25
15,669
2,575
226
18,470
2023/24
15,383
2,546
225
18,154
2022/23
15,082
2,546
223
17,851
2021/22
14,782
2,565
226
17,573
2020/21
14,778
2,517
224
17,519
(a)
Electric System customers as Fiscal Year end.
The following is a list of the ten largest Electric System customers in alphabetical order for Fiscal Year 2024/25.
Ten Largest Electric System Customers (a)
Arizona State University - East
Centurylink, Inc.
Ensemble Mesa Partners, LLC (Delta Marriott)
Epicurean Fine Food, Inc.
Mesa Arizona Temple
Mesa Cold Storage, Inc.
Mesa Public Schools
Rohrer Corporations
Valley Healing Group, Inc.
Valley Metro Rail
(a)
This represents an aggregation of all of the electric meters under each customer and so each entity may have
multiple meters and/or locations. The City receives electric services from the Electric System and records the
revenue as interdepartmental revenue.
The combined Fiscal Year 2024/25 Electric System fees/charges for the top ten Electric System customers set forth above
was $4.3 million, constituting approximately 8% of the total Fiscal Year 2024/25 Electric System operating revenue. No
individual Electric System customer above constitutes more than 2% of the total Fiscal Year 2024/25 Electric System
operating revenue. Additionally, while the list above is representative of the top ten Electric System customers as of
Fiscal Year 2024/25, customer consumption can fluctuate, among other things, with customer process changes, efficiency
enhancement, changes to business practices and locations, and the weather. This can result in yearly shifts in the rankings
of the specific customers. However, the City consistently uses budget forecasting methods to account for such variances.
The City also receives electric services from the Electric System and records the revenue as interdepartmental revenue.
For Fiscal Year 2024/25, Electric System interdepartmental revenues were $5.6 million. The City as a customer
constitutes approximately 10% of the total Fiscal Year 2024/25 Electric System operating revenue.
C-5
Natural Gas System
The City Energy Resources Department’s Natural Gas Utility System (“Natural Gas System”) has been in operation since
1917 and was ranked by the American Public Gas Association (“APGA”) as of Fiscal Year 2024/25, as the 11th largest
publicly-owned natural gas utility system in the United States in terms of customers served. The Natural Gas System’s
service territory is comprised of two major service areas: 1) the City Service Area (“CSA”) of approximately 90 square
miles within the City limits; and 2) the Magma Service Area (“MSA”), a 236 square mile system located southeast of the
City in Pinal County, Arizona. As of Fiscal Year 2024/25 year end, the City’s combined Natural Gas System operated
1,552 miles of distribution mains and served approximately 80,161 total customers comprised of 77,474 residential and
2,687 commercial and other customers.
The City’s Natural Gas System’s natural gas supplies and associated contracts have been structured to fulfill not only
existing system requirements but anticipate system growth and peak needs of that growth. During Fiscal Year 2024/25,
the Natural Gas System’s natural gas supplies were provided by BP Energy Company (“BP”), ConocoPhillips (“COP”),
and Tenaska (“TMV”). The natural gas supplies provided by BP, COP, and TMV came from both the San Juan Basin in
New Mexico and the Permian Basin in West Texas through five separate contracts.
The natural gas was transported via a major pipeline system owned and operated by El Paso Natural Gas Company LLC,
a Kinder Morgan company (“EPNG”). EPNG provided the transport service under the terms and conditions of
Transportation Service Agreements (“TSA”) No. FT2AF000 and No. FT2AE000 that were effective February 1, 2013.
During Fiscal Year 2013/14, TSA No. FT2AE000 was extended for 10 years effective July 1, 2014, given that it was due
to expire June 30, 2014; in 2018, TSA No. FT2AE000 was amended, and an additional year was added to the contract
term. In March 2025, Mesa further extended TSA No. FT2AE000 until June 30, 2075. TSA No. FT2AF000 continues
on an “evergreen” year-to-year basis. Additionally, in early 2025, the City executed TSA No. 62138-FT1EPNG. The
TSAs provide the City’s Natural Gas System with the ability to transport its total, daily natural gas supplies to the current
six (6) Natural Gas System-owned gate stations located in both the CSA and MSA. Additionally, the City is expanding
the Clausen Gate station to accommodate additional capacity from the newest TSA, with completion anticipated in the
third quarter of 2026. Although transmission is anticipated to be adequate to accommodate normal growth in the Natural
Gas System, constraints on interstate and regional transmission have been identified as potential limiting factors. In late
2025, to address future capacity needs, the City joined major electric and natural gas utilities in Arizona in subscribing to
capacity on Energy Transfer’s 516-mile pipeline expansion from Texas to Arizona, expected to be in service in the fourth
quarter of 2029.
For Fiscal Year 2024/25, the Natural Gas System experienced a total coincident hourly system peak demand of 1,048
dekatherms per hour (“DTh/hr”) on January 14, 2025 in the CSA and a peak demand of 696 DTh/hr on January 14, 2025
in the MSA. Total natural gas supply deliveries at the Natural Gas System’s gate stations during Fiscal Year 2024/25
were 3,956,694 dekatherms (“DTh”). Facilities and distribution infrastructure necessary to provide service to the majority
of the CSA has been completed with the exception of infill projects. Continued growth of the Natural Gas System,
especially in the MSA will require the extension of distribution mainlines and associated infrastructure in order to serve
developing residential and commercial areas.
The following tables provide information with respect to the City’s Natural Gas System.
Natural Gas System Fees and Charges (a)
Description of Natural Gas Services
Fee/Charge
Fiscal Year 2024/25
City Service Area Residential Gas Service = G1.1
May 1st through October 31st
Gas System Service Charge
$17.31
First 25 Therms
$0.7440 / therm
All Additional Therms
$0.3681 / therm
Natural Gas Supply Cost Adjustment (b)
November 1st through April 30th
Gas System Service Charge
$20.24
First 25 Therms
$0.7440 / therm
All Additional Therms
$0.8072 / therm
Natural Gas Supply Cost Adjustment (b)
City Service Area General Gas Service = G3.1
C-6
Description of Natural Gas Services
Fee/Charge
Fiscal Year 2024/25
May 1st through October 31st
Monthly Service Charge
$44.66
First 1500 Therms
$0.5929 / therm
All Additional Therms
$0.4366 / therm
Natural Gas Supply Cost Adjustment (b)
November 1st through April 30th
Monthly Service Charge
$54.34
First 1500 Therms
$0.6421 / therm
All Additional Therms
$0.6308 / therm
Natural Gas Supply Cost Adjustment (b)
Magma Service Area Residential Gas Service = GM1.1
May 1st through October 31st
Gas System Service Charge
$18.30
First 25 Therms
$0.8203 / therm
All Additional Therms
$0.4058 / therm
Natural Gas Supply Cost Adjustment (b)
November 1st through April 30th
Gas System Service Charge
$21.54
First 25 Therms
$0.8203 / therm
All Additional Therms
$0.8901 / therm
Natural Gas Supply Cost Adjustment (b)
Magma Service Area General Gas Service = GM3.1
May 1st through October 31st
Monthly Service Charge
$51.48
First 1500 Therms
$0.7324 / therm
All Additional Therms
$0.5393 / therm
Natural Gas Supply Cost Adjustment (b)
November 1st through April 30th
Monthly Service Charge
$63.41
First 1500 Therms
$0.7929 / therm
All Additional Therms
$0.7790 / therm
Natural Gas Supply Cost Adjustment (b)
(a)
The information in this table reflects only certain basic fees and charges of the City’s Natural Gas System and is
not a comprehensive statement of all such fees.
(b)
The Natural Gas Supply Cost Adjustment allows for the full recovery of the cost of natural gas. It is a monthly per
billed therm charge. The average factor for Fiscal Year 2024/25 for residential and general service was $0.35066
per therm.
Natural Gas System Rate Changes
(2020-2026)
Date
Rate Changes
January 1, 2026
$0.00 & $3.00
(a)
March 1, 2025
$0.00 & $3.00
(b)
February 1, 2024
$0.75 & $2.00
(c)
January 1, 2023
$0.75 & $2.00
(d)
February 1, 2022
$0.50
(e)
January 1, 2021
$0.25 & $2.00
(f)
August 1, 2020
$0.75 & $2.00
(g)
(a)
The increase in the monthly fixed component of rates (Service Charge) affected non-residential customers ($3.00).
(b)
The increase in the monthly fixed component of rates (Service Charge) affected non-residential customers ($3.00).
C-7
(c)
The increase in the monthly fixed component of rates (Service Charge) affected both residential ($0.75) and non-
residential customers ($2.00).
(d)
The increase in the monthly fixed component of rates (Service Charge) affected both residential ($0.75) and non-
residential customers ($2.00).
(e)
The increase in the monthly fixed component of rates (Service Charge) affected only residential customers.
(f)
The increase in the monthly fixed component of rates (Service Charge) affected both residential ($0.25) and non-
residential customers ($2.00).
(g)
The increase in the monthly fixed component of rates (Service Charge) affected both residential ($0.75) and non-
residential customers ($2.00).
Natural Gas System Customers
(Fiscal Years 2020/2021 - 2024/25) (a)
Fiscal Year
Residential
Customers
Commercial
Customers
Other
Customers
Total
Customers
2024/25
77,474
2,448
239
80,161
2023/24
74,382
2,431
237
77,050
2022/23
71,725
2,394
236
74,355
2021/22
69,595
2,353
234
72,182
2020/21
67,718
2,331
232
70,281
(a)
Natural Gas System customers as of Fiscal Year end.
The following is a list of the ten largest Natural Gas System customers in alphabetical order for Fiscal Year 2024/25.
Ten Largest Natural Gas System Customers (a)
Arizona Corrugated Container
Banner Corporate Center - Mesa
Commercial Metals Company
Dexcom, Inc.
Mesa Organic Baking Company, Inc.
Mesa Public Schools
Pacific Standard Specialties, Inc.
Regional Public Transit Authority
The Boeing Company
Waste Management of Arizona, Inc.
(a)
This represents an aggregation of all of the gas meters under each customer and so each entity may have multiple
meters and/or locations. The City receives gas services from the Natural Gas System and records the revenue as
interdepartmental revenue.
The combined Fiscal Year 2024/25 Natural Gas System fees/charges for the top ten Natural Gas System customers set
forth above was $6.1 million, constituting approximately 9% of the total Fiscal Year 2024/25 Natural Gas System
operating revenue. No individual Natural Gas System customer constitutes more than 2% of the total Fiscal Year 2024/25
Natural Gas System operating revenue. Additionally, while the list above is representative of the top ten Natural Gas
System customers as of Fiscal Year 2024/25, customer consumption can fluctuate, among other things, with customer
process changes, efficiency enhancement, changes to business practices and locations and the weather. This can result in
yearly shifts in the rankings of the specific customers. However, the City consistently uses conservative budget
forecasting methods to account for such variances.
C-8
The City receives gas services from the Natural Gas System and records the revenue as interdepartmental revenue. For
Fiscal Year 2024/25 Natural Gas System interdepartmental revenues for the City were $1.2 million.
Water System
The water utility system of the City (the “Water System”) serves a population of approximately 500,000 within a service
area of 128 square miles. The Water System currently consists of approximately 161,204 residential, commercial, and
other connections. The City is well positioned to provide reliable delivery of quality water to meet current and future
demands.
Water is provided from three general sources: the Salt and Verde River system, the Colorado River via the Central Arizona
Project (“CAP”) canal, and groundwater wells. In addition, the City has rights to stored groundwater in an amount equal
to approximately five times its annual demand to mitigate future drought. The City is currently designated with a 100-
Year Assured Water Supply by the Arizona Department of Water Resources. The City has adequate supplies for normal
growth and has worked hard to provide current and future availability of water supplies for normal and drought conditions.
The City has also adopted regulations which require new large water users to acquire additional supplies to accommodate
their consumption.
Surface water from the Salt and Verde Rivers is treated at the Val Vista Water Treatment Plant. The plant is jointly owned
by the City and the City of Phoenix, Arizona (“Phoenix”). Currently, the plant has a treatment capacity of 220 million
gallons per day (“mgd”), of which the City owns 90 mgd. The plant produces approximately 38% of the water delivered
by the City.
Colorado River water is delivered to the City via the CAP Canal. The water is treated at the Brown Road Water Treatment
Plant (“BRWTP”) and the Signal Butte Water Treatment Plant (“SBWTP”). Currently the BRWTP has a treatment
capacity of 72 mgd and produces approximately 36% of the City’s water. The SBWTP has a treatment capacity of 24
mgd and produces approximately 21% of the City’s water. The SBWTP Phase II Expansion project is currently underway,
and construction is expected to be completed by February 2027. This expansion project will increase treatment capacity
from 24 to 48 mgd and add 8 million gallons of storage.
Groundwater wells produce the remaining 5% of the water delivered by the City on an average day. The City currently
has 32 active groundwater wells with a pumping capacity of approximately 90 mgd. The continued development of new
wells provides water supplies for future growth, but more importantly, provides redundancy in case of drought, scheduled
maintenance of surface water canals, or operational issues within the surface water system.
The record peak demand day occurred in 2005 and amounted to approximately 138 million gallons of water delivered.
The average demand in calendar year 2025 was approximately 90 mgd, with a peak day of approximately 135 million
gallons. The total current production capacity of the Water System is approximately 276 mgd, increasing to 300 mgd
upon completion of the Signal Butte expansion project.
In addition to the plants and wells outlined above, the City has 19 reservoirs and other storage facilities in the Water
System service area capable of holding 109 million gallons of treated water. The City has over 2,000 miles of water
distribution mains. A backflow prevention program has been implemented to protect the quality of the drinking water
from possible sources of contamination.
The City’s new “Integrated Water/Wastewater Master Plan” was recently completed in April of 2025, updating individual,
citywide water and wastewater master plans completed in 2018.
The City is actively involved in promoting water conservation. As public education plays a large role in conservation,
the City makes available a variety of free publications, participates in community and business sponsored events,
maintains a speaker’s bureau, and sponsors a youth education program. The City has also instituted a rebate program for
low water use landscaping and has generally incorporated an inclining block rate structure to encourage water
conservation.
Notwithstanding the foregoing, while the multiple sources of supply available to the City along with the various plants,
wells, reservoirs and other facilities may help to mitigate risk, future water availability, drought, flooding, environmental
conditions and other climate related conditions in Arizona and the other Colorado River Basin states are unpredictable
and subject to change. For example, since January 2022, Arizona has operated under a drought contingency plan and has
received a reduction to its deliveries of Colorado River water as described above. Additional reductions may result from
the federal Colorado River Post 2026 Operations process, including the development of new operational guidelines for
C-9
Lake Powell and Lake Mead by the Bureau of Reclamation in coordination with the Colorado River Basin states. The
impacts associated with climate variability, natural disasters, and other “force majeure” events on the City cannot be
predicted, but could be significant.
The Lead and Copper Rule Revisions, announced by the EPA in November 2023, require water systems to prepare and
maintain an inventory of service line materials. Initial inventories were required to be submitted to state primacy agencies
by October 16, 2024.
Water System staff responsible for managing and implementing drinking water quality programs reviewed records and
performed field verifications along the customer service lines and the City (public) side to determine service line material.
Data for 170,966 service lines were uploaded into the 120Water database in compliance with the October 16, 2024, initial
inventory deadline.
As of February 2026, remaining inventory includes 433 unverified service lines (147 residential; 286 commercial). The
City has not identified any lead service line materials and records indicate that there is no lead in the Water System.
The Water System is in full compliance with the Lead and Copper Rule promulgated by the EPA that limits the
concentration of lead and copper allowed in the drinking water at the consumer’s tap. The rule also limits the permissible
amount of pipe corrosion occurring due to the water itself. The City completed required triennial monitoring in 2024.
The fifth Unregulated Contaminant Monitoring Rule (“UCMR5”) requires monitoring of the drinking water entry points
of public water systems for 29 selected per- and poly-fluoroalkyl substances (“PFAS”), which was completed by the City
in November 2025. Ongoing monitoring results to date comply with the final PFAS National Primary Drinking Water
Regulation (“NPDWR”) contaminant levels in the published rule. The City intends to utilize the UCMR5 monitoring
data to satisfy some of the initial monitoring requirements of the PFAS NPDWR rule.
The following tables provide information with respect to the City’s Water System.
Water System Fees and Charges (a)
Description of Water System Services
Fees/Charges
Fiscal Year 2024/25
Monthly Minimum Bill-Residential, All Zones(b)
¾ Inch
$32.17
1 Inch
$36.04
1 ½ Inch
$50.44
2 Inches
$66.17
3 Inches
$131.04
Monthly Volume Charge - Residential
4,000 through 6,000 Gallons of Water
$3.72/1,000 Gallons
Next 8,000 Gallons of Water
$5.67/1,000 Gallons
Next 10,000 Gallons of Water
$6.94/1,000 Gallons
All additional 1,000 Gallons of Water
$7.83/1,000 Gallons
(a)
The information in this table reflects only certain basic fees and charges of the City’s Water System and is not a
comprehensive statement of all such fees.
(b)
Includes the first 3,000 gallons of water as a minimum charge for capacity availability.
C-10
Water System Rate Changes - Residential
(2020-2026)
Date
Rate Change
January 1, 2026
2.50%
February 1, 2025
4.00
February 1, 2024
3.00
January 1, 2023
2.75
February 1, 2022
2.50
January 1, 2021
1.50
July 1, 2020
0.00
Water System Customers
(Fiscal Years 2019/20 – 2024/25) (a)
Fiscal Year
Residential
Customers
Commercial
Customers (b)
Multi-Unit
Customers
Total
Customers
2024/25
144,123
12,164
4,917
161,204
2023/24
142,956
11,927
4,863
159,746
2022/23
142,205
11,740
4,822
158,767
2021/22
140,908
11,572
4,796
157,276
2020/21
139,121
11,370
4,699
155,189
(a)
Average number of Water System customers for each Fiscal Year.
(b)
Including interdepartmental.
The following is a list of the ten largest Water System customers in alphabetical order for Fiscal Year 2024/25.
Ten Largest Water System Customers
Banner Corporate Center - Mesa
Cadence Homeowners Association
Cal-Am, Inc.
Commercial Metal Company
Eastmark Residential Association
Gilbert Public Schools
Mesa Public Schools
Niagara Bottling, LLC
Platypus Development, LLC
The Church of Jesus Christ of Latter-Day Saints
The combined Fiscal year 2024/25 Water System fees/charges for the top ten Water System customers set forth above
was $11.4 million constituting approximately 5% of the total Fiscal Year 2024/25 Water System operating revenue.
Additionally, while the list above is representative of the top ten Water System customers as of Fiscal Year 2024/25,
customer consumption can fluctuate, among other things, with customer process changes, efficiency enhancement,
changes to business practices and locations and the weather. This can result in yearly shifts in the rankings of the
specific customers. However, the City consistently uses budget forecasting methods to account for such variances.
The City also receives water services from the Water System and records the revenue as interdepartmental revenue.
For Fiscal Year 2024/25 Water System interdepartmental revenues for the City were $6.0 million.
Wastewater System
The wastewater utility system of the City (the “Wastewater System”) serves a population of approximately 500,000
within a service area of 128 square miles. The Wastewater System currently serves approximately 144,178
connections.
The Phoenix-operated 91st Avenue Wastewater Treatment Plant (“WWTP”), which is jointly owned by the City,
Phoenix, and three other nearby municipalities within the Sub-Regional Operating Group (“SROG”), currently has a
230 mgd capacity. The City’s share of that amount is 26.5 mgd.
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The City’s Northwest Water Reclamation Plant (“NWWRP”) currently has a treatment capacity of 12 mgd. Reclaimed
water from the NWWRP is currently primarily delivered to the Granite Reef Underground Storage Project where it is
stored to meet future potable water demands. The NWWRP also has solids treatment processing capabilities.
The Southeast Water Reclamation Plant (“SEWRP”) serves the northeastern part of the City and has a plant liquids
handling capacity of 8 mgd. Bio-solids from the SEWRP are sent to the 91st Avenue WWTP for further processing.
Substantial components of this facility are nearing the end of useful service, and it is being carefully reviewed by the
City with respect to future operations.
The Greenfield Water Reclamation Plant (“GWRP”) is a regional plant operated by the City, and co-owned with the
Towns of Gilbert and Queen Creek. The GWRP serves the southeast portion of the City and a segment of the northeast
portion of the City. The GWRP liquids treatments capacity is currently 30 mgd of which the City owns 14 mgd and
has a bio-solids processing capacity of 30 mgd of which the City owns 14 mgd.
Reclaimed water from the SEWRP and the GWRP is delivered to the Gila River Indian Community (the
“Community”) for agricultural use as part of a contractual water exchange. Through this exchange, the City receives
four acre-feet of CAP water for delivery by its potable system for every five acre-feet of reclaimed water that is
delivered to the Community. The Central Mesa Reuse Pipeline (“CMRP”) project will allow reclaimed water from
the City’s NWWRP to be delivered to the Community. This project, completed February 2026, improves upon the
existing contractual water exchange and enhance the City’s CAP water portfolio. Moreover, this project provides for
additional redundancy in case of drought, and further support future customer demand and economic development in
the southeast portion of the City. With completion of the CMRP, the City anticipates the ability to deliver up to 12,000
additional acre-feet of effluent in return for CAP water.
The City’s Wastewater System and current agreements allow for a treatment capacity of 60.5 mgd. The average
during calendar year 2025 was 34.3 mgd, with a peak day of 41.9 million gallons.
In addition to the various treatment facilities outlined above, the City has approximately 1,750 miles of sewer mains,
14 lift stations, 21 odor control stations, 5 metering stations, and 31 diversion structures in its wastewater collection
system. In addition, the City is part owner in the Baseline/Southern Interceptors, and the Salt River Outfall interceptor
mains that convey wastewater to the 91st Avenue WWTP.
The City’s new “Integrated Water/Wastewater Master Plan” was recently completed in April of 2025, updating
individual, citywide water and wastewater master plans completed in 2018.
The Wastewater System is authorized to discharge treated domestic wastewater from the three reclamation plants.
Water System staff monitor discharges as specified in five Aquifer Protection Permits (“APP”), three Arizona
Pollutant Discharge Elimination System (“AZPDES”) Permits, and one National Pollutant Discharge Elimination
System (“NPDES”) Permit. Each month, 1,564 parameters are tested and reported to meet compliance for the APP,
AZPDES and NPDES permits. In addition, each water reclamation plant is monitored for compliance with air quality
permits. Regular evaluations and recommendations are performed to ensure continued compliance with applicable
environmental regulations.
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The following tables provide information with respect to the City’s Wastewater System.
Wastewater System Fees and Charges (a)
Description of Wastewater System Services
Fees/Charges
Fiscal Year 2024/25
Residential Sewer Service - Inside City
Monthly Bill
Service Charge
$24.11
User Charge Component
(average winter water consumption)
$1.98/1,000 gallons
Capital Related Component
(average winter water consumption in excess of 5,000 gallons)
$3.58/1,000 gallons
General Commercial Sewer Service - Inside City
Monthly Bill
Service Charge
$26.62
User Charge Component (all water used)
$2.13/1,000 gallons
Capital Related Component
(all water used in excess of 5,000 gallons)
$3.83/1,000 gallons
Multi-Unit Dwelling Sewer Service - Inside City
Monthly Bill
Service Charge
$26.62
User Charge Component (all water used)
$2.13/1,000 gallons
Capital Related Component (all water used in excess of 5,000 gallons)
$3.83/1,000 gallons
(a)
The information in this table reflects only certain basic fees and charges of the City’s Wastewater System and
is not a comprehensive statement of all such fees.
Wastewater System Rate Changes - Residential
(2020-2026)
Date
Rate Change
January 1, 2026
7.50%
February 1, 2025
7.50
February 1, 2024
4.75
January 1, 2023
4.25
February 1, 2022
3.00
January 1, 2021
3.50
July 1, 2020
0.00
Wastewater System Customers
(Fiscal Years 2020/21 - 2024/25) (a)
Fiscal Year
Residential
Customers
Commercial
Customers (b)
Multi-Unit
Customers
Total
Customers
2024/25
133,356
6,157
4,665
144,178
2023/24
131,919
6,083
4,610
142,612
2022/23
130,160
6,004
4,550
140,714
2021/22
128,695
5,895
4,520
139,110
2020/21
126,102
5,810
4,473
136,385
(a)
Average number of Wastewater System customers for each Fiscal Year.
(b)
Including interdepartmental.
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The following is a list of the ten largest Wastewater System customers in alphabetical order for Fiscal Year 2024/25.
Ten Largest Wastewater System Customers
Arizona State University - East
Banner Corporate Center - Mesa
Cal-Am Properties, Inc.
Fry’s Food Stores
International Rectifier EPI Services
Mesa Public Schools
MHC Viewpoint, LLC
Niagara Bottling, LLC
Norton S. Karno, APC ERT
Town of Gilbert
The combined Fiscal Year 2024/25 Wastewater System fees/charges for the top ten Wastewater System customers set
forth above was $5.5 million constituting approximately 5% of the total Fiscal Year 2024/25 Wastewater System
operating revenue. Additionally, while the list above is representative of the top ten Wastewater System customers
as of Fiscal Year 2024/25, customer consumption can fluctuate, among other things, with customer process changes,
efficiency enhancement and changes to business practices and locations. This can result in yearly shifts in the rankings
of the specific customers. However, the City consistently uses budget forecasting methods to account for such
variances.
The City receives wastewater services from the Wastewater System and records the revenue as interdepartmental
revenue. For Fiscal Year 2024/25 Wastewater System interdepartmental revenues for the City were $0.6 million.
Solid Waste System
The City’s solid waste system (the “Solid Waste System”) is the exclusive provider of solid waste collection services
to single family residences located within the City. Standard residential solid waste service includes once per week
collection of trash. The residential Solid Waste System currently consists of approximately 140,117 customers. The
City continues to operate a permanent Household Hazardous Materials (HHM) facility.
The City competes with private solid waste hauler and collection services for commercial customers within the City.
The City commercial program has approximately 2,288 customers. The City also provides roll off services to both
residential and commercial customers and serves approximately 950 customers.
The City has agreements with multiple vendors that operate landfills, transfer stations and recycling centers for the
disposal of solid waste and processing of recyclable materials. The City completes a procurement process in
connection with the agreements with such vendors to ensure contracted vendors have sufficient disposal capacity to
support City demand. The City additionally completes studies and forecasts to determine long-term planning
objectives with respect to safe, appropriately permitted, and reliable landfill capacity in future years. These additional
facilities allow the City to reduce its overall operating costs, and the facilities meet all Federal Subtitle D requirements.
The information in the following tables above reflects only certain basic fees and charges of the City’s Solid Waste
System and is not a comprehensive statement of all such fees.
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Solid Waste System Fees and Charges
Residential Solid Waste System Monthly Billing (Fiscal Year 2024/25)
Rates Applicable Per Dwelling Unit (4 or Less Residential Units Per Structure)
R1.2, R1.2A, R1.2B, R1.21, R1.22, R1.23, R1.28
Rate R1.2*:
$33.17 per dwelling unit for once per week 90 gallon trash barrel and recycling barrel collection.
Rate R1.2A*:
Rate R1.2B*:
$29.60 per dwelling unit for once per week 60 gallon trash barrel and recycling barrel collection.
$27.89 per dwelling unit for once per week 35 gallon trash barrel and recycling barrel collection.
Rate R1.21:
$15.66 per additional 90 gallon trash barrel collected on the same day as the first trash barrel. Service
will be billed for a minimum of six months. This rate is only eligible for R1.2, R1.24 and R1.29
customers.
Rate R1.22:
$15.66 per additional 60 gallon trash barrel collected on the same day as the first trash barrel. Service
will be billed for a minimum of six months.
Rate R1.23:
$35.59 for the first 90 gallon trash barrel in addition to the R1.2 or R1.24 rate for twice per week trash
collection. A $15.81 service fee applies to each additional barrel that is serviced twice per week.
Rate R1.28:
$7.84 per 90 gallon green waste barrel collected once per week in conjunction with City trash service.
Service will be billed for a minimum of six months.
* An $1.00 per billing cycle Mesa Green and Clean fee will be assessed to each dwelling unit.
Rates Applicable Per Dwelling Unit (5 or More Residential Units Per Structure)
R1.21, R1.22, R1.23, R1.24, R1.25, R1.28
Rate R1.24*:
Rate R1.25*:
$29.60 per dwelling unit for a multi-unit structure with five or more residential units for once per week
90 gallon trash barrel and recycling barrel collection when the water account servicing the units is
active with one bill payee.
$29.60 per dwelling unit for a multi-unit structure with five or more residential units for once per week
60 gallon trash barrel and recycling barrel collection when the water account servicing the units is
active with one bill payee.
Rate R1.21:
$15.66 per additional 90 gallon trash barrel collected on the same day as the first trash barrel. Service
will be billed for a minimum of six months. This rate is only eligible for R1.2, R1.24 and R1.29
customers.
Rate R1.22:
$15.66 per additional 60 gallon trash barrel collected on the same day as the first trash barrel. Service
will be billed for a minimum of six months.
Rate R1.23:
$35.59 for the first 90 gallon trash barrel in addition to the R1.2 or R1.24 rate for twice per week trash
collection. A $15.81 service fee applies to each additional barrel that is serviced twice per week.
Rate R1.28:
$7.84 per 90 gallon green waste barrel collected once per week in conjunction with City trash service.
Service will be billed for a minimum of six months.
* An $1.00 per billing cycle Mesa Green and Clean fee will be assessed to each dwelling unit.
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Rates Applicable Per Dwelling Unit (Every Other Week Recycling)
R1.28, R1.29, R2.9A, R2.9B
Rate R1.29*:
$32.09 per dwelling unit for once per week 90 gallon trash barrel collection and every other week
recycling barrel collection.**
Rate R2.9A*:
$28.51 per dwelling unit for once per week 60 gallon trash barrel collection and every other week
recycling barrel collection.**
Rate R2.9B*:
$26.83 per dwelling unit for once per week 35 gallon trash barrel collection and every other week
recycling barrel collection.**
Rate R1.28:
$7.84 per 90 gallon green waste barrel collected once per week in conjunction with City trash service.
Service will be billed for a minimum of six months.
*
A $1.00 per billing cycle Mesa Green and Clean fee will be assessed to each dwelling unit. Service will be
billed for a minimum of six months.
**
Applicability subject to approval of the Solid Waste Division of the City’s Environmental Management and
Sustainability Department.
Commercial Solid Waste System Monthly Billing
Rate R3.8, R6.2:
$33.17 for the first 90 gallon trash barrel and recycling barrel for once per week collection.
Rate R3.8A, R6.2A:
$29.60 for the first 60 gallon trash barrel and recycling barrel for once per week collection.
Rate R3.81, R6.21:
$15.66 per additional 90 gallon trash barrel for once per week collection on same geographic in-
zone day as the first barrel. This rate is only eligible for R3.8 and R6.2 customers. Service will
be billed for a minimum of six months.
Rate R3.83, R6.23:
$15.66 per additional 60 gallon trash barrel for once per week collection on same geographic in-
zone day as the first barrel. Service will be billed for a minimum of six months.
Rate R3.82, R6.22:
Rate 3.89, R6.29:
$35.59 for the first 90 gallon trash barrel in addition to the above R3.8, R6.2 rate for twice per
week collection. A $15.81 service fee applies to each additional barrel that is serviced twice per
week.
$10.00 per 90/60 gallon recycling barrel collected oncer per week in conjunction with City trash
service. Service will be billed for a minimum of six months.
Rate R3.88, R6.28:
$7.84 per 90 gallon green waste barrel collected once per week in conjunction with City trash
service. Service will be billed for a minimum of six months.
Solid Waste System Residential Rate Changes
(2020-2026)
Date
Rate Change
January 1, 2026
5.50%
February 1, 2025
5.50
February 1, 2024
3.00
February 1, 2023
2.00
February 1, 2022
2.00
January 1, 2021
0.00
March 1, 2020
0.00
Solid Waste System Customers
(Fiscal Years 2020/21 - 2024/25) (a)
Fiscal Year
Residential
Customers
Commercial
Customers
Roll Off
Customers
Total
Customers
2024/25
140,117
2,288
950
143,355
2023/24
139,477
2,215
1,079
142,771
2022/23
138,736
2,357
1,326
142,419
2021/22
138,502
2,482
1,632
142,616
2020/21
136,462
2,429
1,689
140,580
(a)
Solid Waste System customers as of Fiscal Year end.
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The following is a list of the ten largest Solid Waste System customers in alphabetical order for Fiscal Year 2024/25.
Ten Largest Solid Waste System Customers
Cal-Am Properties, Inc.
Casa Fiesta Temple Limited Partnership
Equity Lifestyles Properties, Inc. DBA MHC Operating LP
Mesa Public Schools
MHC Monte Vista, LLC
MHC Viewpoint, LLC
MPS-Refuse Only Accounts
Norton S. Karno, APC ERT
Tesoro at Greenfield Condominium Association
Vista del Sol, LLC
The combined Fiscal Year 2024/25 Solid Waste System fees/charges for the top ten Solid Waste System customers set
forth above was $2.9 million constituting approximately 4% of the total Fiscal Year 2024/25 Solid Waste System
operating revenue. No individual Solid Waste System customer above constitutes more than 1% of the total Fiscal Year
2024/25 Solid Waste System operating revenue.
The City receives solid waste services from the Solid Waste System and records the revenue as interdepartmental revenue.
For Fiscal Year 2024/25 Solid Waste System interdepartmental revenues for the City were $0.7 million.
Billing and Collection Procedures
The City bills its utility customers in cycles throughout the month with each customer being billed at approximately the
same time every month. Electric, gas and water accounts are based on meter readings, wastewater charges are based on
water usage and solid waste disposal fees vary depending on the size of the containers and frequency of collections.
The City’s collection procedures for delinquent utility accounts involve a series of billings and notices with a
discontinuance of service at the end of 72 days. Due to the collection procedures, utility deposits required on various
accounts and the nature of the service being provided, the City has experienced write-offs at or below one-quarter of one
percent during the past three Fiscal Years.
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APPENDIX D
CITY OF MESA, ARIZONA
AUDITED GENERAL PURPOSE FINANCIAL STATEMENTS FOR
THE FISCAL YEAR ENDED JUNE 30, 2025
The following audited financial statements are the most recent available to the City. These audited financial statements
are not current and may not represent the current financial conditions of the City.
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APPENDIX E
SUMMARY OF THE MASTER BOND RESOLUTION, AS AMENDED
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SUMMARY OF THE MASTER BOND RESOLUTION, AS AMENDED
The following is a summary of certain provisions of the Resolution No. 6362 adopted by the City Council of the City of
Mesa on July 29, 1991, as amended by Resolution No. 7960 adopted by the City Council of the City on February 3, 2003,
as thereafter supplemented and amended. The amendment in 2003 changed the requirements pertaining to the Reserve
Fund. This summary does not purport to be a full statement of the terms of the Master Bond Resolution and, accordingly,
is qualified by reference hereto and is subject to the full text thereof.
Definitions
“Agreement” – any Reserve Fund Guaranty Agreement.
“Assumed Interest Rate” – an Interest Rate for Variable Rate Obligations computed in the manner set forth in the initial
Agreement.
“Average Annual Debt Service” – at computation, the average of each Bond Year’s aggregate scheduled Bond principal
(including mandatory redemptions) and interest requirements with Variable Rate Obligations deemed to bear interest at
the Assumed Interest Rate).
“Bond Insurer” – with respect to each series of Parity Bonds, an issuer of a Municipal Bond Insurance Policy pertaining
to any Bonds.
“Bonds” – all bonds issued and outstanding on parity pursuant to the Master Bond Resolution and all Parity Bonds
hereafter authorized to be issued.
“Bond Year” – the one-year period commencing each July 2 and ending on the next forthcoming July 1. A Bond Year
shall correspond to the fiscal year beginning on July 1 of the same year and ending on June 30 of the next year.
“Capital Appreciation Bonds” – Parity Bonds whose interest component is compounded semiannually on stated dates
until maturity or until converted to Bonds paying interest semiannually, if so permitted or required.
“Chief Financial Officer” – the City’s Deputy City Manager/Chief Financial Officer.
“Council” – the governing body of the City.
“Deficiency” – the difference between (i) the total amount then due on a principal or interest payment date for the Bonds
and (ii) the then amount of deposit in the Bond Fund (excluding payments made under a Municipal Bond Insurance
Policy).
“Drawdown” – any amount drawn by the Paying Agent under any Reserve Fund Guaranty.
“Drawdown Date” – the date of any Drawdown.
“Master Bond Resolution” – the Master Bond Resolution adopted by the Mayor and City Council of the City of Mesa
on July 29, 1991, as thereafter supplemented and amended.
“Maximum Annual Debt Service” – at computation, the greatest scheduled Bond principal (including mandatory
redemptions) and interest requirements (Variable Rate Obligations shall be deemed to bear interest at the Assumed Interest
Rate) occurring in the then current, or any subsequent, Bond Year.
“Municipal Bond Insurance Policy” – any irrevocable municipal bond insurance policy insuring payment of the principal
and interest on any Bonds.
“Net Revenues” – those Revenues remaining after deducting Operating Expenses.
“Operating Expenses” – the reasonable and necessary costs of System operation, maintenance, and repair, but excluding
depreciation and payments into the Bond, Reserve, Reimbursement and Rebate Funds.
“Owner” – any person who shall be the registered owner of any Bond or Bonds outstanding (for Book-Entry Bonds, the
Depository).
“Parity Bonds” – the additional Bonds issued on a parity with the Bonds.
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“Policy Costs” – the amount necessary to reimburse a Reserve Fund Guarantor for any Drawdown(s) including the
Drawdown amount, the Reserve Fund Guarantor’s expenses plus interest on the aggregate thereof at the Reimbursement
Rate until paid.
“Post-2002 Bonds” – Bonds originally issued after January 1, 2003.
“Post-2002 Reserve Fund” – the Reserve Fund securing all Bonds originally issued after January 1, 2003.
“Post-2002 Reserve Fund Guaranties” – an irrevocable surety bond, letter of credit or line of credit or insurance policy
executed and delivered to the City or a Paying Agent for the City as a Post-2002 Reserve Fund Guaranty for purposes of
the Master Bond Resolution.
“Reimbursement Period” – for any Drawdown, the period from the Drawdown Date to the first anniversary of such
Drawdown Date.
“Reserve Fund” – the Post-2002 Reserve Fund; provided, however, that the Post-2002 Reserve Fund shall only secure
the Post-2002 Bonds.
“Reimbursement Rate” – the rate of interest to be paid by the City to reimburse a Reserve Fund Guarantor after a
Drawdown.
“Reserve Fund Guarantor” – with respect to any series of Bonds, the issuer of a surety bond, letter of credit or line of
credit or insurance policy used as a Reserve Fund Guaranty, if issued by an entity whose Guaranty will not adversely
affect the Bonds’ then-current rating.
“Reserve Fund Guaranty” – any irrevocable surety bond, letter of credit or line of credit or insurance policy as a reserve
fund guaranty used under the Master Bond Resolution.
“Reserve Fund Value” – as to the Post-2002 Bonds, the value of moneys, investments and Reserve Fund Guaranties
deposited to the Post-2002 Reserve Fund.
“Reserve Requirement” – as to the Post-2002 Bonds, if required to be funded, an amount equal to Average Annual Debt
Service of all outstanding Post- 2002 Bonds, which amount shall be adjusted upon the issuance of Post-2002 Parity Bonds
to equal Average Annual Debt Service immediately after issuance, or the maximum amount of the Post-2002 Reserve
Fund is then permitted to increase under Section 148 of the Internal Revenue Code of 1986, as amended, or any
comparable statutory provision limiting the amount of a reasonably required Reserve and Replacement Fund.
“Revenues” – all income, moneys and receipts derived from the System ownership; however, the term Revenues shall
not include Bond proceeds or interest received on any investments placed irrevocably in trust to pay, or provide for the
payment of, any Bond, Bonds being refunded or defeased or other outstanding revenue bonds originally secured in whole
or in part by System Revenues, or amounts received which the City is contractually required to pay out as reimbursement
for acquisition, construction or installations of System facilities.
“Series 1991 Bonds” – the City of Mesa, Arizona, Utility Systems Revenue and Refunding Bonds, Series 1991.
“Variable Rate Obligations” – any Parity Bonds which may, in the future, bear interest at rates which cannot be
determined with specificity on their original issue date.
Authorization of Bonds; Special Obligations.
A.
The Master Bond Resolution authorized the issuance and sale of the Series 1991 Bonds. Each supplemental
resolution authorized the respective later series of Parity Bonds.
B.
The Bonds are special obligations of the City payable solely from the Net Revenues and secured as to the
payment of the principal and redemption price thereof, and interest thereon, in accordance with their terms and the
provisions of the Master Bond Resolution. The Net Revenues are pledged and assigned as security for the Bonds. All
Net Revenues shall be immediately subject to the pledge of the Master Bond Resolution and the lien of this pledge shall
be valid and binding.
Source of Payment and Pledge of Revenues. The Bonds shall be payable solely from the Net Revenues. All of the
Bonds shall be equally and ratably secured by a pledge thereof and a lien thereon without priority one over the other.
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Rate Covenant. The City covenants and agrees with the Owners that it will establish and maintain System charges to
provide Revenues sufficient to pay all Operating Expenses and to produce aggregate Net Revenues in each Fiscal year
equal to one hundred twenty percent (120%) of the current principal and interest requirements on all Outstanding Bonds
for the corresponding Bond Year (treating Variable Rate Obligations as bearing interest at the Assumed Interest Rate and
Bonds subject to mandatory redemption as maturing on their respective mandatory redemption dates) and said rates, fees
and other charges shall also be established and maintained at rates sufficient to provide an amount of Net Revenues for
the then current fiscal year which, net of the aggregate amounts required to be deposited to the Bond Fund during such
fiscal year, will be sufficient to provide at least one hundred percent (100%) of the City’s Policy Costs due and owing in
such fiscal year.
Creation of Funds: Application of Revenues.
A.
The Chief Financial Officer shall create the following special funds and accounts: (1) the Revenue Fund; (2) the
Bond Fund; (3) the Reimbursement Fund; (4) the Reserve Fund, containing the Post-2002 Reserve Fund, which Post-
2002 Reserve Fund shall, if funded, contain the separate Capitalized Reserve Account and Contributed Reserve Account;
(5) the Rebate Fund; (6) the Replacement Fund; and (7) the Construction Fund.
B.
All Revenues shall be deposited as collected with a Depository, and shall be held in the custody of the Chief
Financial Officer in the Revenue Fund. After providing sufficient moneys for the payment of any insufficiency in the
income derived from the investments held in trust to service any Bonds being refunded and payment of the Operating
Expenses, the Revenue Fund shall be disbursed only as follows and only in the following order of priority:
(1)
Bond Fund. First, to the Bond Fund: (a) one-sixth (1/6th) of the interest becoming due on the next interest
payment date on all of the Bonds then Outstanding and; (b) one-twelfth (1/12th) of the principal becoming due on the
next succeeding principal or mandatory redemption payment date on all Bonds then Outstanding. The Bond Fund shall
be a trust fund and shall be used solely for the purpose of paying the principal of and interest on the Bonds.
(2)
Reimbursement Fund. Second, if a Drawdown occurs, to the Reimbursement Fund commencing the tenth
(10th) day of the first month following a Drawdown and each month thereafter for the next succeeding eleven (11) months,
or until the Reimbursement Fund contains amounts sufficient to reimburse all Policy Costs, or all Policy Costs with respect
to such Drawdown have been paid, an amount equal to at least one-twelfth (1/12th) of such Policy Costs in the
Reimbursement Fund shall be used only to pay Policy Costs. Policy Costs with respect to any Drawdown that occurs
against more than one Reserve Fund Guarantor shall be reimbursed on a pro rate basis. Each Supplemental Resolution
increased the amounts to be deposited to the Bond and other Funds to cover the respective deposits for the respective
Parity Bonds then authorized. If the City fails to repay any Policy Costs, the Reserve Fund Guarantor(s) may exercise all
remedies available at law or under the Master Bond Resolution other than (i) acceleration of the Bonds or (ii) remedies
adversely affecting the Owner’s rights. The Paying Agent acting as the Owners fiduciary shall hold all Reserve Fund
Guaranties. Reserve Fund Guaranties shall expire no earlier than the final maturity date of the series for which said
Guaranty applies.
(3)
Reserve Fund. Third, on or before the tenth (10th) day of each month to the Reserve Fund an amount equal to
one ninety-sixth (1/96th) of the amount required to restore the Post-2002 Reserve Value to the Post-2002 Reserve
Requirement within an eight-year period, or such amount as is required to restore the Post-2002 Reserve Fund Value to
the Post-2002 Reserve Requirement after a Reserve Fund withdrawal occurs as to the Post-2002 Reserve Fund. If, on
any principal or interest payment date, a deficiency exists, then: (a) if there are investments or cash in the Post-2002
Reserve Fund, such investments shall be liquidated and the cash and investment proceeds transferred to the Bond Fund;
and (b) if the deficiency is not then cured the Paying Agent shall deliver a request for Drawdown to the Reserve Fund
Guarantor(s). All Drawdown and Reserve Fund proceeds shall be applied to the payment of the interest on, or principal
of, the Bonds then due. The proceedings for the Post-2002 Bonds shall not require a deposit to the Post-2002 Reserve
Fund unless the City is then required to fund a Post-2002 Reserve Fund; if the Parity Bonds are originally issued during
a period the City is then required to maintain the Post-2002 Reserve Fund, the proceedings for such Parity Bonds shall
provide for an increase in the Post-2002 Reserve Fund Value sufficient to meet the Post-2002 Reserve Fund Requirement
immediately after the issuance of such Post-2002 Parity Bonds.
Drawdowns upon Reserve Fund Guaranties required to pay principal and interest will be replaced therein from the first
money in the Revenue Fund thereafter received which is not required for current transfers into the Bond Fund pursuant
to subparagraphs (1) or (2) of this subsection. The Post-2002 Reserve Fund shall contain two accounts, the Contributed
Reserve Account and the Capitalized Reserve Account. The two accounts are created to segregate Post-2002 Reserve
Fund Moneys and Investments to provide a means of tracking Post-2002 Reserve Fund deposits and investment income
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thereon for purposes of the Internal Revenue Code of 1986, as amended, or any comparable provision requiring such
tracking. All Post-2002 Reserve Fund deposits made from Net Revenues or other available moneys of the City shall be
deposited to the Contributed Reserve Account. All Bond proceeds deposited to the Post-2002 Reserve Fund shall be
deposited into the Capitalized Reserve Account. Any proceedings hereinafter taken with respect to the issuance of Parity
Bonds may satisfy the amount to be deposited in either account, so long as the minimum amount required by the Master
Bond Resolution to be deposited to the Post-2002 Reserve Fund shall be so deposited. All Post-2002 Reserve Fund
Guaranties shall be deemed to be deposited to, and a part of the Post-2002 Reserve Fund Capitalized Reserve Account.
(4)
Rebate Fund. Fourth, on or before 30 days after the last day of each Bond Year, to the Rebate Fund the amount
determined necessary to cause the amount in the Rebate Fund to equal the cumulative arbitrage rebate obligation.
(5)
Replacement Fund. Fifth, to the Replacement Fund at least 2% of the previous month’s Revenues until at least
2% of the value of all tangible assets of the System as shown on the balance sheet in the most recent audit, has been so
accumulated. The City may limit additional payments if the balance equals 2% of the value of all tangible assets of the
System as shown by the most recent audit. Any money in such Fund may be used to: (a) Pay any sums due to the holders
of Bonds being refunded if not paid from the income and proceeds of the investments held under a depository trust
agreement. (b) Pay currently maturing the Bond principal and interest to the extent the Bond and the Reserve Funds are
insufficiency for such purpose. (c) Acquire System properties. (d) Make other improvements or repairs to the System,
including the payment of principal and interest on obligations issued for System purposes junior in lien to the Bonds.
C.
All money remaining in the Revenue Fund after all of the payments required above have been made, may be
used for any lawful City purpose. Moneys in the Revenue, Bond, Reserve, Reimbursement and Rebate Funds may be
invested and reinvested by the City in Permitted Investments. All investment income, except Rebate Fund investment
income, shall be regarded as System Revenues and deposited in the Revenue Fund. Such investments shall be liquidated
as needed and the proceeds applied to the purpose for which the respective fund or account was created. Moneys in the
Construction and Replacement Funds may be invested in any lawful investment.
D.
The Construction Fund shall be divided into separate accounts in order to segregate proceeds from differing
series of Bonds.
Covenants Regarding the Operation of the System. The City covenants and agrees with each and every Owner that it
will: (A) maintain the System in good condition and operate the same in an efficient manner and at reasonable cost, and
shall not provide free System services to any consumer or user; (B) maintain insurance on all System properties (which
may be in the form of or include an adequately-funded self-insurance program) with coverage normally carried by
municipalities or private companies engaged in a similar business. System self-insurance may be maintained either
separately or in connection with any Citywide self-insurance program if any such program is in writing. The proceeds of
any such insurance, except public liability insurance, received by the City shall be pledged as security for the Bonds until
used to replace the System parts damaged or destroyed, or if not so used, shall be placed in the Revenue Fund; (C) keep
proper books and accounts for the System, which will be audited at the end of each fiscal year in accordance with generally
accepted governmental accounting practices; The City further will furnish copies of such audits to any Owner at their
request, within one hundred eighty (180) days after the close of each fiscal year; (D) faithfully and punctually perform all
legal duties with reference to the System; (E) not sell, lease, mortgage or in any manner dispose of the System or any part
thereof, until all of the Bonds and the City’s obligations under any Agreement shall have been paid in full except for the
disposition of inexpedient property if the proceeds of the disposition are placed in the Revenue Fund; (F) prior to the
beginning of each fiscal year, prepare and adopt a budget of estimated Revenues and Operating Expenses for the ensuing
fiscal year, and undertake to operate the System within such budget to the best of its ability and make copies of such
budgets and amendments thereto available to any Owner upon request; (G) to the extent allowed by law, discontinue the
service to any premises the owner or occupant of which shall be delinquent for a period beyond that allowed by City
policy and not resume service until all delinquent charges, with interest and penalties, shall have been paid; (H) pay and
discharge all taxes, assessments or other governmental charges, if any, lawfully imposed upon the System or the Revenues
when due, and all lawful claims for labor and materials and supplies which, if unpaid, might become a lien or charge on
the System or the Revenues, or which might impair the security of the Bonds and, subject to the provisions of the Master
Bond Resolution, will duly observe and conform to all valid requirements of any governmental authority relative to the
System; (I) deposit the net proceeds realized by the City from any eminent domain proceeding concerning the System in
the Revenue Fund; (J) not, to the extent allowed by law, grant a franchise or a permit for the operation of any competing
System within the existing service area of the City’s respective utility system, provided however, that this covenant shall
not prohibit the City from entering into “privatization” contracts, agreements or other similar arrangements with private
parties; (K) not issue bonds or other obligations superior in lien to the Bonds or on a parity with the Bonds except in
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accordance with the Master Bond Resolution; (L) not violate the terms of any Agreement and give all notices and perform
all acts and abide by all promises contained in such Agreement or Agreements.
Equality of Lien; Prohibition of Future Lien. The Bonds shall each enjoy complete parity of lien on the Net Revenues.
Parity Bonds may be issued on a parity with the Bonds only if all of the following conditions are met: (1) The Net
Revenues for the completed fiscal year immediately preceding the issuance of the Parity Bonds must have been at least
equal to one hundred twenty percent (120%) of Maximum Annual Debt Service on all outstanding Bonds immediately
after issuance of such Parity Bonds and said Net Revenues must also have been sufficient to provide an amount of Net
Revenues for the then current fiscal year which, net of the aggregate amounts required to be deposited to the Bond Fund
during such fiscal year, will be sufficient to provide at least one hundred percent (100%) of the City’s Policy Costs due
and owing in such fiscal year as shown by a certificate signed by the Chief Financial Officer. For the purposes of the
computation required by this subsection, additional amounts may be added to the Net Revenues of the preceding fiscal
year, as follows: (i) If all or part of the proceeds of the Parity Bonds are to be expended for the acquisition of existing
water, sewer, gas, electrical, garbage or rubbish system properties, there may be added to the Net Revenues of such
preceding fiscal year the net revenues derived from the operation of such existing water, sewer, gas, electrical or solid
waste (garbage and rubbish) System properties during the immediately preceding fiscal year as estimated by an engineer
or engineering firm which shall have a wide and favorable reputation in respect to such matters, and (ii) if during such
preceding fiscal year, the City shall have increased its System rates or charges, there may be added to the Net Revenues
of such fiscal year the increased amount of net revenues which would have been received from the operation of the System
during such fiscal year had such increase been in effect throughout such fiscal year, such increased amount of Net
Revenues to be estimated by an engineer or engineering firm which shall have a wide and favorable repute in respect to
such matters; (2) the payments required to be made into the various funds provided in Section 10 of the Master Bond
Resolution must be current; (3) the Parity Bonds proceeds must be used solely for System extensions, renewals,
improvements, or replacements or to refund any Bonds or general obligation bonds issued for System purposes; and (4)
if on the date of issuance of any Parity Bond the Reserve Fund is required to be maintained, the Post-2002 Reserve Fund
Value shall be increased in order that the Post-2002 Reserve Fund Value equal or exceed the Post-2002 Reserve
Requirement immediately after issuance of such Parity Bonds, at the City Council’s option, by: (i) the deposit of Parity
Bond proceeds or available moneys of the City to the Post-2002 Reserve Fund or the immediate delivery of a Post-2002
Reserve Fund Guaranty to the Paying Agent, or any combination thereof.
All or any part of the Bonds may be refunded and the refunding bonds so issued shall enjoy complete equality of lien with
the Bonds so refunded, if any there be, and the refunding bonds shall continue to enjoy whatever priority of lien enjoyed
by the Bonds being refunded.
Resolution a Contract. The provisions of the Master Bond Resolution are deemed incorporated into the Bonds
themselves and shall constitute a contract between the City, any Reserve Fund Guarantor and the Owner or Owners.
Modification of Resolution.
A.
Without the consent of or notice to any Owner, the Master Bond Resolution may be modified for one or more of
the following purposes: (1) To cure any ambiguity or informal defect or inconsistency; (2) To grant to the Owners any
additional authority that may lawfully be granted; (3) To secure additional Revenues or provide additional security or
reserves for the Bonds; (4) To comply with the requirements of any federal securities laws or the Trust Indenture Act of
1939; (5) To permit, preserve or continue (upon a change in the Internal Revenue Code (the “Code”) requiring a
Supplement to continue such exclusion) the exclusion of the Bonds’ interest income from gross income as defined by the
Code or the exemption from State income taxes and to preserve the power of the City to continue to issue bonds or other
obligations (specifically not limited to the Bonds authorized under the Master Bond Resolution) the interest income on
which is likewise excluded from gross income; (8) To provide any remedies and assurances needed to induce Reserve
Fund Guarantors to issue Reserve Fund Guaranties or Bond Insurers to issue Municipal Bond Insurance Policies.
B.
Except as provided in subsection A above, the Owners of fifty-one percent (51%) in aggregate principal amount
(treating the Accreted Value of a Capital Appreciation Bond as its principal amount) of the Bonds then Outstanding shall
have the right to consent to and approve modifications of any terms or provisions except: (1) Changes in the maturity of
any Outstanding Bond. (2) Changes in the interest rate on any Outstanding Bond. (3) Reduction of the principal or
redemption premium payable on any Bond. (4) Modification of the principal, interest or redemption premium payment
terms on any Bond or imposes any adverse conditions on such payments. (5) Modifications which adversely affect the
rights of the Owners of less than all Bonds then Outstanding.
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C.
No amendment proposed shall become effective until approved by each Reserve Fund Guarantor and each Bond
Insurer.
Rights of Reserve Fund Guarantors; Rights of Bond Insurers.
A.
If any Bond’s principal or interest shall be paid by a Reserve Fund Guarantor, (i) the pledge of the Net Revenues
and all of the City’s obligations shall continue to exist and such Reserve Fund Guarantor shall be fully subrogated to all
of such Owner’s rights.
B.
The City may treat the consent of any Bond Insurer as the consent of the Owners of any Bonds then insured by
such Insurer, if the credit of said Insurer is then in one of the two highest grades of municipal securities by one of the two
most widely recognized rating agencies then rating municipal bond credits.
Method of Valuation; Frequency. In computing the amount in any fund or account, Permitted Investments shall be
valued at the market value exclusive of accrued interest. A valuation shall occur annually on the first day of each Bond
Year and immediately upon withdrawal from the Reserve Fund. If the Reserve Fund Value shall ever be less than the
Reserve Requirement, each Reserve Fund Guarantor shall be notified and such deficiency remedied in twelve (12)
substantially equal monthly payments.
Reporting Requirements.
A.
The City will file or cause to be filed with each Reserve Fund Guarantor and issuer of a Municipal Bond
Insurance Policy any official statement issued by, or on behalf of, the City in connection with the incurrence of any Parity
Bonds issued by the City.
B.
The City promises and agrees promptly to provide or cause to be provided to any issuer of a Municipal Bond
Insurance Policy and any Reserve Fund Guarantor such financial, statistical and other factual information regarding the
City as any such issue or Guarantor shall from time to time reasonably request.
C.
The City agrees, so long as a Municipal Bond Insurance Policy is in effect, to provide not more than ten (10)
days after the end of each fiscal year, a certificate of its Chief Financial Officer to the effect that the City is in compliance
with the terms and conditions of the Master Bond Resolution, or, specifying the nature of any noncompliance and the
remedial action taken or proposed to be taken to cure such noncompliance.
D.
The City agrees, so long as a Municipal Bond Insurance Policy or Reserve Fund Guaranty is in effect, to provide
promptly to each Municipal Bond Insurance Policy issue or Reserve Fund Guarantor (i) its audited (or, if not audited,
then unaudited) financial statements and quarterly financial statements, (ii) its annual report, (iii) all reports, certificates
and financial information required to be filed with the Bond Registrar and Paying Agent pursuant to the Master Bond
Resolution or available at the request of Owners and (iv) all reports or certificates prepared by the consulting engineer
pursuant to the Master Bond Resolution.
Notices. The City and the Bond Registrar and Paying Agent shall notify any issuer of a Policy of Municipal Bond
Insurance or Reserve Fund Guarantor within five (5) days after such entity has received notice or has knowledge of (i)
any default by the City in performance of its obligations under the Master Bond Resolution; (ii) the withdrawal of amounts
on deposit in the Reserve Fund other than amounts comprising investment earnings thereon; or (iii) the failure to make
any required deposit to the Bond Fund to pay principal or interest when due. Any notice that is requested to be given to
Owners or the Bond Registrar and Paying Agent pursuant to the Master Bond Resolution or any supplemental resolution
shall also be provided to any issuer of a Municipal Bond Insurance Policy or Reserve Fund Guarantor.
Defeasance. Payment of all or any part of the Bonds may be provided for by the irrevocable deposit with a trustee of
moneys or Governmental Obligations, or both. If the moneys and the maturing principal and interest income on such
Government Obligations, if any, shall be sufficient, as evidenced by as certificate of experts in the field of calculating the
sufficiency thereof, then to the extent allowed by law, Bonds the payment of which has been provided for in accordance
with this section shall no longer be deemed Outstanding or secured under the Master Bond Resolution.
Continuing Disclosure. The First Supplemental Resolution dated September 18, 1995 and all later Supplemental
Resolutions contained the following Continuing Disclosure covenant: The Chief Financial Officer or Controller of the
City are authorized to execute and deliver a written undertaking or agreement containing such terms and provisions as are
necessary to assist with compliance with the continuing disclosure provisions of Section 240.15c2-12 General Rules and
Regulations, Securities Exchange Act of 1934.
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Provisions relating to the Reserve Fund. Any provision to the contrary notwithstanding, if Net Revenues during any
fiscal year ending after June 30, 2003 do not equal or exceed one hundred seventy-five percent (175%) of the principal
and interest requirements on all Outstanding Bonds for the corresponding Bond Year, then the City will deposit, or cause
to be deposited, within 180 days following the end of such fiscal year, to the Post-2002 Reserve Fund, moneys,
investments, Reserve Fund Guaranties or any combination thereof, equal to the Post-2002 Reserve Requirement. If,
thereafter, Net Revenues for two consecutive fiscal years equal or exceed one hundred seventy-five percent (175%) of
the principal and interest requirements on all Outstanding Bonds for the respective corresponding Bond Years, any
moneys, investments or Post-2002 Reserve Fund Guaranties in the Post- 2002 Reserve Fund may be released (except as
otherwise limited by Reserve Fund Guaranties or related Reserve Fund Guaranty Agreements) and used for any lawful
purpose, and the City’s obligation to maintain the Post-2002 Reserve Fund at the Reserve Requirement will terminate,
subject to a refunding of the Reserve Fund for Post-2002 Bonds, as described in this section.
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APPENDIX F
OBLIGATIONS DOCUMENTS SUMMARIES
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F-1
OBLIGATIONS DOCUMENTS SUMMARIES
The following summaries are supplemental to and should be read together with “SECURITY FOR AND
SOURCES OF PAYMENT OF THE OBLIGATIONS” herein. These summaries are a brief description of certain
provisions of the Trust Agreement and the Purchase Agreement and certain definitions therein not defined elsewhere in
this Official Statement, should not be considered a full statement thereof and are qualified in their entirety by reference
to the entire Trust Agreement and Purchase Agreement, copies of which are available as set forth in this Official Statement
under the heading “ADDITIONAL INFORMATION.”
Definitions
For the purposes hereof and in addition to those defined prior to the Appendices hereof, the following words and
phrases will have the following meanings:
“Additional Obligation Documents” means any contract (including a resolution of the City Council) or
agreement of the City constituting or authorizing Additional Obligations.
“Additional Obligations” means obligations (including loans and bonds) or applicable interests therein that are
incurred (i) by, or the payment of which is assumed by, the City subsequent to, and are to rank on a parity with, the
payments of the Purchase Price and share pro rata in payments to be made by the City from the Pledged Revenues, without
priority one over the other or over the Purchase Agreement, and (ii) for the purpose of acquiring, constructing or improving
the System or to refund any Obligations, Parity Obligations, Additional Obligations or Bonds.
“Assumed Interest Rate” means an interest rate for a series of Variable Interest Rate Obligations at the
computation date computed to be the lesser of (i) the maximum rate that the Variable Interest Rate Obligations of a series
may bear under the terms of their incurrence or (ii) the rate of interest established for long-term bonds by the 30-year
revenue bond index published by The Bond Buyer of New York, New York, on the date that is nearest to 30 days prior
to the computation date (or in the absence of such published index, some other index selected in good faith by the Deputy
City Manager/Chief Financial Officer after consultation with one or more reputable, experienced investment bankers as
being equivalent thereto).
“Bond Year” means a 12-month period beginning July 2 of the calendar year and ending on the next succeeding
July 1.
“Bonds” has the meaning ascribed in the Master Bond Resolution.
“Business Day” means any day other than (a) a Saturday or Sunday, (b) a day on which banks located in the City
of Phoenix, Arizona, and in the city or cities in which the corporate trust office of the Trustee and the Paying Agents are
required or authorized by law or executive order to remain closed, and (c) a day on which the City is required or authorized
by law or executive order to remain closed.
“City Representative” means the Deputy City Manager/Chief Financial Officer or any other person at any time
designated, by written certificate furnished to the Trustee containing the specimen signature of such person and signed by
the City Manager or the Deputy City Manager/Chief Financial Officer, or the designee of either of them, to act on behalf
of the City with respect to the Trust Agreement and the Obligations. Such certificate may designate one or more alternates.
“City Series 2026 Refunding Obligations Fund” means the fund of that name created pursuant to Section 3.3(a)
of the Purchase Agreement.
“Code” means the Internal Revenue Code of 1986, as amended, and any successor provisions thereto.
“Consultant” means, in the sole discretion of the City, a firm of utility consultants experienced in the financing
and operation of utility systems and having a recognized reputation for such work, or City staff with similar experience.
“Credit Facility” means a bank, financial institution, insurance company or indemnity company that is engaged
by or on behalf of the City to perform one or more of the following tasks: (a) enhance the credit of the City securing the
Obligations or Additional Obligations by assuring that principal of and interest on the Obligations or such Additional
Obligations (or any interests therein) will be paid promptly when due (including the issuance of an insurance policy, letter
of credit, surety bond or other form of security for a reserve) or (b) provide liquidity for Additional Obligations (or any
interests therein) by undertaking to cause such Additional Obligations to be bought from the holders thereof when
submitted pursuant to an arrangement prescribed by the Additional Obligation Documents.
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“Debt Service Reserve Account” means the account of the Obligation Fund of that name created pursuant to
Section 5.1 of the Trust Agreement.
“Defeasance Obligations” means any of the following: (1) cash, (2) non-callable direct obligations of the United
States of America (“Treasuries”), (3) evidences of ownership of proportionate interests in future interest and principal
payments on Treasuries held by a bank or trust company as custodian, under which the owner of the investment is the real
party in interest and has the right to proceed directly and individually against the obligor and the underlying Treasuries
are not available to any person claiming through the custodian or to whom the custodian may be obligated, (4) pre-
refunded municipal obligations rated “AAA” and “Aaa” by S&P and Moody’s, respectively, or (5) securities eligible for
“AAA” defeasance under then existing criteria of S&P, or (6) any combination thereof.
“Depository Trustee” means any financial institution meeting the requirements as a successor Trustee under
Section 8.6 of the Trust Agreement that may be designated by the City.
“Deputy City Manager/Chief Financial Officer” means the chief financial officer of the City or other authorized
representative of City staff.
“Existing Projects” means certain improvements to the natural gas system, water system, wastewater system,
electric system and solid waste system of the City financed with the proceeds of the Bonds Being Refunded which remain
unacquired by the City but will be acquired pursuant to the Purchase Agreement.
“Fiscal Year” means the 12-month period used by the City for its general accounting purposes as the same may
be changed from time to time, said fiscal year currently extending from July 1 to June 30.
“Fitch” means Fitch Ratings, Inc., a corporation organized and existing under the laws of the State of Delaware,
its successors and assigns, and, if such corporation shall be dissolved or liquidated or shall no longer perform the functions
of a securities rating agency for the type of credit in question, “Fitch” shall be deemed to refer to any other nationally
recognized securities rating agency designated by the City by written notice to the Trustee.
“Holder” means the registered owner of any Obligation.
“Independent Counsel” means an attorney duly admitted to the practice of law before the highest court of the
state in which such attorney maintains an office and who is not an employee of the City or the Trustee and which may
include the counsel giving a Special Counsel’s Opinion.
“Insolvency Proceeding” means any proceeding by or against the city under the United States Bankruptcy Code
or any other applicable bankruptcy, insolvency, receivership, rehabilitation or similar law.
“Interest Account” means the account of the Obligation Fund of that name created pursuant to Section 5.1 of the
Trust Agreement.
“Interest Requirement” means (i) with respect to the Purchase Agreement, as of any date of calculation, the
interest amount on the Purchase Agreement due during the then-current Bond Year, (ii) with respect to Parity Obligations,
as of any date of calculation, the amount required to be paid by the City during the then-current Bond Year with respect
to interest on such Parity Obligations, and (iii) with respect to Additional Obligations, as of any date of calculation, the
amount required to be paid by the City during the then-current Bond Year with respect to interest on such Additional
Obligations. In the case of Variable Interest Rate Obligations Outstanding or proposed to be incurred, the Interest
Requirement shall be computed with the Assumed Interest Rate.
“Master Bond Resolution” means Resolution No. 6362 passed and adopted by the City Council of the City on
July 29, 1991, as thereafter supplemented and amended.
“Moody’s” means Moody’s Investors Service, Inc., a corporation organized and existing under the laws of the
State of Delaware, its successors and assigns, and, if such corporation shall be dissolved or liquidated or shall no longer
perform the functions of a securities rating agency for the type of credit in question, “Moody’s” shall be deemed to refer
to any other nationally recognized securities rating agency designated by the City by written notice to the Trustee.
“Obligation Fund” means the fund of that name created pursuant to Section 5.1 of the Trust Agreement.
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“Obligation Payment Date” means each January 1 and July 1, commencing, July 1, 2026*, so long as any
Obligations are Outstanding.
“Opinion of Counsel” means a written opinion of an attorney or firm of attorneys acceptable to the Trustee and
who or which (except as otherwise expressly provided in the Trust Agreement or in the Purchase Agreement) may be
counsel for the City or the Trustee, provided that such attorney or firm of attorneys may not be an employee of the Trustee.
“Outstanding” means when used with reference to the Obligations, as of any date of determination, all
Obligations theretofore executed and delivered except:
(i)
Obligations previously cancelled by the Trustee or delivered to the Trustee for cancellation;
(ii)
Obligations that are deemed paid and no longer Outstanding as provided in the Trust
Agreement, including as a result of irrevocable instructions being provided by the City for the redemption
thereof;
(iii)
Obligations in lieu of which other Obligations have been executed and delivered pursuant to
the provisions of the Trust Agreement relating to Obligations destroyed, stolen or lost, unless evidence
satisfactory to the Trustee has been received that any such Obligation is held by a bona fide purchaser; and
(iv)
For purposes of any consent or other action to be taken under the Trust Agreement or under
the Purchase Agreement by the Holders of a specified percentage in principal amount of Obligations, Obligations
held by or for the account of the City, or any Person controlling, controlled by, or under common control with
the City.
“Parity Lien Test Debt Service” means the highest aggregate Principal Requirement and Interest Requirement
of all Obligations, Parity Obligations and Additional Obligations then Outstanding to fall due and payable in the current
or any future Bond Year.
“Parity Obligation Documents” means any contract (including a resolution of the City Council) or agreement of
the City constituting or authorizing Parity Obligations.
“Parity Obligations” means the outstanding utility systems revenue obligations and utility systems revenue
refunding obligations issued or incurred by the City and having a parity of lien on the Pledged Revenues with the
Obligations being the (i) $14,015,000 original aggregate principal amount of Utility Systems Revenue Obligations, Series
2021, (ii) $54,705,000 original aggregate principal amount of Utility Systems Revenue Obligations, Series 2022A, (iii)
$16,075,000 original aggregate principal amount of Utility Systems Revenue Obligations, Taxable Series 2022B,
(iv) $57,655,000 original aggregate principal amount of Utility Systems Revenue Refunding Obligations, Series 2022C,
(v) $193,710,000 original aggregate principal amount of Utility Systems Revenue Obligations, Series 2023, and (vi)
$295,465,000 original aggregate principal amount of Utility Systems Revenue Obligations, Series 2025.
“Paying Agent” means the banks or trust companies and their successors from time to time designated by the
City as the paying agencies or places of payment for the Obligations. The Trustee is designated as the initial Paying Agent
for the Obligations.
“Permitted Investments” means, to the extent the use of which is not otherwise prohibited by applicable law:
1.
A.
Cash;
B.
U.S. Treasury Certificates, Notes and Bonds (including State and Local Government
Series – (SLGs));
C.
Direct obligations of the U.S. Treasury which have been stripped by the U.S. Treasury
itself;
D.
Resolution Funding Corp. (“REFCORP”) but only the interest component of
REFCORP strips which have been stripped by request to the Federal Reserve Bank of New York in
book entry form are acceptable;
E.
Pre-refunded municipal bonds rated “Aaa” by Moody’s and “AAA” by S&P but if,
however, the issue is only rated by S&P (i.e., there is no Moody’s rating) then the pre-refunded bonds
* Subject to change.
F-4
must have been pre-refunded with cash, direct U.S. or U.S. guaranteed obligations, or AAA rated pre-
refunded municipals to satisfy this condition and
F.
Obligations issued by the following agencies which are backed by the full faith and
credit of the U.S.:
(i)
U.S. Export-Import Bank (Eximbank)
– Direct obligations or fully guaranteed certificates of beneficial ownership,
(ii)
Farmers Home Administration (FmHA),
(iii)
Federal Financing Bank,
(iv)
General Services Administration
– Participation Certificates,
(v)
U.S. Maritime Administration
– Guaranteed Title XI financing and
(vi)
U.S. Department of Housing and Urban Development (HUD)
– Project Notes
– Local Authority Bonds
– New Communities Debentures – U.S. government guaranteed debentures
– U.S. Public Housing Notes and Bonds – U.S. government guaranteed public
housing notes and bonds;
2.
Federal Housing Administration debentures;
3.
Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the
following non-full faith and credit U.S. government agencies (stripped securities are only permitted if they have
been stripped by the agency itself):
A.
Federal Home Loan Mortgage Corporation (FHLMC or “Freddie Mac”)
– Participation Certificates (excluded are securities that do not have a fixed par value
and/or whose terms do not promise a fixed dollar amount at maturity or call date)
– Senior debt obligations
B.
Farm Credit Banks (formerly Federal Land Banks, Federal Intermediate Credit Banks
and Banks for Cooperatives)
– Consolidated system-wide bonds and notes
C.
Federal Home Loan Banks (FHL Banks)
– Consolidated debt obligations
D.
Federal National Mortgage Association (FNMA or “Fannie Mae”)
– Senior debt obligations
– Mortgage-backed securities (excluded are stripped mortgage securities that are
purchased at prices exceeding the portion of their unpaid principal amounts)
E.
Financing Corporation (FICO)
– Debt obligations
F.
Resolution Funding Corp. (REFCORP)
– Debt obligations
4.
Unsecured certificates of deposit, time deposits, and bankers’ acceptances (having maturities
of not more than 30 days) of any bank the short-term obligations of which are rated “A-1” or better by S&P or
the highest rating category of Moody’s or are fully insured by the Federal Deposit Insurance Corporation (FDIC).
5.
Deposits the aggregate amount of which are fully insured by the Federal Deposit Insurance
Corporation (FDIC).
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6.
Commercial paper (having original maturities of not more than 270 days) rated “A-1+” by
S&P and “Prime-1” by Moody’s.
7.
Money market mutual funds rated “AAm” or “AAm-G” or higher by S&P or having a rating
in the highest investment category granted thereby from Moody’s.
8.
“State Obligations”, which means:
A.
Direct general obligations of any state of the United States of America or any
subdivision or agency thereof to which is pledged the full faith and credit of a state
the unsecured general obligation debt of which is rated “A3” by Moody’s and “A” by
S&P, or higher, or any obligation fully and unconditionally guaranteed by any state,
subdivision or agency whose unsecured general obligation debt is so rated.
B.
Direct general short-term obligations of any state agency or subdivision or agency
thereof described in (A) above and rated “A-1+” by S&P and “MIG-1” by Moody’s.
C.
Special Revenue Bonds (as defined in the United States Bankruptcy Code) of any
state, state agency or subdivision described in (A) above and rated “AA” or better by
S&P and “Aa” or better by Moody’s.
9.
Pre-refunded municipal obligations rated “AAA” by S&P and “Aaa” by Moody’s meeting the
following requirements:
A.
the municipal obligations are (1) not subject to redemption prior to maturity or (2) the
trustee for the municipal obligations has been given irrevocable instructions
concerning their call and redemption and the issuer of the municipal obligations has
covenanted not to redeem such municipal obligations other than as set forth in such
instructions;
B.
the municipal obligations are secured by cash or United States Treasury Obligations
that may be applied only to payment of the principal of, interest and premium on such
municipal obligations;
C.
the principal of and interest on the United States Treasury Obligations (plus any cash
in the escrow) has been verified by the report of independent certified public
accountants to be sufficient to pay in full all principal of, interest, and premium, if
any, due and to become due on the municipal obligations (“Verification”);
D.
the cash or United States Treasury Obligations serving as security for the municipal
obligations are held by an escrow agent or trustee in trust for owners of the municipal
obligations;
E.
no substitution of a United States Treasury Obligation shall be permitted except with
another United States Treasury Obligation and upon delivery of a new Verification;
and
F.
the cash or United States Treasury Obligations are not available to satisfy any other
claims, including those by or against the trustee or escrow agent.
10.
Repurchase or reverse repurchase agreements: With (1) any domestic bank, or domestic branch
of a foreign bank, the long term debt of which is rated at least “A” by S&P and Moody’s; or (2) any broker-
dealer with “retail customers” or a related affiliate thereof which broker-dealer has, or the parent company (which
guarantees the provider) of which has, long-term debt rated at least “A” by S&P and Moody’s, which broker-
dealer falls under the jurisdiction of the Securities Investors Protection Corporation; or (3) any other entity rated
“A” or better by S&P and Moody’s, provided that:
A.
The market value of the collateral is maintained at levels and upon such conditions as
would be acceptable to S&P and Moody’s to maintain an “A” rating in an “A” rated
structured financing (with a market value approach);
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B.
The Trustee or a third party acting solely as agent therefor (the “Holder of the
Collateral”) has possession of the collateral or the collateral has been transferred to
the Holder of the Collateral in accordance with applicable state and federal laws
(other than by means of entries on the transferor’s books);
C.
The repurchase or reverse repurchase agreement shall state and an opinion of counsel
shall be rendered at the time such collateral is delivered that the Holder of the
Collateral has a perfected first priority security interest in the collateral, any
substituted collateral and all proceeds thereof (in the case of bearer securities, this
means the Holder of the Collateral is in possession);
D.
All other requirements of S&P in respect of repurchase or reverse repurchase
agreements shall be met;
E.
The repurchase or reverse repurchase agreement shall provide that if during its term
the provider’s rating by either Moody’s or S&P is withdrawn or suspended or falls
below “A-” by S&P or “A3” by Moody’s, as appropriate, the provider must, at the
direction of the City or the Trustee, within ten days of receipt of such direction,
repurchase all collateral and terminate the agreement, with no penalty or premium to
the City or Trustee.
Notwithstanding the above, if a repurchase agreement has a term of 270 days or less (with no evergreen
provision), collateral levels need not be as specified in (A) above, so long as such collateral levels are 103 percent
or better and the provider is rated at least “A” by S&P and Moody’s, respectively.
11.
Investment agreements with a domestic or foreign bank or corporation (other than a life or
property casualty insurance company) the long-term debt of which, or, in the case of a guaranteed corporation
the long-term debt, or, in the case of a monoline financial guaranty insurance company, claims paying ability, of
the guarantor is rated at least “AA” by S&P and “Aa2” by Moody’s; provided that, by the terms of the investment
agreement:
A.
interest payments are to be made to the Trustee at times and in amounts as necessary
to pay debt service (or, if the investment agreement is for the construction fund,
construction draws) on the Obligations;
B.
the invested funds are available for withdrawal without penalty or premium, at any
time upon not more than seven days’ prior notice; the Trustee thereby agrees to give
or cause to be given notice in accordance with the terms of the investment agreement
so as to receive funds thereunder with no penalty or premium paid;
C.
the investment agreement shall state that it is the unconditional and general obligation
of, and is not subordinated to any other obligation of, the provider thereof or, if the
provider is a bank, the agreement or the opinion of counsel shall state that the
obligation of the provider to make payments thereunder ranks pari passu with the
obligations of the provider to its other depositors and its other unsecured and
unsubordinated creditors;
D.
the Trustee receives the opinion of domestic counsel (which opinion shall be
addressed to the Trustee) that such investment agreement is legal, valid, binding and
enforceable upon the provider in accordance with its terms and of foreign counsel (if
applicable);
E.
the investment agreement shall provide that if during its term:
(i)
the provider’s rating by either S&P or Moody’s falls below “AA-” or “Aa3”,
respectively, the provider shall, at its option, within ten days of receipt of
publication of such downgrade, either (a) collateralize the investment
agreement by delivering or transferring in accordance with applicable state
and federal laws (other than by means of entries on the provider’s books) to
the Trustee or a third party acting solely as agent therefor (the “Holder of
F-7
the Collateral”) collateral free and clear of any third-party liens or claims the
market value of which collateral is maintained at levels and upon such
conditions as would be acceptable to S&P and Moody’s to maintain an “A”
rating in an “A” rated structured financing (with a market value approach);
or (b) repay the principal of and accrued but unpaid interest on the
investment; and
(ii)
the provider’s rating by either S&P or Moody’s is withdrawn or suspended
or falls below “A-” or “A3”, respectively, the provider must, at the direction
of the Trustee, within ten days of receipt of such direction, repay the
principal of and accrued but unpaid interest on the investment, in either case
with no penalty or premium to the Trustee, and
F.
the investment agreement shall state and an opinion of counsel shall be rendered, in
the event collateral is required to be pledged by the provider under the terms of the
investment agreement, at the time such collateral is delivered, that the Holder of the
Collateral has a perfected first priority security interest in the collateral, any
substituted collateral and all proceeds thereof (in the case of bearer securities, this
means the Holder of the Collateral is in possession);
G.
the investment agreement must provide that if during its term:
(i)
the provider shall default in its payment obligations, the provider’s
obligations under the investment agreement shall, at the direction of the
Trustee, be accelerated and amounts invested and accrued but unpaid with
interest thereon shall be repaid to the Trustee, and
(ii)
the provider shall become insolvent, not pay its debts as they become due,
be declared or petition to be declared bankrupt, etc. (“event of insolvency”),
the provider’s obligations shall automatically be accelerated and amounts
invested and accrued but unpaid with interest thereon shall be repaid to the
Trustee, as appropriate.
12.
Interests in the Local Government Investment Pool established pursuant to Arizona Revised
Statutes Section 35-326.
13.
Any other investment that is permitted by the City’s written investment policy.
“Person” includes an individual, an unincorporated association, a corporation, a partnership, a government
agency or a political subdivision.
“Pledged Revenues” means Revenues remaining after deducting Operating Expenses. (However, see
“SECURITY FOR AND SOURCES OF PAYMENT OF THE OBLIGATIONS – Source of Purchase Payments;
Obligations Junior to Bonds” regarding the modification to Pledged Revenues applicable so long as the Bonds are
Outstanding under the Master Bond Resolution.) For the purposes of the computation required by Sections 4.4, 5.3(b)
and 5.3(c) of the Purchase Agreement, additional amounts will be added to, or subtracted from, the Pledged Revenues of
the preceding Fiscal Year, as follows: (i) if all or part of the proceeds of the Additional Obligations described in Section
4.4 of the Purchase Agreement are to be expended for the acquisition of utility properties, then the Revenues that would
have been derived from the operation of such acquired utility properties during the entire immediately preceding Fiscal
Year, as estimated by a Consultant, will be added; (ii) if during such preceding Fiscal Year the City has acquired or sold
existing utility properties, then the revenues that would have been derived from the operation of such utility properties
during such Fiscal Year had such utility properties been acquired and operating or sold and not operating throughout such
Fiscal Year, as estimated by a Consultant, will be added or subtracted, respectively; and (iii) if during such preceding
Fiscal Year the City has increased rates, fees and charges with respect to the System, then the increased amount that would
have been received during such Fiscal Year had such increase been in effect throughout such Fiscal Year, as estimated by
a Consultant, will be added.
“Principal Account” means the account of the Obligation Fund of that name created pursuant to Section 5.1 of
the Trust Agreement.
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“Principal Installment” means, for any particular date, the aggregate of the principal amount of Obligations that
are due on such date.
“Principal Requirement” means (i) with respect to the Purchase Agreement, as of any date of calculation, the
principal amount of the Obligations maturing or subject to mandatory redemption pursuant to the Trust Agreement during
the then-current Bond Year, and (ii) with respect to Parity Obligations and Additional Obligations, as of any date of
calculation, the principal amount required to be paid by the City during the then-current Bond Year with respect to such
Parity Obligations and Additional Obligations, as applicable. In computing the Principal Requirement for such Parity
Obligations or Additional Obligations, an amount of such Parity Obligations or Additional Obligations, as applicable,
required to be redeemed pursuant to mandatory redemption in each year shall be deemed to fall due in that year and
(except in case of default in observing a mandatory redemption requirement) shall be deducted from the amount of the
Parity Obligations or Additional Obligations, as applicable, maturing on the scheduled maturity date. In the case of Parity
Obligations or Additional Obligations supported by a Credit Facility, the Principal Requirement for such Parity
Obligations or Additional Obligations, as applicable, shall be determined in accordance with the principal retirement
schedule specified in the Parity Obligation Documents or Additional Obligation Documents authorizing the incurrence of
such Parity Obligations or Additional Obligations, as applicable, rather than any amortization schedule set forth in such
Credit Facility unless payments under such Parity Obligations or Additional Obligations, as applicable, shall be in default
at the time of the determination, in which case the Principal Requirements for such Parity Obligations or Additional
Obligations shall be determined in accordance with the amortization schedule set forth in such Credit Facility.
“Purchase Event of Default” means one of the events defined as such in Section 7.1 of the Purchase Agreement.
“Purchase Price” means the sum of the payments paid pursuant to Sections 5.4(i) and (ii) of the Trust Agreement
from amounts to be paid by or on behalf of the City as the purchase price for the Existing Projects.
“Qualified Reserve Fund Instrument” means a letter or line of credit, insurance policy or surety bond that meets
the requirements set forth below:
(i)
A surety bond or insurance policy issued to the Trustee by a company licensed to
issue an insurance policy guaranteeing the timely payment of debt service on the Obligations may be
deposited in the Debt Service Reserve Account to meet the amount that should have then been on
deposit in the Debt Service Reserve Account pursuant to the requirements of the Purchase Agreement
if the claims paying ability of the issuer thereof shall be rated at least “AA-” or “Aa3” by S&P or
Moody’s, respectively, or a lower rating acceptable to the City, provided that any issuer rated below
“AA-“ or “Aa3” by S&P or Moody’s, respectively, will not adversely affect the then-current rating
pertaining to the Obligations, if then rated by S&P or Moody’s.
(ii)
An unconditional irrevocable letter of credit issued to the Trustee, as agent of the
Holders of the Obligations, by a bank may be deposited in the Debt Service Reserve Account to meet
the amount that should have then been on deposit in the Debt Service Reserve Account pursuant to the
requirements of the Purchase Agreement if the issuer thereof is rated at least “AA-” by S&P, or a lower
rating acceptable to the City, provided that any issuer rated below “AA-” by S&P will not adversely
affect the then-current rating pertaining to the Obligations, if then rated by S&P or Moody’s. The letter
of credit shall be payable in one or more draws upon presentation by the beneficiary of a sight draft
accompanied by its certificate that it then holds insufficient funds to make a required payment of
principal or interest on the Obligations. The draws shall be payable within two days of presentation of
the sight draft. The letter of credit shall be for a term of not less than three years. The issuer of the letter
of credit shall be required to notify the City and the Trustee, not later than 24 months prior to the stated
expiration date of the letter of credit, as to whether such expiration date shall be extended, and if so,
shall indicate the new expiration date.
The letter of credit shall permit a draw in full not less than 14 days prior to the expiration or
termination of such letter of credit if the letter of credit has not been replaced or renewed. The Trustee
is authorized and directed to draw upon the letter of credit prior to its expiration or termination unless
an acceptable replacement is in place or the Debt Service Reserve Account is fully funded in its required
amount.
If the expiration date of the letter of credit shall not be extended, the City may deposit in the
Debt Service Reserve Account an amount sufficient to cause cash or Permitted Investments on deposit
in the Debt Service Reserve Account to equal the amount that should have then been on deposit in the
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Debt Service Reserve Account pursuant to the requirements of the Purchase Agreement, such deposit
to be paid in equal installments on at least a semiannual basis over the ensuing three years, unless the
Qualified Reserve Fund Instrument is replaced by a Qualified Reserve Fund Instrument meeting the
requirements in either (i) or (ii) above.
The deposit of any Qualified Reserve Fund Instrument pursuant to this paragraph (ii) shall be
subject to the Trustee’s receipt of an opinion of counsel of an attorney or firm of attorneys of nationally
recognized standing in the related field as to the due authorization, execution, delivery and
enforceability of such instrument in accordance with its terms, subject to applicable laws affecting
creditors’ rights generally, and, in the event the issuer of such credit instrument is not a domestic entity,
an opinion of foreign counsel. In addition, the use of an irrevocable letter of credit shall be subject to
the Trustee’s receipt of an opinion of counsel of such attorney or firm of attorneys to the effect that
payments under such letter of credit would not constitute avoidable preferences under Section 547 of
the U.S. Bankruptcy Code or similar state laws with avoidable preference provisions in the event of the
filing of a petition for relief under the U.S. Bankruptcy Code or similar state laws by or against the
issuer of the Obligations (or any other account party under the letter of credit).
(iii)
The obligation to reimburse the issuer of a Qualified Reserve Fund Instrument for
any fees, expenses, claims or draws upon such Qualified Reserve Fund Instrument shall be subordinate
to the payment of debt service on the Obligations. The right of the issuer of a Qualified Reserve Fund
Instrument to payment or reimbursement of its fees and expenses shall be subordinated to cash
replenishment of the Debt Service Reserve Account, and subject to the second succeeding sentence, its
right to reimbursement for claims or draws shall be on a parity with the cash replenishment of the Debt
Service Reserve Account. The Qualified Reserve Fund Instrument shall provide for a revolving feature
under which the amount available thereunder will be reinstated to the extent of any reimbursement of
draws or claims paid. If the revolving feature is suspended or terminated for any reason, the right of the
issuer of the Qualified Reserve Fund Instrument to reimbursement will be further subordinated to cash
replenishment of the Debt Service Reserve Account to an amount equal to the difference between the
full original amount available under the Qualified Reserve Fund Instrument and the amount then
available for further draws or claims. If (A) the issuer of a Qualified Reserve Fund Instrument becomes
insolvent or (B) the issuer of a Qualified Reserve Fund Instrument defaults in its payment obligations
thereunder or (C) the claims-paying ability of the issuer of the insurance policy or surety bond falls
below a S&P “AA-” or a Moody’s “Aa3” (or if the City initially selected a lower rated issuer, the S&P
or Moody’s rating on such issuer declines from its initial level and such decline adversely affects the
then-current rating pertaining to the Obligations, if then rated by S&P or Moody’s) or (D) the rating of
the issuer of the letter of credit falls below a S&P “AA-” (or if the City initially selected a lower rated
issuer, the S&P rating on such issuer declines from its initial level and such decline adversely affects
the then-current rating pertaining to the Obligations, if then rated by S&P or Moody’s) the obligation
to reimburse the issuer of the Qualified Reserve Fund Instrument shall be subordinate to the cash
replenishment of the Debt Service Reserve Account.
(iv)
If (A) the revolving reinstatement feature described in the preceding paragraph is
suspended or terminated or (B) the rating of the claims paying ability of the issuer of the surety bond or
insurance policy falls below a S&P “AA-” or a Moody’s “Aa3” (or if the City initially selected a lower
rated issuer, the S&P or Moody’s rating on such issuer declines from its initial level and such decline
adversely affects the then-current rating pertaining to the Obligations, if then rated by S&P or Moody’s)
or (C) the rating of the issuer of the letter of credit falls below a S&P “AA-” (or if the City initially
selected a lower rated issuer, the S&P rating on such issuer declines from its initial level and such
decline adversely affects the then-current rating pertaining to the Obligations, if then rated by S&P or
Moody’s), the City shall either (1) deposit into the Debt Service Reserve Account an amount sufficient
to cause the cash or Permitted Investments on deposit in the Debt Service Reserve Account to equal the
amount that should have then been on deposit in the Debt Service Reserve Account pursuant to the
requirements of the Purchase Agreement, such amount to be paid over the ensuing five years in equal
installments deposited at least semiannually or (2) replace such instrument with a surety bond, insurance
policy or letter of credit meeting the requirements in any of (i)-(iii) above within six months of such
occurrence. In the event (a) the rating of the claims-paying ability of the issuer of the surety bond or
insurance policy is no longer investment grade or (b) the rating of the issuer of the letter of credit is no
longer investment grade or (c) the issuer of the Qualified Reserve Fund Instrument defaults in its
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payment obligations or (d) the issuer of the Qualified Reserve Fund Instrument becomes insolvent, the
City shall either (i) deposit into the Debt Service Reserve Account an amount sufficient to cause the
cash or Permitted Investments on deposit in the Debt Service Reserve Account to equal the amount that
should have then been on deposit in the Debt Service Reserve Account pursuant to the requirements of
the Purchase Agreement, such amount to be paid over the ensuing year in equal monthly installments
or (ii) replace such instrument with a surety bond, insurance policy or letter of credit meeting the
requirements above, as applicable, within six months of such occurrence.
(v)
Where applicable, the amount available for draws or claims under the Qualified
Reserve Fund Instrument may be reduced by the amount of cash or Permitted Investments deposited in
the Debt Service Reserve Account pursuant to clause (d)(i) of the preceding subparagraph (iv).
(vi)
Any amounts owed by the City to the issuer of the Qualified Reserve Fund Instrument
as a result of a draw thereon or a claim thereunder, as appropriate, shall be included in any calculation
of debt service requirements required to be made pursuant to the Purchase Agreement for any purpose,
e.g., rate covenant or Additional Obligations test.
(vii)
The Trustee shall ascertain the necessity for a claim or draw upon the Qualified
Reserve Fund Instrument and provide notice to the issuer of the Qualified Reserve Fund Instrument in
accordance with its terms not later than three days (or such longer period as may be necessary depending
on the permitted time period for honoring a draw under the Qualified Reserve Fund Instrument) prior
to each Obligation Payment Date.
(viii)
Cash on deposit in the Debt Service Reserve Account shall be used (or investments
purchased with such cash shall be liquidated and the proceeds applied as required) prior to any drawing
on the Qualified Reserve Fund Instrument.
(ix)
A Qualified Reserve Fund Instrument may not be provided to replace existing cash
or Permitted Investments unless the City obtains, and provides to the Trustee, a Special Counsel’s
Opinion to the effect that such action will not cause the interest on any Obligations to become includible
in gross income for purposes of federal income taxes.
“Rating Agency” means Moody’s or S&P, or either of them or their replacements as provided in the definition
of each.
“Repair and Replacement Fund” means the fund of that name as described in Section 5.1(b) of the Purchase
Agreement.
“Repair and Replacement Fund Funding Requirement” means an amount equal to two percent of all tangible
assets of the System at the end of the preceding Fiscal Year, as shown in the most recent audited financial statements of
the City.
“Reserve Requirement” means, if the Debt Service Reserve Account is required to be funded, an amount equal
to the greatest amount to be paid in any subsequent Fiscal Year of the City with respect to the Obligations; provided,
however, that such amount shall not exceed the least of (a) ten percent (10%) of the net proceeds of the Obligations at the
time of original delivery, (b) the greatest amount to be paid in any subsequent Fiscal Year of the City with respect to the
Obligations at the time of original delivery or (c) one hundred twenty-five percent (125%) of the average annual debt
service at the time of original delivery. If the Debt Service Reserve Account is not required to be funded, the Reserve
Requirement is $0.00.
“S&P” means S&P Global Ratings, a division of Standard & Poor’s Financial Services LLC, its successors and
assigns, and, if such limited liability company shall be dissolved or liquidated or shall no longer perform the functions of
a securities rating agency for the type of credit in question, “S&P” shall be deemed to refer to any other nationally
recognized securities rating agency designated by the City by written notice to the Trustee.
“Special Counsel” means an attorney or a firm of attorneys of nationally recognized standing in the field of law
relating to municipal bonds selected by the City.
“Special Counsel’s Opinion” means an opinion signed by Special Counsel.
“State” means the State of Arizona.
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“Trust Agreement Event of Default” means any one of those events set forth in Section 7.1 of the Trust
Agreement.
“Variable Interest Rate Obligations” means any Additional Obligations that may, in the future, bear interest at
rates that cannot be determined with specificity on their original incurrence.
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The Purchase Agreement
* * * * *
Section 2.1.
Agreement to Cause Execution and Delivery of Obligations; Application of Obligation
Proceeds. In order to provide funds for payment of the costs and expenses of the Existing Projects and of execution and
delivery of the Obligations, the Obligations shall be executed and delivered under the Trust Agreement.
* * * * *
Section 3.3.
City Series 2026 Refunding Obligations Fund; Amounts Payable After Execution and
Delivery of Obligations Including for Purchase Price.
(a)
Upon the issuance of the Obligations, the City shall establish and maintain a separate, internal
fund known as the “City Series 2026 Refunding Obligations Fund,” which the City shall hold in trust for the Holders of
the Obligations. On or before the 10th day of each month, the City shall transfer Pledged Revenues received pursuant to
Section 4.1 of the Purchase Agreement into the City Series 2026 Refunding Obligations Fund as follows:
(i)
Commencing June 10, 2026, the entire amount of the interest on the Obligations
falling due on the July 1, 2026*, Obligation Payment Date and, thereafter, one-sixth (1/6) of the interest
on the Obligations falling due on the next succeeding Obligation Payment Date, which amounts shall
be used to make the payments required by Section 3.3(b)(ii) below.
(ii)
Commencing June 10, 2026, the entire amount of the principal due on July 1, 2026*,
and, thereafter, one-twelfth (1/12) of the principal due or subject to mandatory redemption on the next
succeeding July 1, which amounts shall be used to make the payments required by Section 3.3(b)(iii)
below.
(b)
After providing for certain amounts due to the federal government as rebate of excess earnings,
the Pledged Revenues received pursuant to Section 4.1 of the Purchase Agreement (whether held by the City in the City
Series 2026 Refunding Obligations Fund or otherwise) shall be paid for the following purposes and in the following order
of priority:
(i)
On the dates necessary therefor, fees and expenses of the Trustee in accordance with
the provisions of Section 8.8 of the Trust Agreement to the Trustee.
(ii)
Not later than one Business Day prior to the date on which due, the interest on the
Obligations falling due on the next succeeding Obligation Payment Date for deposit to the Interest
Account (representing a portion of the Purchase Price).
(iii)
Not later than one Business Day prior to the date on which due, the principal of the
Obligations due or subject to mandatory redemption on the next succeeding Obligation Payment Date
for deposit to the Principal Account (representing a portion of the Purchase Price).
(iv)
(1) If Pledged Revenues during any Fiscal Year of the City are less than 175 percent
of the aggregate Principal Requirement and the Interest Requirement on all Obligations, Parity
Obligations and Additional Obligations then Outstanding for the corresponding Bond Year, then the
City will deposit, or cause to be deposited, within 180 days following the end of such Fiscal Year, to
the Debt Service Reserve Account, moneys, investments, Qualified Reserve Fund Instruments or any
combination thereof, equal to the Reserve Requirement, and (2) on the tenth (10th) day of each month,
commencing on the first (1st) day of the month following a payment made on the Obligations from the
Debt Service Reserve Account, an amount equal to one twelfth (1/12) of the amount which, when added
to the balance then in the Debt Service Reserve Account, shall be equal to the Reserve Requirement.
(v)
Commencing on June 10, 2026 and on the tenth (10th) day of each month thereafter,
the City shall deposit to the Repair and Replacement Fund an amount equal to the amount required to
fund and maintain the Repair and Replacement Fund in an amount equal to not less than two percent
(2%) of the Revenues of the previous month until the amount accumulated in the Repair and
Replacement Fund is in an amount equal to or greater than the Repair and Replacement Fund Funding
Requirement; provided that at such time or times as there is on deposit in the Repair and Replacement
* Subject to change.
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Fund an amount at least equal to the Repair and Replacement Fund Funding Requirement, as shown in
the most recent audited financial statements of the City, no amounts need to be deposited to the Repair
and Replacement Fund.
(c)
In the event the City should fail to make when due any of the payments required by this
Section, the installment so in default shall continue as an obligation of the City, payable solely from the Pledged Revenues,
until the amount in default shall have been fully paid, and the City shall pay the same with interest thereon at the rate
applicable to the corresponding maturities of Obligations, from the date said payment was to be made to the date of
payment by the City until paid. The Purchase Agreement shall be deemed and construed to be a “net purchase agreement,”
and the payments provided for in this Section shall be an absolute net return to the Seller, free and clear of any expenses
or charges whatsoever, except as otherwise specifically provided in the Purchase Agreement. The City shall cause an
amount of Revenues to be included in the annual budget for every Fiscal Year sufficient to meet all requirements of the
Purchase Agreement.
* * * * *
Section 4.1.
Limitation of Source of City Payments.
(a)
The Purchase Agreement is a limited, special obligation of the City, payable solely and secured
as to the payment in accordance with the terms and the provisions of the Purchase Agreement.
(b)
All amounts to be paid by the City pursuant to Section 3.3 of the Purchase Agreement (or
under any other section of the Purchase Agreement) shall be payable solely from the Pledged Revenues. Nothing,
however, shall preclude the City, in the sole and absolute discretion of the City Council, from paying such amounts from
other moneys of the City; provided, however, under no circumstances shall amounts paid under the Purchase Agreement
from such other moneys constitute a pledge thereof, and amounts payable by the City under the Purchase Agreement shall
never constitute a general obligation of the City or a pledge of ad valorem property taxes by the City.
(c)
The City pledges, and shall raise and apply, the Pledged Revenues in such amounts and in such
manner as required to make the payments required to be made by the City under the Purchase Agreement and covenants
to make said payments from the Pledged Revenues. This pledge shall be a first lien and on a parity to the pledge thereof
and lien thereon for the Parity Obligations and the Additional Obligations. All of the Pledged Revenues shall be
immediately subject to such pledge without any physical delivery thereof or further act, and the lien of this pledge shall
be valid and binding as against all persons having claims of any kind in tort, contract or otherwise against the City,
irrespective of whether such persons have notice thereof. Nothing contained in this Section shall be construed as limiting
any authority granted elsewhere in the Purchase Agreement or the Parity Obligation Documents to incur the Purchase
Agreement or Additional Obligations nor be deemed a limitation upon the issuance of bonds, notes or other obligations
under any law pertaining to the City secured by moneys, income and funds other than the Pledged Revenues and other
moneys and investments pledged under the Purchase Agreement or under the Trust Agreement. After the application of
the Pledged Revenues for the purposes in the Purchase Agreement, they may be used for any lawful purpose.
* * * * *
Section 4.3.
Prior Lien Obligations. The City shall not incur any obligations payable from the Pledged
Revenues ranking prior to the obligations of the City under the Purchase Agreement. (See Article IX of the Purchase
Agreement, however, which provides that this Section 4.3 is inoperative until all the Bonds issued under the Master Bond
Resolution are no longer Outstanding.)
* * * * *
Section 5.1.
Utilities; Maintenance of the System in a Responsible Manner; Repair and Replacement
Fund.
(a)
All maintenance and repair of the Existing Projects and utilities therefor shall be the
responsibility of the City. The Seller as Trustee under the Trust Agreement shall have no obligation with respect to the
operation or maintenance of the Existing Projects. (In exchange for the payment of the amounts due under the Purchase
Agreement, the Seller shall provide nothing more than the Existing Projects.) The City shall (a) operate and maintain the
System in a responsible manner and at a reasonable cost and (b) perform all functions with reference to the System
required by the Constitution and laws of the State.
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(b)
The City previously created the Repair and Replacement Fund in its custody. Amounts in the
Repair and Replacement Fund shall be used (without priority): (i) for making extraordinary repairs or replacements to the
System which are necessary to keep the System in operating condition and for the making of which provision has not
been made in the annual budget and money is not available as an Operating Expense, (ii) as provided in Section 3.3(b),
(iii) for the payment of any sums due and owing to the Holders of the Obligations, Parity Obligations and Additional
Obligations being refunded which sums cannot for any reason be paid from the income and proceeds of any Defeasance
Obligations held by a Depository Trustee, (iv) for the acquisition of water, electrical, natural gas, wastewater and solid
waste properties or facilities deemed necessary by the City to the efficient and economical operation of the System or to
extend or improve the System, and (v) for otherwise acquiring, constructing and improving the System. Notwithstanding
anything in the Purchase Agreement or in the Trust Agreement to the contrary, if, after any Fiscal Year, amounts in the
Repair and Replacement Fund exceed the Repair and Replacement Fund Funding Requirement, such amounts in excess
of the Repair and Replacement Fund Funding Requirement held in the Repair and Replacement Fund may be released
and used by the City for any lawful purpose. Notwithstanding any provision of the Trust Agreement or the Agreement to
the contrary, the Repair and Replacement Fund is in no way pledged or liened pursuant to the Purchase Agreement as a
source of payment for the Purchase Price, and the City may waive, terminate or modify the uses of the Repair and
Replacement Fund at any time without obtaining any consent from Holders of the Obligations.
Section 5.2.
Insurance. The City shall maintain insurance on the System (which may take the form of or
include an adequately-funded program of self-insurance), for the benefit of the Holder or Holders of the Obligations
payable wholly or in part from the Revenues, for the full insurable value of all buildings and machinery and equipment
therein, against loss or damage by fire, lightning, tornado or winds, and all other combustible property against loss or
damage by fire or lightning, and other coverages and amounts of insurance (including public liability and damage to
property of others to the extent deemed prudent by the City), normally carried by others on similar operations. The cost
of such insurance may be paid as an Operating Expense. All money received for losses under any such insurance policies,
except public liability policies, is pledged by the City as security for the payment of the Purchase Agreement until and
unless such proceeds are paid out in making good the loss or damage in respect of which such proceeds are received. Self-
insurance may be maintained for the System either separately or in connection with any general self-insurance retention
program or other insurance program maintained by the City; provided that (a) any such program has been adopted by the
City and (b) the City’s risk manager or other appropriate officer of the City annually reviews any such program to confirm
that such program is adequate and actuarially sound.
Section 5.3.
No Sale; Lease or Encumbrance Exceptions.
(a)
The City shall not sell, lease, encumber or in any manner dispose of the System as a whole
until all of the Obligations and all interest thereon shall have been paid in full or provision for payment has been made in
accordance with the Trust Agreement.
(b)
The City may sell, lease or otherwise dispose of any of the property comprising a part of the
System in the following manner, if any one of the following conditions exists: (a) such property is not necessary for the
operation of the System, (b) such property is not useful in the operation of the System, (c) such property is not profitable
in the operation of the System or (d) the disposition of such property will be advantageous to the System and will not
adversely affect the security for the Holders of the Obligations. In addition, the City may sell to any municipality or
political subdivision of the State or any agency of any one or more of them, any portion of the System if there is filed
with the Deputy City Manager/Chief Financial Officer a certificate executed by the Consultant showing that, in opinion
of such Consultant, the proposed sale will not reduce the Pledged Revenues to be received in the full Bond Year next
succeeding such sale to an amount less than 120 percent of the Parity Lien Test Debt Service. In making such computation,
the Consultant shall consider such matters as such Consultant deems appropriate including: (i) anticipated diminution of
Revenues; (ii) anticipated increase or decrease in Operating Expenses attributable to the sale and (iii) reduction, if any, in
annual principal and interest requirements attributable to the application of the sale proceeds for payment of Obligations
then Outstanding. The proceeds of the disposition of such property shall be placed in the Repair and Replacement Fund
in addition to all other amounts required in the current Fiscal Year.
(c)
The City may sell or otherwise transfer the System as a whole to any municipality or political
subdivision or agency of one or more political subdivisions of the State to which may be delegated the legal authority to
own and operate the System on behalf of the public, and that undertakes in writing, filed with the Deputy City
Manager/Chief Financial Officer, the City’s obligations under the Purchase Agreement; provided that there shall be first
filed with the Deputy City Manager/Chief Financial Officer (1) a Special Counsel’s Opinion to the effect that (A) such
sale will not cause interest on any of the Obligations to become subject to federal income taxation, (B) such sale will not
materially diminish the security of the Holders of the Obligations (which opinion may be based on the Consultant’s report
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described in clause (2), below) and (C) the obligations of the City under the Purchase Agreement have been validly
assumed by such transferee and are the valid and legally binding obligations of such transferee and (2) an opinion of a
Consultant expressing the view that such transfer in and of itself will not result in any diminution of the Pledged Revenues
to the extent that in the full Bond Year next succeeding such transfer the Pledged Revenues will be less than 120 percent
of the Parity Lien Test Debt Service. In reaching this conclusion, the Consultant shall take into consideration such factors
as he may deem significant including any rate schedule to be imposed by said political subdivision or agency. The
proceeds of the disposition of such property shall be placed in the Repair and Replacement Fund in addition to all other
amounts required in the current Fiscal Year.
(d)
Notwithstanding the above provisions, the City may sell or lease all or any part of the System
in connection with the issuance of Additional Obligations to finance additional improvements to the System or refinance
the Obligations, Parity Obligations, Additional Obligations or Bonds provided that such sale or lease does not permit
foreclosure, or other loss by the City, of such portion of the System.
* * * * *
Section 5.6.
Disconnection of Service for Non-Payment; No Free Service.
(a)
The City shall diligently enforce payment of all bills for services supplied by the System. If a
bill becomes delinquent and remains so for a period to be determined in accordance with City policy from time to time,
the City shall discontinue service in accordance with the laws of the State to any premises the owner or occupant of which
shall be so delinquent, and will not recommence such service to such premises until the delinquent charges shall have
been paid or provisions for payment satisfactory to the City shall have been made. The City shall do all things and exercise
all remedies reasonably available to assure the prompt payment of charges for all services supplied by the System.
(b)
No free service shall be furnished by the System to the City or any department thereof or to
any person, firm or corporation, public or private, or to any public agency or instrumentality, except as provided in the
Purchase Agreement. The reasonable cost and value of all service rendered to the City and its various departments by the
System shall be charged against the City and will be paid for as the service occurs from the City’s current funds. All
payments so made shall be considered Revenues and shall be applied in the manner provided in the Purchase Agreement
for the application of the Revenues of the System.
Section 5.7.
No Competing System. The City shall not, to the extent permitted by law, grant a franchise
or permit for the operation of any competing system within, in whole or in part, the service areas of the System.
* * * * *
Section 7.1.
Purchase Events of Default. Any one or more of the following events (“Purchase Events of
Default”) shall constitute a default under the Purchase Agreement:
(a)
The City shall fail to make any payment when due under Section 3.3(b)(ii) or (iii) of the
Purchase Agreement; or
(b)
The City shall fail to make any payment under Section 3.3(b)(i), (iv) or (v) of the Purchase
Agreement for a period of 30 days after notice of such failure shall have been given in writing to the City by the Seller or
by the Trustee; or
(c)
The City shall fail to perform any other covenant in the Purchase Agreement for a period of
30 days after written notice specifying such default shall have been given to the City by the Seller or the Trustee, provided
that if such failure is a type that it cannot be remedied within such 30 day period, it shall not be deemed a Purchase Event
of Default so long as the City diligently tries to remedy the same; or
(d)
The filing by the City of a voluntary petition in bankruptcy, or failure by the City promptly to
lift any execution, garnishment or attachment, or assignment by the City for the benefit of creditors, or the entry by the
City into an agreement of composition with creditors, or the approval by a court of competent jurisdiction of a petition
applicable to the City in any proceedings instituted under the provisions of the federal bankruptcy statutes, as amended,
or under any similar acts that may be enacted after execution of the Purchase Agreement.
Section 7.2.
Remedies on Default by City. Upon the occurrence of a Purchase Event of Default, the
Trustee, as Seller, shall, but only if indemnified to its satisfaction by the Holders (if acting upon direction from the Holders
of a majority in aggregate principal amount of the Obligations), without further demand or notice, exercise any of the
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available remedies at law or in equity, including, but not limited to, specific performance, except that under no
circumstances may amounts due under the Purchase Agreement be accelerated. Upon the filing of suit by the Trustee, any
court having jurisdiction of the action may appoint a receiver to administer the System for the City with power to charge
and collect fees sufficient to pay all of the Operating Expenses and to make all required payments under the Purchase
Agreement. The Trustee, as Seller, may assign any or all of its rights and privileges under this Section to the Trustee, and
the Trustee may exercise any or all of such rights or privileges as it may deem advisable.
* * * * *
Section 8.12.
Certain Statutory Notices.
(a)
To the extent applicable by provision of law, the Trustee acknowledges that the Purchase
Agreement is subject to cancellation pursuant to Section 38-511, Arizona Revised Statutes, the provisions of which are
incorporated in the Purchase Agreement and that provides that the City may within three years after its execution cancel
any contract (including the Purchase Agreement) without penalty or further obligation made by the City if any person
significantly involved in initiating, negotiating, securing, drafting or creating the contract on behalf of the City is at any
time while the contract or any extension of the contract is in effect, an employee or agent of any other party to the contract
in any capacity or a consultant to any other party to the contract with respect to the subject matter of the contract.
* * * * *
Article IX.
Master Bond Resolution. The terms and provisions of the Master Bond Resolution will
control in all respects to the extent the Master Bond Resolution is inconsistent with the Purchase Agreement, including,
but not limited, with respect to definitions; priority of pledge, lien and security for the Bonds (as defined in the Master
Bond Resolution) issued under the Master Bond Resolution and credit enhancement for such bonds; flow of, and deposit
to, funds; covenants regarding the System; defaults and remedies; etc. So long as the Bonds are Outstanding (as defined
in the Master Bond Resolution), the Obligations and any Additional Obligations shall be junior in lien to the Bonds, as
permitted by the Master Bond Resolution. For purposes of the Purchase Agreement, the City waives its rights to amounts
held in the Replacement Fund established pursuant to the Master Bond Resolution. See APPENDIX E – “Summary of
the Master Bond Resolution, As Amended.”
So long as the Bonds are Outstanding under the Master Bond Resolution, the first sentence of the definition of
“Pledged Revenues” pertaining to the Obligations shall be modified such that Pledged Revenues means Net Revenues (as
defined in the Master Bond Resolution) less the payments made by the City pursuant to Section 10(B) of the Master Bond
Resolution to the Bond Fund, the Reserve Fund, the Reimbursement Fund and the Rebate Fund (each as defined in the
Master Bond Resolution).
So long as the Bonds are Outstanding under the Master Bond Resolution, the reference in Section 4.1(c) to “first
lien” is modified to be “junior lien.”
So long as the Bonds are Outstanding under the Master Bond Resolution, the transfers and payments in Sections
3.3(a) and 3.3(b) shall be made after the transfers and payments required in Section 10(B) of the Master Bond Resolution.
So long as Bonds are Outstanding under the Master Bond Resolution, Section 4.3 shall read as follows: “The
City shall not incur any obligations payable from the Net Revenues (as defined in the Master Bond Resolution) ranking
prior to the obligations of the City under the Master Bond Resolution. The City shall not incur any obligations payable
from the Pledged Revenues ranking prior to the obligations of the City under the Purchase Agreement, provided that the
City may issue Bonds upon meeting the conditions specified in the Master Bond Resolution.”
So long as the Bonds are Outstanding under the Master Bond Resolution, Section 5.3(b) of the Purchase
Agreement is modified such that the certificate of the Consultant to be filed with the Deputy City Manager/Chief Financial
Officer shall indicate the proposed sale will not reduce the Net Revenues (as defined in the Master Bond Resolution) to
be received in the full Bond Year next succeeding such sale to an amount less than 120 percent of the highest aggregate
Principal Requirement and Interest Requirement of all Outstanding Obligations, Parity Obligations and Additional
Obligations, plus the Maximum Annual Debt Service (as defined in the Master Bond Resolution) on all Outstanding
Bonds.
So long as the Bonds are Outstanding under the Master Bond Resolution, Section 5.3(c) of the Purchase
Agreement is modified such that the opinion of a Consultant described in clause (2) of Section 5.3(c) of the Purchase
Agreement shall express the view that such transfer in and of itself will not result in any diminution of the Net Revenues
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(as defined in the Master Bond Resolution) to the extent that in the full Bond Year next succeeding such transfer the Net
Revenues will be less than 120 percent of the highest aggregate Principal Requirement and Interest Requirement of all
Outstanding Obligations, Parity Obligations and Additional Obligations, plus the Maximum Annual Debt Service (as
defined in the Master Bond Resolution) on all Outstanding Bonds.
So long as the Bonds are Outstanding under the Master Bond Resolution, for purposes of the calculations in
Sections 4.4, 5.3(b) and 5.3(c) of the Purchase Agreement, each as such Sections are modified by Article IX of the
Purchase Agreement, additional amounts will be added to, or subtracted from, the Net Revenues in accordance with the
second sentence of the definition of Pledged Revenues and otherwise in accordance with Section 14(A)(1) of the Master
Bond Resolution. See APPENDIX E – “Summary of the Master Bond Resolution, As Amended – Equality of Lien;
Prohibition of Future Lien.”
So long as the Bonds are Outstanding under the Master Bond Resolution, the proceeds of any disposition
described in Sections 5.3(b) or 5.3(c) of the Purchase Agreement shall be deposited by the City in the Revenue Fund in
accordance with the Master Bond Resolution.
So long as Bonds are Outstanding under the Master Bond Resolution, the Repair and Replacement Fund Funding
Requirement shall be $0.00.
Article IX of the Purchase Agreement shall be applicable only until the Bonds are no longer “Outstanding”
pursuant to the Master Bond Resolution. The City shall not amend or otherwise modify the Master Bond Resolution in
any manner that adversely affects the rights of the Holders of the Obligations.
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The Trust Agreement
Granting Clauses. Pursuant to the Trust Agreement, the Trustee has been granted a security interest in and the
following described property has been released, assigned, transferred, pledged mortgaged, granted and conveyed to the
Trustee:
A.
All rights and interests of the Seller in, under and pursuant to the Purchase Agreement as
assigned, mortgaged, hypothecated and pledged to the Trustee pursuant to the Purchase Agreement, provided
that the assignment made by this clause shall not include any right to limitation of liability, indemnification of
liability, or payment or reimbursement of fees, costs or expenses,
B.
Amounts on deposit from time to time in the funds and accounts created pursuant to the Trust
Agreement, subject to the provisions of the Trust Agreement permitting the application thereof for the purposes
and on the terms and conditions set forth in the Trust Agreement and
C.
Any and all other real or personal property of any kind from time to time after execution of the
Trust Agreement by delivery or by writing of any kind specifically conveyed, pledged, assigned or transferred,
as and for additional security under the Trust Agreement for the Obligations, by the City or by anyone on its
behalf or with its written consent, in favor of the Trustee.
* * * * *
Section 1.3.
All Obligations Equally and Ratably Secured; Obligations Not General Obligations of
the City. All of the Obligations executed and delivered under the Trust Agreement and at any time Outstanding shall in
all respects be equally and ratably secured by the Trust Agreement, without preference, priority, or distinction on account
of the date or dates or the actual time or times of the execution and delivery or maturity of the Obligations, so that all
Obligations at any time Outstanding under the Trust Agreement shall have the same right, lien and preference under the
Trust Agreement. The Obligations shall be payable solely out of the revenues and other security pledged by the Trust
Agreement and shall not constitute an indebtedness, a general obligation or a pledge of ad valorem property taxes of the
City within the meaning of any State constitutional provision or statutory limitation. The Obligations shall never
constitute or give rise to a pecuniary liability of the City or be a charge against the City’s general credit, and the
Obligations shall never constitute a charge against the general credit or the taxing powers of the State or any political
subdivision thereof.
* * * * *
Section 5.3.
Flow of Funds into the Obligation Fund. The following payments to the Trustee shall be
applied in the following manner:
(i)
The Trustee shall deposit to the Interest Account amounts paid pursuant to Section 3.3(b)(ii)
of the Purchase Agreement. (Amounts transferred pursuant to Section 5.4(iii)(C) of the Trust Agreement shall
also be deposited into the Interest Account.)
(ii)
The Trustee shall deposit to the Principal Account amounts paid pursuant to Section 3.3(b)(iii)
of the Purchase Agreement as well as the total of any amounts received for any redemption of Obligations.
(Amounts transferred pursuant to Section 5.4(iii)(C) of the Trust Agreement shall also be deposited in the
Principal Account.)
(iii)
The Trustee shall deposit to the Debt Service Reserve Account amounts paid pursuant to
Section 3.3(b)(iv) of the Purchase Agreement. No deposit need be made into the Debt Service Reserve Account
if the amount on deposit therein plus the maximum amount of the Qualified Reserve Fund Instruments contained
therein equals the Reserve Requirement. [The prior written consent of the Insurer shall be a condition precedent
to the deposit of any credit instrument provided in lieu of a cash deposit into the Debt Service Reserve Account.]
Notwithstanding anything to the contrary set forth in the Trust Agreement, amounts on deposit in the Debt
Service Reserve Account shall be applied solely to the payment of debt service due on the Obligations and any
Additional Obligations secured by the Debt Service Reserve Account.
Section 5.4.
Flow of Funds out of the Obligation Fund. Amounts in the following accounts shall be
applied in the following manner:
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(i)
Amounts in the Interest Account shall be used to pay interest on the Obligations as it becomes
due.
(ii)
Amounts in the Principal Account shall be used to retire Obligations by payment at their
scheduled maturity date, mandatory redemption date or optional redemption date.
(iii)
(A)
Amounts in the Debt Service Reserve Account shall be used to pay the interest on, or
to retire at their scheduled maturity or mandatory redemption date, the Obligations in the event that no other
money of the City is available therefor or for the retirement (including by defeasance pursuant to Section 10.2
of the Trust Agreement) of all of the Obligations then Outstanding. If and to the extent that money has been
deposited in the Debt Service Reserve Account, all such money shall be used (or investments purchased with
such money shall be liquidated and the proceeds applied as required) prior to any drawing under a Qualified
Reserve Fund Instrument.
(B)
Notwithstanding anything in the Trust Agreement or in the Purchase Agreement to
the contrary, if, after the City has been required to make deposits to the Debt Service Reserve Account pursuant
to Section 3.3(b)(iv) of the Purchase Agreement, the Pledged Revenues for two consecutive Fiscal Years equal
or exceed 175 percent of the aggregate Principal Requirement and the Interest Requirement on all Obligations,
Parity Obligations and Additional Obligations then Outstanding for the corresponding Bond Year for such Fiscal
Years (as certified in writing by the City to the Trustee), any moneys and/or Qualified Reserve Fund Instruments
held in the Debt Service Reserve Account may, at the written request of the City, be released to or as directed in
writing by the City and (except as otherwise limited by the terms of any Qualified Reserve Fund Instrument)
used by the City for any lawful purpose, and the City’s obligation to maintain the Reserve Requirement in the
Debt Service Reserve Account shall terminate, subject to Section 3.3(b)(iv) of the Purchase Agreement for
funding the Debt Service Reserve Account if the circumstances described in Section 3.3(b)(iv) of the Purchase
Agreement occur.
(C)
If on July 2 of any year the amount in the Debt Service Reserve Account exceeds an
amount equal to the Reserve Requirement and if the City is not then in default under the Purchase Agreement,
the Trustee shall withdraw the amount of any such excess from such account and shall apply such amount, first
and on a pro-rata basis, to pay amounts due with respect to the Qualified Reserve Fund Instrument, including by
transferring amounts in the “reimbursement fund” established to reimburse the provider of the Qualified Reserve
Fund Instrument for any payments made by the provider thereof until the corresponding costs with respect thereto
are paid, second, as a deposit to the Interest Account, and third, if the amount in the Interest Account is equal to
or greater than the interest due on the Obligations on the next Obligation Payment Date, as a deposit to the
Principal Account.
(D)
The Trustee is also directed to draw on a Qualified Reserve Fund Instrument in
accordance with the terms included in the definition of Qualified Reserve Fund Instrument.
* * * * *
Section 5.6.
Investment of Moneys Held by Trustee.
(a)
Moneys in all funds and accounts held by the Trustee shall be invested by the Trustee, as soon
as possible upon receipt of immediately available funds at its designated corporate trust office, to the fullest amount
possible, in Permitted Investments as directed, in writing, by the City Representative; provided that the maturity date or
the date on which such Permitted Investments may be redeemed at the option of the holder thereof shall coincide as nearly
as practicable with (but in no event shall be later than) the date or dates on which moneys in the funds or accounts for
which the investments were made will be required for the purposes thereof. In the event no investment direction is given
to the Trustee by the City, then the Trustee shall invest moneys in investments described in a money market fund permitted
by clause 7 of the definition of Permitted Investments.
(b)
Amounts credited to a fund or account may be invested, together with amounts credited to one
or more other funds or accounts, in the same Permitted Investment, provided that (i) each such investment complies in all
respects with the provisions of subsection (a) of this Section as they apply to each fund or account for which the joint
investment is made and (ii) the Trustee maintains separate records for each fund and account and such investments are
accurately reflected therein.
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* * * * *
Section 7.1.
Events of Default. Each of the following is declared a “Trust Agreement Event of Default”
under the Trust Agreement:
(a)
If payment of any installment of interest on any Obligation is not made in full when the same
becomes due and payable;
(b)
If payment of the principal or redemption premium, if any, on any Obligation is not made in
full when the same becomes due and payable;
(c)
If, under the provisions of any law for the relief or aid of debtors, any court of competent
jurisdiction assumes custody or control of all or any part of the interests pledged under the Trust Agreement and such
custody or control continues for more than 60 days;
(d)
If the City defaults in the due and punctual performance of any other covenant, condition,
agreement or provision on its part to be performed as provided in the Trust Agreement or in the Obligations and such
default continues for 30 days after the Trustee gives the City written notice specifying such default, unless within such 30
days the City commences and diligently pursues in good faith appropriate corrective action to the satisfaction of the
Trustee, the Trustee may give such notice in its discretion and shall give such notice at the written request of the Holders
of not less than 25 percent in principal amount of the Obligations then Outstanding; or
(e)
If any event of default provided by Section 7.1 of the Purchase Agreement occurs.
Section 7.2.
Remedies and Enforcement of Remedies.
(a)
Upon the occurrence and continuance of any Trust Agreement Event of Default and in
accordance with the Trust Agreement and the Purchase Agreement, the Trustee may, and upon the written request of the
Holders of not less than a majority in principal amount of the Obligations Outstanding, together with indemnification of
the Trustee to its satisfaction therefor, shall, protect and enforce its rights and the rights of the Holders under the Trust
Agreement and the Purchase Agreement by such suits, actions or proceedings as the Trustee, being advised by counsel,
deems expedient, including but not limited to, an action for the recovery of any amounts due under the Trust Agreement
for the breach of the Trust Agreement, and the Trustee may pursue any other remedy afforded by law or in equity,
including the remedy of specific performance. The Trustee shall also have those remedies provided pursuant to the
Purchase Agreement subject to any limitations on such remedies set forth therein.
(b)
Regardless of the happening of a Trust Agreement Event of Default and subject to Section 7.7
of the Trust Agreement, the Trustee, if requested in writing by the Holders of not less than a majority in principal amount
of the Obligations then outstanding shall, upon being indemnified to its satisfaction therefor, institute and maintain such
suits and proceedings as it deems necessary or expedient (i) to prevent any impairment of the security under the Trust
Agreement by any acts that may be unlawful or in violation of the Trust Agreement, or (ii) to preserve or protect the
interests of the Holders, provided that such request is in accordance with law and the provisions of the Trust Agreement
and, in the sole judgment of the Trustee, is not unduly prejudicial to the interest of the Holders of Obligations not making
such request.
Section 7.3.
No Acceleration. In no event shall the Trustee have the right to accelerate or cause to become
immediately due and payable, or payable in advance of their scheduled maturity dates, any amounts due under the Trust
Agreement other than as a result of optional redemption pursuant to the Trust Agreement and then only to the extent of
the amount to be so redeemed.
Section 7.4.
Application of Revenues and Other Moneys After Default.
(a)
During the continuance of a Trust Agreement Event of Default all moneys received by the
Trustee pursuant to any right given or action taken under the provisions of the Trust Agreement together with all moneys
held by the Trustee pursuant to the Trust Agreement, shall, after payment of the costs and expenses of the proceedings
resulting in the collection of such moneys and of the fees, expenses and advances incurred or made by the Trustee with
respect thereto, be deposited in the Obligation Fund, and all amounts held by the Trustee under the Trust Agreement shall
be applied as follows provided, that if the amount available shall not be sufficient to pay in full any amount or amounts
then due, then to the payment thereof ratably in a manner consistent with Section 3.3 of the Purchase Agreement,
according to the amounts due to the Persons entitled thereto, without any discrimination or preference:
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First:
To the payment of all installments of interest then due (including interest on amounts not paid
when due on the Obligations); and
Second: To the payment of the unpaid Principal Installments or redemption price of any Obligations
that shall have become due, whether at maturity or by call for redemption, in the order of their
due dates.
(b)
Whenever moneys are to be applied by the Trustee pursuant to the provisions of this Section,
such moneys shall be applied by it at such times, and from time to time, as the Trustee shall determine, having due regard
for the amount of such moneys available for application and the likelihood of additional moneys becoming available for
such application in the future. Whenever the Trustee shall apply such moneys, it shall fix the date upon which such
application is to be made and upon such date interest on the amounts of principal of the Obligations to be paid on such
dates shall cease to accrue. The Trustee shall give such notice as it may deem appropriate of the deposit with it of any
such moneys and of the fixing of any such date, and shall not be required to make payment to the Holder of any unpaid
Obligation until such Obligation is presented to the Trustee for appropriate endorsement of any partial payment or for
cancellation if fully paid.
(c)
Whenever all principal of and interest on the Obligations that has become due has been paid
under the provisions of this Section and all expenses and charges of the Trustee have been paid and the Obligation Fund
contains the amounts then required to be credited thereto, any balance remaining shall be paid to the City.
* * * * *
Section 7.7.
Individual Holder Action Restricted.
(a)
No Holder of any Obligation shall have any right to institute any suit, action or proceeding in
equity or at law for the enforcement of the Trust Agreement or for the execution of any trust or for any remedy under the
Trust Agreement except for the right to institute any suit, action or proceeding in equity or at law for the enforcement of
the Trustee’s duties and powers under the Trust Agreement upon the occurrence of all of the following events:
(i)
The Holders of at least a majority in principal amount of Obligations Outstanding
have made written request to the Trustee to proceed to exercise the powers granted in the Trust
Agreement; and
(ii)
Such Holders have offered to indemnify the Trustee as provided in Section 8.2(v) of
the Trust Agreement; and
(iii)
The Trustee has failed or refused to exercise the duties or powers granted in the Trust
Agreement for a period of 60 days after receipt by it of such request and offer of indemnity; and
(iv)
During such 60-day period no direction inconsistent with such written request has
been delivered to the Trustee by the Holders of a greater majority in principal amount of Obligations
then Outstanding.
(b)
No one or more Holders of Obligations shall have any right in any manner whatsoever to affect,
disturb or prejudice the security thereof or to enforce any right under the Trust Agreement except in the manner provided
in the Trust Agreement and for the equal benefit of the Holders of all Obligations Outstanding.
(c)
Nothing contained in the Trust Agreement shall affect or impair, or be construed to affect or
impair, the right of the Holder of any Obligation (i) to receive payment of the principal of or premium, if any, or interest
on such Obligation, as the case may be, on or after the due date thereof or (ii) to institute suit for the enforcement of any
such payment on or after such due date; provided, however, no Holder of any Obligation may institute or prosecute any
such suit if, and to the extent that, the institution or prosecution of such suit or the entry of judgment therein would, under
applicable law, result in the surrender, impairment, waiver or loss of the lien of the Trust Agreement on the moneys, funds
and properties pledged under the Trust Agreement for the equal and ratable benefit of all Holders of Obligations.
* * * * *
Section 7.9.
Waiver of Trust Agreement Event of Default.
(a)
No delay or omission of the Trustee or of the Holder of any Obligations to exercise any right
or power accruing upon any Trust Agreement Event of Default shall impair any such fight or power or shall be construed
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to be a waiver of any such Trust Agreement Event of Default or an acquiescence therein. Every power and remedy given
by the Trust Agreement may be exercised from time to time and as often as may be deemed expedient.
(b)
The Trustee may waive any Trust Agreement Event of Default that in its opinion has been
remedied before the entry of final judgment or decree in any suit, action or proceeding instituted by it under, the provisions
of the Trust Agreement, or before the completion of the enforcement of any other remedy under the Trust Agreement.
(c)
In case of any waiver by the Trustee of a Trust Agreement Event of Default under the Trust
Agreement, the City, the Trustee and the Holders shall be restored to their former positions and rights under the Trust
Agreement, respectively, but no such waiver shall extend to any subsequent or other Trust Agreement Event of Default.
The Trustee shall not be responsible to anyone for waiving or refraining from waiving any Trust Agreement Event of
Default in accordance with this Section.
* * * * *
Section 8.1.
Certain Duties and Responsibilities of Trustee.
(a)
Except during the continuance of a Trust Agreement Event of Default:
(i)
The Trustee undertakes to perform such duties and only such duties as are specifically
set forth in the Trust Agreement, and no implied covenants or obligations shall be read into the Trust
Agreement against the Trustee; and
(ii)
In the absence of bad faith on its part, the Trustee may conclusively rely, as to the
truth of the statements and the correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of the Trust Agreement; but in
the case of any such certificates or opinions which are required by any provision of the Trust Agreement
or the Purchase Agreement, the Trustee shall be under a duty to examine the same to determine whether
or not they conform on their face to the requirements of the Trust Agreement or the Purchase Agreement
on their face.
(b)
In case a Trust Agreement Event of Default has occurred and is continuing, the Trustee shall
exercise such of the rights and powers vested in it by the Trust Agreement, and use the same degree of care and skill in
their exercise, as a prudent person would exercise or use under the circumstances.
(c)
No provision of the Trust Agreement shall be construed to relieve the Trustee from liability
for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that:
(i)
this subsection (c) shall not be construed to limit the effect of subsection (a);
(ii)
the Trustee shall not be liable for any error of judgment made in good faith and
without negligence or willful misconduct by a president or vice-president of the board of directors, the
president or vice-president of the executive committee of the board of directors, the president, any vice
president, any assistant vice president, the secretary, any assistant secretary, the treasurer, any assistant
treasurer, any associate or senior associate, or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above designated officers or, with respect to a
particular matter, any other officer to whom such matter is referred because of his knowledge of and
familiarity with the particular subject;
(iii)
the Trustee shall not be liable with respect to any action taken or omitted to be taken
by it in good faith and without negligence or in accordance with the direction of the Holders of the
Outstanding Obligations as provided in the Trust Agreement 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 the Trust Agreement; and
(iv)
no provision of the Trust Agreement 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 under the
Trust Agreement, or in the exercise of any of its rights or powers, if it shall have reasonable grounds
for believing that repayment of such funds or indemnity satisfactory to it against such risk or liability is
not reasonably assured to it. The Trustee may, nevertheless, begin suit, or appear in and defend suit, or
do anything else in its judgment properly to be done by it as the Trustee, without prior assurance of
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indemnity, and in such case shall be entitled to reimbursement by the City for all reasonable costs,
expenses, attorneys’ and other fees and expenses, and all other reasonable disbursements, including its
own fees and expenses, and for all liability and damages suffered by the Trustee in connection therewith
except for the Trustee’s negligence or willful misconduct.
(d)
Whether or not therein expressly so provided, every provision of the Trust Agreement relating
to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this
Section.
Section 8.2.
Certain Rights of Trustee. Except as otherwise provided in Section 8.1 of the Trust
Agreement:
* * * * *
(v)
The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by
the Trust Agreement or by the Purchase Agreement at the request or direction of any of the Holders pursuant to the Trust
Agreement unless such Holders shall have offered to the Trustee security or indemnity satisfactory to it against the costs,
expenses and liabilities that might be incurred by it in compliance with such request or direction.
* * * * *
Section 8.6.
Removal and Resignation of Trustee.
(a)
The Trustee may resign at any time from the trusts created by the Trust Agreement by giving
written notice of the resignation to the City and any Paying Agents and by mailing written notice of the resignation to the
Holders as their names and addresses appear on the register it maintains with respect to the Obligations at the close of
business 15 days prior to the mailing. The resignation shall take effect upon the appointment of a successor Trustee. Any
such resignation of the Trustee shall also automatically be deemed a resignation by the Trustee as Seller.
(b)
The Trustee may be removed at any time by an instrument or document or concurrent
instruments or documents in writing delivered to the Trustee, with copies thereof mailed to the City and any Paying
Agents and signed by (i) the City Representative or (ii) by or on behalf of the Holders of not less than a majority in
aggregate principal amount of the Obligations then Outstanding. The Trustee also may be removed at any time for any
breach of trust or for acting or proceeding in violation of, or for failing to act or proceed in accordance with, any provision
of the Trust Agreement with respect to the duties and obligations of the Trustee by an instrument signed by the City or by
any court of competent jurisdiction upon the application of the City, or the Holders of not less a majority in aggregate
principal amount of the Obligations then Outstanding under the Trust Agreement. Any removal shall not take effect until
a successor Trustee has been appointed. In the event a successor Trustee has not been appointed and qualified within 60
days of the date notice of resignation or removal is given, the Trustee may apply to any court of competent jurisdiction
for the appointment of a successor Trustee to act until such time as a successor is appointed as provided in this Section.
(c)
In the event of the resignation or removal of the Trustee or in the event the Trustee is dissolved
or otherwise becomes incapable to act as the Trustee, the City shall be entitled to appoint a successor Trustee acceptable
to the City.
(d)
If the Holders of a majority of the principal amount of Obligations then Outstanding object to
the successor Trustee so appointed by the City and if such Holders designate another Person qualified to act as the Trustee,
the City shall then appoint as the Trustee the Person so designated by the Holders.
* * * * *
Section 8.8.
Trustee’s Fees and Expenses.
(a)
The Trustee shall be entitled to be paid from time to time reasonable compensation for all
services rendered by it under the Trust Agreement; to reimbursement upon request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in accordance with any provision of the Trust Agreement
(including the reasonable compensation and the expenses and disbursements of its counsel and its agents), except any
such expense, disbursement or advance as may be attributable to its negligence or bad faith or willful misconduct; and,
together with the Trustee’s officers, directors, agents and employees, to be indemnified by the City, for, from and against
any loss, liability or expense arising out of or in connection with the acceptance or administration of the trust or its duties
under the Trust Agreement.
F-24
* * * * *
Section 9.1.
Supplements not Requiring Consent of Holders. The City acting through the City
Representative and the Trustee may, without the consent of or notice to any of the Holders, enter into one or more
supplements to the Trust Agreement for one or more of the following purposes:
(i)
To cure any ambiguity or formal defect or omission in the Trust Agreement or to correct or
supplement any provision in the Trust Agreement that is inconsistent with any other provision in the Trust
Agreement, or to make any other provisions with respect to matters or questions arising under the Trust
Agreement provided such action shall, in the opinion of counsel delivered to the Trustee, not materially adversely
affect the interests of the Holders;
(ii)
To grant or confer upon the Holders any additional rights, remedies, powers or authority that
may lawfully be granted or conferred upon them;
(iii)
To secure additional revenues or provide additional security or reserves for payment of the
Obligations or to add a Qualified Reserve Fund Instrument and necessary, related provisions therefor;
(iv)
To comply with the requirements of any state or federal securities laws or the Trust Indenture
Act of 1939, as from time to time amended, if required by law or regulation lawfully issued thereunder;
(v)
To provide for the appointment of a successor trustee or co-trustee pursuant to the terms of the
Trust Agreement;
(vi)
To permit Obligations in bearer form if the City and the Trustee receive a Special Counsel’s
Opinion that such action will not cause the interest on any Obligations to become includible in gross income for
purposes of federal income taxes;
(vii)
To preserve the exclusion of the interest on the Obligations from gross income for purposes of
federal or State income taxes and to preserve the power of the City to continue to incur obligations (specifically
not limited to the Obligations) the interest on which is likewise exempt from federal and State income taxes; and
(viii)
To adopt procedures for the disclosure of information to Holders and to others in accordance
with any guidelines for such purpose promulgated by the American Bankers Association or some other similar
national organization, as such guidelines may be made applicable to the Trust Agreement by agreement of the
Trustee and the City.
Section 9.2.
Supplements Requiring Consent of Holders.
(a)
Other than supplements to the Trust Agreement referred to in Section 9.1 of the Trust
Agreement and subject to the terms and provisions and limitations contained in the Trust Agreement and not otherwise,
the Holders of not less than a majority in principal amount of the Obligations then Outstanding shall have the right, from
time to time, anything contained in the Trust Agreement to the contrary notwithstanding, to consent to and approve the
execution by the City Representative and the Trustee of such supplement as shall be deemed necessary and desirable by
the City and the Trustee for the purpose of modifying, altering, amending, adding to or rescinding, in any particular, any
of the terms or provisions contained in the Trust Agreement; provided, however, nothing in this Section or Section 9.1 of
the Trust Agreement shall permit or be construed as permitting a supplement to the Trust Agreement that would:
(i)
extend the stated maturity of or time for paying interest on any Obligation or reduce
the principal amount of or rate of interest payable on any Obligation without the consent of the Holder
of such Obligation;
(ii)
prefer or give a priority to any Obligation over any other Obligation without the
consent of the Holder of such Obligation;
(iii)
reduce the principal amount of Obligations then outstanding the consent of the
Holders of which is required to authorize such supplement without the consent of the Holders of all
Obligations then Outstanding;
(iv)
increase the principal amount of Obligations then Outstanding, the request of the
Holders of which is required by Section 7.1(d) of the Trust Agreement, without the consent of the
Holders of all Obligations then Outstanding; or
F-25
(v)
reduce the redemption price of any Obligation upon optional redemption or reduce
any period of time prior to commencement of any optional redemption period set forth in Section 3.2
of the Trust Agreement without the consent of the Holder of such Obligation.
(b)
If at any time the City requests the Trustee to enter into a supplement pursuant to this Section,
the Trustee shall, upon being satisfactorily and specifically indemnified by the City with respect to expenses with respect
to such supplement, cause notice of the proposed execution of such supplement to be mailed by first class mail, postage
pre-paid, to all registered Holders of Obligations then Outstanding at their addresses as they appear on the registration
books for the Obligations. The Trustee shall not, however, be subject to any liability to any Holder by reason of its failure
to mail, or the failure of such Holder to receive, the notice required by this Section, and any such failure shall not affect
the validity of such supplement when consented to and approved as provided in this Section. Such notice shall briefly set
forth the nature of the proposed supplement and shall state that copies thereof are on file at the office of the Trustee for
inspection by all Holders.
* * * * *
Section 9.4.
Amendments to Purchase Agreement Not Requiring Consent of Holders. The Trustee
may, without the consent of or notice to any of the Holders, consent to and join with the City in the execution and delivery
of any amendment, change or modification of the Purchase Agreement that is required (i) by the provisions of the Purchase
Agreement; (ii) to cure any ambiguity or formal defect or omission or to correct or supplement any provision of the
Purchase Agreement that is inconsistent with any other provision of the Purchase Agreement, or to make any other
provisions with respect to matters or questions arising under the Purchase Agreement provided that the modification, in
the opinion of counsel delivered to the Trustee under this Section, does not materially adversely affect the interests of the
Holders; (iii) to add a Qualified Reserve Fund Instrument so long as any payments with regard to the new Qualified
Reserve Fund Instrument are paid no sooner, or in an amount greater, than amounts required to be paid pursuant to Section
3.3(b)(iv) of the Purchase Agreement; (iv) to preserve the exclusion of the interest on the Obligations from gross income
for purposes of federal or State income taxes and to preserve the power of the City to continue to incur bonds or other
obligations (specifically not limited to the Obligations authorized by the Trust Agreement) the interest on which is
likewise exempt from federal and State income taxes; and (v) in connection with any other change in the Purchase
Agreement that, in the opinion of counsel delivered to the Trustee, will not materially adversely affect the interests of the
Holders or, in the opinion of the Trustee, the Trustee. In executing any amendment to the Purchase Agreement, the Trustee
shall be entitled to receive and rely on an Opinion of Counsel stating that such amendment is authorized or permitted
under the Trust Agreement and under the Purchase Agreement.
Section 9.5.
Amendments to Purchase Agreement Requiring Consent of Holders.
(a)
Except for amendments, changes or modification to the Purchase Agreement referred to in
Section 9.4 of the Trust Agreement and subject to the terms, provisions and limitations contained in the Trust Agreement
and not otherwise, the Trustee may consent to and join with the City in the execution and delivery of any amendment,
change or modification to the Purchase Agreement only with the consent of the Holders of not less than a majority in
principal amount of Obligations then Outstanding, given as provided in this Section, provided, however, no such
amendment, change or modification may affect the obligation of the City to make payments, under the Purchase
Agreement or reduce the amount of or extend the time for making such payments without the consent of the Holders of
all Obligations then Outstanding.
* * * * *
Section 10.1.
Discharge of Trust Agreement.
(a)
If payment of all principal of and premium, if any, and interest on all of the Obligations in
accordance with their terms and as provided in the Trust Agreement and in the Purchase Agreement is made, or is provided
for in accordance with Article X of the Trust Agreement, and if all other sums, if any, payable under the Trust Agreement
shall be paid, then the liens, estates and security interests granted by the Trust Agreement shall cease. Thereupon, at the
request of the City, and upon receipt by the Trustee of an Opinion of Counsel addressed to the City and the Trustee stating
that all conditions precedent to the satisfaction and discharge of the lien of the Trust Agreement have been satisfied, the
Trustee shall execute and deliver proper instruments acknowledging such satisfaction and discharging the lien of the Trust
Agreement and the Trustee shall transfer all property held by it under the Trust Agreement, other than moneys or
obligations held by the Trustee for payment of amounts due or to become due on the Obligations, to the City or such other
Person as may be entitled thereto as their respective interests may appear. Such satisfaction and discharge shall be without
F-26
prejudice to the rights of the Trustee thereafter to charge and be compensated or reimbursed for services rendered and
expenditures incurred in connection with the Trust Agreement.
(b)
The City may at any time surrender to the Trustee for cancellation any Obligations previously
executed and delivered that the City may have acquired in any manner whatsoever and such Obligations upon such
surrender and cancellation shall be deemed to be paid and retired.
Section 10.2.
Providing for Payment of Obligations.
(a)
Payment of all or any part of the Obligations in authorized denominations may be provided for
by the deposit with the Trustee or a Depository Trustee of moneys or Defeasance Obligations that are not redeemable in
advance of their maturity dates. Amounts in the Debt Service Reserve Account may be included as part of such deposit
only if all of the Obligations are to be defeased. The moneys and the maturing principal and interest income on such
Defeasance Obligations, if any, shall be sufficient, as evidenced by a certificate of an independent nationally recognized
certified public accountant or firm of such accountants, to pay when due the principal or redemption price of and interest
on such Obligations. The moneys and Defeasance Obligations shall be held by the Trustee or such Depository Trustee
irrevocably in trust for the Holders of such Obligations solely for the purpose of paying the principal or redemption price
of and interest on such Obligations as the same shall mature, come due or become payable upon prior redemption, and, if
applicable, upon simultaneous direction, expressed to be irrevocable, to the Trustee or such Depository Trustee as to the
dates upon which any such Obligations are to be redeemed prior to their respective dates.
* * * * *
(c)
If payment of Obligations is so provided for, the Trustee or the Depository Trustee shall mail
a notice so stating to (i) each Holder of an Obligation so provided for.
(d)
Obligations, the payment of which has been provided for, in accordance with this Section, shall
no longer be deemed outstanding under or secured by the Trust Agreement. The obligation in respect of such Obligations
shall nevertheless continue but the Holders of those Obligations will thereafter be entitled to payment only from the
moneys or Defeasance Obligations deposited with the Trustee or such Depository Trustee to provide for the payment of
such Obligations.
(e)
No Obligation may be so provided for if, as a result thereof or of any other action in connection
with which the provisions for payment of such Obligation is made, the interest payable on any Obligation is made
includible in gross income for purposes of federal income taxes. The Trustee and the City may rely upon a Special
Counsel’s Opinion to the effect that the provisions of this paragraph will not be breached by so providing for the payment
of any Obligations.
* * * * *
Section 11.10
Certain Statutory Notices.
(a)
To the extent applicable by provision of law, the Trustee acknowledges that the Trust
Agreement is subject to cancellation pursuant to Section 38-511, Arizona Revised Statutes, the provisions of which are
incorporated in the Trust Agreement and which provides that the City may within three years after its execution cancel
any contract (including the Trust Agreement) without penalty or further obligation made by the City if any person
significantly involved in initiating, negotiating, securing, drafting or creating the contract on behalf of the City is at any
time while the contract or any extension of the contract is in effect, an employee or agent of any other party to the contract
in any capacity or a consultant to any other party to the contract with respect to the subject matter of the contract.
* * * * *
[Placeholder for Insurer Provisions]
* * * * *
APPENDIX G
BOOK-ENTRY-ONLY SYSTEM
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G-1
BOOK-ENTRY-ONLY SYSTEM
This information concerning DTC and DTC’s book-entry system has been obtained from DTC and the City takes
no responsibility for the accuracy thereof. The Beneficial Owners (defined below) should confirm this information
with DTC or the DTC participants.
DTC will act as securities depository for the Obligations. The Obligations will be executed and delivered 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 Obligations certificate will be executed and
delivered for each maturity of the Obligations, each in the aggregate principal amount of such maturity, and will be
deposited with DTC.
DTC, the world’s largest securities 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 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt
issues, and money market instruments (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 is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing
Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries.
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” and, together with Direct Participants, “Participants”). DTC has a
rating of “AA+” from Standard & Poor’s. 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.
Purchases of Obligations under the DTC system must be made by or through Direct Participants, which will receive a
credit for the Obligations on DTC’s records. The ownership interest of each actual purchaser of each Obligation
(“Beneficial Owner”) is in turn to be recorded on the 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 Participant or
Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests
in the Obligations are to be accomplished by entries made on the books of Direct Participants and Indirect Participants
acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership
interests in Obligations, except in the event that use of the book-entry system for the Obligations is discontinued.
To facilitate subsequent transfers, all Obligations 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 Obligations 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 Obligations;
DTC’s records reflect only the identity of the Direct Participants to whose accounts such Obligations are credited, which
may or may not be the Beneficial Owners. The Direct Participants and Indirect Participants will remain responsible for
keeping account of their holdings on behalf of their customers.
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 Obligations may wish to take certain steps to augment the transmission to them of notices of significant events with
respect to the Obligations, such as redemptions, tenders, defaults, and proposed amendments to the Obligations
documents. For example, Beneficial Owners of Obligations may wish to ascertain that the nominee holding the
Obligations 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 Trustee and request that copies of notices be provided
directly to them.
G-2
Redemption notices shall be sent to DTC. If less than all of the Obligations within a maturity are being redeemed, DTC’s
practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed.
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Obligations unless
authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails
an Omnibus Proxy to the City as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s
consenting or voting rights to those Direct Participants to whose accounts Obligations are credited on the record date
(identified in a listing attached to the Omnibus Proxy).
Redemption proceeds and principal and interest payments on the Obligations will be made by the Trustee 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 the City or the
Trustee, 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, the City or the Trustee, subject to any statutory or regulatory requirements as may
be in effect from time to time. Payment of redemption proceeds and principal and interest payments to Cede & Co. (or
such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the City or the
Trustee, 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 Participants and Indirect Participants.
A Beneficial Owner shall give notice to elect to have its Obligations purchased or tendered through its Participant to the
Trustee, and shall effect delivery of such Obligations by causing the Direct Participant to transfer the Participant’s interests
in the Obligations, on DTC’s records, to the Trustee. The requirement for physical delivery of Obligations in connection
with an optional tender or mandatory purchase will be deemed satisfied when the ownership rights in the Obligations are
transferred by Direct Participants on DTC’s records and followed by a book-entry credit of tendered Obligations to the
Trustee’s DTC account.
DTC may discontinue providing its services as depository with respect to the Obligations at any time by giving reasonable
notice to the Trustee or the City. Under such circumstances, in the event that a successor depository is not obtained,
Obligation certificates are required to be printed and delivered.
The City may decide to discontinue the system of book-entry-only transfers through DTC (or a successor securities
depository). In that event, Obligation certificates will be printed and delivered to DTC.
NONE OF THE CITY, THE TRUSTEE, THE UNDERWRITER OR THE MUNICIPAL ADVISOR WILL HAVE ANY
RESPONSIBILITY OR OBLIGATION TO DTC, TO DIRECT PARTICIPANTS, OR TO INDIRECT PARTICIPANTS
WITH RESPECT TO (1) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC, ANY DIRECT
PARTICIPANT OR ANY INDIRECT PARTICIPANT; (2) ANY NOTICE THAT IS PERMITTED OR REQUIRED TO
BE GIVEN TO THE OWNERS OF THE OBLIGATIONS UNDER THE AGREEMENT; (3) THE PAYMENT BY DTC
OR ANY DIRECT PARTICIPANT OR INDIRECT PARTICIPANT OF ANY AMOUNT WITH RESPECT TO THE
PRINCIPAL OR INTEREST OR PAYMENT AMOUNT DUE WITH RESPECT TO THE PRINCIPAL OR INTEREST
OR PAYMENT AMOUNT DUE WITH RESPECT TO THE OBLIGATIONS; (4) ANY CONSENT GIVEN OR OTHER
ACTION TAKEN BY DTC AS THE OWNER OF THE OBLIGATIONS; OR (5) ANY OTHER MATTERS.
APPENDIX H
FORM OF APPROVING LEGAL OPINION
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H-1
[Closing Date]
UMB Bank, n.a., as Trustee
Phoenix, Arizona
Re:
Utility Systems Revenue Refunding Obligations, Series 2026, Evidencing Proportionate Interests of the
Holders Thereof in Installment Payments of the Purchase Price To Be Paid by the City of Mesa,
Arizona, Pursuant to an Installment Purchase Agreement, Dated as of June 1, 2026*
We have examined the transcript of proceedings (the “Transcript”) relating to the execution and delivery
by UMB Bank, n.a. (the “Trustee”), of $206,425,000* principal amount of Utility Systems Revenue Refunding
Obligations, Series 2026 (the “Obligations”), dated June 4, 2026*, pursuant to a Trust Agreement, dated as of June 1,
2026* (the “Trust Agreement”), between the Trustee and the City of Mesa, Arizona (the “City”). The Obligations are
being executed and delivered to refinance the acquisition, construction, improvement, equipping and installation of
improvements to the water, wastewater, natural gas, solid waste and electrical systems of the City (collectively, the
“System”). Each of the Obligations evidence a proportionate, undivided interest in certain obligations of the City pursuant
to an Installment Purchase Agreement, dated as of June 1, 2026* (the “Purchase Agreement”), between the Trustee, in its
capacity as seller (the “Seller”), and the City, as purchaser, pursuant to which the City has agreed to make certain
installment purchase payments to the Seller. The Obligations are payable solely, as to both principal and interest, from
such installment purchase payments made by the City pursuant to the Purchase Agreement. The City and the Seller have
assigned certain of their rights in and benefits from, and their obligations pursuant to, the Purchase Agreement to the
Trustee pursuant to the Trust Agreement. Capitalized terms used and not otherwise defined herein have the meanings
ascribed in the Trust Agreement and the Purchase Agreement. In addition, we have examined such other proceedings,
proofs, instruments, certificates and other documents as well as such other materials and such matters of law as we have
deemed necessary or appropriate for the purposes of the opinions rendered herein below.
In such examination, we have examined originals (or copies certified or otherwise identified to our
satisfaction) of the foregoing and have assumed the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the conformity to the original documents of all documents submitted to us as copies and the
accuracy of the statements contained in such documents. As to any facts material to our opinions, we have, when relevant
facts were not independently established, relied upon the aforesaid documents contained in the Transcript. We have also
relied upon the opinions of the City Attorney delivered of even date herewith as to the matters provided therein.
Based upon such examination, we are of the opinion that, under the law existing on the date of this
opinion:
1.
The Obligations, the Trust Agreement and the Purchase Agreement are legal, valid, binding
and enforceable in accordance with their respective terms, except that the binding effect and enforceability thereof and
the rights thereunder are subject to applicable bankruptcy, insolvency, reorganization, moratorium and other laws in effect
from time to time affecting the rights of creditors generally; except to the extent that the enforceability thereof and the
rights thereunder may be limited by the application of general principles of equity and, as to the Trust Agreement and the
Purchase Agreement, except to the extent that the enforceability of the indemnification provisions thereof may be affected
by applicable law.
2.
The obligation of the City for the payment of the installment purchase payments required to
be paid by the City pursuant to the Purchase Agreement constitutes a valid and binding limited, special obligation of the
City, payable solely from and secured solely by a pledge of, a lien on and a security interest in the Pledged Revenues,
consisting generally of revenues derived by the City from the operation of the System after sufficient funds have been
provided for the operating expenses of the System. Such payments are not secured by an obligation or pledge of any
moneys raised by taxation; the Obligations do not represent or constitute a debt or pledge of the general credit of the City
or the State of Arizona and the Purchase Agreement, including the obligation of the City to make the payments required
* Subject to change.
H-2
thereunder, does not represent or constitute a debt or pledge of the general credit of the City. As described in the Purchase
Agreement, so long as Bonds are Outstanding under the Master Bond Resolution, the Obligations shall be junior in lien
to the Bonds, as permitted by the Master Bond Resolution. Additional obligations may be executed and delivered in the
future on a parity with the Obligations with respect to the lien on the Pledged Revenues.
3.
Based on the representations and covenants of the City and subject to the assumption stated in
the last sentence of this paragraph, under existing statutes, regulations, rulings and court decisions, the portion of each
installment purchase payment made by the City pursuant to the Purchase Agreement, denominated as and comprising
interest and received by the beneficial owners of the Obligations (the “Interest Portion”), is excludable from the gross
income of the owners thereof for federal income tax purposes and is not an item of tax preference for purposes of the
federal alternative minimum tax imposed on individuals. In the case of the alternative minimum tax imposed by Section
55(b)(2) of the Internal Revenue Code of 1986, as amended (the “Code”), on applicable corporations (as defined in Section
59(k) of the Code), the Interest Portion is not excluded from the determination of adjusted financial statement income.
We express no opinion regarding other federal tax consequences resulting from the receipt or accrual of the Interest
Portion on, or ownership or disposition of, the Obligations. The Code includes requirements which the City must continue
to meet after the execution and delivery of the Obligations in order that the Interest Portion not be included in gross
income for federal income tax purposes. The failure of the City to meet these requirements may cause the Interest Portion
to be included in gross income for federal income tax purposes retroactive to the date of execution and delivery of the
Obligations. The City has covenanted in the Purchase Agreement to take the actions required by the Code in order to
maintain the exclusion from gross income for federal income tax purposes of the Interest Portion. (Subject to the same
limitations in the first numbered paragraph hereof as they would relate to such covenants, the City has full legal power
and authority to comply with such covenants.) In rendering the opinion expressed in this paragraph, we have assumed
continuing compliance with the tax covenants referred to hereinabove that must be met after the execution and delivery
of the Obligations in order that the Interest Portion not be included in gross income for federal tax purposes.
4.
Assuming the Interest Portion is so excludable for federal income tax purposes, the Interest
Portion is exempt from income taxation under the laws of the State of Arizona. We express no opinion regarding other
state tax consequences resulting from the receipt or accrual of the Interest Portion, or ownership or disposition of, the
Obligations.
This opinion represents our legal judgment based upon our review of the law and the facts we deem
relevant to render such opinion and is not a guarantee of a result. This opinion is given as of the date hereof, and we
assume no obligation to review or supplement this opinion to reflect any facts or circumstances that may hereafter come
to our attention or any changes in law that may hereafter occur.
Respectfully submitted,
APPENDIX I
FORM OF CONTINUING DISCLOSURE UNDERTAKING
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I-1
CITY OF MESA, ARIZONA
$206,425,000*
UTILITY SYSTEMS REVENUE REFUNDING OBLIGATIONS,
SERIES 2026
CONTINUING DISCLOSURE UNDERTAKING
This Continuing Disclosure Undertaking (this “Undertaking”) is executed and delivered by the City of Mesa, Arizona
(the “City”), in connection with the execution and delivery of $206,425,000* principal amount of Utility Systems Revenue
Refunding Obligations, Series 2026 (the “Obligations”), executed and delivered pursuant to the Trust Agreement, dated
as of June 1, 2026* (the “Trust Agreement”), by and between the City and UMB Bank, n.a., as trustee (the “Trustee”).
The City covenants and agrees as follows:
1.
Definitions. In addition to those defined hereinabove, the terms set forth below shall have the following
meanings in this Undertaking, unless the context clearly otherwise requires:
“Annual Financial Information” means the financial information and operating data set forth in Exhibit I.
“Annual Financial Information Disclosure” means the dissemination of disclosure concerning Annual Financial
Information and the dissemination of the Audited Financial Statements as set forth in Section 4.
“Audited Financial Statements” means the audited financial statements of the City prepared pursuant to the
standards and as described in Exhibit I.
“Commission” means the Securities and Exchange Commission.
“Dissemination Agent” means any agent designated as such in writing by the City and which has filed with the
City a written acceptance of such designation, and such agent’s successors and assigns.
“EMMA” means the Electronic Municipal Market Access system of the MSRB. Information regarding
submissions to EMMA is available at http://emma.msrb.org.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Final Official Statement” means the Final Official Statement relating to the Obligations, dated __________,
2026.
“Financial Obligation” means a (i) debt obligation; (ii) derivative instrument entered into in connection with,
or pledged as security or a source of payment for, an existing or planned debt obligation; or (iii) a guarantee of (i) or (ii).
The term Financial Obligation shall not include municipal securities as to which a final official statement has been
provided to the MSRB consistent with the Rule.
“GAAP” means generally accepted accounting principles, as applied to governmental units as modified by the
laws of the State.
“Listed Event” means the events set forth in Exhibit II.
“Listed Events Disclosure” means dissemination of disclosure concerning a Listed Event as set forth in Section
5.
“MSRB” means the Municipal Securities Rulemaking Board.
“Participating Underwriter” means each broker, dealer or municipal securities dealer acting as an underwriter
in the primary offering of the Obligations.
“Purchase Agreement” means the Installment Purchase Agreement dated as of June 1, 2026*, by and between
the City and the Trustee, in its separate capacity as “Seller.”
* Subject to change.
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“Rule” means Rule 15c2-12 adopted by the Securities and Exchange Commission under the Exchange Act.
“State” means the State of Arizona.
2.
Purpose of this Undertaking. This Undertaking is executed and delivered by the City as of the date set
forth below, for the benefit of the beneficial owners of the Obligations and in order to assist the Participating Underwriter
in complying with the requirements of the Rule. The City represents that it will be the only obligated person with respect
to the Obligations at the time the Obligations are delivered to the Participating Underwriter and that no other person is
expected to become so committed at any time after such delivery of the Obligations.
3.
CUSIP Numbers. The CUSIP Numbers of the Obligations are as follows:
CUSIP No.
(Base 590545)
Maturity Date
(July 1)
4.
Annual Financial Information Disclosure. Subject to Section 8 of this Undertaking, the City shall
disseminate its Annual Financial Information and its Audited Financial Statements, if any (in the form and by the dates
set forth in Exhibit I), through EMMA.
If any part of the Annual Financial Information can no longer be generated because the operations to which it is related
have been materially changed or discontinued, the City will disseminate a statement to such effect as part of its Annual
Financial Information for the year in which such event first occurs.
If any amendment is made to this Undertaking, the Annual Financial Information for the year in which such amendment
is made shall contain a narrative description of the reasons for such amendment and its impact on the type of information
being provided.
5.
Listed Events Disclosure. Subject to Section 8 of this Undertaking, the City shall disseminate in a
timely manner, but in not more than ten (10) business days after the occurrence of the event, its Listed Events Disclosure
through EMMA. Whether events subject to the standard “material” would be material shall be determined under
applicable federal securities laws.
6.
Consequences of Failure of the City to Provide Information. The City shall give notice in a timely
manner through EMMA of any failure to provide Annual Financial Information Disclosure when the same is due
hereunder.
In the event of a failure of the City to comply with any provision of this Undertaking, the beneficial owner of any
Obligation may seek mandamus or specific performance by court order, to cause the City to comply with its obligations
under this Undertaking. A default under this Undertaking shall not be deemed an event of default under the Purchase
Agreement or the Trust Agreement, and the sole remedy available to such owners of the Obligations under this
Undertaking in the event of any failure of the City to comply with this Undertaking shall be an action to compel
performance.
7.
Amendments; Waiver. Notwithstanding any other provision of this Undertaking, the City by certified
resolution or ordinance authorizing such amendment or waiver, may amend this Undertaking, and any provision of this
Undertaking may be waived only if:
(a)
The amendment or waiver is 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 the City, or
type of business conducted;
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(b)
This Undertaking, as amended or affected by such waiver, would have complied with the
requirements of the Rule at the time of the primary offering, after taking into account any amendments or
interpretations of the Rule, as well as any change in circumstances; and
(c)
The amendment or waiver does not materially impair the interests of the beneficial owners of
the Obligations, as determined by parties unaffiliated with the City (such as the Trustee) or by approving vote of
the owners of the Obligations pursuant to the Trust Agreement at the time of the amendment.
The Annual Financial Information containing amended operating data or financial information resulting from
such amendment or waiver, if any, shall explain, in narrative form, the reasons for the amendment or waiver and the
impact of the change in the type of operating data or financial information being provided. If an amendment or waiver is
made specifying an accounting principle to be followed in preparing financial statements and such changes are material,
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. Such comparison shall include
a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting
principles in the presentation of the financial information in order to provide information to investors to enable them to
evaluate the ability of the City to meet its obligations. To the extent reasonably feasible, such comparison also shall be
quantitative. If the accounting principles of the City change or the fiscal year of the City changes, the City shall file a
notice of such change in the same manner as for a notice of Listed Event.
8.
Undertaking Payable from Pledged Revenues. The City’s undertaking to provide information under
this Undertaking is payable solely from Pledged Revenues of the System (as such terms are defined in the Final Official
Statement) to cover the costs of preparing and sending the Annual Financial Information Disclosure and Listed Events
Disclosure. Until payment of all Bonds under the Master Bond Resolution (as such terms are defined in the Final Official
Statement), no receipts segregated or collected for the purpose of paying the principal of and interest and redemption
charges on bonds and other lawful long-term obligations issued or incurred for a specific capital purpose shall be subject
to the provisions of Arizona Revised Statutes, Title 42, Chapter 17.
9.
Termination of Undertaking. This Undertaking shall be terminated hereunder if the City shall no longer
have liability for any obligation on or relating to repayment of the Obligations under the Trust Agreement.
10.
Dissemination Agent. The City may, from time to time, appoint or engage a Dissemination Agent to
assist it in carrying out its obligations under this Undertaking, and may discharge any such Agent, with or without
appointing a successor Dissemination Agent.
11.
Additional Information. Nothing in this Undertaking shall be deemed to prevent the City from
disseminating any other information, using the means of dissemination set forth in this Undertaking or any other means
of communication, or including any other information in any Annual Financial Information Disclosure or notice of
occurrence of a Listed Event, in addition to that which is required by this Undertaking. If the City chooses to include any
information from any document or notice of occurrence of a Listed Event in addition to that which is specifically required
by this Undertaking, the City shall have no obligation under this Undertaking to update such information or include it in
any future Annual Financial Information Disclosure or Listed Events Disclosure.
12.
Beneficiaries. This Undertaking has been executed in order to assist the Participating Underwriter in
complying with the Rule; however, this Undertaking shall inure solely to the benefit of the City, the Dissemination Agent,
if any, and the beneficial owners of the Obligations, and shall create no rights in any other person or entity.
13.
Recordkeeping. The City shall maintain records of all Annual Financial Information Disclosure and
Listed Events Disclosure including the content of such disclosure, the names of the entities with whom such disclosure
was filed and the date of filing such disclosure.
14.
Assignment. The City shall not transfer its obligations under the Purchase Agreement unless the
transferee agrees to assume all obligations of the City under this Undertaking or to execute an undertaking meeting the
requirements of the Rule.
15.
Governing Law. This Undertaking shall be governed by the laws of the State.
[Signature page follows.]
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Dated: [Closing Date]
City of Mesa, Arizona
By
Deputy City Manager/Chief Financial Officer
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EXHIBIT I
ANNUAL FINANCIAL INFORMATION AND TIMING AND
AUDITED FINANCIAL STATEMENTS
“Annual Financial Information” means financial information and operating data of the type contained in the
following tables of the Final Official Statement (in each case, actual results for the most recently completed fiscal year
only):
a.
Combined Schedules of Revenues and Debt Service Coverage (audited information only)
b.
Appendix B – Financial Data – Statements of Bonds Outstanding
All or a portion of the Annual Financial Information and the Audited Financial Statements as set forth below
may be included by reference to other documents which have been submitted through EMMA or filed with the
Commission. If the information included by reference is contained in a final official statement, the final official statement
must be available from the MSRB. The City shall clearly identify each such item of information included by reference.
Annual Financial Information exclusive of Audited Financial Statements will be provided through EMMA by
February 1 of each year, commencing February 1, 2027. Audited Financial Statements as described below should be filed
at the same time as the Annual Financial Information. If Audited Financial Statements are not available when the Annual
Financial Information is filed, unaudited financial statements shall be included, to be followed up by Audited Financial
Statements within 30 days after availability to the City.
Audited Financial Statements will be prepared according to GAAP.
If any change is made to the Annual Financial Information as permitted by Section 4 of this Undertaking, the
City will disseminate a notice of such change as required by Section 4, including changes in fiscal year or GAAP.
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EXHIBIT II
EVENTS FOR WHICH LISTED EVENTS DISCLOSURE IS REQUIRED
1.
Principal and interest payment delinquencies.
2.
Non-payment related defaults, if material.
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, the issuance by the Internal Revenue Service of proposed or final determinations of
taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations, in each
case, with respect to the tax status of the security, or other material events affecting the tax status of the security.
7.
Modifications to the rights of security holders, if material.
8.
Bond calls, if material, or tender offers.
9.
Defeasances.
10.
Release, substitution or sale of property securing repayment of the securities, if material.
11.
Rating changes.
12.
Bankruptcy, insolvency, receivership or similar events of the City, being if any of the following occur: the
appointment of a receiver, fiscal agent or similar officer for the City in a proceeding under the U.S. Bankruptcy
Code or in any other proceeding under State or federal law in which a court or governmental authority has assumed
jurisdiction over substantially all of the assets or business of the City, or if such jurisdiction has been assumed by
leaving the existing governing body and officials or officers in possession but subject to the supervision and orders
of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or
liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the
assets or business of the City.
13.
The consummation of a merger, consolidation or acquisition involving the City or the sale of all or substantially
all of the assets of the City, other than in the ordinary course of business, the entry into a definitive agreement to
undertake such an action or the termination of a definitive agreement relating to any such actions, other than
pursuant to its terms, if material.
14.
Appointment of a successor or additional trustee or the change of name of a trustee, if material.
15.
Incurrence of a Financial Obligation of the City, if material, or agreement to covenants, events of default, remedies,
priority rights, or other similar terms of a Financial Obligation of the City, any of which affect security holders, if
material.
16.
Default, event of acceleration, termination event, modification of terms, or other similar events under the terms of
a Financial Obligation of the City, any of which reflect financial difficulties.
APPENDIX J
SPECIMEN MUNICIPAL BOND INSURANCE POLICY
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