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12/05/2022 City Council Regular Agenda Packet
December 1, 2022 4:00 PM City Council Regular Meeting Agenda Page1 CITY COUNCIL & GILROY PUBLIC FACILITIES FINANCING AUTHORITY Mayor / Board Chair Marie Blankley Mayor Pro Tempore / Vice Chair Peter Leroe-Muñoz Council Members / Board Members Rebeca Armendariz, Dion Bracco, Zach Hilton, Carol Marques, & Fred Tovar AGENDA CITY OF GILROY CITY COUNCIL CHAMBERS, CITY HALL 7351 ROSANNA STREET GILROY, CA 95020 MONDAY, DECEMBER 5, 2022 CITY COUNCIL REGULAR MEETING 6:00 P.M. GILROY PUBLIC FACILITIES FINANCING AUTHORITY 6:01 P.M. CITY COUNCIL PACKET MATERIALS ARE AVAILABLE ONLINE AT www.cityofgilroy.org AGENDA CLOSING TIME IS 5:00 P.M. THE TUESDAY PRIOR TO THE MEETING PLEASE NOTE: Council Member Armendariz will participate in the meeting via teleconference from the site listed below. The meeting agenda will be posted on the teleconference site, which is accessible to the public. Anyone wishing to address the Council from the teleconference site will be provided with an opportunity to do so. Location: Mary & Joseph Retreat Center 5300 Crest Road Rancho Palos Verdes, CA 90275 (310) 377-4867 Due to COVID-19, it is possible that the planned in-person meeting may have to change to a virtual meeting at any time and possibly on short notice. Please check t he City of Gilroy website at http://gilroyca.iqm2.com/Citizens/default.aspx for any updates to meeting information. COMMENTS BY THE PUBLIC WILL BE TAKEN ON AGENDA ITEMS BEFORE ACTION IS TAKEN B Y THE CITY COUNCIL. Public testimony is subject to reasonable regulations, including but no t limited to time restrictions for each individual speaker. Please limit your comments to 3 minutes. The amount of time allowed per speaker may vary at the Mayor’s discretion depending on the number of speakers and length of the agenda. Written comments on any agenda item may be emailed to the City Clerk’s Office at cityclerk@cityofgilroy.org or mailed to the Gilroy City Clerk’s Office at City Hall, 7351 Rosanna Street, Gilroy, CA 95020. Comments received by the City Clerk’s Office by 1 p.m. on the day of a City Council Regular Meeting Agenda 12/5/2022 Page2 Council meeting will be distributed to the City Council prior to or at the meeting and available for public inspection with the agenda packet located in the lobby of Administration at City Hall, 7351 Rosanna Street prior to the meeting. Any correspondence received will be incorporated into the meeting record. Items received after the 1 p.m. deadline will be provid ed to the City Council as soon as practicable. Written comments are also available on the City’s Public Records Portal at https://bit.ly/3G1vihU. In compliance with the Americans with Disabilities Act, the City wil l make reasonable arrangements to ensure accessibility to this meeting. If you need special assistance to participate in this meeting, please contact the City Clerk’s Office at least 72 hours prior to the meeting at (408) 846-0204 or cityclerk@cityofgilroy.org to help ensure that reasonable arrangements can be made. If you challenge any planning or land use decision made at this meeting in court, you may be limited to raising only those issues you or som eone else raised at the public hearing held at this meeting, or in written correspondence delivered to the City Council at, or prior to, the public hearing. Please take notice that the time within which to seek judicial review of any final administrative determination reached at this meeting is governed by Section 1094.6 of the California Code of Civil Procedure. A Closed Session may be called during this meeting pursuant to Gove rnment Code Section 54956.9 (d)(2) if a point has been reached where, in the opinion of the legislative body of the City on the advice of its legal counsel, based on existing facts and circumstances, there is a significant exposure to litigation against the City. Materials related to an item on this agenda submitted to the City C ouncil after distribution of the agenda packet are available with the agenda packet on the City website at www.cityofgilroy.org subject to Staff’s ability to post the documents before the meeting. KNOW YOUR RIGHTS UNDER THE GILROY OPEN GOVERNMENT ORDINANCE Government's duty is to serve the public, reaching its decisions in full view of the public. Commissions, task forces, councils and other agencies of the City exist to conduct the people's business. This ordinance assures that deliberations are conducted before the people and that City operations are open to the people's review. FOR MORE INFORMATION ON YOUR RIGHTS UNDER THE OPEN GOVERNMENT ORDINANCE, TO RECEIVE A FREE COPY OF THE ORDINANCE OR TO REPORT A VIOLATION OF THE ORDINANCE, CONTACT THE OPEN GOVERNMENT COMMISSION STAFF AT (408) 846-0204 If you need assistance with translation and would like to speak during public comment, please contact the City Clerk a minimum of 72 hours prior to the meeting at 408-846-0204 or e-mail the City Clerk’s Office at cityclerk@cityofgilroy.org. Si necesita un intérprete durante la junta y gustaría dar un comentario público, comuníquese con el Secretario de la Ciudad un mínimo de 72 horas antes de la junta al 408-846-0204 o envíe un correo electrónico a la Oficina del Secretario de la Ciudad a cityclerk@cityofgilroy.org. City Council Regular Meeting Agenda 12/5/2022 Page3 The agenda for this regular meeting is as follows: 1. OPENING 1.1. Call to Order 1. Pledge of Allegiance 2. Invocation 3. City Clerk's Report on Posting the Agenda 4. Roll Call 1.2. Orders of the Day 1.3. Employee Introductions 2. CEREMONIAL ITEMS 2.1. Proclamations, Awards, and Presentations 3. PRESENTATIONS TO THE COUNCIL 3.1. Annual Personnel Commission Presentation 3.2. PUBLIC COMMENT BY MEMBERS OF THE PUBLIC ON ITEMS NOT ON THE AGENDA BUT WITHIN THE SUBJECT MATTER JURISDICTION OF THE CITY COUNCIL This portion of the meeting is reserved for persons desiring to address the Council on matters within the Gilroy City Council’s jurisdiction but not on the agenda. Persons wishing to address the Council are requested to complete a Speaker’s Card located at the entrances and handed to the City Clerk. Speakers are limited to 1 to 3 minutes each, varying at the Mayor’s discretion depending on the number of speakers and length of the agenda. The law does not permit Council action or extended discussion of any item not on the agenda except under special circumstances. If Council action is requested, the Council may place the matter on a future agenda. Written comments to address the Council on matters not on this agenda may be e - mailed to the City Clerk’s Office at cityclerk@cityofgilroy.org or mailed to t he Gilroy City Clerk’s Office at City Hall, 7351 Rosanna Street, Gilroy, CA 95020. Comments received by the City Clerk’s Office by 1:00pm on the day of a Council meeting will be distributed to the City Council prior to or at the meeting and available for public inspection with the agenda packet located in the lobby of Administration at City Hall, 7351 Rosanna Street, prior to the meeting. Any correspondence received will be incorporated into the meeting record. Items received after the 1:00pm deadline will be provided to the City Council as soon as practicable. Written material provided by public members under this section of the agenda will be limited to 10 pages in hard copy. An unlimited amount of material may be provided electronically. City Council Regular Meeting Agenda 12/5/2022 Page4 4. REPORTS OF COUNCIL MEMBERS Council Member Bracco – Gilroy Sister Cities Association (alternate), Santa Clara Co. Library JPA, SCVWD Joint Council-SCRWA-Board Water Resources Committee, South County Regional Wastewater Authority Board, Street Naming Committee Council Member Armendariz – ABAG (Alternate), CalTrain Policy Group, Gilroy Downtown Business Association Board (alternate), Gourmet Alley Ad Hoc Committee, Historic Heritage Committee, Santa Clara Co. Library JPA (alternate), Santa Clara Valley Habitat Agency Implementation Board, Silicon Valley Clean Energy Authority JPA Board (Alternate), Street Naming Committee, VTA Committee for Transit Accessibility (Alternate) Council Member Marques – Gilroy Downtown Business Association Board, Gilroy Gardens Board of Directors, Gourmet Alley Ad Hoc Committee, Historic Heritage Committee (Alternate), Santa Clara Valley Habitat Agency Governing Board, Santa Clara Valley Habitat Agency Implementation Board, South County Regional Wastewater Authority (Alternate) Council Member Hilton – Gilroy Economic Development Partnership, Silicon Valley Clean Energy Authority JPA Board, South County United for Health, Visit Gilroy California Welcome Center Board Council Member Tovar – Economic Development Corporation Board, Gourmet Alley Ad Hoc Committee, Recycling and Waste Reduction Commission, Santa Clara Co. Expressway Plan 2040 Policy Advisory Board, SCVWD Water Commission (alternate), South County Joint Recycled Water Advisory Committee, South County Regional Wastewater Authority Board, Street Naming Committee, South County Youth Task Force Policy Team (alternate), VTA Committee for Transit Accessibility Council Member Leroe-Muñoz – ABAG, CalTrain Policy Group (alternate), Cities Association of Santa Clara County Board of Directors, Economic Development Corporation Board, Gilroy Youth Task Force, SCVWD Water Commission, Silicon Valley Regional Interoperability Authority Board, South County Youth Task Force Policy Team, VTA Mobility Partnership, VTA South County City Group (alternate), VTA Policy Advisory Committee (alternate) Mayor Blankley – Cities Association of Santa Clara Co. Board of Direc tors (alternate), Gilroy Economic Development Partnership, Gilroy Sister Cities Association, Gilroy Youth Task Force (alternate), Santa Clara Valley Habitat Agency Governing Board, SCVWD Joint Council-SCRWA-Board Water Resources Committee, South County Joint Recycled Water Advisory Committee, South County Regional Wastewater Authority Board, VTA Board of Directors Alternate, VTA Mobility Partnership, VTA Policy Advisory Committee, VTA South County City Group 5. COUNCIL CORRESPONDENCE 6. FUTURE COUNCIL INITIATED AGENDA ITEMS City Council Regular Meeting Agenda 12/5/2022 Page5 7. CONSENT CALENDAR (ROLL CALL VOTE) All matters listed under the Consent Calendar are considered by the City Council to be routine and will be enacted by one motion. There will be no separate discussion of these items unless a request is made by a member of the City Council or a member of the public. Any person desiring to speak on any item on the consent calendar should ask to have that item removed from the consent calendar prior to the time the Council votes to approve. If removed, the item will be discussed in the order in which it appears. 7.1. Action Minutes of the City Council - Regular Meeting - Nov 21, 2022 6:00 PM 7.2. Adoption of An Ordinance of the City Council of the City of Gilroy Adopting a Franchise Agreement with Recology South Valley for Solid Waste Hauling Services and a Finding that Its Action in Adopting the Ordinance is Exempt From Review Under the California Environmental Quality Act (“CEQA”) Pursuant to CEQA Guidelines Section 15061(b)(3) (Common Sense Exemption) In that the Proposed Ordinance Will Continue an Existing State-Mandated Program for the Protection of Public Health and the Environment, and None of the Circumstances in CEQA Guidelines Section 15300.2 Apply. 7.3. Adoption of an ordinance approving a Planned Unit Development Overlay Zoning Amendment for Property at Royal Way (file number Z 21-05) 8. BIDS AND PROPOSALS 9. PUBLIC HEARINGS 10. UNFINISHED BUSINESS 11. INTRODUCTION OF NEW BUSINESS 11.1. Council Adoption of a Resolution of the City Council of the City of Gilroy Approving Commemorative Flag Flying Applications for 2023 1. Staff Report: Jimmy Forbis, City Administrator 2. Public Comment 3. Possible Action: Council adopt the resolution. City Council Regular Meeting Agenda 12/5/2022 Page6 11.2. Council Adopt an Ordinance of the City Council of the City of Gilroy Repealing Ordinance Number 99-13, Removing the Use of Liens to Collect for Delinquent Garbage Fees 1. Staff Report: Bryce Atkins, Assistant to the City Administrator 2. Public Comment 3. Possible Action: a) Motion to read the ordinance by title only and waive further reading. b) Introduce an ordinance of the City Council of the City of Gilroy repealing Ordinance Number 99-13, removing the use of liens to collect for delinquent garbage fees. 11.3. Discussion of Santa Clara County Civil Grand Jury Report Regarding Ballot Measure Wording and Recommendations 1. Staff Report: LeeAnn McPhillips, Administrative Services/HR Director/Risk Manager 2. Public Comment 3. Possible Action: Provide staff direction. 11.4. Approval of the Refinancing of Gilroy Public Facilities Financing Authority's 2013 Refunding Lease Revenue Bonds 1. Staff Report: Jimmy Forbis, City Administrator 2. Public Comment 3. Possible Action: Adopt a resolution of the City Council of the City of Gilroy approving the issuance by the Gilroy Public Facilities Financing Authority of not to exceed $15 million of Gilroy Public Facilities Financing Authority Lease Revenue Refunding Bonds, Series 2022A; approving the execution and delivery of various related documents in connection with the offering and sale of such bonds; and authorizing the taking of certain other matters related thereto. City Council Regular Meeting Agenda 12/5/2022 Page7 12. ADJOURN TO THE MEETING OF GILROY PUBLIC FACILITIES FINANCING AUTHORITY 13. GILROY PUBLIC FACILITIES FINANCING AUTHORITY BOARD OF DIRECTORS 13.1. Call to Order 1. Roll Call 13.2. INTRODUCTION OF NEW BUSINESS 13.2.1. Approval of the Refinancing of Gilroy Public Facilities Financing Authority's 2013 Refunding Lease Revenue Bonds 1. Staff Report: Jimmy Forbis, City Administrator 2. Public Comment 3. Possible Action: Adopt a resolution of the Board of Directors of the Public Facilities Financing approving the issuance by the Gilroy Public Facilities Financing Authority of not to exceed $15 million of Gilroy Public Facilities Financing Authority Lease Revenue Refunding Bonds, Series 2022A; approving the execution and delivery of various related documents in connection with the offering and sale of such bonds; and authorizing the taking of certain other matters related thereto. 14. ADJOURN TO THE MEETING OF GILROY CITY COUNCIL 15. CITY ADMINISTRATOR'S REPORTS 16. CITY ATTORNEY'S REPORTS 17. CLOSED SESSION 18. ADJOURNMENT City Council Regular Meeting Agenda 12/5/2022 Page8 FUTURE MEETING DATES DECEMBER 2022 12* Special Meeting – 6:00 p.m. 19* Regular Meeting - 6:00 p.m. CANCELED JANUARY 2023 9* Regular Meeting - 6:00 p.m. 23* Regular Meeting - 6:00 p.m. 28* Strategic Planning Workshop - 9:00 a.m. FEBRUARY 2023 6* Regular Meeting - 6:00 p.m. 27* Regular Meeting - 6:00 p.m. MARCH 2023 6* Regular Meeting - 6:00 p.m. 20* Regular Meeting - 6:00 p.m. *Meeting is webstreamed City Council Meeting Minutes 11/21/2022 Page 1 of 9 City of Gilroy City Council Regular Meeting Minutes November 21, 2022 1. OPENING 1.1. Call to Order The meeting was called to order at 6:00 PM by Mayor Marie Blankley 1. Pledge of Allegiance Council Member Armendariz led the Pledge of Allegiance. 2. Invocation Pastor Trevor Van Laar from Gilroy Presbyterian Church provided the Invocation. 3. City Clerk's Report on Posting the Agenda City Clerk Pham declared the posting of the agenda. Attendee Name Title Status Marie Blankley Mayor Present Rebeca Armendariz Council Member Present Dion Bracco Council Member Present Zach Hilton Council Member Absent Peter Leroe-Muñoz Vice Mayor Present Carol Marques Council Member Present Fred Tovar Council Member Present 1.2. Orders of the Day There were none. 1.3. Employee Introductions Fire Chief Wyatt introduced the following new employees: Firefighter / Paramedic Chris Channell Firefighter / Paramedic Cesar Ruelas Firefighter / Paramedic Ian Nickolas 2. CEREMONIAL ITEMS 2.1. Proclamations, Awards, and Presentations 2.1.1. Retirement Proclamation for Visit Gilroy Executive Director/CEO Jane Howard Mayor Blankley read aloud the Proclamation and presented it to Visit Gilroy Executive Director Howard. 2.1.2. Proclamation - Small Business Saturday Mayor Blankley briefly mentioned the Proclamation. 3. PRESENTATIONS TO THE COUNCIL 7.1 Packet Pg. 9 Minutes Acceptance: Minutes of Nov 21, 2022 6:00 PM (CONSENT CALENDAR (ROLL CALL VOTE)) City Council Meeting Minutes 11/21/2022 Page 2 of 9 3.1. Annual Planning Commission Presentation Planning Commission Chair Manny Bhandal presented the annual presentation to Council. 2. PUBLIC COMMENT BY MEMBERS OF THE PUBLIC ON ITEMS NOT ON THE AGENDA BUT WITHIN THE SUBJECT MATTER JURISDICTION OF THE CITY COUNCIL The following speakers spoke on items that were not on the agenda: The following individuals spoke about animal abuse in Gilroy: Mariah Gomez Ron Kirkish Cheryl Parks Stephanie Elle Al Pinheiro requested Council to revisit the trash collection debt ordinance and the social host fireworks ordinance. Nancy Maciel from the Gilroy Downtown Business Association reminded the public to shop and dine downtown on November 26th and thanked the City for supporting the citywide banners. There being no further speakers, Mayor Blankley closed Public Comment. 4. REPORTS OF COUNCIL MEMBERS Council Member Bracco had nothing to report. Council Member Armendariz offered condolences to community mem bers that lost their pets to the abuse and to the survivors, friends, and family members that were affected in the ClubQ attack in Colorado Springs. She also reported on Santa Clara Valley Habitat Agency Implementation Board and CalTrain Policy Group. Council Member Marques offered her condolences to community members that lost their pets to the abuse. Council Member Tovar offered his condolences to community members that lost their pets to the abuse. He also reported on 2023 World Kindness Day and spoke with high-tech CEOs at the event. Council Member Leroe-Muñoz reported Silicon Valley Regional Interoperability Authority Board. He also thanked those who were part of the Veteran's Day Parade to the volunteers who attended the Commissioner Appreciation Dinner. Mayor Blankley reported the Veteran's Day Parade, Arbor Day Event at Sunrise Park, and the Commissioner Appreciation Dinner. She also reported that she along with City Administrator Forbis, Police Chief Espinoza, Fire Chief Wyatt, and Public Works Deputy Director Jones visited a temporary housing place in San Francisco. Lastly, she noted the non-profit Digital Nest celebrated its 8th birthday. 5. COUNCIL CORRESPONDENCE There were none. 6. FUTURE COUNCIL INITIATED AGENDA ITEMS 7.1 Packet Pg. 10 Minutes Acceptance: Minutes of Nov 21, 2022 6:00 PM (CONSENT CALENDAR (ROLL CALL VOTE)) City Council Meeting Minutes 11/21/2022 Page 3 of 9 Council Member Bracco requested a report from staff on fireworks citations and a report on water bills. City Administrator Forbis responded that the fireworks citations report will be provided in January and requested for Council to wait on the water bill report. 7. CONSENT CALENDAR (ROLL CALL VOTE) Mayor Blankley opened public comment. There being no speakers, Mayor Blankley closed public comment. RESULT: APPROVE [UNANIMOUS] MOVER: Peter Leroe-Muñoz, Vice Mayor SECONDER: Fred Tovar, Council Member AYES: Blankley, Armendariz, Bracco, Leroe-Muñoz, Marques, Tovar ABSENT: Zach Hilton 7.1. City Council - Regular Meeting - Nov 7, 2022 6:00 PM A motion was made to approve the minutes. 7.2. Adopt a Resolution of the City Council of the City of Gilroy Authorizing the City Administrator to Execute a Non-Disclosure Agreement with W- Trans and Strategic Economics, Inc. and Release Confidential Sales Tax Data for Development of the Downtown Parking Management Plan A motion was made to adopt the resolution. Enactment No.: Resolution No. 2022-86 8. BIDS AND PROPOSALS 8.1. Award a Contract to Moore Iacofanco Goltsman, Inc. for Justice, Equity, Diversity, and Inclusion Consultation Services in the Amount of $114,905. City Administrator Forbis provided staff presentation and responded to Council Member questions. Mayor Blankley opened Public Comment. There being no speakers, Mayor Blankley closed Public Comment. Possible Action: Award a contract to Moore Iacofanco Goltsman, Inc. for justice, equity, diversity, and inclusion consultation services in the amount of $114,905. RESULT: AWARD CONTRACT [5 TO 1 WITH 1 ABSENCE] MOVER: Rebeca Armendariz, Council Member SECONDER: Fred Tovar, Council Member AYES: Blankley, Armendariz, Leroe-Muñoz, Marques, Tovar NAYS: Dion Bracco ABSENT: Zach Hilton 7.1 Packet Pg. 11 Minutes Acceptance: Minutes of Nov 21, 2022 6:00 PM (CONSENT CALENDAR (ROLL CALL VOTE)) City Council Meeting Minutes 11/21/2022 Page 4 of 9 9. PUBLIC HEARINGS 9.1. Adoption of An Urgency Ordinance of the City Council of the City of Gilroy Adopting a Franchise Agreement with Recology South Valley for Solid Waste Hauling Services and a Finding that Its Action in Adopting the Ordinance is Exempt From Review Under the California Environmental Quality Act (“CEQA”) Pursuant to CEQA Guidelines Section 15061(b)(3) (Common Sense Exemption) In that the Proposed Ordinance Will Continue an Existing State-Mandated Program for the Protection of Public Health and the Environment, and None of the Circumstances in CEQA Guidelines Section 15300.2 Apply. Assistant to the City Administrator Atkins provided staff presentation on items 9.1 and 9.2 combined and responded to Council Member questions. Mayor Blankley opened Public Hearing at 7:12 PM. There being no speakers, Mayor Blankley closed Public Hearing at 7:12 PM. Possible Action: a) Motion to read the ordinance by title only and waive any future reading. RESULT: READ TITLE ORDINANCE AND WAIVE FURTHER READING [UNANIMOUS] MOVER: Rebeca Armendariz, Council Member SECONDER: Peter Leroe-Muñoz, Vice Mayor AYES: Blankley, Armendariz, Bracco, Leroe-Muñoz, Marques, Tovar ABSENT: Zach Hilton City Clerk Pham read aloud the title of the urgency ordin ance. b) Adopt an Urgency Ordinance of the City Council of the City of Gilroy approving a franchise agreement with Recology South Valley for solid waste hauling services. RESULT: APPROVE [UNANIMOUS] MOVER: Peter Leroe-Muñoz, Vice Mayor SECONDER: Rebeca Armendariz, Council Member AYES: Blankley, Armendariz, Bracco, Leroe-Muñoz, Marques, Tovar ABSENT: Zach Hilton Enactment No.: Ordinance No. 2022-09 7.1 Packet Pg. 12 Minutes Acceptance: Minutes of Nov 21, 2022 6:00 PM (CONSENT CALENDAR (ROLL CALL VOTE)) City Council Meeting Minutes 11/21/2022 Page 5 of 9 9.2. Introduction of An Ordinance of the City Council of the City of Gilroy Adopting a Franchise Agreement with Recology South Valley for Solid Waste Hauling Services and a Finding that Its Action in Adopting the Ordinance is Exempt From Review Under the California Environmental Quality Act (“CEQA”) Pursuant to CEQA Guidelines Section 15061(b)(3) (Common Sense Exemption) In that the Proposed Ordinance Will Continue an Existing State-Mandated Program for the Protection of Public Health and the Environment, and None of the Circumstances in CEQA Guidelines Section 15300.2 Apply. Mayor Blankley opened Public Hearing at 7:15 PM. David Matuszak stated that the agreement is a step in the right direction but had concerns about the spring mattress pickup and pop -up stations in downtown and Miller Park not complying with the organic waste regulations. Mike Kelly, General Manager of Recology South Valley, briefly responded to the previous speaker’s concerns and responded to Council Member questions. There being no speakers, Mayor Blankley closed Public Hearing at 7:21 PM. Possible Action: a) Motion to read the ordinance by title only and waive further reading. RESULT: READ TITLE ORDINANCE AND WAIVE FURTHER READING [UNANIMOUS] MOVER: Fred Tovar, Council Member SECONDER: Dion Bracco, Council Member AYES: Blankley, Armendariz, Bracco, Leroe-Muñoz, Marques, Tovar ABSENT: Zach Hilton City Clerk Pham read aloud the title of the ordinance. b) Introduce an Ordinance of the City Council of the City of Gilroy Approving a Franchise Agreement with Recology South Valley for Solid Waste Hauling Services. RESULT: INTRODUCE AN ORDINANCE [UNANIMOUS] MOVER: Rebeca Armendariz, Council Member SECONDER: Carol Marques, Council Member AYES: Blankley, Armendariz, Bracco, Leroe-Muñoz, Marques, Tovar ABSENT: Zach Hilton 9.3. Proposed Rezoning, Tentative Map and Architectural and Site Review to Develop 3.37 Acres with a 45 Unit Townhouse Project (Royal Way Townhomes). Mayor Blankley asked Council Members if they received any ex -parte communications. Council Members Bracco, Armendariz, Marques, and Mayor Blankley reported they met with the developer and residents near the project. Senior Planner Tambornini provided staff presentation and responded to Council Member questions. Dustin Bogue, the applicant, also responded to Council 7.1 Packet Pg. 13 Minutes Acceptance: Minutes of Nov 21, 2022 6:00 PM (CONSENT CALENDAR (ROLL CALL VOTE)) City Council Meeting Minutes 11/21/2022 Page 6 of 9 Member questions. Mayor Blankley opened Public Hearing at 7:35 PM. Rodney Pickett stated he had some privacy concerns and would support the project if certain conditions were met. Mae Valentino Pickett stated she was in support of the Royal Way Townhomes Project. Renee Rocca voiced concerns about the potential fire danger and wanted fire and traffic study reports with regard to the project. Blanca Ramirez voiced concern about the project with regard to her dog and privacy. Ron Kirkish inquired if there is any parking in the project There being no further speakers, Mayor Blankley closed Public Hearing at 7:46 PM. Possible Action: Motion to read the ordinance by title only and waive further reading. RESULT: READ TITLE ORDINANCE AND WAIVE FURTHER READING [UNANIMOUS] MOVER: Peter Leroe-Muñoz, Vice Mayor SECONDER: Fred Tovar, Council Member AYES: Blankley, Armendariz, Bracco, Leroe-Muñoz, Marques, Tovar ABSENT: Zach Hilton City Clerk Pham read aloud the title of the ordinance. Introduce an Ordinance of the City Council approving adoption of a Planned Unit Development Overlay Zoning Amendment for property at Royal Way (file number Z 21-05) RESULT: INTRODUCE AN ORDINANCE [UNANIMOUS] MOVER: Fred Tovar, Council Member SECONDER: Rebeca Armendariz, Council Member AYES: Blankley, Armendariz, Bracco, Leroe-Muñoz, Marques, Tovar ABSENT: Zach Hilton x Resolution approving a Tentative Map for a 45-unit townhome development (file number TM 21-04) RESULT: APPROVE [UNANIMOUS] MOVER: Fred Tovar, Council Member SECONDER: Carol Marques, Council Member AYES: Blankley, Armendariz, Bracco, Leroe-Muñoz, Marques, Tovar ABSENT: Zach Hilton Enactment No.: Resolution No. 2022-87 x Resolution approving an Architectural and Site Review Permit to allow construction of a 45-unit townhome project on the property following approval of the associated PUD zoning amendment and tentative map. A motion was made by Council Member Leroe- Muñoz, seconded by Council 7.1 Packet Pg. 14 Minutes Acceptance: Minutes of Nov 21, 2022 6:00 PM (CONSENT CALENDAR (ROLL CALL VOTE)) City Council Meeting Minutes 11/21/2022 Page 7 of 9 Member Tovar, to adopt the resolution with the following amendment in the Conditional Use Permit: Install a solid 8-foot tall redwood fence along the shared property line of the lots on Antonio Court and the fence shall be constructed with a minimum of 6-inch by 6-inch posts and a pressure-treated kickboard to close the bottom of the fence. The motion was carried by the following vote: RESULT: APPROVE AS AMENDED [UNANIMOUS] MOVER: Peter Leroe-Muñoz, Vice Mayor SECONDER: Fred Tovar, Council Member AYES: Blankley, Armendariz, Bracco, Leroe-Muñoz, Marques, Tovar ABSENT: Zach Hilton Enactment No.: Resolution No. 2022-88 9.4. Adopt an Ordinance Adopting by Reference the 2022 California Building Codes with Amendments Community Development Director Goei provided staff presentation on items 9.4, 9.5, and 9.6 combined and responded to Council Member questions. Mayor Blankley opened Public Hearing at 8:00 PM. There being no speakers, Mayor Blankley closed Public Hearing at 8:00 PM. Possible Action: Waive the second reading and adopt an Ordinance amending Sections 6.1, 6.6, and 6.7 of Chapter 6 of the Gilroy Municipal Code adopting by reference the 2022 California Building Code, 2022 California Residential Code, 2022 California Electrical Code, 2022 California Mechanical Code, 2022 California Plumbing Code, 2022 California Energy Code, 2022 California Historical Building Code, 2022 California Existing Building Code, 2021 International Property Maintenance Code, and 2021 International Swimming Pool and Spa Code, with amendments. RESULT: APPROVE [UNANIMOUS] MOVER: Dion Bracco, Council Member SECONDER: Fred Tovar, Council Member AYES: Blankley, Armendariz, Bracco, Leroe-Muñoz, Marques, Tovar ABSENT: Zach Hilton Enactment No.: Ordinance No. 2022-10 9.5. Adopt an Ordinance Adopting by Reference the 2022 California Green Building Standards Code with Amendments Mayor Blankley opened Public Hearing at 8:01 PM. There being no speakers, Mayor Blankley closed Public Hearing at 8:01 PM. 7.1 Packet Pg. 15 Minutes Acceptance: Minutes of Nov 21, 2022 6:00 PM (CONSENT CALENDAR (ROLL CALL VOTE)) City Council Meeting Minutes 11/21/2022 Page 8 of 9 Possible Action: Waive the second reading and adopt an Ordinance amending Sections 6.6 and 6.7 of Chapter 6 of the Gilroy Municipal Code adopting by reference the 2022 California Green Building Standards Code with amendments. RESULT: APPROVE [UNANIMOUS] MOVER: Peter Leroe-Muñoz, Vice Mayor SECONDER: Dion Bracco, Council Member AYES: Blankley, Armendariz, Bracco, Leroe-Muñoz, Marques, Tovar ABSENT: Zach Hilton Enactment No.: Ordinance No. 2022-11 9.6. Adopt an Ordinance Adopting by Reference the 2022 California Fire Code with Amendments Mayor Blankley opened Public Hearing at 8:01 PM. There being no speakers, Mayor Blankley closed Public Hearing at 8:02 PM. Possible Action: Waive the second reading and adopt an Ordinance amending Sections 10.9 and 10.10 of Chapter 10 of the Gilroy Municipal Code adopting by reference the 2022 California Fire Code with amendments. RESULT: APPROVE [UNANIMOUS] MOVER: Carol Marques, Council Member SECONDER: Rebeca Armendariz, Council Member AYES: Blankley, Armendariz, Bracco, Leroe-Muñoz, Marques, Tovar ABSENT: Zach Hilton Enactment No.: Ordinance No. 2022-12 10. UNFINISHED BUSINESS There were none. 11. INTRODUCTION OF NEW BUSINESS 11.1. Agricultural Zoning Districts and Establishment of Agricultural, Resource, and Open Spaces Uses Including Beekeeping Assistant to the City Administrator Atkins provided staff presentation and responded to Council Member questions. Mayor Blankley opened Public Comment. Mike Phillips stated the safety concern was overblown and that City already has feral beehives. Sara Cutrignelli, Vice President of the Gilroy Beekeeper Association, emphasized the importance of bees and beekeeping and requested that the City work off on existing ordinances from other cities. Robert Weaver took issue with the way the staff report was written and stated that staff should have separated bees from barnyard animals. Gurmon Randhawa, part of the Gilroy Bee Association, emphasized the 7.1 Packet Pg. 16 Minutes Acceptance: Minutes of Nov 21, 2022 6:00 PM (CONSENT CALENDAR (ROLL CALL VOTE)) City Council Meeting Minutes 11/21/2022 Page 9 of 9 importance of honeybees. Stefanie Elle emphasized the importance of honeybees and stated she was disappointed with the way the staff report was written. Gondie Chavez expressed her support for urban beekeeping ordinance within the City. Cheryl Parks expressed her support for an urban beekeeping ordinance within the City. Ron Kirkish expressed his support for an urban beekeeping ordinance within the City. Dudrpreet Randhawa expressed his support for an urban beekeeping ordinance within the City. There being no further speakers, Mayor Blankley closed Public Comment. Possible Action: Council direction not to proceed with pursuing policies permitting agriculture operations, including beekeeping, outside of agriculture districts. The council directed staff to add the urban beekeeping ordinance into the discussion during the strategic planning workshop meeting. 12. CITY ADMINISTRATOR'S REPORTS City Clerk Pham reported on the status of the election results timeline. Police Captain Smith reported on the status of the animal abuse within the City. City Administrator Forbis thanked those who attended the Arbor Day event . He also encouraged everyone to visit the Dolores Huerta E xhibit at the Gilroy Library. 13. CITY ATTORNEY'S REPORTS There were none. 14. CLOSED SESSION There were none. 15. ADJOURNMENT The meeting was adjourned at 9:16 PM by Mayor Blankley. I HEREBY CERTIFY that the foregoing minutes were duly and regularly adopted at a regular meeting of the City Council of the City of Gilroy. /s/ Thai Nam Pham, CMC, CPMC City Clerk 7.1 Packet Pg. 17 Minutes Acceptance: Minutes of Nov 21, 2022 6:00 PM (CONSENT CALENDAR (ROLL CALL VOTE)) City of Gilroy STAFF REPORT Agenda Item Title: Adoption of An Ordinance of the City Council of the City of Gilroy Adopting a Franchise Agreement with Recology South Valley for Solid Waste Hauling Services and a Finding that Its Action in Adopting the Ordinance is Exempt From Review Under the California Environmental Quality Act (“CEQA”) Pursuant to CEQA Guidelines Section 15061(b)(3) (Common Sense Exemption) In that the Proposed Ordinance Will Continue an Existing State- Mandated Program for the Protection of Public Health and the Environment, and None of the Circumstances in CEQA Guidelines Section 15300.2 Apply. Meeting Date: December 5, 2022 From: Jimmy Forbis, City Administrator Department: Administration Submitted By: Jimmy Forbis, City Administrator Prepared By: Bryce Atkins, Assistant to the City Administrator Strategic Plan Goals Develop a Financially Resilient Organization Ensure Neighborhood Equity from City Services ☐ Promote Economic Development Activities ☐ Promote Safe, Affordable Housing for All ☐ Maintain and Improve City Infrastructure RECOMMENDATION Council adopt the Ordinance and authorize the City Administrator to execute the agreement. 7.2 Packet Pg. 18 BACKGROUND At the November 21, 2022 City Council Regular Meeting, staff presented the 2022 Franchise Agreement to the City Council for consideration. Council voted in favor to introduce the Ordinance. Additionally, at the same meeting, the City Council adopted an urgency ordinance placing the agreement into effect immediately. Attached is the ordinance recommended for adoption, as well as the staff report introducing the ordinance and analyzing the agreement’s terms and conditions. ANALYSIS The analysis and fiscal impacts are contained in the staff report for the introduc tion of the ordinance on November 21, 2022, which is attached to this staff report. Attachments: 1. Proposed Ordinance - Solid Waste Franchise Agreement 2. Franchise Agreement 2022 - Recology 3. November 21 2022 Franchise Agreement Staff Report 7.2 Packet Pg. 19 ORDINANCE NO. 2022-XX AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF GILROY ADOPTING A FRANCHISE AGREEMENT WITH RECOLOGY SOUTH VALLEY FOR SOLID WASTE HAULING SERVICES AND A FINDING THAT ITS ACTION IN ADOPTING THE ORDINANCE IS EXEMPT FROM REVIEW UNDER THE CALIFORNIA ENVIRONMENTAL QUALITY ACT (“CEQA”) PURSUANT TO CEQA GUIDELINES SECTION 15061(B)(3) (COMMON SENSE EXEMPTION) IN THAT THE PROPOSED ORDINANCE WILL CONTINUE AN EXISTING STATE- MANDATED PROGRAM FOR THE PROTECTION OF PUBLIC HEALTH AND THE ENVIRONMENT, AND NONE OF THE CIRCUMSTANCES IN CEQA GUIDELINES SECTION 15300.2 APPLY WHEREAS, the City of Gilroy (City) is a municipal corporation, duly organized under the constitution and laws of the State of California; and WHEREAS, pursuant to California Constitution Article XI, Section 7, and the City Charter, Section 600, the City Council has the authority to enact ordinances which promote the public health, safety and general welfare of its residents, including sanitation ordinances and regulations; and WHEREAS, the provision of sanitary solid waste hauling services is an essential component to protecting public health, safety, and welfare, and is a state mandated service; and WHEREAS, solid waste hauling services are contracted through an exclusive franchise agreement, and enacted pursuant to Article XIII of the City Charter entitled “Franchises”; and WHEREAS, Section 1302 of Article XIII of the City Charter places a term limitation on franchise agreements at a maximum of 25 years; and WHEREAS, the prior franchise agreement was adopted on September 2, 1997, which established the 25-year limitation date to be up to and including September 2, 2022, necessitating a new franchise agreement by that date; and WHEREAS, the City has been in negotiations on a new franchise agreement with Recology South Valley (Recology), but was not able to reach agreement in time for the new, long- term agreement to become effective before the end of the 1997 franchise agreement; and WHEREAS, a franchise agreement is required to continue providing solid waste hauling services, a state mandate, generating an urgent need to place a franchise agreement for solid waste hauling services into effect; and WHEREAS, the City and Recology entered into a short-term interim franchise agreement, which lasts until December 31, 2022, to sustain this essential component of protecting the public health while the negotiations completed on the new, longer-term franchise agreement; and, 7.2.a Packet Pg. 20 Attachment: Proposed Ordinance - Solid Waste Franchise Agreement (3951 : Solid Waste Franchise Agreement Adoption) Ordinance No. 2022-XX Franchise Agreement w/ Recology City Council Regular Meeting | December 5, 2022 Page 2 of 4 WHEREAS, the City and Recology South Valley have negotiated a new exclusive franchise agreement, attached as Attachment “A” and incorporated herein by reference, which continues solid waste collection and disposal services as well as implementing the organics and recycling requirements as imposed by adopted State law; and WHEREAS, adopting this Ordinance is exempt from review under the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines Section 15061(b)(3) (Common Sense Exemption) in that the proposed ordinance will continue an existing state- mandated program for the protection of public health and the environment, and none of the circumstances in CEQA Guidelines Section 15300.2 apply. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF GILROY DOES HEREBY ORDAIN AS FOLLOWS: SECTION I The foregoing recitals are true and correct and are incorporated herein by this reference. SECTION II That the franchise agreement between the City and Recology South Valley, attached as Attachment “A” is hereby adopted. SECTION III If any section, subsection, sentence, clause or phrase of this Ordinance is for any reason held to be invalid or unconstitutional, such decision shall not affect the validity of the remaining portions of this ordinance. The City Council of the City of Gilroy hereby declares that it would have passed and adopted this ordinance, and each section, subsection, sentence, clause or phrase hereof, irrespective of the fact that any one or more sections, subsections, sentences, clauses or phrases may be declared invalid or unconstitutional. SECTION IV This Ordinance shall take effect thirty (30) days after its adoption. The City Clerk is hereby directed to publish this Ordinance or a summary thereof pursuant to Government Code Section 36933. 7.2.a Packet Pg. 21 Attachment: Proposed Ordinance - Solid Waste Franchise Agreement (3951 : Solid Waste Franchise Agreement Adoption) Ordinance No. 2022-XX Franchise Agreement w/ Recology City Council Regular Meeting | December 5, 2022 Page 3 of 4 PASSED AND ADOPTED BY THE COUNCIL OF THE CITY OF GILROY this 5th day of December, 2022 by the following vote: AYES: COUNCIL MEMBERS: NOES: COUNCIL MEMBERS: ABSTAIN: COUNCIL MEMBERS: ABSENT: COUNCIL MEMBERS: APPROVED: Marie Blankley, Mayor ATTEST: _______________________ Thai Nam Pham, City Clerk 7.2.a Packet Pg. 22 Attachment: Proposed Ordinance - Solid Waste Franchise Agreement (3951 : Solid Waste Franchise Agreement Adoption) Ordinance No. 2022-XX Franchise Agreement w/ Recology City Council Regular Meeting | December 5, 2022 Page 4 of 4 ATTACHMENT A 7.2.a Packet Pg. 23 Attachment: Proposed Ordinance - Solid Waste Franchise Agreement (3951 : Solid Waste Franchise Agreement Adoption) FRANCHISE AGREEMENT between THE CITY OF GILROY and RECOLOGY SOUTH VALLEY December 1, 2022 7.2.b Packet Pg. 24 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) 1 FRANCHISE AGREEMENT THIS AGREEMENT (Agreement), dated December 1, 2022 is entered into by and between the CITY OF GILROY, a Municipal Corporation (“CITY”) and RECOLOGY SOUTH VALLEY, a California Corporation (“COMPANY”). RECITALS This Agreement is entered into on the basis of the following facts, understandings, and intentions of the parties: A. The Legislature of the State of California, by enactment of the California Integrated Waste Management Act of 1989 (Public Resources Code Section 40000, et seq.; hereinafter the “Act”) established a solid waste management process which requires cities and other local jurisdictions to implement source reduction, reuse, and recycling as integrated waste management practices; and B. The State of California has found and declared that the amount of refuse generated in California, coupled with diminishing Disposal capacity and potential adverse environmental impacts from landfilling and the need to conserve natural resources, have created an urgent need for State and local agencies to enact and implement aggressive integrated waste management programs. The State has, through enactment of AB 939 and subsequent related legislation including, but not limited to: the Jobs and Recycling Act of 2011 (AB 341), the Event and Venue Recycling Act of 2004 (AB 2176), SB 1016 (Chapter 343, Statutes of 2008 [Wiggins, SB 1016]), the Mandatory Commercial Organics Recycling Act of 2014 (AB 1826), and the Short-Lived Climate Pollutants Bill of 2016 (SB 1383), directed the responsible State agency, and all local agencies, to promote diversion and to maximize the use of feasible waste reduction, reuse, recycling, and composting options in order to reduce the amount of refuse, including Organic Waste, that must be disposed; and C. Pursuant to California Public Resources Code Section 40059(a)(2), the City has determined that the public health, safety, and well-being require that an exclusive right be awarded to a qualified contractor to provide for the collection of Recyclable Materials, Organic Materials, Construction and Demolition Debris, and Solid Waste; and D. The City Council has enacted Chapter 12 of the Gilroy City Code, which establishes standards for the Collection and removal of Solid Waste and Recyclables, the Disposal of Solid Waste, the Recycling of Recyclables, and requirements for Collection Agreements; and 7.2.b Packet Pg. 25 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) 2 E. CITY and COMPANY have implemented a new, expanded system of waste collection and management services to more efficiently provide for the collection of such materials, and to facilitate achievement of City’s obligations pursuant to the Act and to further expand collection and management services to facilitate achievement of CITY'S obligations pursuant to SB 1383, SB 341, SB 1826 and AB 827; and F. Pursuant to this Agreement, CITY desires to engage COMPANY as an independent contractor to exclusively provide Solid Waste, Organic Materials and Recyclable Materials Collection Services in the City. COMPANY shall furnish all personnel, equipment, and supplies necessary to collect, or otherwise remove and dispose of all Solid Waste, Organic Materials and Recyclable Materials, as defined herein, generated or accumulated at all Residential and Commercial/Industrial Premises within the City, on the terms and conditions specified herein and except as otherwise specifically provided herein; and G. COMPANY represents and warrants to CITY that it has the experience, responsibility, and qualifications to implement the collection of Solid Waste, Organic Materials and Recyclable Materials, and to arrange with residents and other entities in the City for the collection, safe transport, Processing, and Disposal of all materials in compliance with Applicable Law and the provisions of this Agreement; and H. CITY and COMPANY are mindful of the provisions of the laws governing the safe collection, transport, Recycling, and Disposal of Solid Waste, including the Act, RCRA, and CERCLA; and I. COMPANY currently uses natural gas to fuel the collection vehicles that collect waste throughout the City’s incorporated limits. When alternatives to natural gas become commercially available, City and COMPANY mutually desire to explore, in a mutually agreed manner, collection vehicle fueling alternatives such as electricity, hydrogen, SB 1383 compliant biofuels, and hybrid propulsion in order to further reduce air pollution, carbon emissions and noise and to enhance community health as well as address SB 1383 procurement mandates; and J. CITY and COMPANY recognize that CITY may have the need for temporary services to be provided by COMPANY that arise and fluctuate over time and that the provision of these services result in additional costs (EXCEPTIONAL COSTS); and K. City has negotiated an agreement for waste disposal capacity with Waste Solutions Group of San Benito that is close to COMPANY’s transfer facilities and City desires that COMPANY deliver waste to this facility in order to reduce air pollution and greenhouse gas emissions associated with transportation of solid waste collected in CITY; and 7.2.b Packet Pg. 26 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) 3 L. CITY and COMPANY desire to leave no doubts as to their respective roles and to make it clear that by entering into this Agreement, CITY is not thereby becoming a “generator” or “arranger” as those terms are used in the context of CERCLA Section 107 (a) (3), and that COMPANY will not make any claims that CITY is “arranging for” the Collection of Solid Waste, Construction and Demolition Debris, Organic Materials and Recyclable Materials from Residential and Commercial/Industrial Premises in the City, and transporting of same for Disposal, Recycling of Recyclables, and Processing of Organic Materials; and M. As a material inducement to CITY entering into this Agreement, COMPANY has agreed to fully indemnify CITY in the manner set forth in Section 13 hereof against all claims, losses, lawsuits or actions relating to any Hazardous Waste at any place where COMPANY transfers, stores, processes, or disposes of Solid Waste, Organic Materials or Recyclables pursuant to this Agreement, or its activities pursuant to this Agreement that result in a release of hazardous substances into the environment; and N As a further material inducement to CITY entering into this Agreement, COMPANY has agreed to fully indemnify CITY against all claims, losses, lawsuits or actions relating to any Hazardous Waste at Pacheco Pass Landfill relating to Solid Waste Collected by COMPANY from within the City and disposed of before or after the date of this Agreement; and NOW, THEREFORE, in consideration of the mutual covenants and conditions herein contained, the parties agree to as follows: Definitions Whenever any term used in this Agreement has been defined by Section 12.1 of Chapter 12 of the Gilroy City Code, the definitions in Section 12.1 shall apply unless the term is otherwise defined in this Agreement. Whenever any term used in this Agreement has been defined by Division 30, Part 1, Chapter 2 of the California Public Resources Code, the definitions in Division 30, Part 1, Chapter 2, shall apply, unless the term is otherwise defined in this Agreement or in Chapter 12 of the City Code. Whenever any term used in this Agreement has been defined by Title 14, Division 7, Chapter 12, Article 1 of the California Code of Regulations, the definition in Title 14, Division 7, Chapter 12, Article 1 of the California Code of Regulations shall apply unless the term is otherwise defined in this agreement, Chapter 12 of the City Code or Division 30, Part 1, Chapter 2 of the California Public Resources Code. In addition, the following definitions are hereby incorporated into this Agreement: 1 “Act” means the California Integrated Waste Management Act of 1989. 2 “Applicable Law” means all laws, ordinances, regulations, rules, orders, judgments, decrees, permits, approvals, or other requirement of any governmental body that are in force on the Date of this Agreement and as they may be enacted, issued or amended during the 7.2.b Packet Pg. 27 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) 4 Term. 3 “CERCLA” means the Comprehensive Environmental Responsibility Compensation and Liability Act, 42 U.S.C.A. Section 9601 et seq., as amended or superseded, and the regulations promulgated thereunder. 4 “Change in Law” means any of the following events or conditions, which has a material and adverse effect on the performance by the parties of their respective obligations under this Agreement (except for payment obligations): (a) the enactment, adoption, promulgation, issuance, modification, or written change in administrative or judicial interpretation of any Applicable Law on or after the date of this Agreement; or (b) the order or judgment of any governmental body, on or after the date of this Agreement, to the extent such order or judgment is not the result of willful or negligent action, error or omission or lack of reasonable diligence of CITY or of COMPANY, whichever is asserting the occurrence of a Change in Law; provided, however, that the contesting in good faith or the failure in good faith to contest any such order or judgment shall not constitute or be construed as such a willful or negligent action, error or omission or lack of reasonable diligence. 5 “City Code” means the Code of the City of Gilroy, California, as it presently exists or may subsequently be amended. 6 “City Facilities” means: City Hall Annex, Las Animas Fire Station, Sunrise Fire Station, Gilroy Sports Park, City Hall, Gilroy Golf Course, Police Department, Senior Center, Gilroy Museum, Chestnut Fire Dept., Corporation Yard, City parks, city garbage cans, if any, on city streets, and any other facility or real property used primarily by the CITY that may be constructed by, acquired by or leased to CITY during the Term. 7 “CalRecycle” means the California Department of Resources Recycling and Recovery. 8 “Collection Services” means all of the duties and obligations of COMPANY hereunder. 9 “Compost” shall have the meaning set forth in Public Resources Code Section 40116, as it now exists or may subsequently be amended. 10 “Consumer Price Index” or “CPI” means the Consumer Price Index (CPI) All Urban Consumers for the San Francisco - Oakland - San Jose Metropolitan Area, base period 1982- 84=100. 11 “Construction and Demolition Debris” means discarded materials removed from 7.2.b Packet Pg. 28 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) 5 construction, remodeling, repair, demolition, or renovation operations on any pavement, house, commercial building, or other structure, or from landscaping. Such materials include, but are not limited to, dirt, sand, rock, gravel, bricks, plaster, gypsum wallboard, aluminum, glass, asphalt material, plastics, roofing material, cardboard, carpeting, cinder blocks, concrete, copper, electrical wire, fiberglass, Formica, granite, iron, lead, linoleum, marble, plaster, plant debris, pressboard, porcelain, steel, stucco, tile, vinyl, wood, masonry, rocks, trees, remnants of new materials, including paper, plastic, carpet scraps, wood scraps, scrap metal, building materials, packaging and rubble resulting from construction, remodeling, renovation, repair and demolition operations on pavements, houses, commercial buildings and other structures. 12 “Control” means, for purposes of this Agreement, the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a corporation, partnership, joint venture, or other association. 13 “Diversion” means diversion as defined in Public Resources Code §40124. 14 “Diversion Rate” means the percent of Solid Waste diverted from Disposal. 15 “Environmental Statutes” means, for the purposes of this Agreement, 42 U.S.C. Sections 6901, et seq. and Sections 9600, et seq., and California Health and Safety Code Sections 25300, et seq., or successor statutes. 16 “Final Regulations” means the regulations under SB 1383 issued in November 2020. 17 “Food Scraps” means the following materials, that have been source-separated from other Solid Waste Matter : (i) all kitchen and table food waste; (ii) animal or vegetable waste that is generated during or results from the storage, preparation, cooking or handling of food stuffs; (iii) discarded paper (including paper containers and cartons) that is not coated, lined or waxed, and that is contaminated with Food Scraps; (iv) fruit waste, grain waste, dairy waste, meat waste, and fish waste; and (v) vegetable trimmings and houseplant trimmings. Food Scraps excludes manure, pet wastes, dead animals, and rotten material. Food Scraps are a subset of Organic Materials. 18 “Gross Rate Revenues” means all Rate revenues collected by COMPANY for providing Collection Services. 19 "Hazardous Waste" means all substances defined as Hazardous Waste, acutely Hazardous Waste, or extremely Hazardous Waste by the State of California in Health and Safety Code §25110.02, §25115, and §25117 or in the future amendments to or recodifications of such statutes or identified and listed as Hazardous Waste by the U.S. Environmental Protection Agency (EPA), pursuant to the Federal Resource Conservation and Recovery Act (42 USC §6901 et seq.), all future amendments thereto, and all rules and regulations promulgated thereunder. 7.2.b Packet Pg. 29 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) 6 20 “Organic Material(s)” means Food Scraps and/or Yard Trimmings, either commingled or separate, that have been source-separated from other Solid Waste Matter. 21 “Owner” means the person holding the legal title or having a right to possession to the real property to which Collection Services are provided. 22 “Rates” means the service charges and Special Charges for Collection Services charged to each Subscriber receiving service under this Agreement. 23 “Reasonable Increased Costs” and EXCEPTIONAL COSTS shall include a profit margin to COMPANY calculated based on an operating margin of 90% on all costs except: governmental or regulatory fees, franchise fees, the cost of a performance audit under section 2(B), the cost of compost provided under 6(J), or temporary services provided by COMPANY to CITY and charged at the rates in Exhibit A. 24 “Recyclable Material(s)” or “Recyclables” means the following materials, that have been source-separated from other Solid Waste Matter: (a) newspaper; (b) aluminum and ferrous cans; (c) glass jars and bottles; (d) certain plastic containers and certain packing materials; (e) certain scrap metals; (f) mixed paper including mail, magazines, catalogs, paperboard boxes, envelopes, advertisements, books without hardbound covers, and phone books; (g) corrugated cardboard; and (h) such other material that Company and City mutually agree may be accepted or removed from the foregoing for curbside recycling under this Agreement. 25 “Related Party” means any other Person under the same ownership and/or Control as Recology South Valley. 26 “Residue” means materials that remain after Processing Recyclable Materials and Organic Materials, which cannot be recycled, marketed, or otherwise utilized, including but not limited to materials such as rocks, contaminated paper, putrescible waste, and other debris. 27 “Schedule of Rates” means a listing of all charges per unit of measure established at amounts contained in Exhibit A and modified pursuant to the terms and conditions in Section 9 or Exhibit A2. 28 “Solid Waste” or “Refuse” means solid waste as defined in California Public Resources Code, Division 30, Part 1, Chapter 2, Section 40191 and regulations promulgated thereunder, but excluding Recyclable Material, Organic Material, Construction and Demolition Debris, ashes, industrial wastes, abandoned vehicles and parts thereof, discarded home and industrial appliances, sewage sludge, biosolids, and manure. Notwithstanding any provision to the contrary, Solid Waste may include de minimis volumes or concentrations of waste of a type and amount normally found in Residential Solid Waste after implementation of programs for the safe collection, Recycling, treatment, and Disposal of Household Hazardous Waste in compliance with Section 41500 and 41802 of the California Public Resources Code as may be amended from time to time. 7.2.b Packet Pg. 30 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) 7 29 “Special Charges” means extra charges for certain special services for Residential and Commercial/Industrial Subscribers that are contained on the Schedule of Rates, and that may be billed by COMPANY. 30 “State” means the State of California. 31 “Street Sweeping Fines” means material collected as a result of street sweeping operations. 32 “Subscriber” or “Customer” means an individual or entity that subscribes to Collection Services provided by COMPANY pursuant to this Agreement. 34 “Term” means the term of this Agreement, as set forth in Section 2. 35 “Yard Trimmings” means the following materials, that have been source-separated from other Solid Waste Matter: green trimmings, grass, weeds, leaves, prunings, branches, dead plants, brush, tree trimmings, dead trees, Christmas trees, small pieces of unpainted and untreated wood, and other types of plant materials resulting from normal yard and landscaping maintenance, provided that all such materials are less than six inches (6”) in diameter and three feet (3’) in length. Notwithstanding the foregoing, Yard Trimmings do not include palm fronds, oleander, poison ivy or poison oak. Yard Trimmings are a subset of Organic Materials. 36 “Tipping Fee” means the fee charged by a Disposal or Processing facility to dispose or process one (1) Ton of municipal Solid Waste, not including any charges for Special Wastes, Bulky Waste, or Special Items. 37 “Ton” means a “short ton” of 2,000 pounds. Section 1. Franchise Grant CITY grants to COMPANY, and COMPANY hereby accepts from CITY the exclusive right, franchise and privilege to collect and dispose of all Solid Waste Matter produced, kept or accumulated in the City of Gilroy, together with the right and privilege to use and operate upon the CITY maintained streets and other rights-of-way to the extent necessary to perform COMPANY’s obligations under this Franchise Agreement. The right and privilege herein granted shall be subject to compliance with the provisions of CITY’s ordinances pertaining to the accumulation, collection and removal of Solid Waste Matter as they presently exist or as they may be amended during the term hereof, or any extension thereof, and any applicable State and Federal statutory or administrative laws and rules. For the purposes of this Agreement “Solid Waste Matter” is defined to mean Solid Waste, Recyclable Material, Organic Material, and Construction and Demolition Debris. COMPANY’s exclusive rights shall be subject to the following exceptions: (A) Nonresidential recyclable materials source separated from other wastes by the 7.2.b Packet Pg. 31 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) 8 waste generator that can be at least 95% recycled and for which the COMPANY cannot collect and recycle at a complete cost to the customer equal to or less than the complete cost to the customer charged by other vendors. “Complete cost” means all fees charged by a vendor to a nonresidential generator for recycling, hauling, or other services. (B) Any materials for which there is no charge for the hauling, handling, or disposal or any other fee designed to compensate the vendor removing the materials. This Agreement shall become effective on the date set forth in the introductory paragraph. Company accepts the terms of this Agreement as defining the scope of its exclusive rights to collect and dispose of Solid Waste Matter produced, kept or accumulated in the City of Gilroy, and this Agreement supersedes all prior franchise rights and prior agreements, including but not limited to the Original Agreement. Company waives any right or claim to provide solid waste and recyclables collection services in the City under any prior grant of franchise, contract, license or permit, including but not limited to the Original Agreement, and any right under Section 49520, et seq. of the Public Resources Code. THIS PROVISION SHALL SURVIVE THE EXPIRATION OR TERMINATION OF THIS AGREEMENT. Section 2. Franchise Term and Renewal (A) The term of the Agreement shall be for a period of ten (10) years and seven (7) months, commencing at 12:01 a.m. on the 1st day of December, 2022, and ending at 11:59 p.m. on the 30th day of June 2033, except if earlier terminated as herein otherwise specified. During calendar year 2031, the parties shall meet and confer on the possible extension of the Term. (B) City has the right, at any time during the term of this agreement, to conduct an audit of the performance of COMPANY (herein called the “Performance Audit”), which shall be conducted as set forth in subsection (C) of this Section 2. (i) If after the City Council of CITY has reviewed a particular Performance Audit and has considered any evidence presented by COMPANY in connection therewith, the council determines to its satisfaction that all covenants, provisions, terms and conditions of this Agreement on the part COMPANY to be performed, kept and observed, have not been fully and faithfully performed, kept and observed, then City may provide a notice of default as provided in Section 22(B), setting forth the specific instances of non-performance of this Agreement that City wishes company to correct. If Company fails to correct such instances of non-performance within the time frames required by Section 22(B), then this Agreement may be terminated by CITY at its option and without prejudice to any other remedy to which it may entitled to either at law, in equity, or under this Agreement by giving written notice of termination either by mail or personal service, to COMPANY not less than thirty (30) days prior to the date upon which the termination is to become effective. This right of termination shall be in addition to the right of CITY to terminate this Agreement under the provisions of Section 22 hereof. 7.2.b Packet Pg. 32 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) 9 (ii) In connection with the review of a particular Performance Audit, CITY reserves the right to propose any amendment or amendments of this Agreement which the City Council of CITY determines to be necessary by reason of the findings or results of the Performance Audit to carry out the intent of the terms and conditions of this Agreement. (iii) In conjunction with any Performance Audit, CITY reserves the right to require changes to COMPANY’S operations that CITY determines to be necessary or appropriate by reason of the findings or results of the Performance Audit to carry out the intent of the terms and conditions of this Agreement. If the changes to the COMPANY’S operations entail additional costs or require additional services to be provided, COMPANY and CITY shall mutually agree on the compensation to be provided to COMPANY in advance of COMPANY’s implementation of such change. (C) The performance audit shall: (i) be performed by a qualified firm to be selected by CITY. (ii) be totally paid for by COMPANY and included as EXCEPTIONAL COSTS that are recovered in the next annual rate adjustment, and (iii) address all appropriate areas including, but not limited to the following areas, and shall provide specific recommendations for improvement in each area, namely: (a) Overall organizational structure and management systems and procedures. (b) Efficiency of collection operations, including any analysis of routes, schedules and the impact of franchise requirements. (c) Compliance by COMPANY with provisions of this Agreement and the provisions of the SB 1383 regulations that apply directly to COMPANY by operation of law or are included in Exhibit C of this Agreement. (d) Staffing and management practices, including the deployment of management and supervisory personnel. (e) Financial management practices, including COMPANY’s billing and collection system and its policies with regard to uncollected accounts. (f) Procedures for receiving and resolving customer complaints and 7.2.b Packet Pg. 33 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) 10 concerns, including damage to customer-owner containers and disappearance of container covers. (g) Procedures for the acquisition, maintenance and replacement of equipment; types of equipment; rationale for recent capital investments; and financing options. (h) Utilization and management of facilities. Section 3. City Fees CITY and COMPANY acknowledge that an exclusive franchise is a special agreement that has been negotiated between CITY and COMPANY. The exclusive franchise that has been granted through this Agreement is intended to allow COMPANY to use CITY property to provide collection services. The amount of the fees paid by COMPANY to CITY as set forth in this Agreement, in the aggregate, does not exceed CITY’s reasonable costs in conferring the benefits or granting the privileges conferred or granted by this Agreement to COMPANY, including, without limitation, access to CITY streets to operate heavy equipment, to collect refuse, and to place or to allow to be placed COMPANY’s collection containers within public rights of way; and the exclusive right to collect refuse within CITY’s jurisdiction for profit. Such costs to CITY are impossible or impracticable to calculate, but include, without limitation, staff time and the costs of legal counsel and other outside consultants to negotiate and to administer this Agreement, in addition to the City’s costs to maintain its streets and sidewalks, which COMPANY uses in the performance of services hereunder, it being agreed and understood that COMPANY’s vehicles used in performing those services are heavier than average vehicle weights such that they may cause greater wear and tear on CITY streets than typical vehicles. In consideration of the exclusive franchise granted to COMPANY by this Agreement, CITY shall be paid and retain an administrative fee of four percent (4%) (which does not exceed CITY’s costs of providing services related to this Agreement) and a franchise fee of five percent (5%) (which was negotiated in good faith and at arms-length, does not exceed the fair market value of CITY property used by COMPANY pursuant to this Agreement, and is consistent with the franchise fees paid by franchise waste haulers in other, similar jurisdictions in California) of all revenues received by the COMPANY from customers for services provided by the COMPANY in the CITY hereunder. These revenues shall include, but shall not be limited to, fees received from customers for all regularly scheduled services, fees for “on-call” services, and all other revenues received by the COMPANY resulting from the COMPANY’s provision of services within the CITY, but excluding revenues received from recyclable commodities or compost. Monthly city fee payments must be computed and paid by COMPANY to CITY's Finance Department on or before the tenth (10th) day of each month following the month the revenues were received. For example, city fees for revenues received in October will be payable on or before November 10. 7.2.b Packet Pg. 34 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) 11 If any franchise fee payment, or recomputed amount, is not made on or before the due dates specified above, COMPANY must pay as additional compensation, an interest charge, computed from the applicable due date, at an annual rate equal to the prevailing commercial prime interest rate in effect on the due date, plus one percent (1%). In addition to any late payment made in accordance with the above paragraph, if a payment is overdue by sixty (60) days or more, COMPANY will pay to CITY a sum of money equal to five percent (5%) of the amount due in order to defray additional costs and expenses incurred by CITY as a consequence of that delinquent payment. No acceptance of any payment by CITY may be construed as an accord that the amount is in fact the correct amount, nor may acceptance of payment be construed as a release of any claim CITY may have against COMPANY for any additional sums payable under the provisions of this Agreement. All amounts paid are subject to independent audit and recomputation by CITY. If, after audit, such recomputation indicates a franchise fee underpayment, COMPANY shall pay to CITY the amount of the underpayment within twenty (20) days of receipt of written notice from CITY that such is the case. If, after audit, any recomputation indicates a franchise fee underpayment of more than three percent (3%), COMPANY must also reimburse CITY, within twenty (20) days of written notification, for all reasonable costs and expenses incurred in connection with that audit and recomputation. Section 4. Regulatory and Consulting Fee In consideration for the City’s cost of administering the franchise granted under this Agreement including assuring COMPANY’s adherence to the performance standards and other ratepayer protections provided in the Agreement, as well as compliance with new regulatory requirements imposed by the State of California and the need for specialized expertise to ensure compliance, COMPANY shall submit to CITY eleven (11) times each year, on the tenth (10th) day following the last day of each month, except for the June payment that would otherwise be due in the month of July, a Regulatory and Consulting fee of ten thousand dollars ($10,000). Section 5. Customer Billing Practices COMPANY shall bill all customers on a monthly, bimonthly, or quarterly basis. Customer bills shall be on a format approved by the CITY and must be clear, concise, and understandable. Bills also must clearly delineate all activity during the billing period, including optional charges, rebates, and credits. All bills shall only contain charges and rates that have been approved by the CITY for services performed under this contract. COMPANY’s bills to customers shall be due 60 days after the billing date. COMPANY may charge customers who have not paid their bill on time a late fee equal to one and one-half percent (1.5%) per month of the bill amount. 7.2.b Packet Pg. 35 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) 12 The first billing to a customer after the start of service or a change of service shall be prorated based upon when the new or changed service commenced. Customers shall not be charged a late fee or otherwise penalized for any failure by COMPANY, including the failure to timely or correctly bill the customer. In case of a billing dispute, COMPANY shall respond in writing to a written complaint from a customer within thirty (30) days. COMPANY shall provide credits or refunds to customers who have been missed upon request provided that: (A) the customer notifies COMPANY by the end of the next business day; and (B) COMPANY is unable to provide collection within two (2) days after notification. For each event that service has been missed, the credit shall equal a pro-rata share of the billing for one full week. All credits for service must be issued no later than the customer's next billing cycle following the determination that a credit is warranted. Credit determinations by COMPANY shall be completed within thirty (30) days. For customers terminating service, refunds shall be issued promptly, but no later than thirty (30) days after the customer’s last day of service. COMPANY shall enter into good faith negotiations with the owners or managers of mobile home parks and other commonly-billed developments to develop an equitable billing and monitoring system. Unless otherwise expressly provided in this Agreement, all services provided by COMPANY hereunder shall be provided to customers that sign up for service with COMPANY and at rates not exceeding the rates provided for in this Agreement. Section 6. Franchise Services (A) COMPANY shall furnish the personnel, labor and equipment required for the billing, payment acceptance, collection, removal, handling, transfer, processing, marketing and disposal of all Solid Waste Matter generated within the corporate limits of the City of Gilroy, and to sweep all public streets and parking lots of City Facilities (as designated in Exhibit G) as set forth in Exhibit F, all in accordance with the terms and conditions set forth in this Agreement. COMPANY shall also provide equipment, vehicles, personnel and supervision for the curbside collection of Recyclable Material and Organic Material to all single-family units and multi-family units receiving residential Refuse collection and disposal service from COMPANY in Gilroy and for the collection of Recyclable Material and Organic Material from business establishments receiving Refuse collection and disposal service from COMPANY in Gilroy, all in accordance with the terms and conditions set forth in this Agreement. All containers provided by COMPANY shall conform to the provisions of Exhibit C. COMPANY shall collect all Recyclable Material and Organic Material placed in appropriate containers and properly set out by the generator. 7.2.b Packet Pg. 36 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) 13 (i) Organic Material shall be placed by the customer in a COMPANY-provided container or customer provided thirty-two-gallon (32-gallon) container or tied in bundles no greater than three (3) feet in length and two (2) feet in diameter. For residential customers with cart service, up to seven (7) additional thirty-two gallon (32-gallon) containers or bundles may be set out for collection by COMPANY. (ii) Upon request from a resident, COMPANY may send a representative to a home to verify that excess Yard Trimmings generated have been generated from that resident’s home. COMPANY will provide the resident a voucher(s) sufficient to dispose of Yard Trimmings at the San Martin Transfer Station or a different facility owned by COMPANY without a charge. Upon delivery to the San Martin Transfer Station or different facility owned by COMPANY, resident must provide said voucher and proof of residency where voucher was issued. (iii) The COMPANY shall not be required to collect, and may leave on the curbside, any container or bundle which is contaminated by or mixed with Hazardous Waste, substantially contaminated by or mixed with non-Recyclable Material or non-Organic Material (for Recyclable Material and Organic Material containers, respectively), or any material that is in such a quantity as to indicate that it was not generated by the average reasonable use of the property. COMPANY shall leave notice with the load explaining why it was not collected. (iv) Upon request, the COMPANY shall enter into good faith negotiations with the owners or managers of mobile home parks and other commonly-billed developments to institute recycling and organics collection systems that addresses the special needs of these properties. This provision is not intended, however, to require the COMPANY to use specialized equipment or containers at these properties, absent agreement with the mobile home parks or other commonly-billed developments to do so. (v) COMPANY shall collect household batteries that are contained in zipper plastic bags provided by the customer and placed on top of the container designated for Recyclable Material, and used motor oil and filters that are placed in a COMPANY provided, sealed, oil container or COMPANY provided oil filter bag. (B) COMPANY also agrees, as a part of the consideration for the awarding to it of the right, franchise and privilege for collecting Solid Waste Matter in the City of Gilroy, to collect for CITY, without any charge, Solid Waste Matter from all City Facilities, at the locations and service levels specified in Exhibit G. Upon written notice to COMPANY, CITY may modify the City Facilities receiving service and the service levels for any City Facility from among the available service options set forth on the rate sheet. Notwithstanding the foregoing, COMPANY shall be entitled to compensation for collection services at CITY operated premises that significantly exceed those provided as of the date of this Agreement as EXCEPTIONAL COSTS in the event that such additional CITY services result in COMPANY creating an additional route or adding personnel to service such locations. Compensation for such additional services shall be in an 7.2.b Packet Pg. 37 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) 14 amount equal to the number of additional services provided at the then established rate for the specific additional services. Upon written direction from CITY, COMPANY will also collect Refuse generated at City- identified homeless encampments or other sites with extraordinary litter or refuse collection needs and provide any carts, bins, and debris boxes necessary for that purpose. The material must be loaded into the COMPANY-provided containers either by CITY personnel or other CITY contractors or discarded into the COMPANY-provided containers by residents of the homeless encampments themselves. COMPANY may recover its then-applicable franchised rates for performing these services as EXCEPTIONAL COSTS under Section 9 in its rates for the year following provision of the services. Upon written direction from CITY, COMPANY will provide labor, vehicles and supplies to service complaints of illegal dumping of bulky items on public properties and dispose of the dumped items and materials. COMPANY shall only be required to collect material that is on the public right of way or on CITY property in a location easily accessible by Company’s personnel and vehicles; that fits into COMPANY’s vehicle; that can be readily loaded without sweeping or gathering; and that can be safely loaded into the vehicle by two (2) people without being carried more than twenty-five feet (25’). Notwithstanding the foregoing or anything else in this Agreement, COMPANY shall not be required to collect any material that, in COMPANY’s reasonable opinion, may pose a danger to employees of COMPANY or that appears to be personal property and not abandoned waste. All Recyclable Material and Organic Material collected from CITY premises will be sent for processing for diversion from landfill disposal if it is reasonably source separated from other Solid Waste Matter. CITY staff and contractors serving CITY Facilities may haul and deposit Solid Waste, Construction and Demolition Debris, Recyclable Materials, Yard Trimmings and other Organic Materials generated in the course of routine CITY business (this would not include demolition of buildings or large construction projects) directly to any Transfer Station owned by COMPANY or another corporation affiliated with COMPANY without any charge for as long as the Transfer Station is owned by COMPANY, its current parent corporation, or its successor or assignee. COMPANY also agrees to provide weekly parking lot sweeping services at all CITY premises, buildings, city-owned parking lots, and installations. (C) Collection of Solid Waste, Recyclable Material and Organic Material shall be at the curbside of the customer’s property unless arrangements are made with COMPANY by the customer for on-premises, side yard or backyard pickup and payment of the additional rate for side yard or backyard pickups. COMPANY will collect and process Organic Materials in conformance with the Organic Materials provisions described in detail in Exhibit C to this Agreement. (D) COMPANY may provide additional services upon request of CITY subject to the establishment of a rate therefor. Provided, however, if COMPANY elects not to provide a proposed 7.2.b Packet Pg. 38 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) 15 new service and so notifies CITY in writing, CITY retains the right to perform the proposed new service itself or to contract with another business entity to provide it, provided that the proposed new service does not conflict with the exclusive rights granted to COMPANY by this Agreement. (E) For residential premises, COMPANY shall establish an “On-Call Bulky Item Collection Program” to collect bulky items and other difficult to collect items. COMPANY shall provide up to the Specified Amount of on-call bulky item collections to each premises per calendar year, at the request of the customer (i.e., the building owner or manager, not a tenant), and at no additional charge to the customer. For residential premises with cart service, the Specified Amount shall equal two (2) collections per calendar year. For residential premises with bin service, the Specified Amount shall equal one-half of the number of units in the premises, rounded up (e.g., 10 collections/year for a 19-unit building). By mutual consent with any residential customer with bin service, COMPANY may replace some or all of the Specified Amount of on-call bulky item collections for such customer with equivalent volume debris box service for the collection of bulky items. To be eligible for collection, bulky items must be set out by the customer within three feet of the public roadway, or any other location agreed by COMPANY and the customer that can be safely and efficiently accessed by COMPANY’S collection crew and vehicle. In addition, the customer must notify COMPANY, at the time the customer requests the service, what the bulky items will be. Bulky item collection shall be scheduled at a time mutually agreed by COMPANY and the customer during COMPANY’S normal collection hours. For each bulky item collection, a customer may set out either: (a) Up to two cubic yards of solid waste, properly bagged or bundled, or containerized in customer-provided disposable containers. (b) Up to two pieces of furniture or appliances (emptied of any contents, if applicable). A mattress/box spring set is eligible for collection as equivalent to one piece of furniture. COMPANY shall not be required to collect: any individual item that weighs more than two hundred (200) pounds or is more than six feet (6’) in length; Construction and Demolition Debris; Hazardous Waste other than electronic waste; motor vehicles or parts; tires; liquids or sludge; dirt, rock, concrete or asphalt; or stumps or large limbs. COMPANY shall provide information and CITY-approved guidelines on the program to the residential customers, including owners and/or property managers at housing complexes, at least annually. COMPANY shall provide draft guidelines to CITY and solicit CITY approval thirty (30) days prior to planned finalization of guidelines. Unused bulky item collections shall not roll over to subsequent years. If a customer requests a bulky item collection in excess of the numbers specified above, COMPANY shall provide the service at the normal bulky item collection rate approved by CITY after notifying the 7.2.b Packet Pg. 39 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) 16 customer of the charge. (F) COMPANY shall provide regular, scheduled collection service for Residential collection of Recyclable Material on a weekly basis on the same day as regular Refuse collection service. Collection from businesses shall be performed on a weekly schedule as arranged by the COMPANY with the participating businesses. (G) COMPANY shall not alter or adjust collection schedules without providing prior notice of at least (14) days to all service addresses, and any schedule modification shall not result in reduced service frequency to any customer. COMPANY shall collect and remove from any and all premises, within twenty-four (24) hours after demand, notice or request, any and all Solid Waste Matter that COMPANY shall have failed to collect and remove as required at the regular schedule time. (H) CITY and COMPANY shall mutually agree upon the routes, days and hours for the collection of Solid Waste Matter. Unless so agreed, routes serving residential areas shall not reach the first customer earlier than 6:00 a.m. and must end no later than 7:00 p.m., and collections need only be made Monday-Friday, excluding holidays. (I) Twice annually, on dates to be mutually agreed upon between CITY and COMPANY, COMPANY shall accept, without a charge, mattresses from CITY residents for disposal at the COMPANY’s facility located at 1351 Pacheco Pass, Gilroy, or a different facility owned or operated by COMPANY. (J) CITY desires to purchase compost on behalf of compost customers of COMPANY up to a certain number of tons per calendar year to be determined by CITY on an annual basis. No later than December 1 of each calendar year of the Agreement, CITY shall notify COMPANY in writing of the number of tons of compost that the CITY will commit to purchase on behalf of COMPANY’s compost customers during the upcoming calendar year (the “Annual Compost Commitment”). CITY and COMPANY shall mutually agree on a form of documentation that may be used by eligible customers to request CITY to pay COMPANY for compost tendered to such customer. The form will be published on the CITY website and, provided that CITY has not already met its Annual Compost Commitment, be made available by COMPANY to compost customers desiring to purchase at least forty (40) cubic yards or twenty (20) tons of compost and COMPANY shall inform such customers about the opportunity to have their compost paid for by CITY upon such customers submission and acceptance of the paperwork required by CITY. CITY shall supply COMPANY with documentation authorizing its purchase of compost hereunder prior to COMPANY’s tender of compost that is to be paid for by CITY. The compost customer shall be required to pay all transportation and any other costs associated with their purchases. CITY agrees that the price per ton of compost that CITY will pay for compost purchased under this section will 7.2.b Packet Pg. 40 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) 17 be COMPANY’s then applicable market rate at the time of the sale and such price will be noted on the documentation approved by CITY that authorizes each sale. At the end of each calendar year, COMPANY shall calculate the total price of all compost purchased by CITY under this section as set forth on the documentation approved by CITY throughout the year and include that amount as an EXCEPTIONAL COST in its rate application for the year following the sale of the compost. Notwithstanding the foregoing, in the event that COMPANY is unable to recover any amounts owed to COMPANY under this section through a corresponding adjustment to the maximum service rates for any reason, CITY shall pay COMPANY directly for such costs in quarterly installments over a twelve month period beginning on the date that a claim is made by any person, entity, agency, or party that would, if successful, prevent COMPANY from recovering payment for compost sold under this section or if COMPANY is restricted or prevented in any manner from including such costs in its EXCEPTIONAL COSTS or recovering amounts owed through the rates. Notwithstanding anything else in this Agreement, CITY shall indemnify COMPANY against any and all losses, liabilities, fines, penalties, claims, damages, liabilities or judgments, including attorney’s fees, arising out of or relating to CITY’s or COMPANY’s alleged or actual failure to comply with Article XIlIC or XIIID of the California Constitution or SB 1383 with respect to the CITY’s or COMPANY’s performance under this Section 5(J). In contrast, COMPANY shall have no defense, indemnity or other obligation to CITY with respect to any and all losses, liabilities, fines, penalties, claims, damages, liabilities or judgments, including attorney’s fees, arising out of or relating to CITY’s or COMPANY’s alleged or actual failure to comply with Article XIlIC or XIIID of the California Constitution or SB 1383 with respect to CITY’s or COMPANY’s performance under this Section 5(J). Nothing in this Agreement shall be deemed an admission by CITY or COMPANY that Articles XIIIC or XIIID of the California Constitution apply to any portion of the rates charged by COMPANY under this Agreement and COMPANY does not represent or warrant that the provision of compost under this Agreement shall satisfy any of CITY’s obligations under SB 1383. (K) Provided that CITY has made a written funding request to COMPANY prior to January 31, COMPANY shall pay CITY a solid waste implementation fee in an amount to be set by CITY, in addition to the franchise fee, the administrative fee, and the Regulatory and Consulting fee. The proceeds of the solid waste implementation fee shall be used to fund the costs incurred by CITY to provide trash capture and litter abatement requirement activities, SB 1383 enforcement activities, and/or for other related CITY implementation activities as required by Local, Regional, State, or Federal permits, laws, and/or regulations relating to the collection and/or management of trash or solid wastes and the amount of the fee set by CITY shall not exceed the reasonably anticipated costs to be incurred by CITY for the foregoing activities. CITY may change the amount of the solid waste implementation fee from time to time based on its estimated actual costs for providing such activities, provided, however, that COMPANY shall not be required to pay the initial implementation fee or any changed fee until the rate adjustment required by Section 9(C) has taken effect. CITY shall provide COMPANY with a written funding request prior to January 31 of each year for payment requirements to become effective July 1 of the same calendar year 7.2.b Packet Pg. 41 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) 18 and proportional payments will be made by COMPANY to CITY on a quarterly basis and submitted at the same time as the quarterly franchise fee payment. COMPANY may include these solid waste implementation fee funds as EXCEPTIONAL COSTS in its rate application for the year the implementation fee is to be paid by COMPANY to CITY. (L) COMPANY shall comply with each of the following requirements: (i) All collection vehicles and equipment shall be modern and so constructed and maintained to prevent leakage, spillage and overflow. COMPANY shall maintain all vehicles, detachable containers and debris boxes in a clean and sanitary condition, and shall perform such maintenance as is necessary to assure that each vehicle and piece of equipment is capable of performing all functions for which it was designed. COMPANY shall maintain an equipment replacement schedule to be provided to CITY upon its request. (a) All trucks and equipment shall be clearly identified with COMPANY name, a current local business telephone number, and a vehicle identification number in letters not less than two and one-half (2-1/2) inches in height. (b) CITY may refuse to permit the operation within the City limits of any vehicle not adequately serviced, cleaned or in need of repair. Removal of vehicles for servicing and repair shall not relieve the COMPANY from maintaining all collection schedules. (ii) COMPANY shall not litter premises in the process of making collections nor allow Solid Waste Matter to blow or fall from any vehicles used for collections. COMPANY shall replace lids or covers on containers immediately after emptying the same and shall repair or replace at its expense any containers damaged as a result of its handling thereof, normal wear and tear excepted. COMPANY shall clean up all spills including oil and debris on the streets resulting from its operation. (iii) COMPANY shall establish and maintain an office where complaints may be made. Such office shall have a responsible individual available daily between the hours of eight o’clock a.m. and five o’clock p.m., excepting Saturday, Sunday and such holidays as are recognized by COMPANY and approved by CITY. The following holidays have been approved by City: New Year’s Day, Martin Luther King Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, the day after Thanksgiving, and Christmas Day. Calls for missed collections shall be received twenty-four (24) hours per day. (iv) CITY agrees to require all customers to place their Refuse in metal containers or wheeled carts provided by the COMPANY. COMPANY shall offer residents their choice of 32-gallon, 64-gallon, and 96-gallon carts for Refuse collection. In addition, residential customers shall receive four bag tags (“FREE Tags”) per year 7.2.b Packet Pg. 42 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) 19 that may each be used for up to 32-gallons of excess Refuse to be placed alongside their cart and such Refuse will be collected at no additional charge. Customers may place any excess Refuse that does not fit into their cart or container or that is not placed out with a bag tag in plastic bags alongside their cart for a fee. (v) COMPANY shall provide residents with appropriate recycling containers reasonably acceptable to CITY for the collection of Recyclable Materials. At all times the containers shall be the property of the COMPANY. CITY and COMPANY agree that all curbside containers provided by the CITY prior to the effective date of this AGREEMENT shall be the property of the COMPANY. COMPANY shall make a reasonable effort to maintain or replace damaged or lost recycling containers and to ensure that new customers are provided recycling containers within one week of commencing service. COMPANY shall offer residents their choice of containers including bins, 32- gallon carts and 64-gallon carts for Recyclable Material and 64-gallon and 96- gallon carts for Organic Material. Residents that do not typically set out Yard Trimmings will also be offered a 32-gallon cart for Organic Material. The initial mix of containers offered to residents by the COMPANY shall include one cart for Recyclable Material and one cart for Organic Material, in addition to the cart for Solid Waste. Upon customer request, COMPANY shall provide and deliver indoor food waste collection containers to residential customers. COMPANY shall assist customers in locking organic collection containers upon request. COMPANY shall provide additional containers to any resident requesting additional containers for Recyclable Material or Organic Material collection service provided the request is consistent with the amount of Recyclable Material or Organic Material potentially generated at the residence. COMPANY shall provide businesses with recycling containers adequately sized to contain cardboard for recycling and reasonably acceptable to CITY for the collection of Recyclable Material. At all times the containers shall be the property of the COMPANY. (vi) COMPANY shall replace all Solid Waste, Recyclable Material, and Organic Material containers used by its customers in an upright position, in approximately the same location where the containers were immediately before COMPANY emptied them and use best efforts to replace containers with lids closed. COMPANY shall return all commercial bins to the location where the containers were immediately before COMPANY emptied them, within any enclosures provided and shall make reasonable efforts to close bin lids and shall close any doors or gates provided for screening the bins. COMPANY shall instruct its employees to comply with the foregoing requirements and shall exercise sufficient supervision of its employees to assure that these instructions are followed. 7.2.b Packet Pg. 43 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) 20 (vii) COMPANY shall not collect Yard Trimmings during the collection of Solid Waste unless the Yard Trimmings are not reasonably visible to the COMPANY employee. COMPANY shall make reasonable efforts to not collect corrugated cardboard during the collection of residential garbage unless the cardboard is not reasonably visible to the COMPANY employee. If, prior to servicing the container, yard trimmings or cardboard become visible to a COMPANY employee, said employee shall not empty that container. COMPANY employees shall leave a CITY- approved explanatory notice on all garbage containers not emptied because they contained yard trimmings or cardboard. If a customer requests that the COMPANY return to an address to collect garbage that has had Yard Trimmings or cardboard removed from it and is now collectable, COMPANY shall return within 24 hours after the customer has agreed to pay the extra collection fee contained in Exhibit A, Schedule of Rates. (viii) COMPANY shall be responsible for transporting Solid Waste, Construction and Demolition Debris, Recyclable Material and Organic Material collected under this Agreement to designated processing facilities. As of the date of this Agreement, the current designated processing facilities are identified on Exhibit D. COMPANY and CITY acknowledge that the designated facilities are subject to change throughout the term of this agreement based on external factors and market conditions. (ix) COMPANY will make reasonable efforts to ensure that all Recyclable Material are not disposed of in landfills. (x) When recyclables are not collected from any customer for any reason including the presence or suspected presence of Hazardous Waste or contaminants, COMPANY shall notify its customer in writing why the collection was not made. COMPANY has represented to CITY that COMPANY will carry out its duties to notify all agencies with jurisdiction, including the California Department of Toxic Substance Control and Local Emergency Response Providers, and if appropriate, the National Response Center, of reportable quantities of Hazardous Waste, found or observed in solid waste anywhere within the CITY, including on, in, under or about CITY property, including streets, easements, rights of way and city waste containers. In addition to other required notifications, if COMPANY observes any substance which it or its employees reasonably believe or suspect to contain Hazardous Waste unlawfully disposed of or released on CITY property, including streets, storm drains, or public right of way, COMPANY also will immediately notify the City Administrator, or the City Administrator's designee. (xi) COMPANY shall satisfactorily provide comprehensive customer service for waste diversion programs, including but not limited to responding to complaints, answering questions and handling missed pick-ups. Missed pick-ups shall be 7.2.b Packet Pg. 44 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) 21 collected within one business day of being reported. A record of customer complaints and disposition shall be maintained by COMPANY and made available to CITY at CITY’s request. (xii). COMPANY shall develop and implement an outreach and education program as set forth on Exhibit E and shall also provide supplemental education and outreach related to Organic Material collection as set forth in Exhibit C. Upon mutual agreement, COMPANY may also provide additional assistance in conducting the public awareness/education program. Such assistance may include but is not limited to: 1) providing assistance in developing educational and promotional programs and materials; 2) distributing educational and promotional materials; 3) providing recycling vehicle(s) and personnel for appearances at special events such as parades, fairs, etc.; and 4) distributing an annual calendar for street sweeping. CITY may, at its discretion, require substantial and extraordinary additional education and outreach activities to be provided by COMPANY beyond those described above. COMPANY may recover its reasonable and necessary costs for performing these activities as EXCEPTIONAL COSTS in its rate application for the year following provision of the services. (xiii) Within thirty (30) days after the end of each month, COMPANY shall submit to CITY written monthly reports, in a format reasonably acceptable to the CITY, that provide the following information: a. Collected Tonnages - a monthly summary of the quantity, by weight, of each recyclable material collected. b. Participation Rates - a monthly reasonably estimated summary of the total number of households served per route, the actual number of households participating, the number of pickups per route, the percentage of pickups by route, and the number of businesses participating in the cardboard recycling program. c. Recycling Costs and Revenues - a monthly summary of the total dollar amount received in revenue or paid out in processing cost for Recyclable Materials collected (xiv) Equipment Maintenance - COMPANY shall maintain all equipment in a clean condition and in good repair at all times. All parts and systems of the equipment shall operate properly and be maintained in a condition reasonably satisfactory to CITY. COMPANY shall repaint all equipment on a frequency necessary to maintain a positive public image as reasonably determined by the CITY. (xv) Bins and carts for Garbage, Recyclable Material and Organic Material shall be delivered to the customer within five (5) working days of the request for service by 7.2.b Packet Pg. 45 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) 22 the customer. (xvi) Care shall be taken by the COMPANY’s employees to prevent damage to bins and carts by unnecessary rough handling. Bins and carts damaged by the COMPANY’s employees shall be replaced by the COMPANY, at COMPANY’s sole expense, within five (5) working days of the request by the customer or by the CITY. (xvii) Change in bin size. COMPANY shall within five (5) working days of request by customer, exchange bins for a larger or smaller size bin. Customer may request a change in bin size twice a year at no additional charge. Additional bin exchanges shall be subject to a handling fee. (xviii) Bin Cleaning. COMPANY shall within five (5) working days of request by customer, exchange bins to provide a clean bin. Customer may request a clean bin once a year at no additional charge. Additional bin exchanges shall be subject to a handling fee. Section 7. Performance Standards and Liquidated Damages (A) General. The Parties find that as of the time of the execution of this Agreement, it is impractical, if not impossible, to reasonably ascertain the extent of damages which shall be incurred by City as a result of a breach by COMPANY of its obligations under this Agreement. The factors relating to the impracticability of ascertaining damages include, but are not limited to, the fact that: (i) substantial damage results to members of the public who are denied services or denied quality or reliable service; (ii) such breaches cause inconvenience, anxiety, frustration, and deprivation of the benefits of the Agreement to individual members of the general public for whose benefit this Agreement exists, in subjective ways and in varying degrees of intensity which are incapable of measurement in precise monetary terms; (iii) exclusive services might be available at substantially lower costs than alternative services and the monetary loss resulting from denial of services or denial of quality or reliable services is impossible to calculate in precise monetary terms; and (iv) the termination of this Agreement for such breaches, and other remedies are, at best, a means of future correction and not remedies which make the public whole for past breaches. (B) Service Performance Standards; Liquidated Damages for Failure to Meet Standards. The Parties further acknowledge that consistent, reliable Collection Services, as described in detail in Section 6 of this Agreement, are of utmost importance to City and that CITY has considered and relied on COMPANY’s representations as to its quality of service commitment in awarding the Agreement to it. The Parties recognize that some quantified standards of performance are necessary and appropriate to ensure consistent and reliable service and performance. The Parties further recognize that if COMPANY fails to achieve the performance standards, or fails to submit required documents in a timely manner, CITY and its residents and businesses will suffer damages, and that it is, and will be, impractical and extremely difficult to ascertain and determine the exact amount of damages that CITY will suffer. Therefore, without prejudice to CITY’s right to treat such non-performance as an event of default, the Parties agree that the Liquidated Damages amounts established in this Agreement represent a reasonable 7.2.b Packet Pg. 46 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) 23 estimate of the amount of such damages considering all of the circumstances existing on the Effective Date of this Agreement, including the relationship of the sums to the range of harm to CITY that reasonably could be anticipated and the anticipation that proof of actual damages would be costly or impractical. Before assessing Liquidated Damages, CITY shall give COMPANY notice of its intention to do so. The notice will include a brief description of the incident(s) and non-performance. CITY may review (and make copies at its own expense) all information in the possession of COMPANY relating to incident(s) and/or non-performance. COMPANY may, within ten (10) Business Days after receipt of notice, request a meeting with CITY. CITY may present evidence of non- performance in writing and through testimony of its employees and others relevant to the incident(s) and non-performance. CITY Contract Administrator will provide COMPANY with a written explanation of their determination on each incident(s) and non-performance prior to authorizing the assessment of Liquidated Damages under this Section 7. Should such notices of CITY intention to assess Liquidated Damages exceed $10,000 in total during any 120 day period, COMPANY may within ten (10) Working Days of receipt of such notice representing the amount exceeding $10,000 for such period request the opportunity to meet with the City Administrator or their designee to respond to the intended assessment. If COMPANY has made such request within the required timeframe, the intended assessment of Liquidated Damages will not be imposed on COMPANY until COMPANY has been afforded the opportunity to meet with the City Administrator or their designee to respond to the intended assessment. In such case, the decision of the City Administrator or their designee shall be final and COMPANY shall not be subject to, or required to exhaust, any further administrative remedies. If the City Administrator or their designee is acting as the City Contract Administrator, the City Administrator or their designee shall designate an alternative City representative to meet with COMPANY. Should COMPANY not exercise its right to respond to the assessment as described in this paragraph, and in all other cases, the decision of City Contract Administrator shall be final and COMPANY shall not be subject to, or required to exhaust, any further administrative remedies. COMPANY shall pay CITY the amount assessed within 30 days of receipt of the original assessment or the City Administrator’s decision, whichever is later. Notwithstanding the foregoing or anything else in this Agreement, COMPANY shall not be required to pay Liquidated Damages in excess of the then applicable Annual Liquidated Damages Maximum during each twelve month period beginning July 1 and ending June 30 of each agreement year. The initial Annual Liquidated Damages Maximum shall be equal to $30,000. The Annual Liquidated Damages Maximum shall be increased or decreased throughout the Term as follows: i) The Annual Liquidated Damages Maximum shall be increased from $30,000 to $60,000 effective the year following any year that the Annual Liquidated Damages Maximum was $30,000 during such year and COMPANY was assessed Liquidated Damages of $30,000 or more during such year and such assessment was determined to be justified after a meeting between COMPANY and CITY Administrator; 7.2.b Packet Pg. 47 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) 24 ii) The Annual Liquidated Damages Maximum shall be increased to $90,000 effective the year following any year that the Annual Liquidated Damages Maximum was $60,000 during such year and COMPANY was assessed Liquidated Damages of $60,000 or more during such year and such assessment was determined to be justified after a meeting between COMPANY and CITY Administrator; iii) The Annual Liquidated Damages Maximum shall be decreased to $60,000 effective the year following any year that the Annual Liquidated Damages Maximum was $90,000 and COMPANY was assessed Liquidated Damages of less than $60,000; and iv) The Annual Liquidated Damages Maximum shall be decreased to $30,000 effective the year following any year that the Annual Liquidated Damages Maximum was $60,000 and COMPANY was assessed Liquidated Damages of less than $30,000. For the avoidance of doubt, Liquidated Damages in excess of the applicable Annual Liquidated Damages Maximum shall not be carried over to subsequent years. The Annual Liquidated Damages Maximum shall remain the same from year to year unless and until one of the events in (i) through (iv) above trigger a modification to such amount. In the event that CITY conducts a Performance Audit during any year that the Annual Liquidated Damages Maximum is $90,000, such Performance Audit will not be considered an EXCEPTIONAL COST and COMPANY shall be responsible for the cost of such Performance Audit up to a maximum of $50,000. (C) Amount. City may assess $300 Liquidated Damages for each calendar day or event, as appropriate, for which COMPANY is determined to have failed to meet the performance standards described and listed in Section 6(L)(i) through 6(L)(xviii). In calculating the total assessment, each customer experiencing the substandard service shall count as a separate instance or event. It is agreed and understood that any time period for performance of duties stated in Section 6(L)(i) to (xviii) is a material provision of this Agreement. Section 8. Franchise Representative and Inspections (A) COMPANY shall assign a qualified person to be in charge of its operations in the CITY and shall inform CITY of such person’s identity and experience, and provide direct contact information for such person, without an intermediary person, including e-mail address and telephone number. It shall be such person’s responsibility to assure that all collection operations are effectively performed and all complaints courteously handled and satisfactorily resolved. (B) To ensure that the laws governing the performance of this Agreement are complied with, a representative of CITY may inspect, review and observe the operations of COMPANY during the term of this Agreement without prior notice. At CITY’s request, COMPANY shall make designated personnel available to accompany CITY inspectors provided a minimum of twenty-four (24) hour notice has been given to COMPANY by CITY. 7.2.b Packet Pg. 48 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) 25 Section 9. Franchise Collection Rates (A) COMPANY shall not charge any amount in excess of the approved schedule of service rates for any services required or permitted to be performed by the terms of this Agreement. The approved service rates are those set forth in Exhibit A attached hereto and incorporated herein by reference, as such Schedule of Rates may hereafter be adjusted as provided herein. (B) COMPANY shall submit a request for an adjustment of service rates no later than March 1 of any given year if an annual adjustment under this subsection (B) is desired by the COMPANY. Any approved change in service rates under this subsection shall become effective on July 1 of the same calendar year. For purposes of adjustment, the base rates shall be the rates in effect on January 1, in the calendar year the adjustment is made. The annual adjustment under this subsection shall be calculated using the formula set forth in Exhibit A2. (C) In addition to the adjustment provided for in Section 9(B) herein, the parties agree that service rates shall be adjusted in an amount sufficient to cover COMPANY’S Reasonable Increased Costs resulting from any extraordinary changes in circumstances that increase the COMPANY’s costs of providing service hereunder and that are substantially beyond the control of the COMPANY (including, without limitation, revisions to laws, ordinances, regulations, or other Applicable Law, or the interpretation or enforcement thereof; any change in governmental or regulatory fees; and the unavailability for reasons beyond COMPANY’s control of any facility to which COMPANY delivers material). The parties furthermore agree to adjust the service rates in a mutually agreed manner to cover COMPANY’s Reasonable Increased Costs of the following, which adjustment shall be a condition to COMPANY implementing the following: (i) Following prior written approval by City of a COMPANY proposal, costs of testing and implementing alternative collection vehicle fueling strategies such as electricity, hydrogen and hybrid propulsion, as described in Recital I; and (ii) Changes in the franchise fee, implementation fee, or any other fee payable to CITY pursuant to this Agreement; In addition to the above changes in the service rates, COMPANY shall also be entitled to temporary one-year adjustments in the service rates to recover the Reasonable Increased Costs for additional temporary services provided by COMPANY upon written request by CITY (EXCEPTIONAL COSTS). The temporary adjustment will not be included in the base rate used to calculate the following year’s rate adjustment request. EXCEPTIONAL COSTS shall include, but are not limited to, the reasonable and necessary costs associated with: 7.2.b Packet Pg. 49 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) 26 a. A performance audit required by CITY pursuant to Section 2(B) unless the performance audit is conducted during any year that the Annual Liquidated Damages Maximum is $90,000. In the event that a Performance Audit is conducted during any year that the Annual Liquidated Damages Maximum is $90,000, the first $50,000 in performance audit costs are excluded from the calculation of EXCEPTIONAL COSTS; b. Cleanups of homeless encampments and other sites pursuant to Section 6(B); c. Special on-call collections conducted upon written request by CITY, provided that such collections are not made for the personal benefit of a public official or appointed city employee; d. Additional vouchers provided to residents, institutions, or businesses at City’s request for free disposal at the San Martin Transfer Station; e. Additional temporary public education services beyond those otherwise required by Exhibits C and E as set forth in Section 6(L)(xii); f. Additional city services that qualify for additional compensation as described in Section 6(B); g. Compost provided or delivered by COMPANY as described in Section 6(J); and h. Any other temporary services requested by CITY the costs of which the parties mutually agree shall be treated as EXCEPTIONAL COSTS. (D) Upon confirmation by CITY that COMPANY has submitted an accurate and correctly calculated request for an adjustment of service rates, CITY shall approve new maximum service rates and shall notify COMPANY of such maximum service rates on or before May 1 of the year the adjustment is made. COMPANY may charge service rates that are less than or equal to the maximum service rates approved by CITY. Should an index named in Exhibit A2 not be published in October of any given year, the calculations shall be performed using the most recent index values of a month immediately preceding the October contemplated by this Amendment. (E) COMPANY agrees to provide eligible low-income residents with a 20% discount for residential service provided that: (i) The resident applying for the discount can prove that they are eligible to receive the “lifeline” discount rate offered by Pacific, Gas & Electric. COMPANY may require reverification of eligibility annually. In the event that this utility discount is no longer offered, the COMPANY and the CITY shall meet to agree upon a replacement measure of eligibility. A change in the eligibility requirements for PG&E’s “lifeline” discount rate shall be treated as a change in Applicable Law under subsection (C) above; and 7.2.b Packet Pg. 50 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) 27 (ii) The resident subscribes to single-can garbage service. Section 10. Company Providing Criteria to Review Development Plans. If requested by CITY, COMPANY shall provide CITY with examples of specific criteria by which development plans for residential and nonresidential units may be reviewed by CITY concerning the location of Solid Waste Matter containers and appropriate screening thereof, which criteria CITY may choose to utilize in the review of development plans. Section 11. Franchise Service Termination. COMPANY may terminate service to residential customers who are one hundred twenty (120) days in arrears in payment of rate charges and nonresidential customers who are sixty (60) days in arrears in payment of rate charges, respectively, provided COMPANY: (A) Shall give a customer whose service may be cut off at least (30) days written notice prior to the proposed service termination date. (B) Shall notify CITY in advance of each proposed service termination by property location. (C) Shall monitor each property location at which service has been terminated and notify CITY of any problems observed, including accumulation of garbage on the premises. (D) Shall promptly restore service when all amounts owing have been paid. Section 12. Franchise Disaster Assistance (A) In the event a wartime, natural, physical or other disaster in or proximate to the CITY limits resulting in the declaration of a State of Emergency by the duly authorized authority or City Council, COMPANY shall make available to CITY, all trucks, equipment and personnel normally performing services under this Agreement, for emergency operations conducted or directed by the CITY emergency organization, provided that CITY and COMPANY mutually agree it is safe and practicable to do so. (B) Upon consent from COMPANY, such consent which shall not be unreasonably withheld based on the circumstances giving rise to the State of Emergency, CITY shall have the right to take temporary possession of all such equipment provided by COMPANY, and to temporarily employ all COMPANY personnel who voluntarily agree to serve as emergency operation forces of CITY, under the direction and control of the CITY Emergency Services Director. (C) COMPANY shall use efforts to make available, in addition to the equipment and personnel above, equipment and personnel from those COMPANY operations and resources not 7.2.b Packet Pg. 51 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) 28 serving CITY, to the extent necessary to conduct effective refuse, waste and debris removal during any declared State of Emergency to the specifications of the CITY Emergency Services Director. (D) CITY shall not be required to compensate COMPANY in any manner or form for COMPANY provision of vehicles, personnel or equipment that conforms with the regular level of service provided under this Agreement within the CITY limits, when made available during a declared State of Emergency. When additional vehicles, personnel hours or equipment are provided during an emergency that exceed the level of service provided under this Agreement, CITY shall compensate COMPANY for actual expenses incurred by COMPANY in providing additional vehicles, personnel hours or equipment upon submission by COMPANY to CITY of detailed records of costs and expenses actually borne by COMPANY, and upon approval by the Federal government of CITY as reimbursement of expenses incurred by COMPANY during a disaster. Section 13. Franchise Indemnification (A). Indemnification of CITY. COMPANY agrees that it shall protect, defend with counsel reasonably acceptable to CITY, indemnify and hold harmless CITY, its officers, employees, and agents from and against any and all losses, liabilities, fines, penalties, claims, damages, liabilities or judgments, including attorney’s fees, arising out of or resulting in any way from COMPANY's performance of this franchise, unless such claim is due to the negligence or willful acts of the CITY, its officers, employees, agents, contractors or volunteers. Upon demand of the CITY, made by and through the City Attorney, COMPANY shall appear in and defend the CITY and its officers, employees, and agents, in any claims or actions, whether judicial, administrative or otherwise which are within the scope of the foregoing indemnity. THIS PROVISION SHALL SURVIVE THE EXPIRATION OF THE PERIOD DURING WHICH SOLID WASTE AND RECYCLABLES COLLECTION, PROCESSING AND DISPOSAL SERVICES ARE TO BE PROVIDED UNDER THIS AGREEMENT. (B) Hazardous Substance Indemnification. COMPANY shall indemnify, defend with counsel reasonably acceptable to CITY, protect and hold harmless CITY, its officers, employees, agents, volunteers, assigns and any successor or successors to CITY's interest from and against all claims, actual damages (including special and consequential damages but excluding punitive damages), natural resources damage, injuries, cost, response, remediation and removal costs, losses, liabilities, causes of action, suits, legal or administrative proceedings, interest, fines, charges, penalties and expenses (including but not limited to attorneys' and expert witness fees and costs incurred in connection with defending against any of the foregoing or in enforcing this indemnity) of any kind whatsoever paid, incurred or suffered by, or asserted against, CITY or its officers, employees, or agents arising from or attributable to any repair, cleanup or detoxification, or preparation and implementation of any removal, remedial, response, closure or other plan (regardless of whether undertaken due to governmental action) concerning any Hazardous Substance or Hazardous Wastes at any place owned by COMPANY or its affiliates where COMPANY processes or stores material for recycling pursuant to this Agreement, unless such claim is due to the sole negligence or willful acts of the CITY, its officers, employees, agents, contractors or volunteers. The foregoing indemnity is intended to operate as an agreement 7.2.b Packet Pg. 52 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) 29 pursuant to Section 107(e) of the Comprehensive Environmental Response, Compensation and Liability Act, "CERCLA", 42 U.S.C. Section 9607(e), and California Health and Safety Code Section 25364, to defend, protect, hold harmless and indemnify CITY from liability. THIS PROVISION SHALL SURVIVE THE EXPIRATION OF THE PERIOD DURING WHICH SOLID WASTE AND RECYCLABLES COLLECTION, PROCESSING AND DISPOSAL SERVICES ARE TO BE PROVIDED UNDER THIS AGREEMENT. (C) State Mandate Indemnification. COMPANY agrees to protect, defend, with counsel reasonably acceptable to CITY, and indemnify CITY against fines or penalties imposed by CalRecycle in the event that the CITY fails to meet its AB 939 waste reduction goals or fulfill its obligations pursuant to the SB 1383 Final Regulations due to the COMPANY’s failure to satisfactorily fulfill its obligations pursuant to this Agreement, unless such claim is due to the sole negligence or willful acts of the CITY, its officers, employees, agents, contractors or volunteers. Section 14. Franchise Insurance and Bond. (A) This Agreement and the privileges herein granted to COMPANY is and are conditioned upon the faithful performance by COMPANY and by each and every one of his subcontractors, if any, of each and all of the covenants and provisions herein agreed to be performed by COMPANY or required to be performed by its subcontractors; and payment of all license fees and other monies herein agreed to be paid by COMPANY. (B) Upon execution of this Agreement, COMPANY shall furnish to CITY and shall file with the City Clerk of CITY a corporate surety bond, in substantially the form of the bond filed with CITY in 2021 (or in such other form as may be approved by the City Administrator and approved as to form by the City Attorney) executed by COMPANY as principal and by a corporate surety as surety, in the sum of $1,000,000 (One Million Dollars), conditioned upon the faithful performance by COMPANY and its subcontractors, if any, of this Agreement. (C) COMPANY agrees to maintain and submit evidence to CITY of, during the life of this Agreement, insurance policies as specified in Exhibit B, Insurance Requirements. Evidence of insurance shall be in the form of an ACORD form Certificate of Insurance and original endorsements to policies each naming the CITY and its officers, employees and agents as additional insureds on all policies. In the event of cancellation of any coverage, thirty (30) days prior written notice of termination shall be given to the CITY. Notice shall be sent to: City Administrator City of Gilroy 7351 Rosanna Street Gilroy, California 95020 7.2.b Packet Pg. 53 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) 30 Section 15. Franchise Assignment (A) COMPANY shall not assign, sell, subcontract or otherwise delegate authority to perform any portion of this Agreement, including but not limited to a sale, exchange or other transfer of substantially all of COMPANY’s assets dedicated to service under this Agreement to a third party, or between a subsidiary and a parent company or Related Party, without the prior written express approval of CITY. Use of third party disposal or processing facilities shall not be deemed subcontracting or delegation of authority. In the event of any assignment duly authorized by CITY, the assignee shall assume the liability of COMPANY. (B) No sale, gift, or transfer of stock or other interest of COMPANY, including but not limited to any reorganization, consolidation, merger recapitalization, stock issuance or re-issuance, voting trust, pooling agreement, escrow arrangement, liquidation or other transaction to which COMPANY or any of its shareholders is a party, which would result in a change of Control of COMPANY, shall be made without prior written approval of the City Council. Violation of this provision shall be a breach of this Agreement and grounds for termination by CITY without the need for compliance with the notification requirements of Section 20. (C) If COMPANY shall at any time during the Term become insolvent, or if proceedings in bankruptcy shall be instituted by or against COMPANY (and, if against COMPANY, not dismissed or stayed within 90 days), or if COMPANY shall be adjudged bankrupt or insolvent by any court, or if a receiver or trustee in bankruptcy or a receiver of any property of COMPANY shall be appointed in any suit or proceeding brought by or against COMPANY, or if COMPANY shall make an assignment for the benefit of creditors, then and in each and every such case, this Agreement shall immediately cease, terminate, and be canceled upon written notice by CITY and without the necessity of suit or other proceeding. (D) If COMPANY requests CITY’s consideration of and consent to an assignment, CITY may deny or approve such request in its complete discretion. CITY need not consider any request by COMPANY for consent to an assignment unless and until COMPANY has met the following requirements: (i) COMPANY shall pay to CITY the transfer fee described in Section 15 (E). (ii) COMPANY shall furnish CITY with audited financial statements of the proposed assignee’s operations for the immediately preceding five (5) operating years. (iii) COMPANY shall furnish CITY with satisfactory proof that the proposed assignee has the demonstrated technical capability to perform all Collection Services, including: (a) that the proposed assignee has at least 10 years of experience in the provision and management of Solid Waste and Recyclables Collection Services on a scale equal to or exceeding the scale of operations conducted by COMPANY under this Agreement; (b) in the 7.2.b Packet Pg. 54 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) 31 last five (5) years, the proposed assignee has not suffered any significant citations or other censure from any State, federal or local agencies and the assignee has provided CITY with a complete list of such citations and censures; (c) the proposed assignee has at all times conducted its operations in a environmentally safe and conscientious fashion; (d) the proposed assignee conducts its Solid Waste and Recyclables Collection Services in accordance with sound Solid Waste and Recyclables practices, and in full compliance with all federal, State and local laws regulating the collection and Disposal of Solid Waste including hazardous substances; and (e) any other information required by CITY to ensure the proposed assignee can fulfill the terms of this Agreement in a timely, safe and effective manner. (E) Any application for an assignment transfer shall be made in a manner prescribed by the City Administrator. The application shall include a nonrefundable transfer fee in the amount of Fifty Thousand Dollars ($50,000) to cover the cost of all direct and indirect administrative expenses including consultants and attorneys, necessary to adequately analyze the application and to reimburse CITY for all direct and indirect expenses. In addition, COMPANY shall reimburse CITY for any and all additional costs related to the assignment requested and not covered by the transfer fee. Bills shall be supported with evidence of the expense or cost incurred. COMPANY shall pay such bills within (30) days of receipt. The transfer fees are over and above any COMPANY Fees specified in this Agreement. (F) If CITY consents to an assignment, COMPANY shall cooperate with CITY and the assignee to assist in an orderly transition. Section 16. Franchise Waste It is expressly understood that all Solid Waste, Recyclable Material, Organic Material, and Construction and Demolition Debris collected under this Agreement becomes the property of COMPANY at the point in time it is loaded onto COMPANY’S vehicle, subject to the requirement of delivery of Solid Waste to a disposal site, Recyclable Material to a recycling facility, and Organic Material to an organic waste facility, and Construction and Demolition Debris to an appropriate disposal or processing facility. However, title to Hazardous Waste shall not pass to COMPANY pursuant to Section 6(A)(v) or 6(E) of this Agreement and shall remain with the generator, unless purposefully collected by COMPANY pursuant to one of the Hazardous Waste collection programs provided for in this Agreement. At no time does CITY obtain any right of ownership or possession of solid waste or recyclables placed for collection, and nothing in this Agreement shall be construed as giving rise to any inference that CITY has any such rights. CITY and COMPANY agree that, for the purposes of the Uniform Commercial Code and all other laws imposing liability for defective products, it is COMPANY, and not CITY that is to be considered the “merchant” of goods recycled pursuant to this AGREEMENT. COMPANY shall ensure that all disposal, transfer, Recyclable Material processing, and Organic Material processing and Construction and Demolition Debris processing and/or disposal 7.2.b Packet Pg. 55 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) 32 facilities owned and used by the COMPANY or other corporations affiliated with COMPANY in the performance of this Agreement are properly permitted and in material compliance with Applicable Law at all times during the Term. COMPANY shall immediately inform the City Administrator in writing in the event of any material noncompliance with Applicable Law by such facility, and CITY, in its sole discretion, shall have the right to require the use of a different facility, to be selected by COMPANY. The City Council may also, in its sole discretion, require the use of a different site at any time during the Term if any such facility (as the case may be) is found to not be in material compliance with the provisions of this Section, and the City Council determines that such facility (as the case may be) is not acceptable due to a failure to comply with the terms of this Section or a finding by State or federal regulatory agencies that it is not in material compliance with Applicable Law, including the Environmental Statutes, and is unable to accept City’s Solid Waste, Construction and Demolition Debris, Organic Material or Recyclable Material (as the case may be). COMPANY's written arrangements with its customers for collection of Recyclable Material or Organic Material within CITY (if any) will provide that, subject to the right of the customers to claim lost property, title and the right to possession, and liability for all recyclables which are set out for collection on the regularly scheduled collection day shall pass to COMPANY at the time they are placed in the COMPANY’s truck. The COMPANY shall have the right to retain any benefit or profit resulting from its right to retain, recycle, compost, dispose of or use the recyclables that it collects. At no time does the CITY obtain any right of ownership or possession of recyclables placed for collection, and nothing in this Agreement shall be construed as giving rise to any inference that CITY has any such rights. COMPANY will utilize their best efforts to implement and maintain waste recovery or recycling programs. COMPANY shall have the first right and option and right of first refusal for the recycling of any type of material within the CITY subject to applicable laws. However, if COMPANY chooses not to recycle a type of material which CITY deems recyclable, CITY may, at its option, cause or implement independent recycling programs to handle said waste, provided that the proposed program does not conflict with the exclusive rights granted to COMPANY by this Agreement. Section 17. Franchise Waiver The waiver by CITY of any breach or violation of any term, covenant or condition of this Agreement or of any provision, ordinance or law shall not be deemed to be a permanent waiver of such term, covenant, condition, ordinance or law, or of any subsequent breach or violation of the same or of any other term, covenant, condition, ordinance or law. The subsequent acceptance by CITY of any franchise or other fee or of any other monies which may become due hereunder to CITY shall not be deemed to be a waiver of any preceding breach of violation by COMPANY of any term, covenant or condition of this Agreement or of any applicable law or ordinance. Section 18. Franchise Administration The administration and enforcement of this Agreement shall be the responsibility of the City Administrator or designated representatives of that office. 7.2.b Packet Pg. 56 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) 33 Section 19. Franchise Independent Contractor Status It is agreed that COMPANY is an independent contractor, and all persons working for or under the direction of the COMPANY are the COMPANY's agents, servants, employees, and said persons shall not be deemed agents, servants or employees of CITY. Section 20. Franchise Notice All notices shall be personally delivered or mailed, via first class mail or nationally recognized overnight courier, to the below listed addresses. These addresses shall be used for delivery of service of process. Notices so sent shall be effective five (5) days after date of mailing, or upon date of personal delivery. Address of COMPANY is as follows: RECOLOGY SOUTH VALLEY 1351 Pacheco Pass Highway Gilroy, CA 95020 with a copy to: Recology South Valley Attn: Legal Department 50 California Street, 24th Floor San Francisco, CA 94111 Address of CITY is as follows: City Administrator City of Gilroy 7351 Rosanna Street Gilroy, CA 95020 with a copy to: City Clerk 7351 Rosanna Street Gilroy, CA 95020 Section 21. Continuity of Services None of the following are to be considered an excuse from performance, and COMPANY shall be obligated to continue to provide service notwithstanding the occurrence of any or all of such events: (a) general economic conditions, interest or inflation rates, or currency fluctuation or changes in the cost of fuel, commodities, supplies or equipment; (b) changes in the financial condition of COMPANY or any of its subcontractors affecting their ability to perform their obligations; (c) the consequences of errors, neglect or omissions by COMPANY, or any subcontractor; (d) failure of any subcontractor or supplier to furnish labor, materials, service or equipment; (e) equipment failure; (f) changes in market prices for, or the unavailability of markets 7.2.b Packet Pg. 57 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) 34 for, the sale or purchase of Recyclables; (g) the availability of any Disposal site or Processing facility; (h) labor unrest, including but not limited to strike, work stoppage or slowdown, sickout, picketing, or other concerted job action conducted by COMPANY’s, employees or directed at COMPANY, or a subcontractor. In the case of labor unrest or job action directed at a third party over whom COMPANY has no control, however, the inability of COMPANY to make collections due to the unwillingness or failure of the third party to provide reasonable assurance of the safety of COMPANY’s employees while making collections or to make reasonable accommodations regarding container placement and point of delivery, time of collection, or other operating circumstances to minimize any confrontation with pickets or the number of persons necessary to make collections, shall, to that limited extent, excuse performance. The foregoing excuse shall be conditioned on COMPANY’s cooperation in making collection at different times and in different locations. In addition to any and all other legal or equitable remedies, in the event that COMPANY, for any reason whatsoever, fails, refuses or is unable to perform any Collection Service at the time and in the manner provided in this Agreement, and if, as a result thereof, Solid Waste accumulates in the City to such an extent, in such a manner, or for such a time that the City Administrator finds that such accumulation endangers or menaces the environment, public health, safety or welfare, then CITY shall have the right, but not the obligation, upon twenty-four (24) hours prior notice to COMPANY, to do either one or both of the following during the period of such emergency as determined by City Administrator: (i) cause to be performed such services with other personnel without liability to COMPANY; (ii) to take possession of any or all of COMPANY’s land, equipment and other property used or useful in providing one or more of the Collection Services and to provide one or more of the Collection Services. Should CITY take possession of COMPANY’s equipment and other property pursuant to this Section, CITY shall exercise reasonable, ordinary care in the use of the equipment and property. Any action by CITY pursuant to this Section shall be without payment to COMPANY. Notice of COMPANY’s failure, refusal or neglect to perform one or more Collection Services that meets the requirements of the previous paragraph may be given orally by telephone to COMPANY at its principal office and shall be effective immediately. Written confirmation of such oral notification shall be sent to COMPANY within twenty-four (24) hours of the oral notification. COMPANY further agrees that in such event: (a) It shall fully cooperate with CITY to affect the transfer of possession of property to CITY for CITY’s use. (b) It shall, if CITY so requests and to the extent feasible, keep in good repair and condition all of such property, provide all motor vehicles with fuel, oil and other service, and provide such other service as may be necessary to maintain the property in operational condition. If CITY takes possession of COMPANY’S equipment and causes the equipment to be operated in the performance of any one or more Collection Services, as herein contemplated, CITY shall ensure that operators of the equipment are experienced, knowledgeable, and licensed to operate the equipment taken possession of by CITY. CITY shall indemnify, defend, and hold COMPANY harmless from any and all liability, claims, damages, suits, costs, and expenses that 7.2.b Packet Pg. 58 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) 35 arise out of or in any way relate to CITY’s use of COMPANY’S equipment or property except from liability, claims, damages, suits, costs, and expenses that are the result of defects in COMPANY’S equipment or property. Further, as a condition precedent to exercising any rights described herein, CITY shall provide COMPANY with evidence of insurance reasonably satisfactory to COMPANY that would cover CITY’S conduct of any one or more Collection Services that CITY undertakes pursuant to this section. Such insurance shall include general liability, automobile liability, and workers compensation insurance and each policy maintained by the CITY shall name COMPANY as additional insured. CITY shall also provide maintenance of equipment and property in accordance with standard industry practices during the period of its use and shall return equipment and property to COMPANY in substantially the same condition and repair as on the date CITY took possession, normal wear and tear expected. CITY’s exercise of its contractual rights under this Section does not constitute a taking of private property for which compensation must be paid; (ii) shall not create any liability on the part of CITY to COMPANY; and (iii) does not exempt COMPANY from the indemnity provisions of Section 12, which are meant to extend to circumstances arising under this Article, provided that COMPANY is not required to indemnify CITY against claims and damages that are solely caused by the established active negligence or willful misconduct of City officers, employees, agents, or volunteers acting under this Section. CITY shall not affect a permanent taking of COMPANY’s property pursuant to this Section. CITY’s right to retain temporary possession of COMPANY’s property, and to provide one or more Collection Services shall continue until COMPANY can demonstrate to CITY’s satisfaction that it is ready, willing and able to resume such services. CITY has no obligation to maintain possession of COMPANY’s property or continue its use in performing one or more Collection Services for any period of time and may, at any time, in its sole discretion, relinquish possession to COMPANY. Separate from or in addition to assessing liquidated damages, CITY may also at its sole discretion promptly secure, or direct COMPANY to promptly secure, at COMPANY’s sole expense, substitute services, satisfactory to CITY, for when COMPANY is in breach, upon the same terms and conditions as provided in this Agreement. Section 22. Franchise Termination (A) All terms and specifications of this Agreement are material and binding, and failure to perform any portion of the work described herein shall be considered a breach of this Agreement. Failure or delay by either party to perform any term or provision of this Agreement constitutes a breach under this Agreement. The party who so fails or delays must immediately commence to cure, correct, or remedy such failure or delay and shall complete such cure, correction or remedy with reasonable diligence. (B) Except as set forth in Sections 2(B) and 15 (B) and (C), neither party may exercise any rights or remedies upon a default by the other party, unless and until such default continues for a period of seven (7) days after written notice thereof from the non-defaulting 7.2.b Packet Pg. 59 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) 36 party. If the nature of the default is such that more than seven (7) days are reasonably required for its cure, then the defaulting party shall not be deemed to be in default if it has commenced a cure within the seven (7) day period and thereafter diligently prosecutes such cure to completion within thirty (30) days after receipt of written notice thereof unless CITY and COMPANY mutually agree that curing the default will take longer than thirty (30) days and mutually determine a reasonable longer deadline. No such additional time to cure shall be allowed for failure to pay any amount due to either party under this Agreement, or if the nature of the default is such that the health, welfare, or safety of the public is endangered as determined by the City Administrator. The notice of default shall specify the default complained of by the injured party. In the event of any conflict between the cure periods set forth in this subsection and any shorter cure periods set forth in an applicable Section of this Agreement, the shorter period shall control. (C) Delay in giving a notice of default shall not constitute a waiver of any default nor shall it change the time of default. Any failures or delays by either party in asserting any of its rights and remedies as to any default shall not operate as a waiver of any default or of any such rights or remedies, nor deprive either party of its right to institute and maintain any actions or proceedings which it may deem necessary to protect, assert, or enforce any such rights or remedies. (D) If the City Administrator determines that COMPANY’s performance pursuant to this Agreement may not be in conformity with the provisions of this Agreement, the Act (including, but not limited to requirements for Diversion, source reduction and Recycling as to the waste stream subject to this Agreement), or any other Applicable Law, including but not limited to, the laws governing transfer, storage or Disposal of Solid Waste or Hazardous Waste, the City Administrator may advise COMPANY in writing of such suspected default in accordance with subsection 22(B), specifying the default in reasonable detail (the “Notice of Default”), and including the time within which COMPANY is to cure the default and respond, in accordance with subsection 22(B). COMPANY may request additional time to cure the default; CITY shall not unreasonably deny any such request. (i) The City Administrator shall review any written response from COMPANY and decide the matter or refer the matter to the City Council for consideration pursuant to this Section. If the City Administrator’s decision is adverse to COMPANY, the City Administrator may order remedial actions to cure any deficiencies or invoke any other remedy in accordance with this Agreement and, in the event the City Administrator determines that there has been a material breach and that termination is the appropriate remedy, terminate this Agreement. The City Administrator shall promptly inform COMPANY of the City Administrator’s decision. In the event the decision is adverse to COMPANY, the City Administrator shall inform COMPANY, in writing, of the specific facts found and evidence relied on, and the legal basis in provisions of this Agreement or other laws, for the City Administrator’s decision and any remedial action taken or ordered. An adverse decision by the City Administrator shall be final and binding on COMPANY unless COMPANY files a “Notice of 7.2.b Packet Pg. 60 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) 37 Appeal” with the City Clerk (with copies to the City Administrator and City Attorney) within seven (7) days of receipt of the notification of the adverse decision by the City Administrator. (ii) In any “Notice of Appeal” to the City Council, COMPANY shall state all of its factual and legal contentions, citing provisions of this Agreement or other laws to support its contentions. Within twenty-one (21) days of the filing of the Notice of Appeal with the City Clerk, COMPANY shall deliver to the City Clerk three (3) copies of all relevant affidavits, documents, photographs and recordings that COMPANY may choose to submit. (E) If a matter is referred by the City Administrator to the City Council, or an adverse decision of the City Administrator is appealed to the City Council by COMPANY, the City Clerk shall set the matter for a hearing before the City Council. The City Clerk shall give COMPANY thirty (30) days written notice of the time and place of the hearing. At the hearing, the City Council shall consider the administrative record, including the following: (i) A staff report by the City Administrator, summarizing the proceedings to date and outlining the City Council’s options; (ii) The City Administrator’s written Notice of Default; (iii) COMPANY’s response to the Notice of Default; (iv) The City Administrator’s written notification to COMPANY of adverse decision; (v) COMPANY’s Notice of Appeal to the City Clerk; and (vi) Any evidence submitted by COMPANY pursuant to paragraph (ii) of subsection 22(D). No new legal issues may be raised, or new evidence submitted by COMPANY at this or at any further point in the proceedings, absent a showing of good cause. COMPANY’s representatives and other interested persons shall be provided a reasonable opportunity to be heard. (F) Based on the administrative record, the City Council shall determine by resolution whether the decision or order of the City Administrator should be upheld. A tie vote of the City Council shall be regarded as upholding the decision of the City Administrator. If, based upon the administrative record, the City Council determines that the performance of COMPANY is in breach of any provision of the Agreement or of any applicable federal, State or local statute or regulation, the City Council, in the exercise of its discretion, may order COMPANY to take remedial actions to cure the breach or impose any other remedy in accordance with this Agreement, including but not limited to termination. The decision or order of the City Council shall be final and binding. 7.2.b Packet Pg. 61 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) 38 (G) COMPANY’s performance under this Agreement is not excused during the period of time prior to a final determination as to whether or not COMPANY’s performance is in material breach of this Agreement, or the time set by CITY for COMPANY to discontinue a portion or all of its services pursuant to this Agreement. (H) CITY reserves the right to terminate this Agreement in the event that COMPANY fails to cure any default within the applicable cure periods, including but not limited to the following: (i) if COMPANY violates any material provision of any Applicable Law; (ii) if COMPANY fails to maintain the insurance or bonds required by Section 14, or fails to pay to CITY any monies due CITY pursuant to this Agreement, and fails to remedy such default within five (5) days after written notice thereof from CITY; (iii) there is a seizure or attachment (other than a prejudgment attachment) of, or levy affecting possession on, the operating equipment of COMPANY, including without limit its vehicles, maintenance or office facilities, or any part thereof of such proportion as to impair COMPANY’s ability to perform under this Agreement and which cannot be released, bonded, or otherwise lifted within forty-eight (48) hours excluding weekends and Holidays; (iv) COMPANY fails to provide reasonable assurances of performance; (v) COMPANY fails to notify CITY in a timely manner of any receipt by COMPANY of any notice of violation or official communication from those regulatory agencies regulating Solid Waste, Construction and Demolition Debris, Recyclable Materials, and Organic Material Collection Services, transportation, Processing or Disposal activities, or street sweeping activities; (vi) If COMPANY violates in any material respect any orders or filings of any regulatory body having jurisdiction over COMPANY relative to this Agreement, provided that COMPANY may contest any such orders or filings by appropriate proceedings conducted in good faith, in which case no breach of this Agreement shall be deemed to have occurred until a final decision adverse to COMPANY is entered; (vii) if COMPANY ceases to provide Collection Services as required under this Agreement over all or a substantial portion of the area within the City, for a period of two (2) days or more, for any reason within the control of COMPANY, including but not limited to labor disputes; 7.2.b Packet Pg. 62 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) 39 (viii) if COMPANY fails to make any payment required under this Agreement and/or refuses to provide CITY with required information, reports, and/or records in a timely manner as provided for in this Agreement; (I) Notwithstanding Sections 22 (A), 22(B) and 22(C), CITY reserves the right to terminate this Agreement, without the need to provide COMPANY an opportunity to cure, in the event of any of the following: (i) if COMPANY practices, or attempts to practice, any fraud or deceit upon CITY, or practiced any fraud or deceit or made any misrepresentations in the negotiations which preceded the execution of this Agreement; (ii) if COMPANY has received three (3) or more written Notices of Default in any twelve (12) month period, irrespective of whether or not the act or omission set forth in the notice was corrected or remedied within the time set forth in the notice, but excluding notices where, after investigation, the City Administrator or City Council has determined that no default occurred, and also excluding notices relating to matters that are trivial. Section 23. Compliance With Laws and Regulations In the performance of this Agreement, COMPANY shall comply with all applicable laws, including implementing regulations, as they may be amended from time to time, including, but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") 42 U.S.C. Sections 9601 et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Sections 6901, et seq., the California Integrated Waste Management Act of 1989, the provisions of the SB 1383 Final Regulations that apply directly to COMPANY by operation of law or are duties of COMPANY under this Agreement, all applicable air pollution control laws, applicable California labor laws, and all other applicable laws of the United States of America, the State of California, the County of Santa Clara, ordinances of the City, the requirements of Local Enforcement Agencies and other agencies with jurisdiction. Section 24. General Contract Provisions (A) Amendment & Modification. No amendments, modifications, alterations or changes to the terms of this Agreement shall be effective unless and until made in a writing signed by both parties hereto. (B) Americans with Disabilities Act of 1990. Throughout the term of this Agreement, the COMPANY shall comply fully with all provisions of the Americans with Disabilities Act of 1990 (“the Act”) in its current form and as it may be amended from time to time that are directly applicable to COMPANY’s performance of this Agreement. ADA liability is not 7.2.b Packet Pg. 63 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) 40 excluded from the indemnification and defense obligations of COMPANY under this Agreement. (C) Attorneys’ Fees. If any action at law or in equity, including an action for declaratory relief, is brought to enforce or interpret the provisions of this Agreement, the prevailing party will be entitled to reasonable attorneys’ fees, which may be set by the court in the same action or in a separate action brought for that purpose, in addition to any other relief to which that party may be entitled. (D) Captions. The captions and headings of the various sections, paragraphs and subparagraphs of the Agreement are for convenience only and shall not be considered nor referred to for resolving questions of interpretation. (E) Compliance with Laws. The COMPANY shall keep itself informed of all Applicable Laws which directly relate to and affect those engaged or employed in the work, or the materials used in the work, or which in any way affect the conduct of the work performed by COMPANY under this Agreement. Without limiting the foregoing, COMPANY agrees to observe the provisions of the Municipal Code of the CITY OF GILROY, obligating every contractor or subcontractor under a contract or subcontract to the CITY OF GILROY for public works or for goods or services to refrain from discriminatory employment or subcontracting practices on the basis of the race, color, sex, religious creed, national origin, ancestry of any employee, applicant for employment, or any potential subcontractor. (F) Conflict of Interest. COMPANY certifies that to the best of its knowledge, no CITY employee or officer of any public agency interested in this Agreement has any pecuniary interest in the business of COMPANY that may result in a violation of Government Code Section 1090 or the California Political Reform Act. (G) Entire Agreement. This Agreement supersedes any and all prior agreements, whether oral or written, between the parties hereto with respect to the rendering of services by COMPANY for CITY and contains all the covenants and agreements between the parties with respect to the rendering of such services in any manner whatsoever. Each party to this Agreement acknowledges that no representations, inducements, promises or agreements, orally or otherwise, have been made by any party, or anyone acting on behalf of any party, which are not embodied herein, and that no other agreement, statement or promise not contained in this Agreement shall be valid or binding. No other agreements or conversations with any officer, agent or employee of CITY prior to execution of this Agreement shall affect or modify any of the terms or obligations contained in 7.2.b Packet Pg. 64 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) 41 any documents comprising this Agreement. Such other agreements or conversations shall be considered as unofficial information and in no way binding upon CITY. (H) Governing Law and Venue. This Agreement shall be governed by and construed in accordance with the laws of the State of California without regard to the conflict of laws provisions of any jurisdiction. The exclusive jurisdiction and venue with respect to any and all disputes arising hereunder shall be in state and federal courts located in Santa Clara County, California. (I) Notices. Any notice to be given hereunder by either party to the other may be effected either by personal delivery in writing or by mail, registered or certified, postage prepaid with return receipt requested. Mailed notices shall be addressed to the parties at the addresses appearing in Exhibit “A”, Section V.H. but each party may change the address by written notice in accordance with this paragraph. Notices delivered personally will be deemed delivered as of actual receipt; mailed notices will be deemed delivered as of three (3) days after mailing. (J) Partial Invalidity. If any provision in this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions will nevertheless continue in full force without being impaired or invalidated in any way. (K) Waiver. COMPANY agrees that waiver by CITY of any one or more of the conditions of performance under this Agreement shall not be construed as waiver(s) of any other condition of performance under this Agreement. [Signature page follows.] 7.2.b Packet Pg. 65 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) 42 IN WITNESS THEREOF, these parties have executed this Agreement on the day and year shown below. ATTEST: THE CITY OF GILROY ________________________________ City Clerk City Administrator Date: Date: RECOLOGY SOUTH VALLEY By: Salvatore M. Coniglio Chief Executive Officer APPROVED AS TO FORM City Attorney Date:________________________________ 7.2.b Packet Pg. 66 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) Current Add New DESCRIPTION Rates 13.12%Rates 1. Residential Customers and Multi-Family Can Customers (Including Recycling). 1-Can (32 gallon)35.73 4.69 40.42 2-Cans (64 gallon)51.11 6.70 57.81 3-Cans (96 gallon)66.89 8.77 75.66 4-Cans (128 gallon)85.43 11.20 96.63 Each Additional Can (32 gallon)18.53 2.43 20.96 Extra Can/Bag Tag 7.43 0.97 8.40 Bulky Item Pickup (Plus Disposal Cost)22.27 2.92 25.19 Toter Subscription Changes 18.53 2.43 20.96 RETURNED TRIP COLLECTION 39.82 Low Income Senior 1-Can (32 gallon)30.18 3.96 34.14 2-Cans (64 gallon)42.72 5.60 48.32 3-Cans (96 gallon)55.82 7.32 63.14 4-Cans (128 gallon)68.92 9.04 77.96 Hillside 1-Can (32 gallon)43.06 5.65 48.71 2-Cans (64 gallon)61.19 8.03 69.22 3-Cans (96 gallon)79.77 10.46 90.23 4-Cans (128 gallon)98.34 12.90 111.24 2. Residential Customers on Private Roadways (No Street Sweeping) 1-Can (32 gallon)33.84 4.44 38.28 2-Cans (64 gallon)49.22 6.46 55.68 3-Cans (96 gallon)65.00 8.52 73.52 4-Cans (128 gallon)83.54 10.96 94.50 Each Additional Can (32 gallon)17.01 2.23 19.24 Extra Can/Bag Tag 7.43 0.97 8.40 Bulky Item Pickup (Plus Disposal Cost)22.27 2.92 25.19 Toter Subscription Changes 18.53 2.43 20.96 Low Income Senior 1-Can (32 gallon)28.29 3.71 32.00 2-Cans (64 gallon)40.83 5.35 46.18 3-Cans (96 gallon)53.93 7.07 61.00 4-Cans (128 gallon)67.03 8.79 75.82 Hillside 1-Can (32 gallon)41.17 5.40 46.57 2-Cans (64 gallon)59.30 7.78 67.08 3-Cans (96 gallon)77.88 10.21 88.09 4-Cans (128 gallon)96.45 12.65 109.10 1-Can (32 gallon) Contaminated 10.11 2-Cans (64 gallon) Contaminated 14.45 3-Cans (96 gallon) Contaminated 18.92 4-Cans (128 gallon) Contaminated 24.16 3. Multi-Family Bin Customer Recycling Bulky Item Pickup (Plus Disposal Cost)22.27 2.92 25.19 4. Commercial and Multi-Family Bin Customer (Refuse) 1-Can (32 gallon)35.73 4.69 40.42 2-Cans (64 gallon)53.88 7.07 60.95 3-Cans (96 gallon)72.49 9.51 82.00 4-Cans (128 gallon)91.04 11.94 102.98 Each Additional Can (32 gallon)20.45 2.68 23.13 5. Commercial and Multi-Family Bin Customer (Organics) 1-Can (32 gallon)28.29 3.71 32.00 2-Cans (64 gallon)42.80 5.61 48.41 RECOLOGY SOUTH VALLEY CITY OF GILROY RATES EFFECTIVE DECEMBER 1, 2022 Exhibit A Schedule of Rates 7.2.b Packet Pg. 67 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) Current Add New DESCRIPTION Rates 13.12%Rates RECOLOGY SOUTH VALLEY CITY OF GILROY RATES EFFECTIVE DECEMBER 1, 2022 3-Cans (96 gallon)57.69 7.57 65.26 4-Cans (128 gallon)72.53 9.51 82.04 Each Additional Can (32 gallon)16.06 2.11 18.17 1-Can (32 gallon) Contaminated 10.11 2-Cans (64 gallon) Contaminated 15.24 3-Cans (96 gallon) Contaminated 20.50 4-Cans (128 gallon) Contaminated 25.75 6. Commercial Front Loader Service Rates 1 Yard F/L (1x/wk)163.87 21.49 185.36 1 Yard F/L (2x/wk)307.31 40.30 347.61 1 Yard F/L (3x/wk)450.73 59.11 509.84 1 Yard F/L (4x/wk)594.18 77.93 672.11 1 Yard F/L (5x/wk)737.60 96.74 834.34 1 Yard F/L (6x/wk)881.06 115.55 996.61 1 Yard F/L (on call)120.48 2 Yard F/L (1x/wk)237.32 31.12 268.44 2 Yard F/L (2x/wk)445.20 58.39 503.59 2 Yard F/L (3x/wk)653.05 85.65 738.70 2 Yard F/L (4x/wk)860.98 112.92 973.90 2 Yard F/L (5x/wk)1068.82 140.18 1,209.00 2 Yard F/L (6x/wk)1276.72 167.44 1,444.16 2 Yard F/L (on call)154.26 20.23 174.49 3 Yard F/L (1x/wk)341.81 44.83 386.64 3 Yard F/L (2x/wk)643.87 84.44 728.31 3 Yard F/L (3x/wk)945.83 124.05 1,069.88 3 Yard F/L (4x/wk)1247.85 163.66 1,411.51 3 Yard F/L (5x/wk)1549.86 203.27 1,753.13 3 Yard F/L (6x/wk)1851.85 242.87 2,094.72 3 Yard F/L (on call)219.94 28.85 248.79 4 Yard F/L (1x/wk)458.37 60.12 518.49 4 Yard F/L (2x/wk)866.80 113.68 980.48 4 Yard F/L (3x/wk)1275.19 167.24 1,442.43 4 Yard F/L (4x/wk)1683.64 220.81 1,904.45 4 Yard F/L (5x/wk)2092.11 274.38 2,366.49 4 Yard F/L (6x/wk)2500.49 327.94 2,828.43 4 Yard F/L (on call)305.46 40.06 345.52 6 Yard F/L (1x/wk)667.36 87.53 754.89 6 Yard F/L (2x/wk)1268.75 166.40 1,435.15 6 Yard F/L (3x/wk)1870.18 245.28 2,115.46 6 Yard F/L (4x/wk)2471.57 324.15 2,795.72 6 Yard F/L (5x/wk)3072.95 403.02 3,475.97 6 Yard F/L (6x/wk)3674.35 481.90 4,156.25 6 Yard F/L (on call)418.79 54.93 473.72 Front Loader Special (per cubic yard)25.49 3.34 28.83 Commercial Front Loader Service Organics rates 1 Yard F/L (1x/wk)130.80 17.15 147.95 1 Yard F/L (2x/wk)245.55 32.20 277.75 1 Yard F/L (3x/wk)360.28 47.25 407.53 2 Yard F/L (4x/wk)475.05 62.30 537.35 1 Yard F/L (5x/wk)589.78 77.35 667.13 1 Yard F/L (6x/wk)704.55 92.40 796.95 1 Yard F/L Contaminated Recycle and Organics 46.34 1 Yard F/L (on call)85.16 11.17 96.33 2 Yard F/L (1x/wk)189.56 24.86 214.42 2 Yard F/L (2x/wk)355.86 46.67 402.53 2 Yard F/L (3x/wk)522.15 68.48 590.63 2 Yard F/L (4x/wk)688.49 90.30 778.79 2 Yard F/L (5x/wk)854.76 112.10 966.86 2 Yard F/L (6x/wk)1021.09 133.92 1,155.01 2 Yard F/L (on call)123.41 16.19 139.60 2 Yard F/L Contaminated Recycle and Organics 67.11 Exhibit A Schedule of Rates 7.2.b Packet Pg. 68 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) Current Add New DESCRIPTION Rates 13.12%Rates RECOLOGY SOUTH VALLEY CITY OF GILROY RATES EFFECTIVE DECEMBER 1, 2022 3 Yard F/L (1x/wk)273.15 35.82 308.97 3 Yard F/L (2x/wk)514.80 67.52 582.32 3 Yard F/L (3x/wk)756.37 99.20 855.57 3 Yard F/L (4x/wk)997.99 130.89 1,128.88 3 Yard F/L (5x/wk)1239.59 162.57 1,402.16 3 Yard F/L (6x/wk)1481.19 194.26 1,675.45 3 Yard F/L (on call)175.95 23.08 199.03 3 Yard F/L Contaminated Recycle and Organics 96.66 4 Yard F/L (1x/wk)366.41 48.06 414.47 4 Yard F/L (2x/wk)693.14 90.91 784.05 4 Yard F/L (3x/wk)1019.86 133.76 1,153.62 4 Yard F/L (4x/wk)1346.61 176.61 1,523.22 4 Yard F/L (5x/wk)1673.39 219.47 1,892.86 4 Yard F/L (6x/wk)2000.08 262.31 2,262.39 4 Yard F/L (on call)244.37 32.05 276.42 4 Yard F/L Contaminated Recycle and Organics 129.62 6 Yard F/L (1x/wk)533.60 69.98 603.58 6 Yard F/L (2x/wk)1014.71 133.08 1,147.79 6 Yard F/L (3x/wk)1495.84 196.18 1,692.02 6 Yard F/L (4x/wk)1976.96 259.28 2,236.24 6 Yard F/L (5x/wk)2458.07 322.38 2,780.45 6 Yard F/L (6x/wk)2939.18 385.48 3,324.66 6 Yard F/L (on call)335.05 43.94 378.99 6 Yard F/L Contaminated Recycle and Organics 188.72 Front Loader Special (per cubic yard)20.39 2.67 23.06 6. Compactor Service Front Loader (per cubic yard)54.80 7.19 61.99 3-yd F/L compactor (1x/wk)709.22 93.02 802.24 3-yd F/L compactor (2x/wk)1416.50 185.78 1,602.28 3-yd F/L compactor (3x/wk)2123.79 278.54 2,402.33 Front Loader (Contaminated per cubic yard) Recycle and Organics 61.99 7. Debris Box Rates 20 Cubic Yard Debris Box,576.73 75.64 652.37 Per ton charge (over 3 tons)111.37 14.61 125.98 40 Cubic Yard Debris Box,961.11 126.05 1,087.16 Per ton charge (over 6 tons)111.37 14.61 125.98 20 Cubic Yard Debris Box, (organics)461.39 60.51 521.90 Per ton charge (over 3 tons)89.09 11.68 100.77 40 Cubic Yard Debris Box, (organics)768.89 100.84 869.73 Per ton charge (over 6 tons)89.09 11.68 100.77 Debris Box Compactors 54.43 7.14 61.57 (per cubic yard of capacity) 20 Cubic Yard Debris Box (recyclable)357.23 46.85 404.08 40 Cubic Yard Debris Box (recyclable)632.19 82.91 715.10 PERM RENTAL 297.60 39.03 336.63 20 Cubic Yard Debris Box, (organics) Contaminated 652.37 Per ton charge (over 3 tons) Contaminated 125.98 40 Cubic Yard Debris Box, (organics) Contaminated 1,087.16 Per ton charge (over 6 tons) Contaminated 125.98 Debris Box Return Trip Fee 75.00 8. Additional Street Sweeping M-F 8:00am-5:00pm (Per Hour)136.89 17.95 154.84 Sat-Sun 8:00am-5:00pm-Per Hr+4hr Minimum 228.17 29.92 258.09 Exhibit A Schedule of Rates 7.2.b Packet Pg. 69 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) No later than March 1 of each agreement year, COMPANY shall annually submit to City for approval its calculation of the percentage adjustment to be applied to customer rates during the following contract year. The adjustment shall be calculated using the following components and sub-components: (1)Consumer Price Index (CPI) Component. The CPI Component is equal to 83.5% and the Consumer Price Index” or “CPI” means the Consumer Price Index (CPI) All Urban Consumers for the San Francisco - Oakland - San Jose Metropolitan Area, base period 1982-84=100. This index is used to adjust the portion of rates that the parties have agreed represents costs for labor, capitalized equipment, equipment parts, repair and maintenance, facilities, utilities, insurance, administration and other necessary and reasonable costs not specified below. COMPANY shall calculate the percentage change between the CPI values published for October of the two immediately preceding years before the date of the rate application. The calculated annual percentage change is then multiplied by 83.5% and the resulting percentage shall equal the applicable CPI Component Adjustment. (2)Fuel Component. The Fuel Component is equal to 3.5% of each service rate. This component is used to adjust the portion of rates that the parties have agreed represents the cost of fuel used by COMPANY for its operations. It is adjusted by the percentage change in unit cost per therm for natural gas fuel charged to COMPANY by its natural gas fuel provider, currently Pacific Gas & Electric (PG&E) under Rate Schedule G-NGV1. COMPANY shall calculate the average monthly cost per therm for each of the two most recent years ending October 31 and then calculate the percentage change between the average monthly cost per therm for those two years. The average monthly cost per therm for each year is calculated by summing the twelve month “Total G-NGV1 Charges” that appear on the PG&E billings and dividing that total by twelve (12). The calculated annual percentage change is multiplied by 3.5% and the resulting percentage shall equal the applicable Fuel Component Adjustment. The term “Natural gas” may also include methane fuel from other sources, including but not limited to methane fuel produced from landfill, dairy or digester gas. Cost for fuel from such other source will be adjusted based on the change in the applicable average annual cost per therm in the most recent year ending October 31. If more than one methane fuel source is used, COMPANY shall calculate a weighted unit cost based on the proportional cost and quantity of fuel used from each fuel source. That weighted unit cost would then be compared to the unit cost per therm from the preceding year to determine the annual percent change in unit cost per therm. The result would then be multiplied by 3.5%. (3)Disposal Component. Exhibit A 2 Rate Adjustment Formula 7.2.b Packet Pg. 70 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) (5)Exceptional Costs Component. In addition to the adjustments based on the components set forth above in Sections (1) through (4), the rates will be adjusted in an amount sufficient for Contractor to recover the EXCEPTIONAL COSTS described in Section 8(C) that were incurred during the previous year and the amount of the solid waste implementation fee that Contractor shall be required to pay during the upcoming rate year. Examples of Exceptional Cost changes include, but are not limited to: •Cost of Performance Audit •Cost of compost provided by COMPANY pursuant to Section 5(J) •Cost of City-requested homeless encampment and other cleanup events •Cost of City-requested disposal vouchers Exhibit A 2 Rate Adjustment Formula The Disposal Component is equal to 10.5% of each service rate and this component is used to adjust the portion of rates that the parties have agreed represents the cost of disposing solid waste at the designated disposal facility. It is annually adjusted by the percent of change in the unit cost of disposal, measured in dollars per ton disposed. COMPANY shall calculate the percentage change in the unit cost of disposal between the two invoices for the month of October for the two most recent years ending October 31. The calculated annual percent change is then multiplied by 10.5% and the resulting percentage shall equal the applicable Disposal Component Adjustment. (4) Recyclables Processing Component. This Recyclables Processing Component is equal to 2.5% of each service rate and is used to adjust the portion of rates that the parties have agreed represents the cost of processing recyclable materials delivered to a recycling processing facility. It is annually adjusted by the percent of change in the unit cost, of processing, including amounts for any revenue received from COMPANY from the processor for recyclable material delivered by COMPANY for processing, measured in dollars per ton processed. COMPANY shall compare the unit cost of (or revenue from) processing for the most recent year ending October 31 to the corresponding unit cost from the preceding year. For the initial year of the term only, the preceding year cost is agreed to be $35 per ton processed. The calculated annual percentage change is then multiplied by 2.5% and the resulting percentage shall equal the Recyclables Processing Component Adjustment. If in the preceding year, net transactions between the processor and COMPANY resulted in processer paying COMPANY for recycled materials, COMPANY shall divide the net revenues by the tons delivered to calculate revenue per ton. Revenue per ton will be compared to the unit cost of processing (or preceding year unit revenue, if applicable) for the preceding year to calculate the change in unit value. For example, $5 per ton revenue would equal a net change of $40 (-$5 - $35) per ton if the preceding year processing cost was $35 per ton. This example would produce a cost component decrease calculated as (-$5 - $35) / $35, or -114.28%. That cost component decrease would then be applied to 2.5% of COMPANY’s current rates. 7.2.b Packet Pg. 71 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) The net total of Exceptional Cost will be divided by COMPANY’S Annualized Billed Revenue and the resulting percentage shall equal the applicable Exceptional Costs Component Adjustment. Annualized Billed Revenue is defined as two times COMPANY’s billed revenues for the six months ending the preceding December 31 of each year, minus the amount included as Exceptional Costs expended by COMPANY in the prior year’s rate adjustment application. (6)Calculation of Adjustment to Maximum Service Rates Contractor shall calculate the sum of the CPI Component Adjustment, Fuel Component Adjustment, Disposal Component Adjustment, Recyclables Processing Component Adjustment, and Exceptional Costs Component Adjustment calculated in Sections (1) through (5). The resulting percentage shall be equal to the percentage rate increase that will be applied to each of the maximum service rates that shall become effective July 1 of each agreement year (the “Total Rate Adjustment Percentage”). An example of the calculation of the Total Rate Adjustment Percentage appears on the following pages. Finally, COMPANY adjusts its current service rates by the Total Rate Adjustment Percentage to calculate its proposed maximum service rates for the following year. Exhibit A 2 Rate Adjustment Formula 7.2.b Packet Pg. 72 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) Rate change calculation formula X (1) - X (2) X (2) 1)CPI Index Component X (1) = October, 2021 =313.265 X (2) = October, 2020 =301.736 CPI =313.265 - 301.736 301.74 CPI =3.82% Percentage Applicable 83.5% 83.5% of CPI =3.19% 2)Fuel (PG&E Schedule G-NGV1) X (1) = 12-mo Average ended Oct-21 =0.860 X (2) = 12-mo Average ended Oct-20 =0.740 Fuel =0.86 - 0.74 0.74 Fuel =16.22% Percentage Applicable 3.5% 3.5% of Fuel =0.57% 3)Disposal Component X (1) = MSW Disposal Rate January 2021 25.59 X (2) = MSW Disposal Rate January 2020 25.34 Disposal Change =25.59 - 25.34 25.34 Disposal Change =0.99% Percentage Applicable 10.5% 10.5% of Disposal =0.10% 4)Recyclables Processing Component X (1) = Recyclables unit cost per ton 2021 35.00 X (2) = Recyclables unit cost per ton 2020 30.00 Recyclables unit cost per ton Change =35 - 30 30.00 Recyclables unit cost per ton Change =16.67% Percentage Applicable 2.5% 2.5% of Recyclables Processing =0.42% 5)Exceptional Costs Annualized Billed Revenue 12,000,000 Remove Prior Year Exceptional Costs (48,000) Performance Audit 0 City requsted homeless encampment and other clean-up events 5,000 City requested dispoals vouchers 2,500 Annual Mandatory Implementation Funds 30,000 Other City requested item a 5,000 Other City requested item b 1,000 Other City requested item c 250 Current Year Exceptional Costs 43,750 TOTAL EXCEPTIONAL COSTS (4,250) Exceptional Costs Adjustment =-0.04% Total rate adjustment (1+2+3+4+5)4.24% RECOLOGY SOUTH VALLEY CITY OF GILROY RATE ADJUSTMENT EXAMPLE EFFECTIVE JULY 1, XXXX Exhibit A 2 Rate Adjustment Formula 7.2.b Packet Pg. 73 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) https://data.bls.gov/cgi-bin/srgate CUURS49BSA0 Exhibit A 2 Rate Adjustment Formula 7.2.b Packet Pg. 74 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) http://www.pge.com/nots/rates/tariffs/GRF.SHTML#GNGV1 Effective Date Advice Number Customer Charge Procureme nt Charge Transportat ion Charge Total G- NGV1 Charge4/ Cap-and- Trade Cost Exemption Credit 5/ PPP Surcharge4/ ($/day) 01/01/19 4052-G $0.44121 $0.38544 $0.39675 $0.78219 $0.04781 $0.02811 02/01/19 4063-G $0.44121 $0.41033 $0.39675 $0.80708 $0.04781 $0.02811 03/01/19 4070-G $0.44121 $0.33998 $0.39675 $0.73673 $0.04781 $0.02811 04/01/19 4079-G $0.44121 $0.26565 $0.40300 $0.66865 $0.04781 $0.02811 05/01/19 4092-G $0.44121 $0.17121 $0.40300 $0.57421 $0.04781 $0.02811 06/01/19 4102-G $0.44121 $0.15989 $0.40300 $0.56289 $0.04781 $0.02811 07/01/19 4113-G $0.44121 $0.23873 $0.40300 $0.64173 $0.04781 $0.02811 08/01/19 4122-G $0.44121 $0.25501 $0.35867 $0.61368 $0.04781 $0.02811 09/01/19 4135-G $0.44121 $0.21066 $0.35867 $0.56933 $0.04781 $0.02811 10/01/19 4148-G $0.44121 $0.21928 $0.37707 $0.59635 $0.04781 $0.02811 11/01/19 4172-G $0.44121 $0.27540 $0.37707 $0.65247 $0.04781 $0.02811 12/01/19 4183-G $0.44121 $0.34410 $0.37707 $0.72117 $0.04781 $0.02811 01/01/20 4199-G $0.44121 $0.39729 $0.39035 $0.78764 $0.04893 $0.02857 02/01/20 4209-G $0.44121 $0.38623 $0.39035 $0.77658 $0.04893 $0.02857 03/01/20 4222-G $0.44121 $0.27579 $0.51148 $0.78727 $0.05161 $0.02857 04/01/20 4230-G $0.44121 $0.17368 $0.51148 $0.68516 $0.05161 $0.02857 05/01/20 4240-G $0.44121 $0.16308 $0.51148 $0.67456 $0.05161 $0.02857 06/01/20 4251-G $0.44121 $0.18301 $0.51148 $0.69449 $0.05161 $0.02857 07/01/20 4265-G $0.44121 $0.17652 $0.51148 $0.68800 $0.05161 $0.02857 08/01/20 4277-G $0.44121 $0.22119 $0.51148 $0.73267 $0.05161 $0.02857 09/01/20 4300-G $0.44121 $0.35702 $0.51148 $0.86850 $0.05161 $0.02857 10/01/20 4313-G $0.44121 $0.31912 $0.51483 $0.83395 $0.05161 $0.02857 11/01/20 4327-G $0.44121 $0.39607 $0.51483 $0.91090 $0.05161 $0.02857 12/01/20 4337-G $0.44121 $0.420933/$0.51483 $0.93576 $0.05161 $0.02857 01/01/21 4347-G $0.44121 $0.42688 $0.52017 $0.94705 $0.07366 $0.04308 02/01/21 4372-G $0.44121 $0.42371 $0.52017 $0.94388 $0.07366 $0.04308 03/01/21 4390-G $0.44121 $0.35715 $0.55521 $0.91236 $0.07366 $0.04308 04/01/21 4408-G $0.44121 $0.15796 $0.55521 $0.71317 $0.07366 $0.04308 05/01/21 4426-G $0.44121 $0.14327 $0.55521 $0.69848 $0.07366 $0.04308 06/01/21 4439-G $0.44121 $0.15061 $0.55433 $0.70494 $0.07366 $0.04308 07/01/21 4455-G $0.44121 $0.12506 $0.55433 $0.67939 $0.07366 $0.04308 08/01/21 4470-G $0.44121 $0.15999 $0.55433 $0.71432 $0.07366 $0.04308 09/01/21 4480-G $0.44121 $0.37864 $0.55433 $0.93297 $0.07366 $0.04308 10/01/21 4497-G $0.44121 $0.61632 $0.55433 $1.17065 $0.07366 $0.04308 11/01/21 4515-G $0.44121 $0.74245 $0.55433 $1.29678 $0.07366 $0.04308 12/01/21 4532-G $0.44121 $0.75586 $0.55433 $1.31019 $0.07366 $0.04308 01/01/22 4542-G $0.44121 $0.69158 $0.64160 $1.33318 $0.10234 $0.04380 02/01/22 4559-G $0.44121 $0.66224 $0.64160 $1.30384 $0.10234 $0.04380 03/01/22 4578-G $0.44121 $0.54679 $0.64160 $1.18839 $0.10234 $0.04380 04/01/22 4589-G $0.44121 $0.45563 $0.63517 $1.09080 $0.10235 $0.04380 05/01/22 4602-G $0.44121 $0.56892 $0.63517 $1.20409 $0.10235 $0.04380 06/01/22 4614-G $0.44121 $0.62615 $0.63517 $1.26132 $0.10235 $0.04380 07/01/22 4622-G $0.44121 $0.66807 3/$0.63517 $1.30324 $0.10235 $0.04380 1/ Rate Schedule G-NGV1 was converted to Standard Status, rather than Experimental, effective August 30, 2008, due to Advice Letter 2945-G. 2/ Unless otherwise noted. 3/ This procurement rate includes a charge of $0.01115 per therm to reflect account balance amortizations in accordance with Advice Letter 3157-G. 4/ Schedule G-PPPS (Public Purpose Program surcharge) needs to be added to the Total G-NGV1 Charge for bill calculation. See Schedule G-PPPS for details and exempt customers. 5/ The Cap-and-Trade Cost Exemption Credit is applicable to Covered Entities (i.e., customers that currently have a direct obligation to pay for allowances directly to the Air Resources Board for their Greenhouse Gas (GHG) emissions) who will see a line item credit on their bill equal to $0.05161 per therm times their monthly billed volumes. See tariff for further explanation. Pacific Gas and Electric Company Schedule G-NGV1 Natural Gas Service for Compression1/ on Customers' Premises January 1, 2019, to December 31, 2020 ($/therm2/) Exhibit A 2 Rate Adjustment Formula 7.2.b Packet Pg. 75 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) Charge Tons Rate 477.41 18.84 25.34 520.74 20.55 25.34 Exhibit A 2 Rate Adjustment Formula 7.2.b Packet Pg. 76 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) Charge Tons Rate 541.23 21.15 25.59 522.55 20.42 25.59 Exhibit A 2 Rate Adjustment Formula 7.2.b Packet Pg. 77 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) RECOLOGY SOUTH VALLEY CITY OF GILROY Recyclables unit cost per ton - EXAMPLE Month Tons Cost/(Revenue) 2021 January 1795 $53,850.00 February 1569 $47,070.00 March 1668 $50,040.00 April 1664 $49,920.00 May 1927 $57,810.00 June 1865 $55,950.00 July 1762 $52,860.00 August 1641 $49,230.00 September 1674 $50,220.00 October 1440 $43,200.00 November 1547 $46,410.00 Cost/(Revenue) December 1753 $52,590.00 per ton 2021 20,305 $609,150.00 $30.00 Month Tons Cost/(Revenue) 2020 January 1785 $62,475.00 February 1554 $54,390.00 March 1680 $58,800.00 April 1677 $58,695.00 May 1952 $68,320.00 June 1839 $64,365.00 July 1748 $61,180.00 August 1628 $56,980.00 September 1693 $59,255.00 October 1473 $51,555.00 November 1521 $53,235.00 Cost/(Revenue) December 1734 $60,690.00 per ton 2020 20,284 $709,940.00 $35.00 Exhibit A 2 Rate Adjustment Formula 7.2.b Packet Pg. 78 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) EXHIBIT B INSURANCE REQUIREMENTS COMPANY shall procure and maintain for the duration of the franchise agreement all the insurance required in this Exhibit B against claims for injuries to persons or damage to property which may arise from or in connection with the performance of the work hereunder and the results of that work by the COMPANY, his agents, representatives, employees or subcontractors. With respect to General Liability, and Pollution Liability coverage should be maintained for a minimum of five (5) years after the franchise agreement expires. COMPANY shall submit certificates and additional insured endorsements for review and approval by the CITY. As a material term of this franchise agreement and as a condition precedent to the CITY’s obligations hereunder, COMPANY shall provide all required certificates and endorsements of insurance within 15 days of execution of this Agreement by both parties. COMPANY shall not begin to perform services under this Agreement until such evidence of insurance is provided. Acceptance of the certificates shall not relieve COMPANY of any of the insurance requirements, nor decrease the liability or indemnification obligations of COMPANY. The CITY reserves the right to require COMPANY to provide insurance policies for review by CITY. Minimum Scope of Insurance Coverage shall be at least as broad as: 1. Insurance Services Office Commercial General Liability coverage (occurrence Form CG 0001 or Claims Made Form CG 0002 or their equivalent forms). 2. Insurance Services Office Form No. CA 0001, covering Automobile Liability, Code 1 (any auto). 3. Workers’ Compensation insurance as required by the State of California and Employer’s Liability insurance. 4. Pollution and/or Asbestos Pollution Liability . Minimum Limits of Insurance Commercial General Liability Insurance COMPANY shall take out and maintain during the life of the Agreement Automobile and Commercial General Liability (CGL) Insurance that provides protection from claims which may arise from operations or performance under this Agreement. If COMPANY elects to self-insure (self-fund) any liability exposure during the contract period above $50,000, COMPANY is required to notify the CITY immediately. Any request to self-insure must first be approved by the CITY before the changed terms are accepted. The amounts of insurance coverages shall not be less than the following: General Liability: $10,000,000/Occurrence, Bodily Injury, Property Damage: $5,000,000/Occurrence, Bodily Injury, Property Damage. Should Company choose to engage subcontractors, insurance requirements for those subcontractors shall be negotiated and determined as part of any mutually agreed-upon written 7.2.b Packet Pg. 79 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) consent for COMPANY to engage subcontractors under Section 15.A of the Franchise Agreement. General Liability The following coverages or endorsements must be included in the policy(ies): 1. CITY and its Directors, officers, and employees are additional insureds in the policy(ies) as to the work being performed under this Agreement. 2. The coverage is primary and non-contributory to any other insurance carried by CITY. 3. The policy(ies) cover(s) contractual liability for the assumption of liability through the indemnity in this Agreement. 4. The policy(ies) is(are) written on an occurrence basis. 5. The policy(ies) cover(s) City property in the COMPANY’s care, custody, and control. 6. The policy(ies) cover(s) personal injury (libel, slander, and wrongful entry and eviction) liability. 7. The policy(ies) cover(s) products and completed operations. 8. The policy(ies) shall not be canceled nor materially altered unless 30 days' written notice is given to CITY. 9. The insurance provider must have a minimum AM Best Rating of A:VIII or better. Auto Liability 1. The policy(ies) cover(s) use of owned, non-owned, and hired automobiles and equipment. Workers Compensation Insurance COMPANY shall take out and maintain during the life of the Agreement, Workers Compensation Insurance in amounts and upon terms and conditions required by Applicable Law, for all of its employees on the project. In lieu of evidence of Workers Compensation Insurance, CITY will accept a Self-Insured Certificate from the State of California. COMPANY shall require any sub- consultant to provide it with evidence of Workers Compensation Insurance in amounts and upon terms and conditions required by Applicable Law. Pollution and Remediation Legal Liability Insurance COMPANY shall take out and maintain during the life of the Agreement Pollution and Remediation Legal Liability Insurance that provides protection from claims which may arise from unknown pre-existing and future hazardous materials and environmental liabilities under this Agreement. The amounts of insurance coverages shall not be less than the following: Hazardous Waste and Environmental Impairment Liability: $10,000,000/Occurrence Commercial Crime Coverage COMPANY shall take out and maintain during the life of the Agreement Commercial Crime Coverage Insurance that provides protection from claims which may arise from significant losses caused by internal employees and/or third parties under this Agreement. The amounts of insurance coverages shall not be less than the following: Commercial Crime Coverage: $5,000,000/Occurrence 7.2.b Packet Pg. 80 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) Deductible and Self Insured Retentions Any deductibles or self-insured retentions must be declared to the Entity. The COMPANY shall provide evidence satisfactory to the Entity guaranteeing payment of losses and related investigations, claim administration, and defense expenses. Other Insurance Provisions A. The General Liability, Automobile Liability, Pollution policies are to contain, or be endorsed to contain, the following provisions: 1. The Entity, its officers, officials, employees and volunteers are to be covered as additional insureds with respect to liability arising out of automobiles owned, leased, hired or borrowed by or on behalf of the COMPANY; and with respect to liability arising out of work or operations performed by or on behalf of the COMPANY including materials, parts or equipment furnished in connection with such work or operations; Pollution. 2. For any claims related to this project, the COMPANY’s insurance coverage shall be primary insurance as respects the Entity, its officers, officials, employees, agents and volunteers, except for Workers’ Compensation and/or Employer’s Liability. Any insurance or self-insurance maintained by the Entity, its officers, officials, employees, agents or volunteers shall be excess of the COMPANY’s insurance and shall not contribute with it. 3. Each insurance policy required by this clause shall be endorsed to state that coverage shall not be canceled by the Insurer except after endeavoring to provide thirty (30) days prior written notice to the Entity, except ten (10) days for non-payment of premium. 4. Coverage shall not extend to any indemnity coverage for the active negligence of the additional insured in any case where an agreement to indemnify the additional insured would be invalid under Subdivision (b) of Section 2782 of the Civil Code. B. The Automobile Liability policy shall be endorsed to delete the Pollution and/or the Asbestos exclusion and add the Motor Carrier Act endorsement (MCS-90), Broadened Pollution Liability Coverage – Covered Autos Form #: DA4P05a and/or other endorsements required by federal or state authorities. C. If General or Pollution Liability coverages are written on a claims-made form: 1. The “Retro Date” must be shown, and must be before the date of the contract or the beginning of contract work. 2. Insurance must be maintained and evidence of insurance must be provided for at least five (5) years after completion of the contract of work. 3. If coverage is canceled or non-renewed, and not replaced with another claims-made policy form with a “Retro Date” prior to the contract effective date, the COMPANY must purchase “extended reporting” coverage for a minimum of five (5) years after expiration of the franchise. 7.2.b Packet Pg. 81 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) 4. A copy of the claims reporting requirements must be submitted to the Entity for review. Acceptability of Insurers Insurance is to be placed with insurers with a current A.M. Best’s rating of no less than A:VIII if admitted. Coverage may be written by a Nonadmitted insurance company. A Nonadmitted company should have an A.M. Best’s rating of A:VIII or higher. Exception may be made for the State Compensation Insurance Fund when not specifically rated. Verification of Coverage COMPANY shall furnish the Entity with endorsements effecting coverage required by this clause. The endorsements are to be signed by a person authorized by that Insurer to bind coverage on its behalf. The endorsements are to be on forms provided by the Entity, unless the insurance company will not use the Entity’s form. All endorsements are to be received and approved by the Entity before work commences. As an alternative to the Entity’s forms, the COMPANY’s insurer may provide complete copies of endorsements effecting the coverage required by these specifications. Subcontractors COMPANY shall include all subcontractors as insureds under its policies or shall furnish separate certificates and endorsements for each subcontractor. All coverages for subcontractors shall be subject to all of the requirements stated herein, except for the General Liability Limits required and the Pollution Liability coverage in its entirety. 7.2.b Packet Pg. 82 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) EXHIBIT C SB 1383 RELATED MATTERS Defined Terms. This Exhibit uses certain terms defined in Section 18982 of the Final SB 1383 Regulations issued in November 2020 (the “Final Regulations”). For ease of reference, when such terms are used herein, they are generally capitalized. Unless otherwise defined in this Agreement or unless the context otherwise requires, as used in this Exhibit, terms defined in said Section 18982 shall carry the meanings set forth therein. Compliance Method. The following SB 1383 requirements assume the use of a “standard” compliance approach in accordance with the Final Regulations. For information purposes only, and without intending to modify City or Company’s obligations under this Agreement or applicable law, it is understood between the parties that a "standard” compliance approach means an approach to compliance other than a Performance-Based Approach pursuant to Section 18998.1 of the Final Regulations, so that the city shall not be entitled to compliance exemptions under Section 18998.2 of the Final Regulations. City and Company agree to meet and confer as needed to discuss changes to Company’s operations related to Exhibit C as necessary or appropriate to meet CalRecycle’s expectations for compliance with SB 1383. If the changes to the Company’s operations entail additional costs or require additional services to be provided, Company and City shall mutually agree on the compensation to be provided to Company in advance of Company’s implementation of such change. During the Term of this Agreement, City may elect to pursue a “performance-based Source Separated collection service” approach in accordance with Section 18998.1 as set forth in the Final Regulations. In general terms, based on the Final Regulations, the performance-based compliance approach would require provision of at least three Containers for Source Separated Collection of Discarded Materials to ninety percent (90%) of Residential Customers and to ninety percent (90%) of Commercial Customers, while reducing some requirements for the City and the Company, as described in Section 18998.2. The performance-based compliance approach places significant added responsibility on Processors; Company would coordinate with the Approved Facility(ies) as necessary to ensure Organic Materials and Recyclable Materials are provided in a form that allows for Processing in accordance with the Final Regulations. Company would also coordinate with the Approved Facility(ies) as necessary to ensure Solid Waste characterization studies can be conducted in accordance with the Final Regulations. Should the City elect to pursue such a performance-based compliance approach, the City Contract Manager and Company shall meet and confer at least one (1) year prior to the implementation of the performance-based approach. Notwithstanding the foregoing or any other provision, Company shall not be required to implement the performance-based approach or any related services unless and until the parties mutually agree in writing as to the specific obligations Company is to perform and the compensation to Company for the same. Key SB 1383 Staff. Company shall hire three (3) half time fully qualified individuals for the new Company staff positions of SB 1383 Compliance Specialist, Outreach and Education Specialist, and Hauler Route Reviewer(s). The SB 1383 Compliance Specialist and Outreach and Education 7.2.b Packet Pg. 83 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) Specialist shall have primary responsibility for planning and executing all compliance, outreach, issuance of communication and follow-up levels, and technical assistance activities necessary to ensure successful implementation of all SB 1383-related requirements of Company set forth in this Agreement, including managing the work of any technical assistance Subcontractors hired by Recology at Recology’s sole discretion, as applicable, and ongoing close coordination with the City Contract Manager and their designees. Section 1. SB 1383 Inspections and Follow-Up General. Company shall perform Customer Compliance Reviews and Complaint Investigations as described in this Section commencing as soon as practicable after the Effective Date of the contract and no later than June 30, 2023, and at least annually thereafter, unless otherwise noted. 1.1 Commercial Generator Desktop Compliance Reviews Company shall complete a compliance review of all Multi-Family and Commercial Customers that subscribe for two (2) cubic yards or more per week of Solid Waste, including Organic Materials, to determine whether they: (i) are subscribed for Organic Materials collection service and/or Recyclable Material collection service, as applicable, (ii) have an applicable waiver, (iii) have notified Company in writing that they are in compliance with the Self- Hauling requirements set forth in Section 18988.3 of the Final Regulations and the Gilroy City Code, including whether such Commercial Customer is complying through Back-Hauling Organic Materials, or (iv) have indicated on their waiver application or in a separate writing to Company that a hired landscaper hauls their organic waste and that organic waste generation post-hauling is below the organics recycling subscription threshold (in which case they need to apply for a De Minimis Waiver, see Section 6.1). Commercial Generator Desktop Compliance Reviews shall consist of a “desk” review of records to determine Customers’ compliance with the above requirements and does not require on-site observation of service. 1.2 Annual Hauler Route Reviews Beginning as soon as practicable after the Effective Date of the contract and no later than June 30, 2023, and annually thereafter, the Company shall initiate annual Hauler Route Reviews of Commercial, Multi-Family, and Single-Family customers in accordance with the terms set forth in Section 2 of this Exhibit C. 1.3 Food Recovery Compliance Reviews 7.2.b Packet Pg. 84 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) The City anticipates fulfilling the City’s obligations to address edible food recovery through its participation in regional programs coordinated by other entities. Company acknowledges that the collection of and regulatory activities addressing recoverable edible food that are contemplated by the SB 1383 regulations are outside of the exclusive rights City grants to Company in this Agreement. Should these other programs fail to adequately address the City’s obligations for edible food recovery, City and Company may discuss expanding Company’s activities in order to fulfill City’s regulatory obligations. Should the City and Company mutually elect to utilize Company’s services to support the Food Recovery Program, Company may recover its reasonable and necessary costs for performing these services as EXCEPTIONAL COSTS in its rate application for the year following provision of the services. 1.4 Complaint Investigations for SB 1383-Noncompliance A. Reporting to City. Prior to commencement of investigation of complaints received in which a Person alleges that an entity is in violation of SB 1383 requirements, Company shall provide a brief complaint report to the City Contract Manager for each SB 1383-noncompliance complaint within five (5) Working Days of receipt of such complaint. B. Investigation. Company shall assist City in meeting its obligation to investigate written and oral complaints by commencing an investigation within ten (10) business days of receiving a complaint in the following circumstances: (i) upon Company receipt of a complaint that an entity may not be compliant with SB 1383; and (ii) upon City Contract Manager request to investigate a complaint received by City. Company is required to investigate complaints against Customers only, and not against Edible Food recovery organizations, Edible Food recovery services, and other entities regulated by SB 1383, and is only required to investigate complaints related to services provided by Company. Company shall investigate the complaint by: i) Reviewing the Service Level of the Customer; Reviewing the waiver list, if applicable, to determine if the entity has a valid, City-approved de minimis, space constraint, or Collection frequency waiver; ii) Reviewing the Self-Haul customer list, if applicable, to determine if the customer is on the list; iii) Contacting the entity to gather more information and inspecting Premises of the entity identified by the complainant, if warranted; 7.2.b Packet Pg. 85 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) iv) If non-compliance is confirmed during the process of investigation, then the Company shall proceed through the levels of communication and follow-up detailed below in Section 1.5 (A) or (B) as applicable. C. Documentation of Complaints. The Company shall enter all complaints received or investigated by Company as required in the Company Implementation Record including an electronic investigation complaint log that documents the Customer account in question, the nature of the complaint, the investigation performed, dates of outreach conducted and/or communication and follow-up levels issued per Section 1.5 (A) or (B), as applicable, whether or not the customer investigated was found to be in violation of SB 1383, and the final resolution. This information shall be available to the City Contract Manager as described in Section 8, Reporting, below. 1.5 Communication and Follow-Up for Desktop Compliance Reviews and Complaint Investigations A. Non-Compliant Entities through December 31, 2023. When compliance reviews or complaint investigations are performed by Company, Company shall provide City- approved educational materials where Company has determined a Customer is either not properly subscribed for service based on the results of a Commercial Generator Desktop Compliance Review, where Company has identified Prohibited Container Contaminants during the performance of a Hauler Route Review (as described in Section 2), or if a Complaint Investigation confirms a violation. Company shall provide these educational materials to the non-compliant Customers within two (2) Working Days of determination of any non-compliance discovered as a result of a Commercial Generator Desktop Compliance Review or Complaint Investigation or immediately upon identification of Prohibited Container Contaminants during a Hauler Route Review. B. Communication and Follow-Up for Commercial Generator Desktop Compliance Reviews and Complaint Investigations Beginning January 1, 2024. If a Commercial Generator Desktop Compliance Review leads to the determination that a customer is not properly subscribed for service, or if a Complaint Investigation confirms a violation then Company shall proceed through the levels of communication and follow-up including: i) issuance of a Notice of Referral to the City requiring compliance within 40 days of the issuance of that notice, to be issued within two (2) Working Days of determination of non-compliance, accompanied by outreach and educational materials; ii) issuance of a 25-day warning letter that reiterates the non-compliance issue, action items, and deadline for compliance; 7.2.b Packet Pg. 86 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) iii) issuance of a 10-day warning letter that reiterates the non-compliance issue, action items, and deadline for compliance; and iv) referral to City if non-compliance issue remains unresolved after 45 days of determination of non-compliance. For the purpose of this document, the Notice of Referral to City is defined as a notice that a violation has occurred that includes a compliance date for the non- compliant customer to avoid an action by City to seek penalties. When a violation is referred to the City, the Company shall provide the following information at the time of referral: Customer’s account information, the nature of the violation, then-current Service Level, Company’s efforts to resolve the violation to-date, and any other documentation that may be useful to the City as they escalate communication and follow-up to enforcement that may include penalties and fines. C. Documentation of Communication and Follow-Up. City Contract Manager shall be immediately notified of contamination or compliance issues when it will result in a Referral to the City by the Company. This will provide an opportunity for the City to witness contamination and take photo documentation. Company shall keep up-to-date records and documents required in the Company Implementation Record including Customers and Generators with SB 1383 violations, the type of educational materials provided, levels of communication and follow-up issued, and the resolution, along with dates the outreach and/or levels of communication and follow-up were issued. This information shall be available to the City Contract Manager per the requirements of Section 8, Reporting, below. Section 2. Hauler Route Review Methodology / SB 1383 Contamination Minimization Program Company shall assist in minimizing Contamination by helping to educate Customers on acceptable and non-acceptable materials, by monitoring the contents of Collection Containers, and by refusing to Collect Containers with visible Prohibited Container Contaminants. Commencing with the Effective Date of the contract, Company shall hire staff or a consultant to complete the Hauler Route Reviews in accordance with the procedures described in this Section (Section 2). The Hauler Route Reviews shall be completed no later than December 31of each year of the Agreement. The Company shall conduct Hauler Route Reviews for Prohibited Container Contaminants in Containers in a manner that is deemed safe by the Company and is conducted in a manner that results in all Hauler Routes being reviewed annually. Annual Hauler Route Reviews shall be conducted in accordance with the Annual Hauler Route Review Methodology set forth in this section. The following reflects the original methodology as established at the effective date of this agreement. Company and City shall annually review and amend the methodology as needed 7.2.b Packet Pg. 87 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) to ensure SB 1383 compliance, and any change in methodology agreed to shall be documented in writing and shall be deemed to be incorporated herein by this reference. 2.1 Annual Hauler Route Review Methodology At least once annually, Company shall conduct a Route Review for each Hauler Route. A Hauler Route is the designated weekly itinerary or sequence of stops scheduled to be performed by one collection vehicle providing regularly scheduled Solid Waste, Recyclable Material or Organic Material collection services (not on-call or Bulky Item Collection Program services) within the service area. For each Route Review, the Company shall visually inspect the contents of the number of Containers set forth below. Each inspection shall involve observing the contents of the Container (whether by lifting the lid, using a camera, or other method deemed appropriate by Company), but shall not require Company to disturb the contents or open any bags. The Containers shall be randomly selected by a method approved by the City Contract Manager. For the avoidance of doubt, Company shall not be required to annually inspect every Container on a Hauler Route. If Company finds Prohibited Container Contaminants in a Container during a Route Review, Company shall notify the customer of the violation in writing by following the communication and follow-up levels described below in Section 2.3. Company may dispose of the contents of any Container found to contain Prohibited Container Contaminants. 2.2 Number of Inspections Containers on Hauler Routes shall be inspected consistent with the Table shown below. Company may if it wishes, but shall not be required to, inspect more than the number of Containers identified in the table. Company’s practice shall be to only inspect one Container per customer service location per Route Review (e.g., 40 Containers = 40 locations). Company may inspect more Containers per location if Company wishes, but those additional Containers shall not count towards the number in the table. Route Size (# accounts serviced per week) Number of Containers to be Inspected per Hauler Route in City’s Collection service area Less than 1,500 25 1,500-4,000 30 4,001-7,000 35 7,001 or more 40 7.2.b Packet Pg. 88 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) City reserves the right to require additional inspections if the City determines that the amount of inspections conducted by the Company is insufficient. City may require the Company to prioritize inspections of entities that the City determines are more likely to be out of compliance. Company shall be entitled to recover its reasonable and necessary costs for performing any additional inspections as EXCEPTIONAL COSTS in its rate application for the year following provision of the services. 2.3 Communication and Follow-Up for Hauler Route Reviews If Prohibited Container Contaminants are discovered during a Hauler Route Review, then Company shall proceed through the levels of communication and follow-up immediately upon determination of non-compliance, including: i. issuance of a Courtesy Notice with Educational Materials for containers with <10% contamination by volume; and ii. issuance of a Notice of Non-Collection with Educational Materials for containers with >10% contamination by volume, in addition to a Return Trip Fee and, if applicable, an additional Garbage Collection Fee as described in Section 2.5. 2.4 Documentation of Hauler Route Reviews The Company shall maintain documentation for each Hauler Route Review conducted. The documentation shall include all records and documents relating to Hauler Route Reviews that are required to be included in the Company Implementation Record, including noncompliant account numbers, locations of contamination issues, date of identified contamination, summary of findings, notifications/education issued, number of containers on route, and number of containers inspected. The foregoing information shall be available to the City Contract Manager per the requirements of Section 8, Reporting, below. Company shall permit observation of Route Reviews by the City. In addition, Company shall upon request by City provide email notice to the City’s Contract Manager of the upcoming scheduled Hauler Route reviews that includes the specific time(s) and location(s). 2.5 Assessment of Contamination Fees/Return Trip Fee No sooner than one hundred twenty (120) days following the Commencement Date, Company and City shall meet and confer to discuss potential use of Contamination Fees for Customers that do not properly sort their Discarded Materials. In the event Company leaves a Customer a non-collection notice as a result of contamination, Company shall return to Customer Premises to Collect Contaminated materials as garbage and charge a return trip fee and, if applicable, additional garbage collection fee. 7.2.b Packet Pg. 89 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) 2.6 Communications with Customers Company shall be the primary contact with customers for the communication and follow- up set forth in Section 1.3 of this document. 2.7 Disposal of Contaminated Materials Company may Dispose of Contaminated materials observed in Customer’s Organic Materials Container or Recyclable Materials Container. 2.8 Reporting Requirements Company shall maintain records and report to the City Contract Manager on Contamination monitoring activities and actions taken as required per the Company Implementation Record. This information shall be available to the City Contract Manager per the requirements of Section 8, Reporting, below. Section 3. SB 1383 Container Requirements To ensure continued compliance with SB 1383 Container color and labeling requirements, and in coordination with any related activities that occur prior to the Commencement Date, Company shall confer with the City Contract Manager prior to placing any orders for, purchasing, taking delivery of, and/or utilizing any new Containers when there are material changes in the cart style, sizes, labels, colors, etc. 3.1 Color Standards Company shall provide Collection Containers to customers that comply with color requirements when replacing containers with any containers that have been newly purchased by Company. Colors shall be green for organic wastes, blue for recycling, and grey for landfill waste. Containers provided to customers starting service shall conform to the above color scheme. Recology and City shall agree to work collaboratively on Debris Box color standards and labeling. 3.2 Labeling Requirements Imprinted or In-Mold Labels for New Containers. Commencing with the Effective Date of the contract, all new Containers provided by the Company that are purchased by Company shall be imprinted with text or graphic images that indicate the primary materials accepted and the primary materials prohibited in that Container. Labels shall clearly indicate items that are Prohibited Container Contaminants for each Container. Prior to ordering any Containers or lids with in-mold labels, Company shall submit a sample of its proposed label, proposed location(s) for placement of labels on each type of Container, and its labeling plan to the Contract Manager for approval. 7.2.b Packet Pg. 90 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) Section 4. Food Recovery Program The City anticipates fulfilling the City’s obligations to address edible food recovery through its participation in regional programs coordinated by other entities. Company acknowledges that the collection and regulatory activities addressing recoverable edible food that are contemplated by the SB 1383 regulations are outside of the exclusive rights City grants to Company in this Agreement. Should these other programs fail to adequately address the City’s obligations for edible food recovery, City and Company may discuss expanding Company’s activities in order to fulfill City’s regulatory obligations. Should the City and Company mutually elect to utilize Company’s services to support the Food Recovery Program, Company may recover its reasonable and necessary costs for performing these services as EXCEPTIONAL COSTS in its rate application for the year following provision of the services. Section 5. Education and Outreach All program related education and outreach materials designed by Recology and in collaboration with the City and distributed by the Company in compliance with the requirements of the Agreement, shall be translated into Spanish. This includes both printed materials and digital outreach including social media posts, website, etc. All program related education and outreach efforts designed by Recology and in collaboration with the City shall be documented for inclusion in the Company Implementation Record including number of people reached, type of message delivered, distribution type, etc. Section 6. SB 1383 Generator Waiver Program Coordination The following SB 1383 waivers are defined in Section 18984.11 as set forth in the Final Regulations, for implementation, individually or collectively, at City discretion. Should the City elect to allow one or more Generator waivers pursuant to SB 1383, Company shall coordinate with City as necessary to comply. Company understands and accepts that Company’s scope of services, and provision of services may be affected by City grant of waivers. Company shall cooperate with and coordinate with the City regarding verification of eligibility for waivers in accordance with the following steps: 1) Company shall respond to Customers requesting De Minimis or Physical Space waivers and provide the Customer with the appropriate City application form; 2) Company shall verify the information provided by the customer on the application, and submit to the City for review; 3) City reviews waiver application materials, approves or declines the waiver application, and returns to Company the completed application form that has been updated with City’s approval or denial of the waiver for Company to distribute to Customer; 4) Company provides Customer with completed application form that indicates City’s approval or denial of the waiver application; 5) Company maintains an up-to-date list in the Company Implementation Record of Customers that have been granted waivers by City; and 6) at least every five years from the date of issuance, Company shall verify that commercial businesses are still meeting requirements of granted de minimis and physical space waivers. All parts of the waiver issuance process shall be recorded on one form including Customer application, Company 7.2.b Packet Pg. 91 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) verification, and City approval/denial. Company shall verify information included in waiver applications in the following manner and indicate findings on the application form: i. For Physical Space Waiver applications, Company will verify whether the Container storage area(s) at the service address are in Company’s opinion sufficient to add a Recyclable Materials and/or Organic Materials container (whichever one(s) the Customer is seeking a physical space waiver for). “Container storage area” means a contiguous area designated by the Customer for storage of Refuse, Recyclable Materials, and/or Organic Materials Containers. ii. For De Minimis Waiver applications, Company will verify the estimated weekly volume of Organic Materials and/or Recyclable Materials generated by the Customer and discarded in the Solid Waste Containers at the service address. The estimate shall be based on a single visual inspection of the contents of Container(s) at the service address. Each inspection shall involve observing the contents of the Container(s) by the method deemed appropriate by Company but shall not require Company to disturb the contents or open any bags. 6.1 De Minimis Waivers (Three-Container Systems) The City may elect to waive a Commercial Customer’s obligation to comply with some or all of the Recyclable Materials and Organic Materials requirements as set forth in this Agreement, pursuant to SB 1383, and in the Municipal Code if the Commercial Customer provides documentation or the City has evidence demonstrating one of the following de minimis conditions: i) The Commercial Customer’s total Solid Waste Collection service is two (2) cubic yards or more per week, and its Organic Materials or Recyclable fibers comprises less than twenty (20) gallons per week of organic waste subject to collection, per applicable Container, of the Commercial Business’ total waste; or, ii) The Commercial Customer’s total Solid Waste Collection service is less than two (2) cubic yards per week, and its Organic Materials or Recyclable fibers comprises less than ten (10) gallons per week of organic waste subject to collection, per applicable Container, of the Commercial Business’ total waste. When a Customer submits an application for a De Minimis Waiver and the Customer indicates on their application that a landscaper hauls away green waste, Company shall collect contact information from the Customer’s application for the landscaping company that is removing the organic waste from the site and provide that information to the City as part of the De Minimis Waiver application. 7.2.b Packet Pg. 92 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) 6.2 Physical Space Waivers The City may elect to waive a Commercial Customer’s or Property Owner’s obligation to comply with some or all of the Recyclable Materials or Organic Materials Collection service requirements as set forth in this Agreement, pursuant to SB 1383, and in the Gilroy City Code if the Commercial Customer or Property Owner provides documentation, or the City has evidence from its staff, the Company, licensed architect, engineer, or similarly qualified source demonstrating that the Premises lacks adequate space for Recyclable Materials and/or Organic Materials Containers. Should the City elect to grant such physical space waivers, Multi Family Customers that do not have sufficient space to comply with some or all of the Organic Materials Collection service requirements set forth in this Agreement may be required to Self-Haul Organic Materials to the Approved Facility, subject to Applicable Law. 6.3 Collection Frequency Waivers The City may elect to allow the Company to provide Collection of Solid Waste once every fourteen (14) days, rather than once per week, for Customers that have been granted a Collection frequency waiver from the City. 6.4 Company Recordkeeping of Generators Granted Waivers Company shall maintain waiver-related records identified on the Company Implementation Record and report on waiver verifications per the requirements of Section 8, Reporting, below. Section 7. SB 1383 Procurement Requirements Company’s responsibilities regarding compost procurement arrangements are identified in Recital I and Section 5.J of the Agreement. Company shall be proactive in evaluating commercially available SB 1383-compliant vehicle fuel for use in Company vehicles. Section 8. Record Keeping Company shall supply City with the following categories of complete and up-to-date records as required in the Company Implementation Record: Route Reviews Waivers and Exemptions Education and Outreach Compliance Reviews Complaint Investigation Edible Food Recovery (if Recology support of Food Recovery Program becomes needed) Contamination Minimization (in event of a switch to Performance-Based Approach) 7.2.b Packet Pg. 93 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) Company and City shall mutually agree on the format of all forms required as part of the Company Implementation Records, as well as the setup of the electronic folder system where all forms shall be stored in the agreed-upon folders. As of the date of this Agreement, the City and Company agree that the accompanying documentation shall be organized into the appropriate files as identified in the Company Implementation Record, once the format and contents are mutually agreed upon by Company and City as stated above. Company shall enter required data into the Company Implementation Record and save corresponding documentation in the agreed-upon Filing System within five (5) business days of any change affecting data within any required reporting category and within one (1) business day of notification from CalRecycle request to review implementation record. All information shall be entered into a shared electronic platform that meets data security and confidentiality criteria agreed upon by Company and City. 7.2.b Packet Pg. 94 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) EXHIBIT D DESIGNATED FACILITIES As of July 1, 2022, the designated facilities for disposal or processing of Solid Waste Matter are as follows: (i) Solid Waste shall be disposed of at John Smith Road Landfill in Hollister, California or another facility designated by Waste Solutions Group of San Benito, LLC in accordance with the CITY’s disposal agreement. (ii) Recyclable Material shall be transferred at COMPANY’s San Martin Transfer Station and then processed at GreenWaste Recovery in San Jose, California or other facilities determined by COMPANY. (iii) Organic Material shall be processed at COMPANY’s affiliate’s South Valley Organics facility in Gilroy, California. (iv) Construction and Demolition Debris shall be processed at Pacific Coast Recycling in Gilroy, California or other facilities determined by COMPANY. 7.2.b Packet Pg. 95 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) EXHIBIT E COMMUNITY EDUCATION AND OUTREACH CORE REQUIREMENTS Recology’s outreach in Gilroy will be comprised of the items listed below. All printed materials, web and other content will have cohesive appearance. The Recology corporate branding will serve as the default, except in cases where the City and Recology have agreed on a different visual theme. All materials will be provided in English and Spanish and/or using universal imagery or symbols. The organics stream will be included and at times emphasized to assist the City with SB 1383 compliance. Strategic Outreach Plan In collaboration with City staff, Recology will create a Strategic Outreach Plan will be created in Year 1 of the contract that will guide the overall approach and major deliverables. The Plan will be updated on an annual basis by Recology, in collaboration with City staff. Website COMPANY will update the existing website upon initiation of the new Agreement. Subsequent updates will be made over the duration of the Agreement. Recycling Guide A guide will be distributed to all three customer types (Commercial, Multifamily, and Residential) at the beginning of each calendar year. The guide will provide “how-to” information for all three streams (Waste, Recycling, and Organics), using text and helpful images. In addition, the guide will contain helpful information about the bulky item pick-up program and safe disposal of household hazardous waste, sharps, prescription drugs, and other hard-to-dispose items. New Start Packets New Start Packets will be designed for each customer segment, and will contain the following collateral: Residential Welcome letter with customer service, billing and other basic information. Residential Recycling Guide Calendar indicating street sweeping information Multifamily Welcome letter 7.2.b Packet Pg. 96 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) Multi-family Recycling Guide In-unit “buddy bags” to assist residents with transport of recyclables to the common recycling area(s) or chutes. Buddy bags will depict program information and Recology’s contact information. Commercial Welcome letter Commercial Recycling Guide Supply sheet with information on how to request sorting posters, internal containers, etc. Quarterly Communications Quarterly communications to customers may include the following methods, as determined jointly by the City and Recology: Print newsletter Electronic newsletter Bill insert/flyer, printed Bill insert/flyer, electronic Direct-mail, such as letters or postcards Social Media Other collateral, as agreed upon by the City and Recology Technical Assistance Recology will provide technical assistance to the following customer types: Commercial Recology staff will work to enroll all eligible businesses, institutions, and other commercial customers for all three streams. Recology will provide trainings to staff to help them engage in their programs and properly sort material. Recology will offer tailored outreach to specific commercial sectors and accounts, focusing on contamination reduction and increased diversion. MFD Recology staff will work to enroll all multi-family complexes in all three streams. Recology staff will provide trainings to building managers, custodial staff, and other stakeholders. Recology will offer tailored outreach to specific multi-family complexes, focusing on contamination reduction and increased diversion. Schools/Youth Recology will give presentations to schools and closely affiliated groups. 7.2.b Packet Pg. 97 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) EXHIBIT F STREET SWEEPING (a) Scope of Services. (i) Company shall perform street sweeping operations using appropriate vehicles on all designated City streets, as identified by the City and approved by the Company, no less frequently than once every two weeks, weather permitting, except as provided below. (ii) Company shall perform street sweeping operations using appropriate vehicles in City business districts and on arterial streets, as identified by the City and approved by the Company, no less frequently than once per week, weather permitting. (iii) Company shall perform street sweeping operations using appropriate vehicles on the parking lots at City Facilities (as designated on Exhibit G), no less frequently than once every two weeks, weather permitting. Notwithstanding the foregoing or anything else in this agreement, Company shall not be required to perform street sweeping operations on any street, parking lot, or portion thereof that Company determines is unsafe or poses a threat of damage to Company’s equipment. (b) Performance Requirements. (i) Company will provide sufficient equipment to guarantee uninterrupted service to City, at Company's sole cost and expense. Company shall maintain the equipment in good repair and operating condition and shall provide all fuel, lubricants, tires, and all materials and supplies for the operation thereof. (ii) Company, at its sole cost and expense, shall furnish competent personnel to operate all equipment and such other employees as required to furnish adequately the service required in this Section and will further comply with the following: o In the performance of the street sweeping services described in this Exhibit F, Company agrees to comply with all requirements of Chapter 1 of Part 7 of Division 2 of the Labor Code as they are directly applicable to such services, including requirements pertaining to wages, working hours and workers’ compensation insurance. 7.2.b Packet Pg. 98 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) o Company shall take cognizance of the prevailing wage requirements set forth in California Labor Code Sections 1720, et seq. and 1770, et seq. applicable to certain “public works” and Maintenance” projects and that the performance of the street sweeping services described in this Agreement is subject to compliance monitoring and enforcement by the Department of Industrial Relations. o Company shall not enter into a contract with a subcontractor for the performance of the street sweeping services described in this Exhibit F unless the subcontractor is registered with the California Department of Industrial Relations to perform public work under Labor Code Section 1725.5, subject to limited legal exceptions. (iii) Company shall be solely responsible for disposal of all sweepings collected by Company in the performance of services pursuant to this Section. (iv) Company shall not be required to perform street sweeping in any new subdivision or development in the City until the public improvements of the subdivision or development have been accepted by the City. (v) Company shall be provided with access and the materials necessary to obtain water from City water hydrants and shall be allowed to use such water as necessary to perform duties under this Section free of charge. (c) Service Exclusions. Company and City agree that the street sweeping performed by Company pursuant to this Agreement shall be limited to the collection and disposal of routine debris from streets. For the avoidance of doubt, Company is not required to perform the following: (i) Street sweeping to clear debris from public emergencies and traffic accidents; and (ii) The clearing of hazardous waste. 7.2.b Packet Pg. 99 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) EXHIBIT G SERVICES TO CITY FACILITIES (as of December 1, 2022) City of Gilroy City Services List Cust Name Facility Name Service Address CITY OF GILROY CITY HALL ANNEX 7370 ROSANNA STREET CITY OF GILROY LAS ANIMAS FIRE STATION 8383 WREN AVE CITY OF GILROY SUNRISE FIRE STATION 880 SUNRISE LN CITY OF GILROY GILROY SPORTS PARK 5925 MONTEREY FRONTAGE RD #GSP CITY OF GILROY CITY HALL 7351 ROSANNA STREET CITY OF GILROY GILROY GOLF COURSE 2695 HECKER PASS CITY OF GILROY POLICE DEPT 7301 HANNA ST #PD CITY OF GILROY CORP YARD 613 OLD GILROY ST CITY OF GILROY SENIOR CENTER 7371 HANNA STREET CITY OF GILROY FIRE DEPT. 7070 CHESTNUT/PUBLIC CAN CITY OF GILROY GILROY MUSEUM 95 5TH STREET DEBRIS BOX SERVICE 613 OLD GILROY ST. garbage 198 boxes yard waste 98 boxes C&D 3 boxes 5925 MONTEREY FRONTAGE RD. garbage 6 boxes 7351 ROSANNA ST. garbage 1 box 7.2.b Packet Pg. 100 Attachment: Franchise Agreement 2022 - Recology (3951 : Solid Waste Franchise Agreement Adoption) City of Gilroy STAFF REPORT Agenda Item Title: Introduction of An Ordinance of the City Council of the City of Gilroy Adopting a Franchise Agreement with Recology South Valley for Solid Waste Hauling Services and a Finding that Its Action in Adopting t he Ordinance is Exempt From Review Under the California Environmental Quality Act (“CEQA”) Pursuant to CEQA Guidelines Section 15061(b)(3) (Common Sense Exemption) In that the Proposed Ordinance Will Continue an Existing State - Mandated Program for the Prot ection of Public Health and the Environment, and None of the Circumstances in CEQA Guidelines Section 15300.2 Apply. Meeting Date: November 21, 2022 From: Jimmy Forbis, City Administrator Department: Administration Submitted By: Jimmy Forbis, City Administrator Prepared By: Bryce Atkins, Assistant to the City Administrator Strategic Plan Goals Develop a Financially Resilient Organization Ensure Neighborhood Equity from City Services ☐ Promote Economic Development Activities ☐ Promote Safe, Affordable Housing for All ☐ Maintain and Improve City Infrastructure RECOMMENDATION a) Motion to read the ordinance by title only and waive further reading. b) Introduce an Ordinance of the City Council of the City of Gilroy Approving a 7.2.c Packet Pg. 101 Attachment: November 21 2022 Franchise Agreement Staff Report (3951 : Solid Waste Franchise Agreement Adoption) Franchise Agreement with Recology South Valley for Solid Waste Hauling Services. EXECUTIVE SUMMARY The purpose of this item is to provide the City Council with an opportunity to consider a new solid waste franchise agreement with Recology South Valley. For many decades, the City has partnered with Recology South Valley, and its predecessor companies, to provide the full range of solid waste management services for the community. During this time, City residents and businesses have enjoyed excellent service from the company provided at competitive prices. The City has a franchise agreement with Recology that will expire in 2022, the Council directed staff to negotiate a replacement agreement with Recology. Due to the pandemic and other factors, the negotiations with Recology have just been completed and the recommended franchise agreement (attached) is ready for Council consideration. The City Charter (Charter) places a limit of 25 years for franchise agreements. The previous franchise agreement for solid waste ha uling services was adopted on September 2, 1997, placing the required end of the agreement on September 2, 2022. The City of Gilroy commenced negotiations for a new franchise agreement for solid waste hauling services, but which was not able to be finalized before the 25-year limit was reached. A new, short-term franchise agreement was created to provide this essential service, and begin implementation of new state legislation, while the process to finalize the new, longer-term franchise agreement was completed. The negotiations have been completed, and a draft new long -term franchise agreement has been produced for Council consideration to adopt via ordinance. POLICY DISCUSSION Does Council wish to grant a new, long -term franchise agreement to Recology South Valley to provide solid waste hauling services within the City of Gilroy? BACKGROUND The City contracts through exclusive franchise agreements for solid waste hauling services, sometimes referred to as garbage or refuse service, but which now also includes, due to recent legislation, required recycling and organic waste service. The franchise agreement process is regulated by the Charter. According to the Charter, the maximum term limit on franchise agreements is 25 years. The City entered into its previous franchise agreement on September 2, 1997. At 25 years, the required termination of that franchise agreement was reached on September 2, 2022. The City has been in negotiations with Recology South Valley (Recology) on a new franchise agreement, pursuant to the requirements of the Charter. However, the new franchise agreement that was in negotiations was not able to be completed in time 7.2.c Packet Pg. 102 Attachment: November 21 2022 Franchise Agreement Staff Report (3951 : Solid Waste Franchise Agreement Adoption) for a transition from the 25-year agreement. An interim franchise agreement was executed, effective August 15, 2022 and terminating December 31, 2022. Negotiations have continued between the City’s negotiating team and Recology South Valley. New state legislation and court cases have necessitated changes in the franchise agreement between the version adopted in 1997 and the agreement proposed this evening. New legislation includes: • AB 341 – instituting mandatory commercial recycling to reduce greenhouse gas emissions by diverting commercial solid waste to recycling efforts and to expand the opportunity for additional recycling services and recycling manufacturing facilities in California. • AB 1826 –instituting mandatory commercial organics recycling. This bill implemented an organic waste recycling program to divert organic waste generated by businesses, including mu ltifamily residential dwellings that consist of five or more units. • SB 1383 –instituting required organic waste recycling for residential and commercial customers, building on top of AB 1826. The law requires local agencies to enforce organic waste recycling and food recovery programs, as well as education and outreach. Adoption by Ordinance Required The Charter also specifies procedures for adoption of a franchise agreement. The franchise must be granted by ordinance pursuant to Section 600 of the Chart er. ANALYSIS Summary While the expiration of any franchise agreement would typically involve some updating and modernization of the document, changes in California laws and regulations have required the City and Recology to include significant changes in the services provided. Most notably, SB 1383 and its accompanying regulations mandate that the City take actions to require local residents, businesses, and institutions to divert compostable and recyclable wastes away from the garbage stream. In additi on to the marketing and communication efforts that have typically been implemented to encourage recycling, these new regulations require inspections, enforcement, and recordkeeping if the City is to achieve compliance with the State law. State regulations also now require the City to purchase certain quantities of compost or other products made from the diverted organic materials and oversee/support the recovery of edible food. In addition, the City is now required to ensure that litter is removed from the streets and kept out of the storm drain system. Failure to comply with these mandates will ultimately result in fines from the State. 7.2.c Packet Pg. 103 Attachment: November 21 2022 Franchise Agreement Staff Report (3951 : Solid Waste Franchise Agreement Adoption) The City has worked with Recology to develop a franchise agreement with the following attributes: • Recology continues to perform all of the services they are currently providing including collection, management, disposal, transfer, street sweeping, and billing; • Recology will initiate a new bulky item collection program for multifamily residences and will cooperate with City efforts to collect waste in special and unusual circumstances at the City's request; • Recology staff are largely responsible for the maximum amount of SB 1383 compliance activities that State law allows private parties to perform including outreach to customers, inspections, audits, recordkeeping etc.; • Recology staff will provide the City with enforcement referrals, as needed, to enforce the City's ordinance as required by State law; • Recology will cooperate with the City's efforts to procure compost or other materials as required by law; • Recology will provide the City with implementation funds required by the City to comply with State, regional, and/or local laws; and • Service rates will be adjusted based on updated relevant cost factors and the amount of support required by the City for regulatory compliance. These additional services will require an increase in the rates paid by customers. The initial increase that was negotiated with Recology would be 13.12% effective January 1. This increase is broken down in the “Rate Increase” section below. Key Changes Below are described the key changes from the 1997 -2022 Solid Waste Franchise Agreement and the proposed ten -year franchise agreement being introduced. • Term. The term of the new franchise agreement is ten years and seven months, from December 1, 2022 through June 30, 2033. The agreement stipulates that the parties shall meet again and confer on the possible extension during calendar year 2031, well in advance of the term ending date. • State Legislation Implementation. The new franchise agreement continues implementation of state legislation mentioned earlier relating to solid waste. The three-cart system will remain, but additional efforts as outlined in the agreement, including Exhibit C, include additional workload for Recology to implement these laws for those elements that can be delegated to the franchise waste hauler. • Rate Increase. Rates are proposed to increase by 13.12%, which results in increases of between $0.97 on the low end and $12.90 on the largest residential rate for multiple carts and hillside location, as shown on Exhibit A. No rate increase was made effective in July of 2022 due to the negotiations underway and the development of the interim agreement. In the proposed agreement, Exhibit A identifies the new rates that would be in effect on December 1, 2022. The reason for the increase is two-fold: 7.2.c Packet Pg. 104 Attachment: November 21 2022 Franchise Agreement Staff Report (3951 : Solid Waste Franchise Agreement Adoption) 1. The additional scope of work being performed by Recology related to SB 1383 compliance. 2. The loss of commodity values related to the China Na tional Sword Policy in 2018, a policy initiative by the government of China to monitor and stringently review recyclable waste imports. The China National Sword Policy has reduced the demand for recycling commodities to a point where Recology now has to pay to have the material processed. Prior to 2018, hauling companies were paid for recycling commodities. The prior agreement did not consider commodity values as part of the rate change calculation. To protect the rate payers moving forward, in case the demand for commodities returns, changes in commodity values are now included in the rate change calculation. The detailed breakdown of the negotiated increase is as follows: • 3.18% - Adjustment that would have normally taken effect on July 1, 2022 but was delayed due to negotiations; • 1.57% - Adjustment for additional staff and resources required for SB 1383 compliance; • 3.73% - Adjustment for new bulky item collection program; • 4.64% - Adjustment for changes in recycling market revenues in which recycling commodities, which used to have value, now actually cost money to be recycled. The increase above does not include any payment to the City of implementation funds, any compost procurement, or any special collection services as the rate impacts associated with these items will vary depending on the City's request and do not begin on January 1. The earliest some of these charges could be included is July 1, 2023. These are discussed more later in this report. Staff believes that the rate adjustment is reaso nable given the new services required and changes in the marketplace that have impacted Recology financially. Many communities have seen rate adjustments required of over 20% as a result of these same factors. In addition, the City has negotiated for Recology to perform the maximum amount of regulatory services legally permissible in order to avoid the need for additional City staff to maintain compliance. • Future Rate Increases. Governed by Section 9 of the Agreement, with the basis of calculation and example in Exhibit 2A of the 2022 proposed Agreement, future annual increases will consist of a formula driven by weighted amounts. This formula considers the consumer price index, fuel cost increases, refuse disposal costs, recyclables processing costs, and any exceptional costs that may have been incurred in the year prior. 7.2.c Packet Pg. 105 Attachment: November 21 2022 Franchise Agreement Staff Report (3951 : Solid Waste Franchise Agreement Adoption) • Service Level Changes. Below is a table identifying the changes in services received from the 1997 Franchise Agreement and comparing them to the services being provided in the proposed 2022 Franchise Agreement. Service 1997 Franchise Agreement 2022 Franchise Agreement Performance Audits Performance audits may be conducted by the City, but not more frequently than once every five years. [Section 12] Change - The City now has the right, at any time during the term of the agreement, to conduct an audit of the performance of Recology [Section 2(A)] Fees Paid to City Administrative Fee – 4% Franchise Fee – 5% [Section 11(d)] No Change: Administrative Fee – 4% Franchise Fee – 5% [Section 3] New: Regulatory and Consulting Fee - $110,000. [Section 4] Collect Refuse from Homeless Encampments None. New - Collection provided, and costs will be included as exceptional costs in the rates for the following year. Only pickup of bins, not manual labor of ground cleanup [Section 6(B)] Bulky Item pickup for customers (formerly Spring Cleanup) Annual Spring Cleanup event once per year. Change - Two bulky item collections per calendar year. For bin service, the number of collections per calendar year shall be half the number of units. Limits on type and amount of collection are imposed [Section 6(E)] Mattress Collection Events None. New - Twice per year mattresses can be dropped off at the Pacheco Pass facility, or other facility owned or operated by Recology [Section 6(I)] Compost Procurement None. New – as part of SB1383, City is now required to procure compost at 7.2.c Packet Pg. 106 Attachment: November 21 2022 Franchise Agreement Staff Report (3951 : Solid Waste Franchise Agreement Adoption) Service 1997 Franchise Agreement 2022 Franchise Agreement regulated amounts. Purchase provisions are included to allow City to procure through the franchise agreement compost from Recology. Charges will come through Exceptional Costs, accounted for in the following year’s rate adjustment. [Section 6(J)] Solid Waste Implementation Fee None. New – The City may, in implementing the requirements of the City’s solid waste programs in keeping with local, regional, state and federal requirements, request and receive a fee that shall not exceed the reasonable foreseeable costs for these activities, and the costs will be included in the exceptional costs for calculating the next year’s rate adjustments. [Section 6(K)] Develop and Implement an Outreach and Education Program Recology assisted in promotion of the recycling program and services. [Section 4(h)] Change – the 1997 agreement had a program, but it has changed over time, and in the new agreement has been expanded due to the requirements of state legislation regarding solid waste, recycling and organics recycling requirements. [Section 6(L)(xii)] Liquidated Damages Liquidated damage amounts vary from $10- $50 per occurrence, depending upon the event, up to $100 per day for the Change – the amount is now $300 per day, with certain caps per year that escalate based on prior year liquidated damage 7.2.c Packet Pg. 107 Attachment: November 21 2022 Franchise Agreement Staff Report (3951 : Solid Waste Franchise Agreement Adoption) Service 1997 Franchise Agreement 2022 Franchise Agreement largest incident, with specific causes. [Exhibit M] amounts levied. [Section 7(B)] Termination of Service for Non-Payment No termination of service, lien placed on property each year for any unpaid balances. [Section 11(b)] Change – the previous system for continuing service and applying liens on property has changed. Failure of a customer to make payment who are 120 days in arrears will now result in termination of service until the bill is paid. Details of the timing and conditions are outlined in this section. [Section 11] Transfer Requests No reimbursement to City for costs associated with analyzing a transfer or assignment. [Section 16] Change - In the event Recology wishes to assign/transfer the agreement, it must pay the City $50,000 to cover all direct and indirect costs with evaluation and processing requested transfer. [Section 15] Insurance Coverage $5 million general liability, as well as other insurance requirements Change – Recology will now retain $10 million in insurance, with additional insurance language from the municipal risk pool the City participates within, enhancing protection for the City and its taxpayers and ratepayers from losses relating to insurance claims. [Exhibit B] SB 1383 Education, Outreach, and Enforcement None. New – Recology will now assist the City to comply with SB 1383 and other state legislation surrounding organics and recycling. 7.2.c Packet Pg. 108 Attachment: November 21 2022 Franchise Agreement Staff Report (3951 : Solid Waste Franchise Agreement Adoption) Service 1997 Franchise Agreement 2022 Franchise Agreement [Exhibit C] Fiscal Impact of Franchise The fees paid by the waste hauler are intended to compensate the City for the fiscal impacts of the agreement on the City. There currently is no means to fully assess the full financial impacts of the franchise services on the City’s infrastructure and staffing. After considering the costs to the City of these various impacts, it is Staff's conclusion that the fees charged bear a reasonable relationship to the costs and burdens imposed upon the City. These impacts include the following: • Heavy Vehicles on Streets Franchise fees are intended, in part, to reimburse the City a portion of its costs in maintaining the City’s street system. This is because a waste hauler franchise agreement provides the waste hauler with special access to City streets, including the unique privilege to use the City’s street network to collect waste and the privilege of placing collection bins within City rights of way. Also, the refuse trucks used by waste haulers, such as Recolog y, are heavy vehicles, especially when loaded with refuse. To reach each residence, the vehicles travel on local roads as well as collectors and major streets. While some streets are designed with heavier commercial vehicles in mind, most of the surface streets are not designed and built to undertake repeated loads of that size. This leads to significant contributions towards the deterioration of smaller streets. While there is not currently a cost estimate that the City has prepared, the impacts are known in the engineering community. The Franchise Fee is intended to offset this impact by funding, at least in part, the impact of the vehicles on the roadway. • Contract Management The contractual management of the previous franchise agreement was conducted with staff in addition to their normal duties, mainly due to the relative simplicity of waste hauling services in 1997 when the franchise agreement was enacted. However, since then the world of solid waste, environmental protections, and other legislative req uirements relating to the same have increased complexity and require much more direct oversight of the function and performance of the agreement. This increase has been occurring more rapidly as time has passed, and based on current experience we can antic ipate continued new legislation over the next few years that will require increased direct oversight, but to an unknown degree. The Administrative Fee is intended to pay for the costs associated with managing the contract and solid waste concerns in the community. • New Requirements of SB1383 and costs of implementation SB1383 is still in the process of being implemented over the next several years. The full costs are not known yet. The State mandates are creating new programs 7.2.c Packet Pg. 109 Attachment: November 21 2022 Franchise Agreement Staff Report (3951 : Solid Waste Franchise Agreement Adoption) without known costs. These programs, including food waste recovery management, organics recycling education, recycling enforcement and reporting requirements are tasks above and beyond managing the franchise agreement. Additional staff time will be needed to effectuate these new requir ements on the City’s behalf. Additional staff time, potentially up to a dedicated staff position for solid waste and environmental services, will be needed. These are costs that are not incorporated into the franchise agreement with a dedicated amount. The re is a provision in the agreement that implementation costs that are required to deliver these mandated programs may be included as exceptional costs in each year relating to the rate adjustments. • Consulting Services and Outside Expertise To help ensure compliance with State mandates, the City will need to engage consultants with expertise in the field to assist in ensuring that our activities are meeting compliance requirements, as well as to help address the new programs that are being implemented. To h elp pay for this, there is a $110,000 payment from Recology called a Regulatory and Consulting Fee in the franchise agreement. The amount is enough to obtain needed consultant services to help with regulatory and programmatic projects to keep the City in c ompliance, and lessening the possibility of fines and penalties that taxpayers and ratepayers might have the bear. Franchise and Administration Fee Rates Unchanged The Franchise Fee and Administration Fee rates are not changing in this new franchise agreement. These fee rates, 4% for an Administration Fee and 5% for a Franchise Fee, have not changed since 1997. The monthly charges for services are increasing by approximately 13%, so the amount that the percentage would generate would increase commensurate with the increase in the monthly rates because the rate paying base is increasing. New Fees and Potential Costs There is a new fee, as discussed above, called the Regulatory and Consulting Fee of $110,000 annually to be used to help the City remain com pliant with State regulations. Additionally, there is a cost category called the Implementation Fee which does not have an expressed amount, but that can be used to generate revenue to ensure that the implementation of the mandates are completed, and the c osts would be considered exceptional costs for rate adjustments. Finally, the City is mandated to procure an amount each year of compost under SB 1383. The franchise agreement allows the City to identify each year the required amount of compost, and Recology’s cost to provide that compost will be incorporated into the exceptional costs for the annual rate adjustment the following year. Reasonable Relationship to the Value of the Franchise 7.2.c Packet Pg. 110 Attachment: November 21 2022 Franchise Agreement Staff Report (3951 : Solid Waste Franchise Agreement Adoption) Staff has compiled a comparison of current franchise agreements hel d by other cities within our region, to demonstrate that the fees imposed for the franchise are reasonable to the value as determined through other franchise agreement processes. Below is a table that shows the amount of franchise fees compared to the City of Gilroy’s proposed franchise fees. Municipality Aggregate Revenue- Based Fee Percentage Aggregate Total Fixed or Flat Fees Gilroy (Existing) 9% (4% Admin Fee; 5% Franchise Fee) N/A Gilroy (Proposed) 9% (4% Admin Fee; 5% Franchise Fee) $110,000 Annually Belmont 26% (10% Franchise Fee; 3.5% AB 939 Payment; 2.5% Collection Vehicle Payment; 2% Litter Control Payment; 6% Street Sweeping Payment; 1% NPDES Litter Impact Payment; 1% Rate Stabilization Fund) Monthly $0.63 per month per Single Family Dwelling and $0.28 per Multi-Family Dwelling Unit (Household Hazardous Waste Curbside Collection Payment) Cupertino 12% (10% Franchise Fee; 2% Franchise Surcharge) N/A East Palo Alto Franchise Fees 1. 2.5% of residential customer’s billed amount 2. 15.5% of commercial Customer’s Billed amount) $185,000 Annually (Litter Abatement Fee) Los Altos Hills 10% (Franchise Fee for solid waste) 7.25% (Franchise Fee for recycling) N/A Milpitas 14.17% $425,000 one-time payment for procurement and negotiation of agreement Redwood City 13.65% (Franchise Fee 13%; AB 939 Fee 0.4%; Administrative Fee 0.25%) N/A San Mateo 4% $2,192,698 (2017 rates for Street Sweeping Fee of $320,000; Landfill Closure 7.2.c Packet Pg. 111 Attachment: November 21 2022 Franchise Agreement Staff Report (3951 : Solid Waste Franchise Agreement Adoption) Municipality Aggregate Revenue- Based Fee Percentage Aggregate Total Fixed or Flat Fees Fee $978,198; and AB 939 Fee of $894,500) Santa Clara 3% to 18% (based on rate of recovery of refuse disposed of by specific means in the agreement) N/A CEQA Exemption Adopting this Ordinance is exempt from review under the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines Section 15061(b)(3) (Common Sense Exemption) in that the proposed ordinance will continue an existing state- mandated program for the protection of public health and the environment, and none of the circumstances in CEQA Guidelines Section 15300.2 apply. ALTERNATIVES Council may either adopt, reject, or modify the ordinance and attached franchise agreement. Rejection of the item is not recommended, as there would not be sufficient time to find alternatives to provide the service consistent with the Charter. Modification of the agreement is likewise not recommended, due to the need to take any changes back to Recology to see if agreeable, which may interrupt service for an unknown amount of time. FISCAL IMPACT/FUNDING SOURCE All funds received are placed in the City’s General Fund to pay for s taffing, streets and roads impacts, and other services and supplies related to refuse and recycling. As more robustly discussed above, there is no current method to fully encapsulate the net value of costs and the value of negative impacts against the reve nue and positive impacts in a manner to produce a specific number. This franchise agreement includes the existing 9% of franchise and administration fees that has been in place for the past 25 years, as well as small inclusions for consultant services in t he amount of $110,000 annually. There are mechanisms to increase the value depending upon how implementation of State mandates proceeds, and what the final cash costs amount to in meeting the legal requirements. Overall, funds received will increase consistent with the total increase in user fees, as that is the basis of the franchise and administration fees. Staff expects an increase in those fees by 13.12% above current amounts. In Fiscal Year 2022, the total franchise fees received were approximately $697,100. The 13.12% increase will be a total of $91,460. Combined with the $110,000 for consulting fees, the total increase would be $201,460. 7.2.c Packet Pg. 112 Attachment: November 21 2022 Franchise Agreement Staff Report (3951 : Solid Waste Franchise Agreement Adoption) The cost value of the required compost purchase, as well as any additional staffing or services that may become needed to provide this service and comply with the legal mandates placed upon the City by the State of California are not currently known. CONCLUSION The City’s negotiations for a new franchise agreement has reached its completion and are being presented for adoption via ordinance. The agreement continues the services currently in place and includes services and requirements that are imposed by the State on the City and passes the maximum amount of responsibility and service to the refuse hauler. There is an increase in the rates charged by the hauler for customers, as contained in the agreement. Given that the inflation for the Bay Area of California is at 6.0% for the 12-month period ending in October as reported by the U.S. Bureau of Labor Statistics, the 13% increase for existing service and the expanded services and duties under this agreement is reasonable. The franchise agreement would continue until June 30, 2033. NEXT STEPS Should Council introduce this ordinance, staff will place said ordin ance approving the agreement onto the December 5, 2022 Council meeting for adoption. Additionally, staff will bring forth a proposed ordinance to rescind the 1999 ordinance that established the lien process for unpaid bills. PUBLIC OUTREACH This item was advertised in the Gilroy Dispatch on November 11, 2022 and has been included on the publicly posted agenda for this Council Meeting. Attachments: 1. Proposed Ordinance - Solid Waste Franchise Agreement 2. Proposed Franchise Agreement 7.2.c Packet Pg. 113 Attachment: November 21 2022 Franchise Agreement Staff Report (3951 : Solid Waste Franchise Agreement Adoption) City of Gilroy STAFF REPORT Agenda Item Title: Adoption of an Ordinance Approving a Planned Unit Development Overlay Zoning Amendment for Property at Royal Way (File Number Z 21-05) Meeting Date: December 5, 2022 From: Jimmy Forbis, City Administrator Department: Community Development Department Submitted By: Sharon Goei, Community Development Director Prepared By: Kraig Tambornini, Senior Planner Strategic Plan Goals ☐ Develop a Financially Resilient Organization ☐ Ensure Neighborhood Equity from City Services ☐ Promote Economic Development Activities Promote Safe, Affordable Housing for All ☐ Maintain and Improve City Infrastructure RECOMMENDATION Adopt the second reading of an ordinance to rezone the Royal Way Project pr operty from R3 to R3 PUD Zone District. ANALYSIS At the November 21, 2022 Regular Meeting, the City Council considered and introduced an Ordinance approving zoning amendment application Z 21-05 for the Royal Way Townhouse Project, to rezone the property from the R3 Medium Density Residential Zone District to R3-PUD Medium Density Residential Planned Unit Development Overlay Zone District. The Council motioned to read the Ordinance by title only, waived 7.3 Packet Pg. 114 further reading of the Ordinance, and then introduced the Ordinance (6-0 vote with one absence). No modifications to the draft Ordinance were proposed by the Council. Council is now asked to adopt the Ordinance consistent with its November 21, 2022 action. The Ordinance will take effect thirty (30) days f rom the date of Council action. Attachments: 1. Vicinity Map 2. November 21, 2022 Staff Report 3. Proposed Ordinance 7.3 Packet Pg. 115 Note: Map is for reference purposes only. City of Gilroy 4,427City of Gilroy, GIS Services 737.8 1:NAD_1983_StatePlane_California_III_FIPS_0403_Feet 368.89 Feet737.80 Vicinity Map - Royal Way Townhomes 7.3.a Packet Pg. 116 Attachment: Vicinity Map (4072 : Royal Way Townhomes) City of Gilroy STAFF REPORT Agenda Item Title: Proposed Rezoning, Tentative Map and Architectural and Site Review to Develop 3.37 Acres with a 45 Unit Townhouse Project (Royal Way Townhomes). Meeting Date: November 21, 2022 From: Jimmy Forbis, City Administrator Department: Community Development Department Submitted By: Sharon Goei, Community Development Director Prepared By: Kraig Tambornini, Senior Planner Strategic Plan Goals ☐ Develop a Financially Resilient Organization ☐ Ensure Neighborhood Equity from City Services ☐ Promote Economic Development Activities Promote Safe, Affordable Housing for All ☐ Maintain and Improve City Infrastructure RECOMMENDATION a) Motion to read the ordinance by title only and waive further rea ding; and b) Introduce an Ordinance of the City Council approving adoption of a Planned Unit Development Overlay Zoning Amendment for property at Royal Way (file number Z 21-05); and c) Adopt a resolution approving a Tentative Map for a 45-unit townhome development (file number TM 21-04); and d) Adopt a resolution approving an Architectural and Site Review Permit to allow construction of a 45-unit townhome project on the property following approval of the associated PUD zoning amendment and tentative map. 7.3.b Packet Pg. 117 Attachment: November 21, 2022 Staff Report (4072 : Royal Way Townhomes) EXECUTIVE SUMMARY The project proposes to consolidate and subdivide existing lots totaling 3.37 acres into a 45-unit townhome condominium project. The proposal may be permitted with a Planned Unit Development (PUD) Zoning Amendment, Tentative Map, and Architectur al and Site Review. The PUD zoning overlay is required to permit exceptions to the minimum R3 development standards for setbacks and lot sizes. POLICY DISCUSSION The project entitlements require approval by the City Council upon recommendation of the Planning Commission as it consists of a PUD overlay rezoning and Tentative Parcel Map. An Architectural and Site Review Permit would otherwise be subject to review and approval by the Community Development Director, for permitted multi-family development of the site. BACKGROUND History: This site was rezoned from R2 to R3 zoning in 1983. Prior applications for development were reviewed in 2007 and again in 2015. The applicant , Third Millennium Partners (TMP) Royal Way, LLC, submitted the subject project for preliminary review in 2021. This application responds to preliminary review comments provided on March 19, 2021. The formal submittal was made on October 4, 2021 and deemed complete for processing on July 29, 2022. Planning Commission Recommendation: On October 6, 2022, the Planning Commission reviewed the project and heard testimony from neighbors to the east of the site who expressed concerns with loss of privacy and construction noise and dust. The Planning Commission voted 4-1-0 to recommend approval of the PUD Zoning Amendment and Tentative Map, and voted 5-0-0 to recommend approval of the Architectural and Site Review Permit, with the following additional items: • Explore installation of temporary fencing during construction to control dust. • Change garage door colors to a lighter tone and include windows. • Include additional window treatments such as recessing windows, adding a sill and or shutters. • Consider providing privacy trees between the project and neighboring residences to the east. • Explore need for a water curtain between the project and open space preserve if needed for fire safety. Following the Planning Commission meeting, t he applicant met with the residents to discuss their concerns. A comment letter from PG&E has also been received that notes an existing overhead line crosses the property. The applicant has provided the following 7.3.b Packet Pg. 118 Attachment: November 21, 2022 Staff Report (4072 : Royal Way Townhomes) response to the comments received, including the Planning Commission recommendations: 1. Windows: The applicant, TMP, confirmed the exterior windows are recessed for articulation. 2. Front Entry: TMP confirmed that roof line has rain gutters. 3. Garage Doors: TMP agrees to add a top panel that includes windows. 4. Garage Doors: TMP agrees to lighten the paint color on the garage doors. 5. Neighbors: a. Privacy – TMP met with neighbors at the site on 10.17.22 and agreed to install a solid 8’ good-neighbor fence along the property line of Antonio Ct. lots pending approval by the City Council. b. Privacy - showed neighbors location of trees in front yards of Building E that will face their backyards – will install 24” box trees in this area. c. Dust - per draft Conditions of Approval 41(a), TMP agreed to increase daily watering from “two” to “three” times-a-day during grading. 6. PG&E: Per PG&E letter, TMP confirmed that the pole/line nea r Building E is no longer energized and will be removed as part of land development for current project (most likely was used for former house, pump, etc.). Staff has incorporated responses 3, 4, and 5 into the conditions of approval. The PG&E pole/line will be addressed as part of the subdivision improvement agreement. Staff has further confirmed that the site is not in a high fire hazard zone and requires no further mitigation in this regard. Environmental Assessment: Pursuant to Section 15183 of the California Environmental Quality Act, projects that are consistent with the general plan do not require additional environmental review except as might be necessary to examine whether there are particular project-specific significant effects. Staff has investigated the site and concludes the project qualifies for an infill exemption pursuant to section 15332 of the CEQA Guidelines, and no further environmental analysis is require d. ANALYSIS Project Description: The project proposes to develop 3.37 total ac res of vacant land, between Royal Way and Uvas Creek levee and trail, with 45 two-story townhomes in 11 buildings. The units would be for sale, market-rate housing, and consist of six three- bedroom units and 39 two-bedroom units. The three-bedroom units average 1,300 square feet in size and the two-bedroom units average 1,200 square feet in size. Each townhome includes a two-car garage, front yard and private patio area. Project features and amenities include an onsite recreational playground, 12 guest pa rking spaces, on-site and offsite landscaping, 7.3.b Packet Pg. 119 Attachment: November 21, 2022 Staff Report (4072 : Royal Way Townhomes) perimeter pathway, fencing and outdoor courtyard area. The project also includes landscaping on the Gilroy Unified School District property to the west, and in the parkstrip on Royal Way. The site is relatively level and would result in approximately 3,000 cubic yards of soils removal to accommodate site development. The property is permitted for medium-density residential development and zoned R3 multi-family residential. The planned development overlay is proposed to permit individual townhome lots with deviations to side and front setback standards along the exterior boundary. The tentative map is required to create individual lots for each unit. The architectural and site review permit is required to approv e all site and building design details, consistent with the PUD overlay. The site could otherwise develop as an apartment complex, subject to administrative review, without the PUD rezoning and Tentative Map. General Plan Consistency: The 2040 General Plan requires development of the site at a density of 8 to 20 units per net acre. The site is 3.37 net acres as no additional public rights of way or dedications are required. Therefore, the 45 unit project is within the density range for the site which allows for 30 to 68 units. The attached Planning Commission report contains further detailed discussion of project consistency with goals and policies relevant to the project. Zoning Amendment/Planned Unit Development (PUD) Overlay Zone Analysis: Pursuant to Zoning Code Chapter 30.26, the PUD planned unit development combining district allows diversification in development standards that promote unified planning and development, economical and efficient land use, a higher standard of amenities, creative design, and upgrading of the urban environment. Development standards are established through issuance of a Planned Unit Development permit pursuant to Chapter 30.50.50. The project would propose slight setback reductions for some of the buildings to allow deviations in the required front setback in a few locations (24’ instead of 26’), cul-de-sac setback (20’4” instead of 21’) and interior side setback (6’ instead of 12’); as discussed in detail in the attached Planning Commission staff report. The deviations are minimal and supported to accommodate the project. No other deviations to standards are requested. Tentative Map Analysis: Consistent with Section 21.41(a) of the City Code, the tentative map was distributed to various departments and utility agencies to ensure compliance with the standards for services. The project layout, design and circulation have been reviewed and recommended with conditions. As proposed and conditioned the project would not conflict with existing easements and would result in an orderly pattern of development that is consistent with the medium density land use designation . Architectural and Site Permit Analysis : The building designs and site plan have been reviewed to ensure that they satisfy the applicable criteria listed in Section 30.50.40 of the City Code and City Objective Design Standards. Each unit includes covered 7.3.b Packet Pg. 120 Attachment: November 21, 2022 Staff Report (4072 : Royal Way Townhomes) entryways, private yard areas, covered parking, guest parking provided in the development, and active and passive outdoor recreational areas. The project includes public amenities with an area for installation of artwork at the northeast corner of the site and will provide and maintain landscaping on the Gilroy Unified School District site to the west. This improvement would help assure the area is publicly visible and maintained. The project also includes high quality materials and details, open view fencing and walkways along the site perimeter. ALTERNATIVES The City Council may approve the project with revisions, continue the project for further review, or deny the project. Staff does not recommend these actions. FISCAL IMPACT/FUNDING SOURCE There is no fiscal impact associated with the approval of the project. All project costs are covered by the applicant. The applicant has paid all planning entitlement costs associated with the project. The project will also require payment of all associated building permit fees and development impact fees for citywide improvements. CONCLUSION The Planning Commission recommends that the City Council adopt an ordinance approving the Planned Unit Development Zoning Amendment for reduced setbacks and townhouse condominium lots and adopt resolutions approving the Tentative Map and the Architectural and Site Review Permit for the 45 -unit townhome development project. NEXT STEPS Upon City Council approval, the Engineering Department would complete the process of signing and recording the Parcel Map. The applicant can then apply for building permits to construct the project. PUBLIC OUTREACH On September 21, 2022, notice of the pending project was posted on-site, and notice of the Planning Commission public hearing was published in the Gilroy Dispatch and mailed to residents within 500 feet. On November 11, 2022, notice of the City Council public hearing was published in the Gilroy Dispatch and mailed to property owners within 500 feet of the subject site. In addition, the Planning Commission and City Council public hearing packets are available through the City's webpage. Attachments: 1. Vicinity Map Royal Way 7.3.b Packet Pg. 121 Attachment: November 21, 2022 Staff Report (4072 : Royal Way Townhomes) 2. Architectural Plans 3. Civil and Landscape Plans 4. Street Name Exhibit 5. Planning Commission Resolutions and Staff Report 6. Proposed Ordinance 7. Draft Resolution - TM 21-04 8. Draft Resolution - AS 21-17 9. Correspondence - Sean Reedy Received 11/15/2022 7.3.b Packet Pg. 122 Attachment: November 21, 2022 Staff Report (4072 : Royal Way Townhomes) ORDINANCE NO. 2022-XX AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF GILROY APPROVING A PLANNED UNIT DEVELOPMENT OVERLAY ZONING AMENDMENT FOR PROPERTY LOCATED ON ROYAL WAY APN: 790-44-93, 94, 95, 96, 97, 98, 101, 109 & 110, GILROY, CA 95020 (FILE NUMBER Z 21-05) WHEREAS, on October 4, 2021, Michael Cady, Third Millennium Partners, and property owner Paul Sanders, TMP Royal Way, LLC filed applications requesting architectural and site review, tentative map, and planned unit development rezoning to permit a 45-unit townhome project on the subject 3.37 acre vacant in-fill site located on Royal Way and the Uvas Creek Trail; and WHEREAS, on July 29, 2022, the application submittal was accepted as complete; and WHEREAS, the project has been reviewed and determined to qualify for an infill exemption under the California Environmental Quality Act, pursuant to section 15332 of the CEQA Guidelines, and no further environmental analysis is required, as follows: i) The project is consistent with the applicable general plan medium density land use designation, all applicable general plan policies that promote attached medium density development of the site as proposed, and CEQA Guidelines Section 15183 that states the no additional environmental review is for a project consistent with the general plan where there are no particular project -specific significant effects. ii) The project is substantially consistent with the base R3 zoning designation and regulations, with the flexibility to the zoning standards that have been considered and approved through the PUD overlay process in order to permit attached townhome development consistent with the General Plan. iii) The proposed development occurs within city limits on a project site of no more than five acres which is substantially surrounded by urban uses. iv) The site has no value as a habitat for endangered, rare, or threatened species. v) Approval of the project would not result in any significant effects relating to traffic, noise, air quality, or water quality and proposes development anticipated by the General Plan and General Plan EIR. vi) The site can be adequately served by all required utilities and public services which ae available at the street frontage. vii) There are no significant effects peculiar to this site which is a vacant infill site that was previously approved for residential development and has no unique constraints or habitat conditions. 7.3.c Packet Pg. 123 Attachment: Proposed Ordinance (4072 : Royal Way Townhomes) Ordinance No. 2022-XX Planned Unit Development Zoning Amendment Z 21-05; Royal Way Townhomes Project City Council Regular Meeting | December 5, 2022 Page 2 of 4 WHEREAS, pursuant to Gilroy City Code Section 30.26.50 and Section 30.50.50, the Planning Commission and City Council must approve the planned unit development (PUD) rezoning request and a planned development permit prior to development under the PUD overlay; and WHEREAS, on October 6, 2022, the Planning Commission of the City of Gilroy held a duly noticed public hearing on the project, independently considered the environmental determination, considered the Planned Unit Development request (Z 21-05) and related entitlements in accordance with the Gilroy Zoning Ordinance, staff report, and all evidence received including written and oral public testimony and recommended approval of the project to the City Council; and WHEREAS, the Planning Commission concurrently reviewed and recommended to the City Council approval of Architectural and Site Plan Review application AS 21-17, which serves as the approved PUD development plan, to assure that quality design elements and public amenities are included as required for development within the PUD overlay; and WHEREAS, the Planning Commission concurrently reviewed and recommended to the City Council approval of the Vesting Tentative Map application TM 21-04, as necessary to subdivide the property into individual townhome lots for sale consistent with the PUD rezoning and development plan approvals; and WHEREAS, the Planning Commission of the City of Gilroy determined that the proposed Planned Unit Development Zoning Map Amendment (Z 21-05) meets the findings for approval and recommended that the City Council approve application Z 21-05, subject to Conditions of approval. WHEREAS, the City Council held a duly noticed public hearing on November 21, 2022, at which time the City Council received and considered the staff report, as well as all evidence, received including written and oral public testimony related to the project Z 21-05 and related entitlements; and WHEREAS, the location and custodian of the documents or other materials which constitute the record of proceedings upon which the project approval is based is the City Clerk’s Office. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF GILROY DOES HEREBY ORDAIN AS FOLLOWS: SECTION I The City Council finds pursuant to Gilroy Municipal Code Chapter 30.26 and Article LII that: A. The R3PUD overlay conforms to the applicable Gilroy General Plan in that it promotes attached medium-density residential development at 13.35 units per acre, consistent with the Medium Density Residential land use density of 8 to 20 units per acre. 7.3.c Packet Pg. 124 Attachment: Proposed Ordinance (4072 : Royal Way Townhomes) Ordinance No. 2022-XX Planned Unit Development Zoning Amendment Z 21-05; Royal Way Townhomes Project City Council Regular Meeting | December 5, 2022 Page 3 of 4 B. The PUD overlay amendment is necessary in order to carry out the applicable general plan goals and policies in that it would provide an attached housing ownership option that complies with applicable multi-family objective design standards, provides a type of development that would integrate well within the existing neighborhood which contains a mixture of multi-family and single- family development, and meets the medium density general plan land use density established for the site. C. The PUD overlay amendment is necessary in order to carry out the general purpose of the Zoning Ordinance in that it would promote the development of high quality, medium density, ownership housing options within the City. D. As required by the overlay combining district, Architectural and Site Review Permit AS 21-17 has been submitted and considered concurrently to establish the PUD development plan for this PUD overlay zoning amendment, and findings have been provided to support the amendment and development plan as required pursuant Section 30.50.50. SECTION II The Planned Unit Development Overlay Zoning Amendment (Z 21-05) for property located on Royal Way, Assessor Parcel No’s 799-44-93, 94, 95, 96, 97, 98, 101, 109 and 110, within the City of Gilroy R3 Medium Density Residential zoning district is hereby approved subject to the following conditions: 1. The development approval shall be implemented consistent with the plans and materials submitted for concurrent applications AS 21-17 and TM 21-04. Should these related entitlements expire, the property may otherwise develop under the R3 base zoning regulations. 2. The approval is subject to all, restrictions and requirements established in Gilroy City Code Section 30.50.26 and 30.50.50 which address modifications, time limits, violations and revocations, and revisions. SECTION III If any section, subsection, subdivision, sentence, clause, or phrase of this Ordinance is for any reason held to be unconstitutional or otherwise void or invalid by any court of competent jurisdiction, the validity of the remaining portion of this Ordinance shall not be affected thereby. SECTION IV Pursuant to section 608 of the Charter of the City of Gilroy, this Ordinance shall be in full force and effect thirty (30) days from and after the date of its adoption. 7.3.c Packet Pg. 125 Attachment: Proposed Ordinance (4072 : Royal Way Townhomes) Ordinance No. 2022-XX Planned Unit Development Zoning Amendment Z 21-05; Royal Way Townhomes Project City Council Regular Meeting | December 5, 2022 Page 4 of 4 INTRODUCED the 21st day of November, PASSED AND ADOPTED this 5th day of December 2022 by the following roll call vote: AYES: COUNCIL MEMBERS: NOES: COUNCIL MEMBERS: ABSTAIN: COUNCIL MEMBERS: ABSENT: COUNCIL MEMBERS: APPROVED: Marie Blankley, Mayor ATTEST: _______________________ Thai Nam Pham, City Clerk 7.3.c Packet Pg. 126 Attachment: Proposed Ordinance (4072 : Royal Way Townhomes) City of Gilroy STAFF REPORT Agenda Item Title: Council Adoption of a Resolution of the City Council of the City of Gilroy Approving Commemorative Flag Flying Applications for 2023 Meeting Date: December 5, 2022 From: Jimmy Forbis, City Administrator Department: Administration Submitted By: Jimmy Forbis, City Administrator Prepared By: Bryce Atkins, Assistant to the City Administrator Strategic Plan Goals ☐ Develop a Financially Resilient Organization ☐ Ensure Neighborhood Equity from City Services ☐ Promote Economic Development Activities ☐ Promote Safe, Affordable Housing for All ☐ Maintain and Improve City Infrastructure RECOMMENDATION Council adopt the resolution. BACKGROUND At the February 7, 2022 City Council Regular Me eting, Council adopted the amended and restated Flying Flags at City Facilities Policy (Policy), which is attached to this staff report. The Policy identifies the requirements and application process established to receive approval to fly a commemorative flag at City Hall. 11.1 Packet Pg. 127 ANALYSIS The City received one application during the application window1 for requesting a commemorative flag, which is attached to this staff report. The flag application is to fly the Progressive Pride Flag in June. The application also has been marked that a flag- raising ceremony will be planned, though the applicant has since stated to staff that there is no event planned at this time . If approved, and the applicant later decides to have an event, staff will work with the applicant consistent with the special event permit process. Per the policy, staff’s only involvement as it relates to any approved commemorative flag application is the minimal staff time of raising and lowering the flag. Any other activity must be done through a special event permit and/or encroachment permit, where any staff involvement can be considered. The costs for any such approved staff time would be recovered through the fees for that permit. This ensures that the taxpayers are not incurring the cost of any ceremonies or events related to an approved flag. The application was submitted with signatures to meet the requirement of 150 signed registered voters in Gilroy. There were 199 signatures submitted. After a detailed review by the City Clerk, a declaration of sufficiency was granted, showing successful verification of 168 of the signatures, enough to exceed the 150 required signatures. The certification of sufficiency is also attached to this staff report. Staff is submitting the application to Council for consideration of approval through a resolution, as provided for in the Policy. ALTERNATIVES Council may reject the resolution authorizing the commemorative flag application submitted. FISCAL IMPACT/FUNDING SOURCE None. The applicant paid at the time of application the required user fees, which offsets the cost of processing the application and reviewing signatures. As required by the Policy, fees will be required for any necessary permits for any event that the applicant desires to hold for the flag raising. There will be a minor amount of staff time from Public Works to raise and lower the flag, but this is a nominal amount of staff time. CONCLUSION The City’s first round of commemorative flag-flying applications under the revised Policy has been completed, and one application was received. The application meets the 1 The application window was from September 1, 2022 through October 31, 2022. 11.1 Packet Pg. 128 signature requirements and is being presented to the City Council for its consideration of approval. NEXT STEPS If approved, staff will reach out to the applicant and work with the m as they plan and submit their event plans for their raising of the commemorative flag ceremony. PUBLIC OUTREACH The application process was announced on the City’s website and social media. This agenda item was included on the publicly posted agenda fo r the Council Meeting. Attachments: 1. Draft Resolution - Flag Flying Application Approval for 2023 2. Flag Flying Application - Progressive Pride - June 2023 3. Certificate of Sufficiency - Progressive Pride Flag Application 4. Amended and Restated City Flag Flying Policy 11.1 Packet Pg. 129 RESOLUTION NO. 2022-XX RESOLUTION NO. 2022-XX A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF GILROY APPROVING COMMEMORATIVE FLAG FLYING APPLICATIONS FOR 2023 WHEREAS, on February 7, 2021, the City Council adopted the amended and restated Flying Flags at City Facilities Policy (“Policy”); and WHEREAS, the Policy calls for any interested party that wishes to request a commemorative flag to be flown at City Hall to submit an application to the City on forms and with requirements as outlined and pursuant to the Policy; and WHEREAS, under the Policy the applications that meet sufficiency for signatures are then submitted to the City Council for consideration, with any applications being approved to be done through a resolution of the City Council; and WHEREAS, the City received only one application for flying a Commemorative Flag for flying the Progressive Pride Flag for the month of June 2023; and WHEREAS, the application attained 168 verified signatures, sufficient to meet the 150 signature requirement for the application pursuant to the Policy. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF GILROY DOES HEREBY RESOLVE that the application for the Progressive Pride Flag for the month of June 2023 is hereby approved. PASSED AND ADOPTED this 5th day of December, 2022 by the following roll call vote: AYES: COUNCILMEMBERS: NOES: COUNCILMEMBERS: ABSENT: COUNCILMEMBERS: 11.1.a Packet Pg. 130 Attachment: Draft Resolution - Flag Flying Application Approval for 2023 (4076 : 2023 Flag Flying Applications) RESOLUTION NO. 2022-XX APPROVED: ___________________________ ATTEST: Marie Blankley, Mayor _________________________ Thai Nam Pham, City Clerk 11.1.a Packet Pg. 131 Attachment: Draft Resolution - Flag Flying Application Approval for 2023 (4076 : 2023 Flag Flying Applications) 11.1.b Packet Pg. 132 Attachment: Flag Flying Application - Progressive Pride - June 2023 (4076 : 2023 Flag Flying Applications) 11.1.b Packet Pg. 133 Attachment: Flag Flying Application - Progressive Pride - June 2023 (4076 : 2023 Flag Flying Applications) 11.1.b Packet Pg. 134 Attachment: Flag Flying Application - Progressive Pride - June 2023 (4076 : 2023 Flag Flying Applications) 11.1.b Packet Pg. 135 Attachment: Flag Flying Application - Progressive Pride - June 2023 (4076 : 2023 Flag Flying Applications) 11.1.b Packet Pg. 136 Attachment: Flag Flying Application - Progressive Pride - June 2023 (4076 : 2023 Flag Flying Applications) 11.1.b Packet Pg. 137 Attachment: Flag Flying Application - Progressive Pride - June 2023 (4076 : 2023 Flag Flying Applications) CITY OF GILROY CITY CLERK'S OFFICE Thai Nam Pham , CMC , CPMC I City Clerk 7351 Rosanna Street I Gilroy , CA 95020-6197 Email : t hai.p ham @cityofq il roy.org Phone : (408) 846-0204 I www.cityofgilroy.org CERTIFICATE OF SUFFICIENCY OF COMMEMORATIVE FLAG FL YING APPLICATION I, Thai Nam Pham , City Clerk of the City of Gilroy, County of Santa Clara, State of California, hereby certify that: The flag-flying application for the Progress Pride Flag for the month of June was received on Monday, October 31, 2022 . The Prima Facie count of the recall petition was conducted and accepted as filed with the City Clerk Department on Monday , October 31 , 2022 . That said application consists of 30 sections ; That each section contains signatures purporting to be signatures of qualified electors of the City of Gilroy, California ; That attached to this petition at the time it was filed, was an affidavit purporting to be the affidavit of the person who solicited the signatures, and containing the dates between which the purported qualified electors signed this petition ; That the affiant stated his or her own qualification, that he or she had solicited the signatures upon that Section , that all of the signatures were made in his or her presence, and that to the best of his or her own information and belief, each signature to that section was the genuine signature of the person whose name it purports to be; That after the proponents filed this petition and based on the County of Santa Clara Registrar of Voters' Signature Verification Certificate, I have determined the following facts regarding this petition : Total number of signatures required to qualify: 150 Total number of signatures filed by proponent raw count: 199 Total number of signatures verified: 199 Number of signatures found sufficient: 168 Number of signatures found insufficient: 30 Number of signatures insufficient because of duplication: 1 Based on the above, the petition is deemed to be sufficient (insufficient). IN WITNESS WHEREOF , I have hereunto set my hand and affixed the official seal of the City of Gilroy on this 2nd day of November 2022. Thai Nam Pham City Clerk, City of Gilroy 11.1.c Packet Pg. 138 Attachment: Certificate of Sufficiency - Progressive Pride Flag Application (4076 : 2023 Flag Flying Applications) City of Gilroy Flying Flags at City Facilities Policy Amended and Restated February 7, 2021 Policy Effective February 8, 2022 11.1.d Packet Pg. 139 Attachment: Amended and Restated City Flag Flying Policy (4076 : 2023 Flag Flying Applications) City of Gilroy Flying Flags at City Facilities Policy Purpose To create a Council policy regarding the flying of flags at City Facilities, inclusive of the flags of the United States, the State of California, Sister Cities, and any Commemorative Flags as may be authorized by the City Council. Policy I. Definitions a. “Applicant” shall mean an individual, business, corporation, organization or other entity residing or based within the City Limits of the City of Gilroy who submits an application to display a Commemorative Flag pursuant to this policy. b. “Application Cycle” shall mean a period of time as outlined in this policy for Applicants to submit an application for a Commemorative Flag to be displayed during the subsequent calendar year. Complete applications compliant with the requirements of this policy submitted during the Application Cycle will be submitted to the City Council for consideration. c. “Commemorative Flag” shall mean a flag that identifies with a specific date, historical event, cause, nation, or group of people, whereby the City honors or commemorates the date, event, cause, nation, or group of people by flying the flag. d. “Sister City Flag” shall mean a flag of another city that is an officially designated Sister City to the City of Gilroy. II. General Policy a. It is the policy of the City of Gilroy that the City’s flag poles are not intended to serve as a forum for free expression by the public, but rather for the display of the Flags of the United States and the State of California. The flag poles located at all City facilities may also be used to display the flags of the City of Gilroy, any Sister City Flag, and any Commemorative Flag as may be authorized by the City Council as an expression of the City’s official sentiments. III. Flags of the United States and the State of California a. The Flag of the United States and the Flag of the State of California shall be displayed in conformance with the requirements as provided in Title 1, 11.1.d Packet Pg. 140 Attachment: Amended and Restated City Flag Flying Policy (4076 : 2023 Flag Flying Applications) City of Gilroy Flying Flags at City Facilities Policy Division 2, Chapter 3 of the California Government Code entitled “Display of Flags” b. The Flag of the United States shall further be displayed and handled in accordance with Title 4, Chapter 1 of the United States Code entitled “The Flag”; sometimes referred to as the United States Flag Code. Where the language of this code is mandatory, the City shall comply with the requirement. Where this code provides advisory language, the City shall follow the advisory language to the extent feasible. IV. Flags of the City of Gilroy and any Sister City Flag a. The Flag of the City of Gilroy, when displayed, shall be displayed in conformance with the requirements as provided in Title 1, Division 2, Chapter 3 of the California Government Code entitled “Display of Flags” b. Any Sister City Flags, when displayed, shall be flown in a manner subordinate to the requirements for the Flags of the United States and the State of California. Additionally, they shall be in the fourth position of honor, after the Flags of the United States, the State of California, and the City of Gilroy. V. Commemorative Flags a. Requirements for Requesting the City to Display a Commemorative Flag i. For an Applicant to request the display of a Commemorative Flag at the Gilroy City Hall, an application must be completed which shall require at a minimum the following: 1. The full name, physical address, phone number, electronic mail address, and other such contact information for the applicant as may be requested by the City. 2. The name and a full color image accurately depicting the Commemorative Flag. 3. A statement of explanation or purpose of the Commemorative Flag, including what the flag stands for; any local, national, or international affiliation; brief history; website address; and any other relevant information to be considered by the City Council. 4. The month in which the Commemorative Flag is requested to be displayed. 5. A minimum of 150 signatures from registered voters in Gilroy, each of whom having reached the age of 18 years or greater and are successfully verified as meeting these requirements by the City through utility billing, property 11.1.d Packet Pg. 141 Attachment: Amended and Restated City Flag Flying Policy (4076 : 2023 Flag Flying Applications) City of Gilroy Flying Flags at City Facilities Policy owner information, or other means that may be available to the City. If the City is unable to verify that one or more signatures meet these requirements through available means of the City, the applicant will be advised of the number of signatures deemed unverifiable and removed from the total count. a. The signatures are required for the initial application when a commemorative flag is first requested. If the applicant re-applies each year for the same flag with the same information, the signature requirement is waived every other year, so long as the applications are continuous. If there is a break in the applications for a year or more and an applicant reapplies, even if the last application required signatures, the signature requirement will apply. 6. Whether the applicant intends to hold a ceremony or event for the flag raising, and verification of the applicant’s understanding regarding the requirement to obtain approvals and permits and pay fees to encroach upon or utilize any public right-of-way or City property for the event. 7. An application fee, the amount of which shall be determined and updated/maintained as part of the Master Fee Schedule. 8. If approved, the applicant must provide the flag to be flown. The flag must be provided to City staff for inspection of the actual flag to be displayed, which must conform with specifications as provided by the City for size, shape, and structure. The flag must be in acceptable condition for display, determined at the sole discretion of the City. ii. The specific format of the application and submittal procedures shall be at the discretion of the City Administrator or their designee, so long as the requirements for Applicants as outlined in this policy are contained on the application. iii. The Application Cycle shall open the first day of September (September 1st) each year and shall close at the end of business on the thirty-first day of October (October 31st) each year. Whenever either of these dates fall on a non-business day for the City, the deadlines shall move to the following business day for the City. b. Commemorative Flag Approval Process i. Applications that are complete and compliant with this policy shall be presented to the City Council for consideration during a City 11.1.d Packet Pg. 142 Attachment: Amended and Restated City Flag Flying Policy (4076 : 2023 Flag Flying Applications) City of Gilroy Flying Flags at City Facilities Policy Council meeting held before the end of December each year, after the close of the Application Cycle. ii. Council, in its sole discretion, shall consider the applications, and render a decision to approve which, if any, Commemorative Flags are approved for display. iii. The following requirements regarding approval of displaying Commemorative Flags shall be considered in determining which Commemorative Flags be approved for display: 1. Only one flag may be displayed at a time. 2. Each flag shall be displayed only for one calendar month, beginning with the first day of the month and ending on the last day of the month. 3. Approval shall only be valid for one calendar year. A new application must be filed for any succeeding years, even for flags that have been approved for prior years. This is to allow open and equal opportunities for competing Commemorative Flags that may typically be displayed during the same month each year. 4. Commemorative flags cannot contain messaging or content of the following nature: (a) promoting or opposing a political party, candidate, campaign, or political organization; (b): religious, commercial, racial or other discriminatory themes/speech, adult or sexually explicit, lewd, or obscene themes or materials; illegal activity; drug or alcohol themes or materials. Flag applications that contain these or reasonably related material shall not be considered. iv. Approval shall be completed via a resolution adopted by the City Council identifying the list of which Commemorative Flags were approved, and for which month. c. Displaying of Commemorative Flags i. The City’s involvement in the displaying of Commemorative Flags shall be limited to only the following: 1. Raising of the Commemorative Flag in the earlier part of the morning of the first day of the month. 2. Lowering of the Commemorative Flag in the late afternoon on the last day of the month. 3. Announce the flag raising on the City’s social media and electronic newsletter(s). 4. Where the first or last day of the month lands on a weekend or observed City holiday, and City staff cannot raise or lower the flag on the exact day of either the beginning and/or end 11.1.d Packet Pg. 143 Attachment: Amended and Restated City Flag Flying Policy (4076 : 2023 Flag Flying Applications) City of Gilroy Flying Flags at City Facilities Policy of the month, the lowering of the previous month’s flag will occur in the morning of the next business day, at the same time as the raising of the next month’s flag. ii. Commemorative Flags may only be displayed on a flag pole located at City Hall. d. Commemorative Flag Events i. Should an Applicant wish to host a ceremonial event, the applicant must file an application requesting an encroachment permit, special event permit, and/or a facility rental to have the event. The specific permits needed will depend upon the nature of the event and shall be at the discretion of the City. The Applicant will be required to pay the full application and permit fees for each permit that is required. ii. The application document shall contain language to advise the Applicant: 1. To contact the Community Development Department to inquire about which permits may be required based on the type of event they would like to host. 2. Information about the required deadlines to submit applications, and lead-times between when a permit application is submitted and when an approval or rejection decision is made. 3. That such events are not approved unless and until an official approval of all required permits is granted. 4. The application fees that must be paid by the applicant. iii. The normal fees, insurance requirements, attestations and permit requirements will be required to host the event, and that approval is not guaranteed because of the flag being raised, lowered, or displayed. iv. All conditions of approval in each permit, as required, must be followed for the event to be held. 11.1.d Packet Pg. 144 Attachment: Amended and Restated City Flag Flying Policy (4076 : 2023 Flag Flying Applications) City of Gilroy STAFF REPORT Agenda Item Title: Council Introduce an Ordinance of the City Council of the City of Gilroy Repealing Ordinance Number 99-13, Removing the Use of Liens to Collect for Delinquent Garbage Fees Meeting Date: December 5, 2022 From: Jimmy Forbis, City Administrator Department: Administration Submitted By: Jimmy Forbis, City Administrator Prepared By: Bryce Atkins, Assistant to the City Administrator Strategic Plan Goals ☐ Develop a Financially Resilient Organization ☐ Ensure Neighborhood Equity from City Services ☐ Promote Economic Development Activities ☐ Promote Safe, Affordable Housing for All ☐ Maintain and Improve City Infrastructure RECOMMENDATION a) Motion to read the ordinance by title only and waive further reading. b) Introduce an ordinance of the City Council of the City of Gilroy repealing Ordinance Number 99-13, removing the use of liens to collect for delinquent garbage fees. BACKGROUND On November 21, 2022, the City Council adopted an urgency ordinance enacting the 2022 Franchise Agreement with Recology to provide solid waste hauling services. The 11.3 Packet Pg. 145 previous 1997 Franchise Agreement had a provision within it that delinquent bills that were not paid would be applied as a special assessment on t he property owner’s property tax bill. An ordinance was adopted on September 7, 1999 – Ordinance No. 99-13 – to implement the terms of the franchise agreement. The ordinance enacted the legal authorization to apply delinquent bills as special assessments . ANALYSIS The new 2022 Franchise Agreement has changed the method for collecting unpaid solid waste customer billing fees. Instead of applying the debt as a special assessment, the 2022 Franchise Agreement sets that service shall be terminated after a delinquent payment is in arrears by 120 days for residential customers, 60 days for non-residential customers. Recology, if service is terminated, will let the City know so that the property condition can be monitored to ensure a health and/or safety issue does not arise from the accumulation of refuse/waste. The enforcement mechanism to prevent the accumulation of refuse is the use of the City’s Code Enforcement program. Due to the change in methodology, Ordinance No. 99 -13 needs to be repealed to reverse the code language it implemented. With the repeal of Ordinance 99 -13, the City Code language will revert to the previous version adopted with Ordinance No. 77-15 adopted in 1977, the most recent language in effect before Ordinance No. 99-13. City Code Section 12.16 will change back to the language contained in Ordinance 880, which is attached to this staff report, and provided below: Sec. 12.16. Mandatory garbage service required; unlawful to hinder collectors. a. It shall be mandatory for all owners, occupants or persons in possession, charge or control of all places and premises in the City of Gilroy in or from which garbage is created, accumulated or produced to subscribe to and use the City' s garbage collection service in the manner and according to the terms and provisions of this Chapter, and failure to do so shall be unlawful. b. It shall be unlawful for any person to hinder, threaten, impede or obstruct any garbage collector holding a permit as provided in this division, in the performance of his duties as defined in section 12.9. The remaining sections of the Code enacted by Ordinance 99 -13, specifically Sections 12.23-2 through 12.23-12 that included the special assessment liens, will be removed in their entirety, as 99-13 created those sections. 11.3 Packet Pg. 146 ALTERNATIVES Council may adopt, modify or reject the ordinance. Not recommended, as the 2022 Franchise Agreement is now in effect, and the code section needs to be updated to be consistent with the application of the Franchise Agreement. FISCAL IMPACT/FUNDING SOURCE None. There may be additional Code Enforcement time spent on refuse accumulation. Costs associated with any abatement of refuse accumulation from not having refuse service will be collected via fines, penalties and fees established for code enforcement activities. CONCLUSION Adopting this cleanup ordinance will aid in keeping consistency between the regulatory provisions of the garbage chapter of the City Code, and the practical applications and processes of the 2022 Franchise Agreement with Recology. NEXT STEPS After the public hearing, if introduced by the City Council, staff will bring the ordinance back to the January 9, 2023 Council Meeting for adoption. PUBLIC OUTREACH This item was discussed briefly during the public hearing for the urgency and regular ordinance adopting the 2022 Franchise Agreement with Recology and was included on the publicly posted agenda for tonight’s regular Council meeting. Attachments: 1. Proposed Ordinance - Garbage Lien Ordinance Repeal 2. Ordinance 99-13 3. Ordinance 77-15 11.3 Packet Pg. 147 ORDINANCE NO. 2022-XX AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF GILROY REPEALING ORDINANCE NUMBER 99-13, REMOVING THE USE OF LIENS TO COLLECT FOR DELINQUENT GARBAGE FEES WHEREAS, on September 7, 1999, the Gilroy City Council adopted Ordinance No. 99- 13 regarding garbage and refuse collection and disposal, and procedures for the collection of delinquent garbage and refuse customer billings as special assessment liens; and WHEREAS, the 1997 Franchise Agreement between the City of Gilroy and Recology, then called South Valley Disposal and Recycling, Inc., instituted the process for using liens to recover delinquent billings of customer accounts by placing the liens on the property; and WHEREAS, Recology South Valley and the City have entered into a new franchise agreement effective December 1, 2022 (2022 Franchise Agreement); and WHEREAS, the 2022 Franchise Agreement has changed the manner in which delinquent garbage fees are collected, switching to a model of terminating service for unpaid bills with terms contained in the 2022 Franchise Agreement; and WHEREAS, the placement of liens for unpaid bills is no longer a practice under the 2022 Franchise Agreement, nor mandatory service under the termination model, and therefore the need for the lien process in the City Code is no longer needed or to be used; and WHEREAS, if the City Council decides to repeal Ordinance No. 99-13, Section 12.16 would revert to the original language of Ordinance 77-15, and Sections 12.23-2 through 12.23-12 would be removed from the City Code. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF GILROY DOES HEREBY ORDAIN AS FOLLOWS: SECTION I The foregoing recitals are true and correct and are incorporated herein by this reference. SECTION II That the City Council hereby repeals Ordinance No. 99-13, regarding garbage and refuse collection and disposal, and procedures for the collection of delinquent garbage and refuse customer billings as special assessment liens. SECTION III If any section, subsection, sentence, clause or phrase of this Ordinance is for any reason held to be invalid or unconstitutional, such decision shall not affect the validity of the remaining portions of this ordinance. The City Council of the City of Gilroy hereby declares that it would have passed and adopted this ordinance, and each section, subsection, sentence, clause or phrase hereof, 11.3.a Packet Pg. 148 Attachment: Proposed Ordinance - Garbage Lien Ordinance Repeal (4071 : Garbage Lien Repeal) Ordinance No. 2022-XX Repeal of Ordinance 99-13: Liens for Delinquent Garbage Fees City Council Special Meeting | December 5, 2022 Page 2 of 2 irrespective of the fact that any one or more sections, subsections, sentences, clauses or phrases may be declared invalid or unconstitutional. SECTION IV This Ordinance shall take effect thirty (30) days after its adoption. The City Clerk is hereby directed to publish this Ordinance or a summary thereof pursuant to Government Code S ection 36933. PASSED AND ADOPTED BY THE COUNCIL OF THE CITY OF GILROY this 9th day of January, 2023 by the following vote: AYES: COUNCIL MEMBERS: NOES: COUNCIL MEMBERS: ABSTAIN: COUNCIL MEMBERS: ABSENT: COUNCIL MEMBERS: APPROVED: Marie Blankley, Mayor ATTEST: _______________________ Thai Nam Pham, City Clerk 11.3.a Packet Pg. 149 Attachment: Proposed Ordinance - Garbage Lien Ordinance Repeal (4071 : Garbage Lien Repeal) 11.3.b Packet Pg. 150 Attachment: Ordinance 99-13 (4071 : Garbage Lien Repeal) 11.3.b Packet Pg. 151 Attachment: Ordinance 99-13 (4071 : Garbage Lien Repeal) 11.3.b Packet Pg. 152 Attachment: Ordinance 99-13 (4071 : Garbage Lien Repeal) 11.3.b Packet Pg. 153 Attachment: Ordinance 99-13 (4071 : Garbage Lien Repeal) 11.3.b Packet Pg. 154 Attachment: Ordinance 99-13 (4071 : Garbage Lien Repeal) 11.3.b Packet Pg. 155 Attachment: Ordinance 99-13 (4071 : Garbage Lien Repeal) 11.3.b Packet Pg. 156 Attachment: Ordinance 99-13 (4071 : Garbage Lien Repeal) 11.3.b Packet Pg. 157 Attachment: Ordinance 99-13 (4071 : Garbage Lien Repeal) ORDINANCE NO. 77-15 AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF GILROY REPEALING AND AMENDING VARIOUS SECTIONS OF THE GILROY CITY CODE SO AS TO MAKE VIOLATIONS THEREOF INFRACTIONS RATHER THAN MISDEMEANORS. THE CITY COUNCIL OF THE CITY OF GILROY DOES ORDAIN AS FOLLOWS: Section I: The following sections of the Gilroy City Code are hereby repealed: Sections 6A~9, 11.13 and 15.24, Section II: Section 1.7 of the Gilroy City Code is amended to read as follows: Sec. 1.7. General penalty; continuing violations. Whenever in this Code or in any other ordinance of the city any act is prohibited or is made or declared to ~be un- lawful or an offense, or the doing of any act is required or the failure to do any act is declared to be unlawful, where no specific penalty is provided therefor, the violation of any such provision of this Code or any other ordinance of the city shall be deemed an infraction, and shall be punished as set forth in Government Code Section 36900 as it now exists or may hereafter be amended. Such v£olations may also be redressed by civil action. Every day any violation of this Code or any other ordinance of the city shall continue shall constitute a separate offense. Section III: Section 6.5 of the Gilroy City Code is amended to read as follows: Sec. 6.5. Penalty for violation of article, Any person violating any of the provisions of this article shall be deemed guilty of an infraction. Section IV: read as follows: Section 6.8(b) of the Gilroy City Code is amended to Sec. 6.8.Removal and penalty for violation. b) Any person violating any of the provisions of this article shall be deemed guilty of an infraction. Section V' Section 6A.10 of the Gilroy City Code is amended to read as follows: Sec. 6A.10. Authority ~07 enactment of chaPter, The provisions of this chapter have been enacted pursuant to the provisions of chapter 5b of the Penal Code of the state. 1- ORDINANCE NO. 77-15 11.3.c Packet Pg. 158 Attachment: Ordinance 77-15 (4071 : Garbage Lien Repeal) Section VI: Section 10.16(a) of the Gilroy City Code is amended to read as follows: Sec. 10.16. Penalties for violations. a) Any person who shall violate any of the provisions of the code hereby adopted or fail to comply therewith, or who shall violate or fail to comply with any order made thereunder, or who shall build in violation of any detailed statement of specifications or plans submitted and approved thereunder, or any certificate or permit issued thereunder, and from which no appeal has been taken, or who shall fail to comply with such an order as affirmed or modified by the council or by a court of competent jurisdiction, within the time fixed herein, shall severally for each and every such violation and noncompliance respectively, be guilty of an infraction. The imposition of one penalty for any violation shall not excuse the violation or permit it to continue; and all such persons shall be required to correct or remedy such violations or defects within a reason- able time; and when not otherwise specified, each ten days that prohibited conditions are maintained shall constitute a separate offense. Section VII: read as follows: Section 12.21 of the Gilroy City Code is amended to Sec. 12.21.Removal of accumulated rubbish within e~ght hours f n0tifl-~atiOn~ ..... Any person who shall fail to cause all rubbish, waste material, dry grass, weeds or foul growths which become a menace to public safety and increases the fire hazard, to be removed from any lot, piece or parcel of land within the city within eight (8) hours after having been notified to do so by the chief of police or the chief of the fire department of the city shall be guilty of an infraction. Section VIII: Section 12.35 of the Gilroy City Code is amended to read as follows: Sec. 12.35.Penalties for violation, Any person violating any of the provisions of this Chapter shall be deemed guilty of an infraction. Each day such violation is committed or permitted to continue shall constitute a separate offense and shall be punishable as such hereunder. Section IX: read as follows: Sec. 13A.12. Violations. Each violation of any provision of this chapter and each violation of any of the prescribed terms under which the Section 13A.12~of the Gilroy City Code is amended to 2- ORDINANCE NO. 77-15 11.3.c Packet Pg. 159 Attachment: Ordinance 77-15 (4071 : Garbage Lien Repeal) permit is issued shall constitute an infraction. Each violation of this chapter and each violation of any of the prescribed terms under which the permit is issued shall constitute a public nuisance and be subject to abate- ment as such. Section X: Section 15.120 of the Gilroy City Code is amended to read as follows: Sec. 15.120. Abandonment. It shall be unlawful for any person to abandon, park, store or leave or permit the abandonment, parking, storing or leaving of any licensed or unlicensed vehicle or part thereof which is in an abandoned, wrecked dismantled or inoperative condition upon any private property or public property not including highways within the city for a period in excess'of seven (7) days unless such vehicle or part thereof is completely enclosed within a fence or building in a lawful manner where it is not plainly visible from the street or other public or private property, or unless such vehicle is stored or parked in a lawful manner on private property in connection with the business of a licensed dismantler, licensed vehicle dealer, licensed junkyard or other similar duly licensed business conducted pursuant to law when such parking or storing of vehicles or parts thereof is necessary to the operation of the business. Section XI: Section 15.121 of the Gilroy City Code is amended to read as follows: Sec. 15.121. Failure to remove. It shall be unlawful for any person to fail or refuse to remove an abandoned, wrecked, dismantled or inoperative vehicle or part thereof or refuse to abate such nuisance when ordered to do so in accordance with the abatement provisions of this article of state law where such state law is applicable. Section XII: read as follows: Sec. 15.122. Section 15.122 of the Gilroy City Code is amended to Interference with abatement. It shall be unlawful for any person to interfere with, hinder or refuse admittance to persons authorized by this article to enter upon private property for the purpose of enforcing the pro- visions of this article. Section XIII: Section 16.5(b) of the Gilroy-City Code is amended to read as follows: b) It shall be unlawful for any licensee to operate with- out a permit. 3- ORDINANCE NO. 77-15 11.3.c Packet Pg. 160 Attachment: Ordinance 77-15 (4071 : Garbage Lien Repeal) Section XIV: Section 16.13-1 of the Gilroy City Code is amended to read as follows: Sec. 16.13-1.Nudity of waiter, waitress, entertainer in food and beverage establishments~ Any person, with or without compensation, who acts as a waiter, waitress, or entertainer, in any establishment which serves food, beverages, or food and beverages, including but not limited to alcoholic beverages, for consumption on the premises of such establishment and performs such activity in the nude, is guilty of an infraction. Section XV: Section 16.14-1(c) of the Gilroy City Code is amended to read as follows: Sec. 16.14-1. Public safety telephone numbers; delivery of i--n-~-j~tate rec6rded te%ephone mesSage ther~-~o. c) Violation of this section is an infraction. Section XVI: Section 18A.21 of the Gilroy City Code is amended to read as follows: Sec. 18A.21. Penalty. Any person violating any of the provisions of this chapter shall be punished as provided by section 1,7. Section XVII: Section 20.65 of the Gilroy City Code is amended to read as follows: Sec. 20.65. Penalty. Any person violating any of the provisions of this article shall be punished as provided in section 1.7. Section XV.III: Section 21.8 of the Gilroy City Code is amended to read as follows: Sec. 21.8. Penalty. Any offer to sell or to contract to sell, or any sale or deed of conveyance, made contrary to the provisions of this chapter is an infraction. Nothing herein contained shall bar any legal, equitable or summary remedy to which the city or other political subdivision or ahy person may be entitled and the city or such other political subdivision or person may file a suit in the superior court of the county to restrain or enjoin any attempted or proposed subdivision or sale in violation of this chapter. ORDINANCE NO. 77-15 11.3.c Packet Pg. 161 Attachment: Ordinance 77-15 (4071 : Garbage Lien Repeal) Section XIX: Section 22~32 of the Gilroy City Code is amended to read as follows: Sec. 22.32.Violation of provisions of article deemed n]-- Any person violating any provision of this article, or any distributor who fails or refuses to register as required herein, or to furnish any return required to be made, or who fails to furnish other data required by the director of finance, or who renders a false or fraudulent return of claim, or any person required to make, render, sign or verify and report or claim who makes a false or fraudulent report or claim with intent to defeat or evade the determination of any amount due under this article is guilty of an infraction, Section XX:Section 23.13 of the Gilroy City Code is amended to read as follows: Sec. 23.13. Same--Settlement of disputes. All disputes as to fare shall be forthwith determined by the officer in charge of the police station, and if his decision is in favor of the passenger, the driver shall convey him to the police station and back to his original destination without charge. Failure to comply with such determination shall subject the offending party to a charge of an' infraction. Section XXI: Section 23.14 of the Gilroy City Code is amended to read as follows: Sec. 23.14. Same--Refusal to pay. It shall be unlawful for any person to refuse to pay the lawful fare as fixed in section 23.12 of any of the vehicles regulated by this chapter, after employing or hiring the same. Section XXII: Section 25A.13 of the Gilroy City Code is amended to read as follows: Sec. 25A.13. Violations. Any person violating any of the provisions of this chapter shall be guilty of an infraction. Section XXIII: Section 26A.12 of the Gilroy City Code is amended to read as follows: Sec. 26A.12. Penalty. It shall be unlawful for any person to violate any provision or to fail to comply with any of the requirements of this chapter. Each such person shall be deemed guilty of a separate offense 5- ORDINANCE NO. 77-15 11.3.c Packet Pg. 162 Attachment: Ordinance 77-15 (4071 : Garbage Lien Repeal) for each day during any portion of which any violation of any of the provisions of this chapter is committed, continued or permitted by such person. Section XXIV: Ail ordinances and parts of ordinances in conflict herewith are hereby repealed. Section XXV: This ordinance shall take effect and be in full force thirty (30) days from and after its passage and approval, PASSED AND ADOPTED this 18th day of April, 1977, by the following vote: AYES: NOES: ABSENT: COUNCILMEMBERS: COUNCILMEMBERS: COUNCILMEMBERS: STOUTCHILDERSHUGtlAN, LINK, PATE, GOODRICH NONE CUNNINGHAM APPROVED: ayor 6- ORDINANCE NO. 77-15 11.3.c Packet Pg. 163 Attachment: Ordinance 77-15 (4071 : Garbage Lien Repeal) I, SUSANNE E. STEINMETZ, City Clerk of the City of Gilroy, do hereby certify that the attached Ordinance No.77-15 is an original ordinance, duly adopted by the Council of the City of Gilroy at a regular meeting of sa|d Council held on the 18th day of April , 19 77L , at which meeting a quorum was present. IN WITNESS WHEREOF, I have hereunto set my hand and affixed the offici2 seal of the City of Gilroy, this 19th ity clerk of th'~ City of i~lroy /~ seal) day of April , 19 77 11.3.c Packet Pg. 164 Attachment: Ordinance 77-15 (4071 : Garbage Lien Repeal) City of Gilroy STAFF REPORT Agenda Item Title: Discussion of Santa Clara County Civil Grand Jury Report Regarding Ballot Measure Wording and Recommendations Meeting Date: December 5, 2022 From: Jimmy Forbis, City Administrator Department: Administrative Services Submitted By: LeeAnn McPhillips, Administrative Services/HR Director/Risk Manager Prepared By: LeeAnn McPhillips, Administrative Services/HR Director/Risk Manager Strategic Plan Goals ☐ Develop a Financially Resilient Organization ☐ Ensure Neighborhood Equity from City Services ☐ Promote Economic Development Activities ☐ Promote Safe, Affordable Housing for All ☐ Maintain and Improve City Infrastructure RECOMMENDATION Provide staff direction. BACKGROUND On October 7, 2022, the City of Gilroy received a report from the Santa Clara County Civil Grand Jury (SCCCGJ) entitled “If You Only Read the Ballot, You’re Being Duped”. Staff forwarded a copy of the report to Council on October 7, 2022. All cities and certain special districts and school districts in Santa Clara County received a copy of this report and are required to provide a response. 11.4 Packet Pg. 165 In summary, the SCCCGJ report reports that “the 2022 Civil Grand Jury has seen ballot question language that is confusing, advocacy-oriented, or simply dishonest.” The report goes on to indicate that “many voters cannot comprehend the complicated language or the implications of that “yes’ or “no” vote.” The report summary indicates that voters do not have time to fully research ballot questions and “almost always rely on the language of the ballot measure question itself.” As a result of this concern, the SCCCGJ proposes an oversight person or body who is “well versed in the requirements of the law” and who is “empowered to review and to reject ballot question wording that is false, misleading, or partial to one side.” The SCCCGJ believes this oversite person or body will ensure due process, clearer writing, and more transparency with voters. The Gilroy City Council is required to submit a response to the SCCCGJ report by no later than January 5, 2023. In the response, the Council must indicate agreement or disagreement (in whole or in part) with the report’s single finding and with three of the report’s six recommendations. If Council disagrees with the finding, an explanation for the disagreement must also be provided. In addition, the Council must indicate whether each identified recommendation in the report has been implemented, not yet implemented, but will be implemented, requires more analysis requiring a future response in no less than six months, or will not be implemented because it is not warranted or is not reasonable with an explanation thereof. This report is stage one of the Council’s response process allowing Council to discuss the report, finding, and recommendations. Following Council discussion, direction can be provided so that a more formal response can be drafted, approved by Council at a future meeting, and submitted to the SCCCGJ by the January 5, 2023 response deadline. ANALYSIS This SCCCGJ report appears to be in response to a ballot measure on term limits submitted by Valley Water. Staff believes the recommendation is an overreach by the SCCCGJ toward agencies that have done nothing wrong. The SCCCGJ recommendations attempt to take away local control of the ballot measure process. In addition, Gilroy, as a Charter City, is not subject to the jurisdiction of the County in these matters and would not be required to abide by a County ordinance regarding ballot questions. Therefore, the SCCCGJ is recommending that the County pursue other legislative solutions to grant control over local agency ballot measures to the County. The current process has worked well in Gilroy and the Gilroy City Attorney has been able to draft effective impartial analyses of proposed ballot measures to ensure that ballot language is clear to voters. The City Attorney’s process, as required by law, is independent and neutral, and is completed without any outside influence or pressure. The Gilroy City Attorney has the experience and understanding of the law like County Counsel making it unnecessary to add another layer of review to the process. The actual ballot measure titles are approved by the City Council. Further, Gilroy has not received any complaints regarding confusing ballot measure wording. Therefore, staff 11.4 Packet Pg. 166 does not see a reason or need for the proposed SCCCGJ recommendation s and recommends Council respond accordingly. For purposes of Council discussion, staff is providing the below draft recommendations. Council can alter the below responses based on the discussion and direction of Council. Finding 1: The Civil Grand Jury finds that in the current environment, which is unregulated at the local level, it is easy for the author of a ballot measure question to write the question in a way that is confusing or misleading to voters. Draft Response to Finding 1: The City of Gilroy disagrees with the finding that the writing of ballot measures at the local level is unregulated. All ballot measure questions are reviewed and approved by the Gilroy City Council and subject to State Law. In addition, there is a judicial remedy available by State Law. The main concern raised by the SCCCGJ report focuses on Measure A submitted by Valley Water. The City of Gilroy, therefore, disagrees that additional restrictions and oversight by the County of Santa Clara are necessary and does not support the removal of local control. Recommendation 1b: Governing entities within Santa Clara County should voluntarily submit their ballot questions to the County Counsel for review prior to submission to the Registrar of Voters, unless and until Recommendation 1d is implemented. Draft Response to Recommendation 1b: The City of Gilroy does not believe this recommendation is necessary and it will not be implemented by the City. The City of Gilroy will retain local control of ballot measure questions and will not hand over that responsibility to County Counsel. The Gilroy City Council will continue to review and approve ballot measure language as the Gilroy City Council is the body elected by, and responsible to, the residents of the City of Gilroy. In addition, the City of Gilroy has a qualified City Attorney to provide the review as is being proposed in Recommendation 1b. Recommendation 1c: Governing entities within Santa Clara County should, by March 31, 2023, adopt their own resolution or ordinance to require submission of their ballot questions to the County Counsel for review prior to submission to the Regist rar of Voters, unless and until Recommendations 1d and 1e are implemented. Draft Response to Recommendation 1c: 11.4 Packet Pg. 167 The City of Gilroy finds this recommendation unwarranted and it will not be implemented by the City. The City of Gilroy does not often have local measures on the ballot, and has not encountered the type of problem discussed in the report. The Gilroy City Attorney will continue to provide the services identified and the City will not be shifting those responsibilities to County Counsel. Recommendation 1e: Governing entities within Santa Clara County should submit their ballot questions for review by the Good Governance in Ballots Commission pursuant to Recommendation 1d. Draft Response to Recommendation 1e: The City of Gilroy finds this recommendation unwarranted and it will not be implemented by the City. The County of Santa Clara does not have the authority to regulate another agency and, as a Charter City, Gilroy will retain local control. Passing legislation that would enable the County of Santa Clara to have an express grant of power over local agencies would be a dangerous precedent and would take away local Gilroy control and grant control to the County of Santa Clara. The elected officials of Gilroy take the ballot measure process very seriously and will continue to satisfy their responsibilities to the residents of Gilroy to ensure a thorough review and approval of any ballot measure questions. ALTERNATIVES The Council must reply to the report. However, there are various alternatives the Council can communicate in response to the report. FISCAL IMPACT/FUNDING SOURCE Other than staff time, there is no additional fiscal impact in the preparation of this report. If the recommendations are approved and implemented, it is unclear if there will be fees charged by the County to provide the services identified in the recommendations. NEXT STEPS Staff will return at the next Council meeting, December 12, 2022, with final response documents consistent with the Council’s direction. Once approved, documents will be submitted to the Santa Clara County Civil Grand Jury in advance of the January 5, 2023 deadline. Attachments: 1. SCCCGJ Report - If You Only Read the Ballot You're Being Duped 10.7.22 2. SCCCGJ Letter to City of Gilroy 10.7.22 3. SCCCGJ Report - 93305 Requirements for Responses to Findings 11.4 Packet Pg. 168 Release date here Page 0 of 23 IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED 2022 Santa Clara County Civil Grand Jury October 7, 2022 11.4.a Packet Pg. 169 Attachment: SCCCGJ Report - If You Only Read the Ballot You're Being Duped 10.7.22 (4073 : Discussion re: SCCCGJ Ballot Measure Wording Page 1 of 23 IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED T ABLE OF CONTENTS GLOSSARY AND ABBREVIATIONS..........................................................................................2 SUMMARY .....................................................................................................................................4 BACKGROUND .............................................................................................................................5 METHODOLOGY ..........................................................................................................................6 INVESTIGATION ...........................................................................................................................6 CONCLUSION ..............................................................................................................................16 FINDINGS AND RECOMMENDATIONS..................................................................................17 REQUIRED RESPONSES ............................................................................................................19 REFERENCES ..............................................................................................................................21 11.4.a Packet Pg. 170 Attachment: SCCCGJ Report - If You Only Read the Ballot You're Being Duped 10.7.22 (4073 : Discussion re: SCCCGJ Ballot Measure Wording Page 2 of 23 IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED GLOSSARY AND ABBREVIATIONS Attorney General The chief law officer who represents a state in legal proceedings. Ballot Card The printed ballot, usually on high-grade paper, consisting of the ballot questions and names of individuals running for elected office. Ballot Measure Ballot measures are proposals, usually at a county or local level, to enact new laws or repeal existing laws, which are placed on the ballot for approval or rejection by the electorate. Ballot Proposition Ballot propositions are proposals, usually at the state level, to enact new laws or constitutional amendments or repeal existing laws or constitutional amendments, which are placed on the ballot for approval or rejection by the electorate. Ballot Question or Ballot Label Boards and Commissions For purposes of this report, Ballot Question or Ballot Label means the 75-word or less statement of a measure that precedes “Yes” or “No” on the ballot card. Boards and Commissions are made up of residents who volunteer their time and expertise to assist and advise governing bodies in the chosen capacity. Caselaw Law or legal precedent established by the outcome of court cases. County Counsel or Office of the County Counsel The County Counsel is the chief legal advisor and representative for the county, including the county board of supervisors and all county agencies and departments. Elections Code A collection of California laws related to public elections. 11.4.a Packet Pg. 171 Attachment: SCCCGJ Report - If You Only Read the Ballot You're Being Duped 10.7.22 (4073 : Discussion re: SCCCGJ Ballot Measure Wording Page 3 of 23 IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED Governing Entity A jurisdiction such as a city, county, school district, special district, or political subdivision. Home Rule The right of self-government that is granted by state constitution or statute to give autonomy to a local government. Home Rule implies that each level of government has a separate realm of authority. Public Opinion Pollsters Registrar of Voters Opinion polls are designed to represent the opinions of a population by conducting a series of questions and then extrapolating generalities in ratio or within confidence intervals. A person who conducts polls is referred to as a pollster. The department responsible for the operation, administration, and direction of the elections department, with primary responsibility for the registration of voters, the holding of elections, and all matters pertaining to elections. Single Subject Rule Per Article II, Section 8(d) of the California Constitution, “An initiative measure embracing more than one subject may not be submitted to the electors or have any effect.” Essentially, the rule stands for the notion that where an initiative embraces more than one subject, it can neither be submitted to, nor enacted by, the voters. Term Limits A specified number of terms (in years) that a person in office is allowed to serve. Writ of Mandate In California, writs of mandate are used by superior courts, courts of appeal, and the Supreme Court to command lower bodies, including both courts and government agencies, to do or not to do certain things. 11.4.a Packet Pg. 172 Attachment: SCCCGJ Report - If You Only Read the Ballot You're Being Duped 10.7.22 (4073 : Discussion re: SCCCGJ Ballot Measure Wording Page 4 of 23 IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED SUMMARY It is not uncommon for the public to be confronted daily with news and information through multiple sources—traditional television programming, 24/7 cable news, satellite radio, social media, and phone alerts. In the context of elections, voters’ busy lives can be overwhelmed with many different voices. County and state voter information guides are required by law to be mailed to every registered voter, but voters today do not have a lot of time to read these resources. As a result, the ballot measure question printed on the ballot itself becomes a key factor in the outcome of an election. There is an expectation in California law that ballot questions be drafted in a manner that is not false, misleading, or partial to one side.1 But there are ways to work around it. Among the fifty or so jurisdictions in Santa Clara County that are eligible to put forth a ballot measure, the 2022 Santa Clara County Civil Grand Jury (Civil Grand Jury) has seen ballot question language that is confusing, advocacy-oriented, or simply dishonest. Yes, sometimes voters are being deceived. Many voters cannot comprehend the complicated language or the implications of that "yes” or "no” vote. In a perfect world, voters would have the luxury of time to research these issues. In reality, however, voters almost always rely on the language of the ballot measure question itself. What can be done about this? The Civil Grand Jury proposes an oversight person or body, one who has taken an oath to act with integrity, is well versed in the requirements of the law, and is empowered to review and to reject ballot question wording that is false, misleading, or partial to one side. Santa Clara County should have a climate whereby governing entities in Santa Clara County are discouraged from using dishonest or deceitful wording in a ballot question, especially when they know it will be reviewed and could be rejected. In so doing, due process will be strengthened. With clearer writing, ballot measure questions will be more transparent and straightforward, which will lead to a better perception of government by the voters. It is time to remove impediments to good governance. 1 California Elections Code section 10403 requires a ballot question to “conform to this code governing the wording of propositions submitted to the voters at a statewide election.” The California Elections Code contains Section 9051, which provides that in a statewide election the ballot title and summary of an initiative or referendum must be a “true and impartial statement of the purpose of the measure in such language that the ballot title and summary shall neither be an argument, nor be likely to create prejudice, for or against the proposed measure.” (Elec. C. §9051(c); see also, McDonough v. Superior Ct. (2012) 204 Cal. App. 4th 1169, 1172.) 11.4.a Packet Pg. 173 Attachment: SCCCGJ Report - If You Only Read the Ballot You're Being Duped 10.7.22 (4073 : Discussion re: SCCCGJ Ballot Measure Wording Page 5 of 23 IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED BACKGROUND Ballot measures or ballot propositions are proposals to enact new laws or constitutional amendments or to repeal existing laws or constitutional amendments. They are placed on the ballot for approval or rejection by the voting public. The words “ballot measures” are often used by county, city, and local governing entities, whereas at the state level, the California State Legislature uses the term “ballot propositions” to refer to the same concept. The ballot measure question, which is the subject of this report, refers to the maximum 75-word text that precedes the “Yes” or “No” selection on the ballot card itself. Because most voters never read beyond what is printed on the ballot card, it is of critical importance that ballot measure questions be concise, accurate, and impartial. Recently, two local newspaper articles highlighted the tactics that governing entities have used to manipulate voters: • Borenstein, Daniel, Tricks California Local Officials Use To Trick Voters, Bay Area News Group, January 21, 2022. • Mercury News and East Bay Times Editorial Boards, Stop Deceiving Bay Area Voters on Local Tax Measure Costs, June 26, 2020, updated September 5, 2020. As part of its charge, the Civil Grand Jury is responsible for identifying areas within local government that lack good governance or practices. This Civil Grand Jury identified as a problem the choice of wording used in local ballot measure questions. Specifically, the Civil Grand Jury discovered that some local governing entities presenting measures for a public vote create ballot questions that are purposefully misleading so they may obtain their desired result. In particular, it was noted that the wording of a ballot question from the June 2022 election, although representing a relatively simple issue, created confusion among the public. When voters found out what the text of the measure actually meant, they felt deceived by the wording of the ballot question. Deception in ballot questions is worth the attention of the Civil Grand Jury. This problem must be remediated to reinstate good governance in the election process. 11.4.a Packet Pg. 174 Attachment: SCCCGJ Report - If You Only Read the Ballot You're Being Duped 10.7.22 (4073 : Discussion re: SCCCGJ Ballot Measure Wording Page 6 of 23 IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED METHODOLOGY The Civil Grand Jury used the following investigative methods: • Interviews with ten individuals who are well versed in the intricacies of the election process and experts in political science and local governments • Three published Civil Grand Jury reports: 2021-22 Alameda County, 2021-22 Santa Cruz County, 2021 Santa Clara County • Editorials from local and regional newspapers: Mercury News, Los Angeles Times, San Francisco Chronicle • Close reviews of ballot measures, past and upcoming, from the counties of San Mateo, Santa Clara, Santa Cruz, and the City and County of San Francisco • Legal research of court challenges involving ballot questions INVESTIGATION Throughout this report, the Civil Grand Jury was interested only in the process of ballot measure question drafting, not the substance of the underlying ballot measure itself. In its research and analysis, the Civil Grand Jury does not examine the merits of the measure, but rather whether the question as drafted is truthful, impartial, and fair. Ballot questions must conform to statutory requirements and should provide voters with sufficient information and transparency to make informed decisions. A straightforward ballot question can be summarized this way: A vote for “Yes” means yes and a vote for “No” means no. Unfortunately, it is common for ballot questions to be presented whereby a vote for “Yes” actually means no, and vice versa. This wording is arguably confusing. Inching farther away from confusing questions, the research performed by the Civil Grand Jury found ballot questions that are even worse—they are misleading. Santa Clara Valley Water District’s Measure A During the last election in June 2022, the question for Measure A put forth by the Santa Clara Valley Water District (Water District) employed such a tactic: Shall the measure amending the Santa Clara Valley Water District Ordinance 11-01 to limit Board members to four successive four-year terms be adopted? The Water District had term limits already in place for board members to serve three four-year terms, or 12 years at most. Measure A sought to increase term limits to four four-year terms, or 16 years at most. However, the ballot question hid the fact that a term limit was already in place; it 11.4.a Packet Pg. 175 Attachment: SCCCGJ Report - If You Only Read the Ballot You're Being Duped 10.7.22 (4073 : Discussion re: SCCCGJ Ballot Measure Wording Page 7 of 23 IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED asked voters whether a term limit of four terms should be adopted, thereby couching the question as a measure to adopt term limits generally, which one political science expert described to the Civil Grand Jury as a concept widely favorable to the voting public. The ballot question did not reflect what the Water District wanted to do. The Water District wanted to extend term limits, but it wrote the ballot question without using the words “extend,” “change,” or “increase.” Instead, the Water District characterized the ballot measure as setting term limits, which is a mischaracterization of what Measure A was actually about. Further, it is notable that in November 1998, the County of Santa Clara placed a substantially similar measure on the ballot using the same tactic. Measure E asked: Shall the County of Santa Clara amend section 202 to limit the number of terms a member of the Board of Supervisors may serve to three terms, consisting of four years each? Again, the ballot question failed to inform the reader that each member of the County of Santa Clara Board of Supervisors was already limited to two terms and that the ballot measure proposed to extend years served, not “limit” them. By not being transparent, this tactic of ballot question drafting is tantamount to a lie by omission; it borders on deceiving the public. From Measure E in 1998 to Measure A this year, 24 years later, the climate has not changed. Regulations that Govern Ballot Questions Sections 9100-9190 of the California Elections Code specifically address county-level elections. Other sections of the Elections Code, while they do not specifically address county-level elections, have import and therefore apply as well. The County of Santa Clara has not enacted local ordinance code provisions regarding ballot question language. Under the Elections Code, the wording of a ballot measure must state the ballot question, or what the Elections Code calls the “label,” in 75 words or less (Elec. C. §9051(b), §10403, §13247). The ballot question must state “the nature” of the measure (Elec. C. §13120). The official who drafts the ballot question “shall give a true and impartial statement of the purpose of the measure in such language that the ballot title and summary shall neither be an argument, nor be likely to create prejudice, for or against the proposed measure” (Elec. C. §9051(c)). In other words, ballot measure questions shall not be false, misleading, or partial to one side. Who is Responsible for Writing Ballot Questions? Today, ballot questions are rarely written “from scratch.” Residing in the public domain are hundreds, if not thousands, of boilerplate questions spanning the universe of issues typically faced by government and public agencies. Putting a measure on the ballot usually starts with selecting 11.4.a Packet Pg. 176 Attachment: SCCCGJ Report - If You Only Read the Ballot You're Being Duped 10.7.22 (4073 : Discussion re: SCCCGJ Ballot Measure Wording Page 8 of 23 IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED an existing template, preferably one that had been used successfully within a reasonable timeframe and geographic proximity to the one at hand. Tweaks are then made to the chosen template to fit the measure being proposed. Governing entities are ultimately responsible for approving the final text of the ballot question, but the actual selection of words is often the calculated and carefully calibrated work product of hired election experts, consultants, and attorneys. These outside consultants often rely on public opinion pollsters to determine the type of proposal and wording to put before voters that would achieve the desired outcome. Often, this includes using “feel good” wording that is shown to resonate with voters: “reduce crime;” “funds spent locally;” “all money locally controlled;” and “with citizen oversight.” Results from public opinion polls often dictate the structure and selection of words used within the ballot question, which is then voted on and, if successful, adopted by the governing body such as a city council, a county board of supervisors, the board members of a school district, or any governing body of a government entity operating within the county. During the course of this investigation, the Civil Grand Jury learned that local measures on the ballot that governing entities choose wording likely to be most successful at the ballot box over clarity of language to the voter. For purposes of this investigation, the Civil Grand Jury focused on ballot questions relating to local ballot measures, not state propositions, because according to the California Elections Code, the state attorney general is responsible for providing ballot questions for state propositions. In contrast, there is no similar requirement that a certain officer provide the ballot question for local elections, so it is instead drafted by the proponent of the measure at the local level. Advocacy and Tactical Wordplay Result in Poorly Drafted Ballot Questions It has been widely observed today that the 75-word ballot questions are being used as advocacy pieces, at the expense of fairness and impartiality. In an aptly titled report published in June of last year, the Alameda County Civil Grand Jury advocated for “The Need for Accuracy and Impartiality of Ballot Measure Questions.” The jury explained how and why the desire to achieve a certain outcome has tainted the process to produce ballot measure questions that are not accurate and impartial: In general, we found ballot questions suffer from a “proponent’s bias” that is a natural outgrowth of the typical process through which questions are selected, drafted, and proposed. … In general, we found that ballot questions too often fall short of what voters have a right to expect in terms of transparency and impartiality, even when satisfying minimum legal standards. 11.4.a Packet Pg. 177 Attachment: SCCCGJ Report - If You Only Read the Ballot You're Being Duped 10.7.22 (4073 : Discussion re: SCCCGJ Ballot Measure Wording Page 9 of 23 IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED The jury in Alameda reviewed and provided an in-depth analysis of six ballot questions to reach their conclusion. In so doing, they exposed the “tricks of the trade”—wording chosen for the sole purpose of increasing the odds of success at the polls. Adopting the same methodology as the Alameda report, the Civil Grand Jury reviewed past and upcoming ballot measure questions from local jurisdictions within Santa Clara County. The Santa Clara County Civil Grand Jury observed the same tricks and tactics used by governing bodies to deceive voters: (1) Using “feel-good" words to garner voter approval. Measure F, November 2020, said “all funds spent locally,” which is meaningless when one pauses to think about it. (2) Adding favorable language even where it plainly does not apply. Measure F, November 2020, said “independent audits, citizens’ oversight” where the underlying ordinance implementing the measure makes no mention whatsoever of audit and oversight requirements. (3) Adding misleading words to lead voters astray. Measure S, November 2020, said “until ended by voters,” falsely implying that the measure itself provided for repeal or that voters would have an opportunity to repeal the tax when they did not; Measure L, November 2020, conveyed the same with “can be ended by voters.” Measure A, March 2017, said “[funds] cannot be taken away by the State,” falsely implying that the state may access local funds when it may not. (4) Manipulating words to divert voters from what is actually at issue. Upcoming Measure N, November 2022, which seeks authorization of $572 million in school bonds costing approximately 3 cents per $100 of assessed valuation, states “no increase in tax rates.” (5) Omitting relevant information necessary for voters to make informed decisions. Measure AA, November 2016, and Measure H, November 2014, made no mention of the tax increase that would be required to fund the school bonds that were at issue. (6) Putting multiple issues on a single measure, ostensibly violating the single subject rule. Measure H, November 2020, sought to increase card room tax and the number of card tables allowed in gambling facilities. At the writing of this report, the following measures slated for the upcoming November 2022 election also rely on at least one of the tactics described: E “all funds spent locally with no money taken by the State and spent elsewhere” - see (1) and (3) above. G, H, J, L “until ended by voters” - see (3) above. I “Shall the City Charter be amended to add the City's ethics and elections commission (Board of Fair Campaign and Political Practices) to the Charter; remove requirements that members of the Planning, Civil Service, and Salary Setting Commissions be electors and/or citizens; remove gender-specific language; and require the City Council to adopt equity values, standards, and assessments in making certain decisions?” - see (6) above. O “all money staying local” - see (1) above. 11.4.a Packet Pg. 178 Attachment: SCCCGJ Report - If You Only Read the Ballot You're Being Duped 10.7.22 (4073 : Discussion re: SCCCGJ Ballot Measure Wording Page 10 of 23 IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED Along the same lines, it is worth noting that in June 2022, the Santa Cruz County Civil Grand Jury released its report, “Words Matter: Did Measure G Deceive Voters?” The question confronting the jury was whether the County of Santa Cruz was honoring the provisions in the ballot measure following its passage. The jury concluded that the ballot question behind the November 2018 Measure G was misleading after its investigation and research revealed no basis whatsoever for including the words “annual audits and independent citizens oversight” within the ballot question. Arguably, these words were used for no purpose other than to elicit good feelings in the voter. The Elephant in the Room: Big Money Elections cost money—lots of money. In an article published June 30, 2002, updated June 22, 2022, CalMatters put it succinctly: “Ballot measures are big business.” The Civil Grand Jury learned that cost is a major factor in the decision to get to the ballot. San Jose’s Mercury News reported that the Water District’s Measure A from the June 2022 election cost taxpayers $3.2 million. Once the decision is made by the government entity to spend the money to go to ballot, a lot of pressure is put on the entity to do whatever it takes to secure a win. For this reason, proponents of ballot measures stay focused on the result, hiring high-priced election consultants, attorneys, and opinion pollsters to carefully frame the ballot question to achieve the desired outcome. Successful elections will reward those that are behind them. It does not take much imagination to understand how this practice has evolved to become “high stakes.” For example, a school district superintendent who has successfully secured funding through school bond measures may parlay these wins to rally support for a more prestigious role or a position at a larger public institution. On the other hand, if a measure fails, individuals’ livelihoods are at stake because someone will likely have to take the blame for it—usually either someone on staff or the board proponents of the governing body. This is why proponents advocate so strongly, often—as exemplified above— sacrificing context, clarity, truthfulness, and transparency in ballot question wording in favor of pure advocacy. The Civil Grand Jury learned from those in the ballot question business that it is understood that the drafter will make sure the statement is “lawful,” but it is also understood that it will not necessarily provide full disclosure. Eroding the Public’s Trust Many voters in Santa Clara County felt that they were tricked by the Water District based on how Measure A was worded. The Civil Grand Jury compiled the following descriptors of Measure A from local news sources and through its interviews: “deceitful,” “deceptive ballot language,” “designed to confuse voters,” “dishonest,” “false,” “hiding the ball,” “lacks integrity,” “lie by omission,” “misleading,” “not ethical,” “not transparent,” “not clear,” “violates the norm,” 11.4.a Packet Pg. 179 Attachment: SCCCGJ Report - If You Only Read the Ballot You're Being Duped 10.7.22 (4073 : Discussion re: SCCCGJ Ballot Measure Wording Page 11 of 23 IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED “violates standards of good governance,” “board must be held accountable,” “board should resign,” “board violated its fiduciary duty,” “board violated the trust of the people,” “board wasting money,” “failure of character,” “failure to represent its constituents,” “fraudulent misappropriation of public funds,” “misled the public for political gain,” “self-serving hoodwinking of the electorate,” “self-serving dishonesty,” “unacceptable in a democracy.” Public opinion made it clear that where a ballot question fails to provide voters with sufficient information to make an informed decision, it does so at the expense of public trust. Forming distrust between government and its citizenry hurts. What the Water District did through Measure A has severe ramifications because it creates distrust between the government agency and the people the agency is supposed to serve and protect. Going forward, Santa Clara County residents will likely question the integrity and ethical behavior of the Water District. Once the bonds of trust have been weakened, citizens are less inclined to trust the actions and decisions of this agency and more inclined to ask, “If the Water District cannot be trusted to be truthful on the ballot, how can we know them to be truthful in other matters?” With the passage of Measure A, many residents lost confidence in the Water District. It may take a long time to regain trust from the community. While the Civil Grand Jury appreciates the desire of a government entity to advocate for itself when putting ballot measures up for a public vote, ballot questions cannot be false, misleading, or partial to one side. Based on Civil Grand Jury research and reports, too many local measures fail to meet this standard in favor of advocacy and “proponent’s bias.” Lack of Oversight Results in Poorly Drafted Ballot Questions Despite the number of hands that touch a proposal from inception to ballot card, the Civil Grand Jury was surprised to discover that there is no filter or oversight by an appropriate official prior to the adoption of ballot question wording. At the state level, the “Attorney General gives a true and impartial statement of the purpose of the measure in such language that the ballot title [e.g., the ballot question] and summary shall neither be an argument, nor likely to create prejudice, for or against the proposed measure” (Elec. C. §9051(c)). But the Attorney General does not have jurisdiction over local measures and thus does not provide the ballot question. When it comes to local measures, the Civil Grand Jury learned that there is not a similar role performed by an official, like the Attorney General, that can provide the wording for ballot questions. Rather, when the ballot question is submitted to the Santa Clara County Registrar of Voters, their review is narrowly limited to enforcement of the 75-word limit. Staff at the County Registrar of Voters manually count the number of words to ensure that the word cap has not been stretched. They do not monitor the content of the ballot question. 11.4.a Packet Pg. 180 Attachment: SCCCGJ Report - If You Only Read the Ballot You're Being Duped 10.7.22 (4073 : Discussion re: SCCCGJ Ballot Measure Wording Page 12 of 23 IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED At the local level, the County of Santa Clara Office of the County Counsel performs legal services that are most analogous to the Attorney General’s role at the state level with respect to elections. Further, County Counsel has expertise in election law and advises the County of Santa Clara Registrar of Voters. The County Counsel does not, however, have authority over cities and political subdivisions within the boundaries of the county. Therefore, when a city, school district, or special district places a local measure on the ballot, they are permitted under current law to draft the language themselves. They have every incentive to adopt wording proposed by their polling consultants, who will give weight to “feel good” words over simplicity, transparency, and impartiality. Fundamentally, the government entity’s self-interest dictates the ballot question wording. The Current Sole Remedy—Initiating a Court Challenge—Falls Short Under current legislation, there is no realistically expedient method to challenge problematic ballot questions. When a measure is to be placed on the ballot for an upcoming election, it is subject to a 10-day public examination period during which any voter in the jurisdiction may file a lawsuit to amend the language of the measure. California Elections Code section 9295 sets forth the procedure: During the 10-calendar-day public examination period provided by this section, any voter of the jurisdiction in which the election is being held, or the elections official, himself or herself, may seek a writ of mandate or an injunction requiring any or all of the materials to be amended or deleted. The writ of mandate or injunction request shall be filed no later than the end of the 10-calendar-day public examination period. A peremptory writ of mandate or an injunction shall be issued only upon clear and convincing proof that the material in question is false, misleading, or inconsistent with the requirements of this chapter, and that issuance of the writ or injunction will not substantially interfere with the printing or distribution of official election materials as provided by law. There are several reasons why the 10-calendar-day public examination period to object in a formal court setting does not work well: (1) The public tends not to hear about ballot measures until it is too late. This is due in part to a dearth of media coverage of local news, a result of the consolidation of local news outlets by media conglomerates. It is no secret that in today’s news environment, local news coverage has been reduced significantly. Furthermore, ten days is a very short window to react, let alone mount a court challenge to remediate. 11.4.a Packet Pg. 181 Attachment: SCCCGJ Report - If You Only Read the Ballot You're Being Duped 10.7.22 (4073 : Discussion re: SCCCGJ Ballot Measure Wording Page 13 of 23 IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED (2) Ten days is much too short a time to locate an attorney well versed in the laws and processes of elections to file a lawsuit in this specialized field. (3) Even if an attorney can be available within the 10-day window, it is not within the means of the average person to afford the attorney fees necessary to pursue a remedy. (4) Voters challenging the wording in a ballot question face an uphill battle because the courts give deference and considerable latitude to the original author. Further, courts uphold the ballot measure question if it substantially complies with the requirement not to be “false, misleading, or partial to one side.” (See Bibliography, Amador and McDonough decisions.) (5) There is practically no recourse to fix non-conforming ballot questions after the 10- calendar day public examination period has passed. (See Bibliography, Denny decision.) (6) Even the single subject rule—a state constitutional doctrine—has been watered down by case law; hence it is no longer vigorously enforced. (See Bibliography, Amador and Harbor decisions.) When confronted with challenges to ballot measures, the courts have stated: • Relief under a writ of mandate may be granted "only upon clear and convincing evidence" that the challenged election material is "false or misleading or otherwise inconsistent with the provisions." (See Bibliography, McDonough decision.) • The test is not whether the ballot question could be more complete. (See Bibliography, Martinez decision.) • The ballot title need not be the “most accurate,” “most comprehensive,” or “fairest” that a skilled wordsmith might imagine. (See Bibliography, Yes on 25, Citizens for an On-Time Budget decision.) • The courts are not free to change an accurate statement to reflect their interpretation of the common sense understanding of the language. (See Bibliography, Yes on 25, Citizens for an On-Time Budget decision.) • The courts are not free to wordsmith the ballot question and change it just because they believe it could be better. (See Bibliography, Martinez decision.) • The courts must give deference to the official who drafts the ballot question; “all legitimate presumptions should be indulged in favor of the propriety” of the drafter’s actions. (See Bibliography, Becerra decision.) Solutions The Civil Grand Jury has learned that the sole legal remedy currently available to right a wrong when it comes to ballot measure questions is insurmountable for the average citizen. Nonetheless, the Civil Grand Jury notes that there could be two potential mechanisms to improve the current process. 11.4.a Packet Pg. 182 Attachment: SCCCGJ Report - If You Only Read the Ballot You're Being Duped 10.7.22 (4073 : Discussion re: SCCCGJ Ballot Measure Wording Page 14 of 23 IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED 1. Task an appropriate official to review ballot measure questions Current law requires that the individual who drafts the ballot question do so in a way that is not false, misleading, or partial to one side. In order to meet this requirement, an objective, neutral third party is needed to speak on behalf of the voting public, ideally someone who is well versed in the law, has a fiduciary duty to uphold the law, and has taken an oath to act with integrity. The Civil Grand Jury recommends that County Counsel perform this task. Further, the Civil Grand Jury recommends that the County of Santa Clara Board of Supervisors should endorse the County Counsel to act in a role, like that of the Attorney General, to provide for ballot question wording for all local measures. What this might look like: After the governing entity ratifies the concept behind the proposed measure, as is the practice today, the entity’s lawyer, whether a city attorney, school district attorney, or special district attorney, would draft a ballot question that is impartial, unbiased, and non-argumentative. The proposed ballot question would then be submitted to the County Counsel, who would be charged with overseeing the narrow task of ensuring that the wording of the question is not false, misleading, or biased in favor of one view. Most importantly, County Counsel would also be authorized to reject non-conforming or deficient wording and to compel revisions. Only when the ballot question at issue conforms to statutory requirements would County Counsel approve it for use. 2. Create an independent oversight commission to review ballot questions It is not unusual for jurisdictions to convene independent advisory commissions to assist in county governance. The County of Santa Clara alone boasts over 75 boards and commissions, ranging from an Advisory Commission on Consumer Affairs to a Youth Task Force. For purposes of overseeing conformity of ballot measure questions, the Civil Grand Jury recommends that the County form a Good Governance in Ballots Commission (Good Governance Commission). This advisory commission should act quickly to review and comment on ballot questions or provide recommendations to remediate questions that that are false, misleading, or partial to one side. The composition of the Good Governance Commission should, at a minimum, include an attorney member of the California State Bar, either to participate as a full member or act as an ex officio member without voting privileges. Because County Counsel is the attorney to most Santa Clara County advisory boards and commissions, it could therefore be tasked to help members of this commission navigate the intricacies of California’s statutory requirements. Apart from the obvious benefits—non-partisanship and public representation—another advantage of having a single commission perform the task of reviewing ballot questions would be to maintain consistency across all governing entities. Regardless of whether a city, county, school district, or 11.4.a Packet Pg. 183 Attachment: SCCCGJ Report - If You Only Read the Ballot You're Being Duped 10.7.22 (4073 : Discussion re: SCCCGJ Ballot Measure Wording Page 15 of 23 IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED other jurisdiction puts forth the measure, the output from a neutral, uninterested third party would probably help eliminate the rhetoric and advocacy inherent in the current practice. To be successful, the Good Governance Commission should ideally have the ability to review and to reject language that is biased and partial. The power of rejection is crucial because it would also likely have the effect of encouraging the governing entity to self-police. It must not be merely optional for governing entities to submit their ballot questions for review. If the commission were granted mere advisory powers, then it would have very limited impact; it is reasonable to surmise that most, if not all, governing entities would choose to decline to submit their ballot questions for consideration in the interest of the time required to add a layer of review. Unfortunately, adoption of a Good Governance Commission that has the power to reject language would require passage of a state law that would enable the County of Santa Clara to have an express grant of power to impose a requirement on other entities. This is because “[t]he board of supervisors has no inherent powers; the counties are legal subdivisions of the state, and the county board of supervisors can exercise only those powers expressly granted it by Constitution or statutes and those necessarily implied therefrom” (Hicks v. Board of Supervisors (1977) 69 Cal. App. 3d 228, 242). In general, absent other express authorization, one governmental entity cannot regulate another. Put another way, charter cities operate under home rule, which means that they do not answer to the county the city is located in. For example, the County of Santa Clara Board of Supervisors does not have jurisdiction to compel the City of Gilroy, a charter city, to abide by a county ordinance. Absent some legislative authorization, the County of Santa Clara cannot impose a mandatory review process for ballot questions on other entities. For this reason, the Civil Grand Jury urges the County to pursue legislative solutions to facilitate a process by which the County Counsel would be required to review and approve local measure ballot questions before they are voted on. Formation of a Good Governance in Ballots Commission The Civil Grand Jury believes that having an independent oversight commission with advisory powers will improve the local electoral process. It puts pressure on governing bodies, sending the message that their ballot questions are being monitored for clarity, truthfulness, fairness, and impartiality. The Alameda Civil Grand Jury report provides detailed instructions around the formation, structure, and operation of an oversight committee. This can be found in Appendix B of their June 2021 report. Last, but not least, another possibility is to lean on an existing Santa Clara County advisory body, the Citizens’ Advisory Commission on Elections, to create a subcommittee focused 11.4.a Packet Pg. 184 Attachment: SCCCGJ Report - If You Only Read the Ballot You're Being Duped 10.7.22 (4073 : Discussion re: SCCCGJ Ballot Measure Wording Page 16 of 23 IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED on ballot question integrity and good governance. Because time is of the essence when it comes to the elections process, the subcommittee must act within the short turnaround timeframe established by state statutes and county ordinances. There do not appear to be any advocates for transparent and neutral language. Action must be taken. Having the Office of the County Counsel review and approve ballot questions to ensure conformity to statutory requirements would be a good start. Convening a citizen-led, independent oversight Good Governance Commission is another solution. CONCLUSION Civil Grand Juries are charged to help government develop practical solutions to improve government operations. Poorly worded ballot questions may not be illegal, but if they withhold information to shield what is really at issue, they are unethical. There are insufficient workable checks and balances to prevent this ongoing issue from being curtailed. Not doing anything about this only adds to the distrust of government. The Civil Grand Jury recommends that elected officials be held accountable—ballot questions must be transparent and clear in order to enable today’s voters to make informed decisions. The Civil Grand Jury wants governing entities to know that the public is paying attention and will not tolerate questions that are anything less than truthful, impartial, and fair. Further, ballot measure questions need to be straightforward, understandable, transparent, and honest. 11.4.a Packet Pg. 185 Attachment: SCCCGJ Report - If You Only Read the Ballot You're Being Duped 10.7.22 (4073 : Discussion re: SCCCGJ Ballot Measure Wording Page 17 of 23 IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED FINDINGS AND RECOMMENDATIONS Finding 1 The Civil Grand Jury finds that in the current environment, which is unregulated at the local level, it is easy for the author of a ballot measure question to write the question in a way that is confusing or misleading to voters. Recommendation 1a The Board of Supervisors should ask the County Counsel to review all ballot questions submitted to it pursuant to Recommendation 1b. Recommendation 1b Governing entities 2 within Santa Clara County should voluntarily submit their ballot questions to the County Counsel for review prior to submission to the Registrar of Voters, unless and until Recommendation 1d is implemented. Recommendation 1c Governing entities 3 within Santa Clara County should, by March 31, 2023, adopt their own resolution or ordinance to require submission of their ballot questions to the County Counsel for review prior to submission to the Registrar of Voters, unless and until Recommendations 1d and 1e are implemented. Recommendation 1d The County should create an independent, citizen-led oversight commission like the recommended Good Governance in Ballots Commission as described in the “Solutions” section of this report. The Commission should be implemented by August 1, 2024. 2 There are approximately 50 governing entities within Santa Clara County. The Civil Grand Jury has elected to address these recommendations to the County, cities, and a select number of special districts and school districts that have historically the most measures on the ballot for response. The Civil Grand Jury encourages all governing entities to adopt these recommendations. 3 Id. 11.4.a Packet Pg. 186 Attachment: SCCCGJ Report - If You Only Read the Ballot You're Being Duped 10.7.22 (4073 : Discussion re: SCCCGJ Ballot Measure Wording Page 18 of 23 IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED Recommendation 1e Governing entities 4 within Santa Clara County should submit their ballot questions for review by the Good Governance in Ballots Commission pursuant to Recommendation 1d. Recommendation 1f The County should, by March 31, 2023, take appropriate action to request that the state legislature consider amending current law to require the County Counsel to review and approve local ballot measure questions before they are voted on. 4 Id. 11.4.a Packet Pg. 187 Attachment: SCCCGJ Report - If You Only Read the Ballot You're Being Duped 10.7.22 (4073 : Discussion re: SCCCGJ Ballot Measure Wording Page 19 of 23 IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED REQUIRED RESPONSES Pursuant to California Penal Code § 933(b) et seq. and California Penal Code § 933.05, the County of Santa Clara 2022 Civil Grand Jury requests responses from the following governing bodies: Responding Agency Findings Recommendations County of Santa Clara Board of Supervisors 1 1a, 1b, 1d, 1f City of Campbell 1 1b, 1c, 1e City of Cupertino 1 1b, 1c, 1e City of Gilroy 1 1b, 1c, 1e City of Los Altos 1 1b, 1c, 1e Town of Los Altos Hills 1 1b, 1c, 1e Town of Los Gatos 1 1b, 1c, 1e City of Milpitas 1 1b, 1c, 1e City of Monte Sereno 1 1b, 1c, 1e City of Morgan Hill 1 1b, 1c, 1e City of Mountain View 1 1b, 1c, 1e City of Palo Alto 1 1b, 1c, 1e 11.4.a Packet Pg. 188 Attachment: SCCCGJ Report - If You Only Read the Ballot You're Being Duped 10.7.22 (4073 : Discussion re: SCCCGJ Ballot Measure Wording Page 20 of 23 IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED Responding Agency Findings Recommendations City of San Jose 1 1b, 1c, 1e City of Santa Clara 1 1b, 1c, 1e City of Saratoga 1 1b, 1c, 1e City Sunnyvale 1 1b, 1c, 1e Santa Clara Valley Water District 1 1b, 1c, 1e Valley Transportation Authority 1 1b, 1c, 1e El Camino Healthcare 1 1b, 1c, 1e Foothill-DeAnza Community College District 1 1b, 1c, 1e San Jose Unified School District 1 1b, 1c, 1e East Side Union High School District 1 1b, 1c, 1e Cupertino Union School District 1 1b, 1c, 1e 11.4.a Packet Pg. 189 Attachment: SCCCGJ Report - If You Only Read the Ballot You're Being Duped 10.7.22 (4073 : Discussion re: SCCCGJ Ballot Measure Wording Page 21 of 23 IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED REFERENCES Bibliography: Alameda County 2020-2021 Grand Jury, Final Report, “The Need for Accuracy and Impartiality of Ballot Measure Questions,” June 2022. Ballotpedia.org, https://ballotpedia.org/Santa_Clara_County,_California, Measure A (June 2022); Measures F, G, H, L, and S (November 2020); Measure AA (November 2016); Measure H (November 2014); Measure E (November 1998) (accessed September 22, 2022). Borenstein, Daniel, “Tricks California Local Officials Use To Trick Voters,” The Bay Area News Group, https://www.mercurynews.com/2022/01/21/borenstein-tricks-california-local-officials- use-to-deceive-voters/ January 21, 2022 (accessed August 23, 2022). California Elections Code sections 303, 9051, 9100-9190, 9295, 13120, and 133247. Christopher, Ben; Kamal, Sameea, “California Ballot Measures: What You Need to Know,” https://calmatters.org/explainers/california-ballot-measures-2022/ June 30, 2022, updated July 1, 2022 (accessed August 23, 2022). City and County of San Francisco Department of Elections, https://sfelections.sfgov.org/measures (accessed August 2, 2022). County of Santa Clara 2020-21 Grand Jury, Final Report, “Gavilan College Measure X Bond Program: Oversight Shortchanged.” June 2022. County of Santa Clara, Office of the Clerk of the Board of Supervisors, List of Boards and Commissions, https://stenttssaim2publicportal.blob.core.windows.net/bc- entcabodocs/MaddyReport.pdf (accessed August 24, 2022). County of Santa Clara Registrar of Voters, Ballot Measures proposed for the upcoming November 2022 election, https://sccvote.sccgov.org/candidates-measures/november-8-2022- general-election-list-local-measures (accessed Aug 20, 2022). Editorial, Mercury News and East Bay Times, “Stop Deceiving Bay Area Voters On Local Tax Measure Costs,” MercuryNews.com, https://www.mercurynews.com/2020/06/26/editorial-stop- deceiving-voters-on-local-tax-measure-costs/ June 26, 2020 (accessed August 23, 2022). Kumar, Rishi, “Opinion: Why 4 Valley Water board members should resign,” MercuryNews.com, https://www.mercurynews.com/2022/05/11/opinion-why-4-valley-water- board-members-should-resign/ May 11, 2022 (accessed August 23, 2022). 11.4.a Packet Pg. 190 Attachment: SCCCGJ Report - If You Only Read the Ballot You're Being Duped 10.7.22 (4073 : Discussion re: SCCCGJ Ballot Measure Wording Page 22 of 23 IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED Rogers, Paul, “Self-Serving Dishonesty: Liccardo Blasts Santa Clara Valley Water District Measure To Extend Term Limits, Even After Polling Shows Voters Oppose,” Mercury News, March 30, 2022 (accessed August 23, 2022). Santa Cruz County 2020-2021 Grand Jury, Final Report, “Words Matter: Did Measure G Deceive Voters?” June 2022. Caselaw: Amador Valley Joint Union High School District v. State Board of Equalization, 22 Cal.3d. 208 (1978). Becerra v. Superior Court, 19 Cal.App.5th 967 (2017). Denny v. Arntz, 55 Cal.App.5th 914 (2020). Harbor v. Deukmejian, 43 Cal.3d 1078 (1987). Hicks v. Bd. of Supervisors, 69 Cal. App. 3d 228 (1977). Home Gardens Sanitary Dist. v. City of Corona, 96 Cal. App. 4th 87 (2002). Martinez v. Superior Court, 142 Cal.App.4th 1245 (2006). McDonough v. Superior Court of Santa Clara, 204 Cal.App.4th 1169 (2012). People v. Langdon, 54 Cal. App.3d 384 (1976). Rodeo Sanitary Dist. v. Bd. of Supervisors, 71 Cal. App.4th 1443 (1999). Yes on 25, Citizens for an On-Time Budget v. Superior Court, 189 Cal.App.4th 1445 (2010). Interviews: The Civil Grand Jury conducted interviews with ten individuals between June 28, 2022, and August 22, 2022. 11.4.a Packet Pg. 191 Attachment: SCCCGJ Report - If You Only Read the Ballot You're Being Duped 10.7.22 (4073 : Discussion re: SCCCGJ Ballot Measure Wording Page 23 of 23 IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPEDIF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED This report was ADOPTED by the Santa Clara County 2022 Civil Grand Jury on this 7th day of October, 2022. ______________________________ Mr. James Renalds Foreperson 11.4.a Packet Pg. 192 Attachment: SCCCGJ Report - If You Only Read the Ballot You're Being Duped 10.7.22 (4073 : Discussion re: SCCCGJ Ballot Measure Wording SUPERIOR COURT BUILDING • 191 NORTH FIRST STREET, SAN JOSE, CALIFORNIA 95113 • (408) 882-2721 • FAX (408) 882-2795 G R A N D J U R Y S A N T A C L A R A C O U N T Y October 7, 2022 City of Gilroy c/o Mr. Thai Pham, City Clerk 7351 Rosanna Street Gilroy, CA 95020 Sent via email: cityclerk@cityofgilroy.org Dear Mr. Pham: The 2022 Santa Clara County Civil Grand Jury is transmitting to you its Final Report, If You Only Read the Ballot, You’re Being Duped. California Penal Code § 933(c) requires that a governing body of the particular public agency or department that has been the subject of a Grand Jury final report shall respond within 90 days to the Presiding Judge of the Superior Court on the findings and recommendations pertaining to matters under the control of the governing body. California Penal Code § 933.05 contains guidelines for responses to Grand Jury findings and recommendations and is attached to this transmission. Please note: 1. As stated in Penal Code § 933.05(a), attached, you are required to "Agree" or "Disagree" with each applicable Finding: 1. If you disagree, in whole or part, you must include an explanation of the reasons you disagree. 2. As stated in Penal Code § 933.05(b), attached, you are required to respond with one of four possible actions to each applicable Recommendation: 1b, 1c, 1e. Your comments are due to the office of the Honorable Beth McGowen, 2023 Presiding Judge, Superior Court of California, County of Santa Clara, 191 North First Street, San José, CA 95113, no later than January 5, 2023. Copies of all responses shall be placed on file with the Clerk of the Court. If you have any questions, please contact Britney Huelbig, Deputy Manager for the Civil Grand Jury, at (408) 882-2721 or CGJ@scscourt.org. Sincerely, James Renalds Foreperson, 2022 Civil Grand Jury Enclosures 11.4.b Packet Pg. 193 Attachment: SCCCGJ Letter to City of Gilroy 10.7.22 (4073 : Discussion re: SCCCGJ Ballot Measure Wording Report and Recommendations) § 933.05. Responses to findings, West's Ann.Cal.Penal Code § 933.05 © 2019 Thomson Reuters. No claim to original U.S. Government Works.1 California Statutes Annotated - 2018 West's Annotated California Codes Penal Code (Refs & Annos) Part 2. Of Criminal Procedure (Refs & Annos) Title 4. Grand Jury Proceedings (Refs & Annos) Chapter 3. Powers and Duties of Grand Jury (Refs & Annos) Article 2. Investigation of County, City, and District Affairs (Refs & Annos) West's Ann.Cal.Penal Code § 933.05 § 933.05. Responses to findings Currentness (a) For purposes of subdivision (b) of Section 933, as to each grand jury finding, the responding person or entity shall indicate one of the following: (1) The respondent agrees with the finding. (2) The respondent disagrees wholly or partially with the finding, in which case the response shall specify the portion of the finding that is disputed and shall include an explanation of the reasons therefor. (b) For purposes of subdivision (b) of Section 933, as to each grand jury recommendation, the responding person or entity shall report one of the following actions: (1) The recommendation has been implemented, with a summary regarding the implemented action. (2) The recommendation has not yet been implemented, but will be implemented in the future, with a timeframe for implementation. (3) The recommendation requires further analysis, with an explanation and the scope and parameters of an analysis or study, and a timeframe for the matter to be prepared for discussion by the officer or head of the agency or department being investigated or reviewed, including the governing body of the public agency when applicable. This timeframe shall not exceed six months from the date of publication of the grand jury report. (4) The recommendation will not be implemented because it is not warranted or is not reasonable, with an explanation therefor. (c) However, if a finding or recommendation of the grand jury addresses budgetary or personnel matters of a county agency or department headed by an elected officer, both the agency or department head and the board of supervisors shall 11.4.c Packet Pg. 194 Attachment: SCCCGJ Report - 93305 Requirements for Responses to Findings (4073 : Discussion re: SCCCGJ Ballot Measure Wording Report § 933.05. Responses to findings, West's Ann.Cal.Penal Code § 933.05 © 2019 Thomson Reuters. No claim to original U.S. Government Works.2 respond if requested by the grand jury, but the response of the board of supervisors shall address only those budgetary or personnel matters over which it has some decisionmaking authority. The response of the elected agency or department head shall address all aspects of the findings or recommendations affecting his or her agency or department. (d) A grand jury may request a subject person or entity to come before the grand jury for the purpose of reading and discussing the findings of the grand jury report that relates to that person or entity in order to verify the accuracy of the findings prior to their release. (e) During an investigation, the grand jury shall meet with the subject of that investigation regarding the investigation, unless the court, either on its own determination or upon request of the foreperson of the grand jury, determines that such a meeting would be detrimental. (f) A grand jury shall provide to the affected agency a copy of the portion of the grand jury report relating to that person or entity two working days prior to its public release and after the approval of the presiding judge. No officer, agency, department, or governing body of a public agency shall disclose any contents of the report prior to the public release of the final report. Credits (Added by Stats.1996, c. 1170 (S.B.1457), § 1. Amended by Stats.1997, c. 443 (A.B.829), § 5.) HISTORICAL AND STATUTORY NOTES 2008 Main Volume Stats.1997, c. 443 (A.B.829), in subds. (a) and (b), in the introductory paragraphs, substituted “(b)” for “(c)”; in subd. (b)(3), substituted “head” for “director”; in subd. (c), inserted “agency or” throughout; inserted subd. (e), relating to investigations and meetings with the grand jury; and, in subd. (f), substituted “presiding” for “supervising”. CROSS REFERENCES Grand jury defined, see Penal Code § 888. Words and phrases, “county”, see Penal Code § 691. RESEARCH REFERENCES Encyclopedias Cal. Jur. 3d Criminal Law: Pretrial Proceedings § 716, Recommendations and Reporting. Cal. Jur. 3d Criminal Law: Pretrial Proceedings § 717, Responses to Findings. Treatises and Practice Aids Witkin, California Criminal Law 4th Introduction to Criminal Procedure § 43, Reports. West's Ann. Cal. Penal Code § 933.05, CA PENAL § 933.05 Current with all 2017 Reg.Sess. laws. (C) 2017 Thomson Reuters. No Claim to Orig. US Gov. Works. 11.4.c Packet Pg. 195 Attachment: SCCCGJ Report - 93305 Requirements for Responses to Findings (4073 : Discussion re: SCCCGJ Ballot Measure Wording Report § 933.05. Responses to findings, West's Ann.Cal.Penal Code § 933.05 © 2019 Thomson Reuters. No claim to original U.S. Government Works.3 End of Document © 2019 Thomson Reuters. No claim to original U.S. Government Works. 11.4.c Packet Pg. 196 Attachment: SCCCGJ Report - 93305 Requirements for Responses to Findings (4073 : Discussion re: SCCCGJ Ballot Measure Wording Report City of Gilroy STAFF REPORT Agenda Item Title: Approval of the Refinancing of Gilroy Public Facilities Financing Authority's 2013 Refunding Lease Revenue Bonds Meeting Date: December 5, 2022 From: Jimmy Forbis, City Administrator Department: Finance Department Submitted By: Harjot Sangha, Finance Director Prepared By: Harjot Sangha, Finance Director Strategic Plan Goals Develop a Financially Resilient Organization ☐ Ensure Neighborhood Equity from City Services ☐ Promote Economic Development Activities ☐ Promote Safe, Affordable Housing for All ☐ Maintain and Improve City Infrastructure RECOMMENDATION Adopt a resolution of the City Council of the City of Gilroy approving the issuance by the Gilroy Public Facilities Financing Authority of not to exceed $15 million of Gilroy Public Facilities Financing Authority Lease Revenue Refunding Bonds, Series 2022A; approving the execution and delivery of various related documents in connection with the offering and sale of such bonds; and authorizing the taking of certain other matters related thereto. 11.5 Packet Pg. 197 EXECUTIVE SUMMARY The Gilroy Public Facilities Financing Authority (“Authority”) and the City of Gilroy (“City”) issued $23,120,000 of bonds in 2013 (the “2013 Bonds”) to refund prior b onds and notes issued for the construction of the Police Station, improvements to the Corporation Yard, Fire Stations, Sports Park and joint use gymnasium/recreation facility and aquatics center for the Christopher High School campus. The Authority and Cit y have the opportunity to refund the outstanding 2013 Bonds with new Lease Revenue Refunding Bonds, Series 2022A (Convertible) (the “2022 Bonds”) to capture interest savings and reduce the annual lease payments from the City. BACKGROUND In 2013, the Authority and City issued the 2013 Bonds at a fixed average interest rate of 4.53% and a 21-year amortization period with debt service secured by General Fund lease payments. The leased assets are comprised of the City’s Police Station, Sunrise Fire Station, Corporation Yard, and Sports Park site. At the time of the issuance of the Authority’s Lease Revenue Refunding Bonds, Series 2020A, it was written into the documents that the Corporation Yard and Sports Park site would be released when the 2013 Bonds were refunded. Since 2013, the City has made lease payments to the Authority, which in turn has made debt service payments on the 2013 Bonds. The outstanding principal amount is $15,185,000 as of December 1, 2022. ANALYSIS Current tax law does not allow for an advanced tax-exempt refunding of the 2013 Bonds prior to August 3, 2023 (90 days prior to November 1, 2023 , first optional redemption date). However, the Authority and City have the ability to issue taxable refunding bonds that convert to tax-exempt bonds once we are within the 90-day redemption window. This is often referred to as a “convertible” or “Cinderella” structure. Such a structure provides the Authority and City with the ability to approve the refunding of the 2013 Bonds with the 2022 Bonds, lock in interest rates, and capture savings based on current taxable and tax-exempt rates. NHA Advisors, the City’s independent financial advisor and fiduciary, advised the City that a convertible transaction is best suited for a private placement, which is expected to provide greater savings than a public offering. A private placement is the sale of bonds to a pre-selected bank rather than a public offering sold to many investors through an underwriter. Following the receipt of several interest rate and st ructure proposals, NHA Advisors determined that Wells Fargo offered the best combination of interest rates and terms. Based on preliminary interest rates provided by Wells Fargo on November 18, 2022, the City can realize approximately $1,135,000 of net present value savings over the 11.5 Packet Pg. 198 remaining 11-year term of the bonds, which is a 7.45% reduction to total debt service. This exceeds the standard 5% threshold for minimum savings that is generally used in the municipal finance industry. It should be noted, how ever, that the interest rates cannot be locked until the rate lock agreement is executed, which will only occur if the Authority and Council approve the refinancing, and the legal due diligence is complete. At that time, the final savings amount will be determined. In order to comply with the tax laws, Wells Fargo will have consent rights to the conversion of taxable bonds to tax-exempt bonds. In the event Wells Fargo was to withhold consent, which is unlikely, the 2022 Bonds would remain taxable , and accordingly, the net present value savings would decrease to $372,000 (a 2.45% reduction to total debt service). The attached resolution and draft financing documents permit the City to proceed with all steps necessary for the issuance of the 2022 Bonds. The resolution authorizes the issuance of bonds not to exceed $15 million, requires a minimum of 5% savings, and limits the repayment term not to exceed the existing debt’s term, November 1, 2033. ALTERNATIVES The City Council could decide not to approve the resolution and draft financing documents, maintaining the 2013 Bond debt service terms and conditions. This is not recommended because the issuance of the 2022 Bonds will provide considerable savings to the City. FISCAL IMPACT/FUNDING SOURCE The current annual debt service on the bonds is approximately $1.8 million. The estimated annual debt service on new bonds will be approximately $1.6 million, resulting in a net savings of about $200,000 annually through the term of the bonds. The exhibit to the City Resolution includes information required to be disclosed in a meeting open to the public pursuant to SB 450. Such information includes the true interest cost of the bonds, finance charges of the bonds, the amount of proceeds received by the City, and the total payment amount. NEXT STEPS Should the Authority and Council approve the resolution and draft financing documents, the rate lock agreement will be executed, and the interest rates will be locked. Attachments: 1. Draft Resolution (City) 2. First Supplement to Indenture 3. Fourth Amendment to Lease Agreement 4. Forward Fixed Rate Lock Agreement 11.5 Packet Pg. 199 5. Convertible Bond Purchase Agreement (City of Gilroy) 11.5 Packet Pg. 200 RESOLUTION NO. 2022-XX A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF GILROY APPROVING THE ISSUANCE BY THE GILROY PUBLIC FACILITIES FINANCING AUTHORITY OF NOT TO EXCEED $15,000,000 OF GILROY PUBLIC FACILITIES FINANCING AUTHORITY LEASE REVENUE REFUNDING BONDS, SERIES 2022A (CONVERTIBLE); APPROVING THE EXECUTION AND DELIVERY OF VARIOUS RELATED DOCUMENTS IN CONNECTION WITH THE ISSUANCE AND DELIVERY OF SUCH BONDS; AND AUTHORIZING THE TAKING OF CERTAIN OTHER MATTERS RELATED THERETO WHEREAS, the Gilroy Public Facilities Financing Authority (the “Authority”) was established for the purpose, among others, of providing for the financing and refinancing of public capital improvements for the City of Gilroy (the “City”); and WHEREAS, the Authority has previously issued its $23,120,000 Gilroy Public Facilities Financing Authority Refunding Lease Revenue Bonds, Series 2013 (the “Series 2013 Bonds”), of which $15,185,000 are currently outstanding; and WHEREAS, the Authority and the City have determined, that it is necessary and desirable in order to refund the Series 2013 Bonds to authorize the issuance, sale and delivery of the Gilroy Public Facilities Financing Authority Lease Revenue Refunding Bonds, Series 2022A (Convertible) (the “Series 2022A Bonds”) in the aggregate principal amount of not to exceed $15,000,000, under the provisions of Article 4 (commencing with Section 6584) of Chapter 5 of Division 7 of Title 1 of the Government Code of the State of California (the “Law”); and WHEREAS, the City desires to approve in connection with the sale of the Series 2022A Bonds, the form of a Bond Purchase Agreement (the “Bond Purchase Agreement”), among the Authority, the City and Wells Fargo Municipal Capital Strategies, LLC (including any affiliate thereof, the “Purchaser”) and the form of a Forward Fixed Rate Lock Agreement (the “Forward Fixed Rate Lock Agreement”) between the City and Wells Fargo Bank, National Association; and WHEREAS, Senate Bill 450 (Chapter 625 of the 2017-2018 Session of the California Legislature) (“SB 450”) requires that the City obtain from an underwriter, financial advisor or private lender and disclose, prior to authorization of the issuance of bonds with a term of greater than 13 months, good faith estimates of the following information in a meeting open to the public: (a) the true interest cost of the bonds, (b) the sum of all fees and charges paid to third parties with respect to the bonds, (c) the amount of proceeds of the bonds expected to be received net of the fees and charges paid to third parties and any reserves or capitalized interest paid or funded with proceeds of the bonds, and (d) the sum total of all debt service payments on the bonds calculated to the final maturity of the bonds plus the fees and charges paid to third parties not paid with the proceeds of the bonds; and WHEREAS, in compliance with SB 450, the City has obtained from NHA Advisors, as Municipal Advisor, the required good faith estimates and such estimates are disclosed and set forth on Exhibit A attached hereto; and 11.5.a Packet Pg. 201 Attachment: Draft Resolution (City) (4070 : City - 2013 Lease Revenue Bonds Refinancing) Resolution No. 2022-XX 2013 Lease Revenue Bonds Refinancing City Council Regular Meeting | December 5, 2022 Page 2 of 5 WHEREAS, Senate Bill 1029 (“SB 1029”) was signed by the California Governor on September 12, 2016, and places additional responsibilities on any issuer of public debt including the adoption of debt management policies that meet certain criteria; and WHEREAS, the City has represented that it is in compliance with the applicable SB 1029 pre-issuance requirements and that it expects to comply with all post-issuance requirements of SB 1029 applicable to the Series 2022A Bonds; and WHEREAS, there have been presented to this meeting the proposed forms of the following documents: (a) the First Supplement to Indenture, dated as of December 1, 2022 (the “First Supplement to Indenture”), among the Authority, the City and U.S. Bank Trust Company, National Association, as trustee (the “Trustee”); (b) the Fourth Amendment to Lease Agreement, dated as of December 1, 2022 (the “Fourth Amendment to Lease”) between the City and the Authority; (c) the Forward Fixed Rate Lock Agreement; and (d) the Bond Purchase Agreement; NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Gilroy, as follows: SECTION 1. Approval of Issuance of Series 2022A Bonds by the Authority. The issuance of the Series 2022A Bonds by the Authority on the terms and conditions set forth in, and subject to the limitations specified in, the Indenture, dated as of August 1, 2020, by and among the Authority, the City and the Trustee, as amended by the First Supplement to Indenture, and this Resolution, is hereby approved; provided, however, that (i) the aggregate principal amount of Series 2022A Bonds shall not exceed $15,000,000, (ii) the maturity of the Series 2022A Bonds shall not exceed November 1, 2033, and (iii) there shall be expected present value savings with respect to the refunding of the Series 2013 Bonds of at least 5% (assuming a successful conversion from a taxable rate to a tax-exempt rate on or about August 8, 2022) of the principal amount of the Series 2013 Bonds using the yield on the Series 2022A Bonds as the discount rate. SECTION 2. Approval of First Supplement to Indenture. The form of First Supplement to Indenture presented at this meeting is hereby approved, and the Mayor, the City Administrator, the Finance Director and the City Clerk, or his or her designee (each, an “Authorized Officer”) are each hereby authorized and directed, for and in the name of and on behalf of the City, to execute, acknowledge and deliver the First Supplement to Indenture in substantially the form presented at this meeting with such changes therein as the officer executing the same may approve, such approval to be conclusively evidenced by the execution and delivery thereof. 11.5.a Packet Pg. 202 Attachment: Draft Resolution (City) (4070 : City - 2013 Lease Revenue Bonds Refinancing) Resolution No. 2022-XX 2013 Lease Revenue Bonds Refinancing City Council Regular Meeting | December 5, 2022 Page 3 of 5 SECTION 3. Approval of Fourth Amendment to Lease. The form of Fourth Amendment to Lease presented at this meeting is hereby approved and each Authorized Officer is hereby authorized and directed, for and in the name of and on behalf of the City, to execute, acknowledge and deliver the Fourth Amendment to Lease in substantially the form presented at this meeting with such changes therein as the Authorized Officer executing the same may approve, such approval to be conclusively evidenced by the execution and delivery thereof. SECTION 4. Approval of Forward Fixed Rate Lock Agreement. The City is hereby authorized to enter into the Forward Fixed Rate Lock Agreement and each Authorized Officer is hereby authorized and directed to execute and deliver the Forward Fixed Rate Lock Agreement on behalf of the City, in substantially the form presented to this meeting, with such changes therein, deletions therefrom and additions thereto as the Authorized Officer shall approve in consultation with the City’s financial and legal consultants, which approval shall be conclusively evidenced by the execution and delivery thereof. SECTION 5.Approval of Bond Purchase Agreement. The City is hereby authorized to enter into the Bond Purchase Agreement and each Authorized Officer is hereby authorized and directed to execute and deliver the Bond Purchase Agreement on behalf of the City, in substantially the form presented to this meeting, with such changes therei n, deletions therefrom and additions thereto as the Authorized Officer shall approve in consultation with the City ’s financial and legal consultants, which approval shall be conclusively evidenced by the execution and delivery thereof. SECTION 6. Other Acts. The officers and staff of the City are hereby authorized and directed, jointly and severally, to do any and all things, to execute and deliver any and all documents, which in consultation with the City Attorney or with Nixon Peabody LLP, as bond counsel, they may deem necessary or advisable in order to effectuate the purposes of this Resolution, and any and all such actions previously taken by such officers or staff members are hereby ratified and confirmed. SECTION 7. Effective Date. This Resolution shall take effect upon adoption. 11.5.a Packet Pg. 203 Attachment: Draft Resolution (City) (4070 : City - 2013 Lease Revenue Bonds Refinancing) Resolution No. 2022-XX 2013 Lease Revenue Bonds Refinancing City Council Regular Meeting | December 5, 2022 Page 4 of 5 PASSED and ADOPTED this 5th day of December 2022 by the following roll call vote: AYES: COUNCIL MEMBERS: NOES: COUNCIL MEMBERS: ABSTAIN: COUNCIL MEMBERS: ABSENT: COUNCIL MEMBERS: APPROVED: Marie Blankley, Mayor ATTEST: _______________________ Thai Nam Pham, City Clerk 11.5.a Packet Pg. 204 Attachment: Draft Resolution (City) (4070 : City - 2013 Lease Revenue Bonds Refinancing) EXHIBIT A GOOD FAITH ESTIMATES The following information was obtained from the City’s Municipal Advisor as of November 18, 2022, and is provided in compliance with Section 5852.1 of the California Government Code with respect to the base rental payments evidenced by the Series 2022A Bonds expected to be issued in the aggregate principal amount of $14,605,490: 1. True Interest Cost of the Base Rental Payments Evidenced by the Bonds. Based on market interest rates prevailing at the time of preparation of this information, a good faith estimate of the true interest cost of the base rental payments evidenced by the Bonds, which means the rate necessary to discount the amounts payable on the respective principal and interest payment dates to the purchase price received for the Bonds, is 3.84%. 2. Finance Charge of the Bonds. Based on market interest rates prevailing at the time of preparation of this information, a good faith estimate of the City’s finance charge of the Bonds, which means the sum of all fees and charges paid to third parties (or costs associated with the Bonds), is $175,000. 3. Amount of Proceeds to be Received. Based on market interest rates prevailing at the time of preparation of this information, a good faith estimate of the amount of proceeds expected to be received by the City following the Authority’s sale of the Bonds, less the finance charge of the Bonds described in paragraph 2 above and any reserves or capitalized interest paid or funded with proceeds of the Bonds, is $14,430,490. 4. Total Payment Amount. Based on market interest rates prevailing at the time of preparation of this information, a good faith estimate of the total payment amount, which means the sum total of all payments the City will make to pay base rental payments evidenced by the Bonds plus the finance charge of the Bonds described in paragraph 2 above not paid with the proceeds of the Bonds, calculated to the final base rental payment evidenced by the Bonds, is $18,092,275. Attention is directed to the fact that the foregoing information constitutes good faith estimates only. The actual interest cost, finance charges, amount of proceeds and total payment amount may vary from those presently estimated due to variations from these estimates in the timing of the sale of the Bonds, the actual principal amount of Bonds sold, the amortization of the Bonds sold and market interest rates at the time of sale. The date of sale and the amount of Bonds sold will be determined by the City based on need for improvement funds and other factors. The actual interest rates at which the Bonds will be sold will depend on the bond market at the time of sale. The actual amortization of the Bonds will also depend, in part, on market interest rates at the time of sale. Market interest rates are affected by economic and other factors beyond the City’s control. 11.5.a Packet Pg. 205 Attachment: Draft Resolution (City) (4070 : City - 2013 Lease Revenue Bonds Refinancing) 4863-6504-4543.3 FIRST SUPPLEMENT TO INDENTURE by and among U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION , as Trustee, CITY OF GILROY and GILROY PUBLIC FACILITIES FINANCING AUTHORITY Dated as of ______, 2022 Relating to the $_________ Gilroy Public Facilities Financing Authority Lease Revenue Refunding Bonds, Series 2022A (Convertible) 11.5.b Packet Pg. 206 Attachment: First Supplement to Indenture (4070 : City - 2013 Lease Revenue Bonds Refinancing) 4863-6504-4543.3 TABLE OF CONTENTS Page -i- PART 1 PARTICULAR AMENDMENTS Part 1.1. Amendments to Section 1.01 of the Original Indenture .................................................. 2 Part 1.2. Amendments to Section 5.01(a) of the Indenture ............................................................ 5 PART 2 ADDITION OF ARTICLE XIV Part 2.1. Addition of Article XIV .................................................................................................. 6 ARTICLE XIV TEMRS AND CONDITIONS OF SERIES 2022A BONDS Section 14.01. Authorization of Series 2022A Bonds ................................................................... 6 Section 14.02. Terms of Series 2022A Bonds ............................................................................... 7 Section 14.03. Form of Series 2022A Bonds ................................................................................. 8 Section 14.04. Execution of Series 2022A Bonds ......................................................................... 8 Section 14.05. Deposit of Proceeds of Series 2022A Bonds; Other Moneys ................................ 8 Section 14.06. Redemption of Series 2022A Bonds ...................................................................... 9 Section 14.07. Transfer Restrictions ............................................................................................ 10 PART 3 MISCELLANEOUS Part 3.1. Effect of First Supplement to Indenture ........................................................................ 11 Part 3.2. Execution in Counterparts ............................................................................................. 11 Part 3.3. Effective Date ................................................................................................................ 11 EXHIBIT A FORM OF SERIES 2022A BONDS .................................................................... A-1 EXHIBIT B BREAKAGE FEE CALCULATION.................................................................... B-1 EXHIBIT C FORM OF PURCHASER LETTER ..................................................................... C-1 EXHIBIT D FORM OF TAX-EXEMPT BOND CONVERSION AGREEMENT .... D-ERROR! BOOKMARK NOT DEFINED. 11.5.b Packet Pg. 207 Attachment: First Supplement to Indenture (4070 : City - 2013 Lease Revenue Bonds Refinancing) 4863-6504-4543.3 FIRST SUPPLEMENT TO INDENTURE THIS FIRST SUPPLEMENT TO INDENTURE (this “First Supplement to Indenture”), is made and entered into as of _______ 1, 2022, by and among U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, a national banking association duly organized and existing under and by virtue of the laws of the United States of America, as successor trustee (the “Trustee”), the CITY OF GILROY, a political subdivision duly organized and existing under the laws of the State of California (the “City”), and GILROY PUBLIC FACILITIES FINANCING AUTHORITY, a joint powers authority duly organized and existing under and by virtue of the laws of the State of California (the “Authority”); W I T N E S S E T H: WHEREAS, the Authority previously issued its Lease Revenue Refunding Bonds, Series 2020A (the “Series 2020A Bonds”), in the aggregate principal amount of $13,740,000, pursuant to an Indenture, dated as of August 1, 2020 (the “Original Indenture”) by and among the Trustee, the City and the Authority, and in accordance with the Joint Exercise of Powers Agreement and its powers thereunder and under the laws of the State of California; WHEREAS, the Original Indenture provides that, subject to the conditions set forth therein, in addition to the Series 2020A Bonds, the Authority may by execution of a Supplemental Indenture without the consent of the Owners, provide for the execution and delivery of Additional Bonds; WHEREAS, the Authority intends to issue its Lease Revenue Refunding Bonds, Series 2022A (Convertible) (the “Series 2022A Bonds”) pursuant to this First Supplement to Indenture and the Original Indenture (as so amended the “Indenture”), and in accordance with the Joint Exercise of Powers Agreement and its powers thereunder and under the laws of the State of California; WHEREAS, the proceeds of the Series 2022A Bonds will be applied by the City to (i) refund the Authority’s Refunding Lease Revenue Bonds, Series 2013 (the “Series 2013 Bonds”) and (ii) pay the costs incurred in connection with the issuance of the Series 2022A Bonds; WHEREAS, in order to accomplish such refunding, the Authority and the City are entering into a Fourth Amendment to Lease Agreement, dated as of ________ 1, 2022, in order to amend the First Amended and Restated Lease Agreement, dated as of August 1, 2009, as amended, between the Authority and the City, the “Lease” (i) to increase the amount of Base Payments payable thereunder and (ii) to make certain other modifications in order to provide for the execution and delivery of the Series 2022A Bonds in accordance with the provisions of the Indenture; and WHEREAS, all acts, conditions and things required by law to exist, to have happened and to have been performed precedent to and in connection with the execution and entering into of this First Supplement to Indenture do exist, have happened and have been performed in regular and due time, form and manner as required by law, and the parties hereto are now duly authorized to execute and enter into this First Supplement to Indenture; 11.5.b Packet Pg. 208 Attachment: First Supplement to Indenture (4070 : City - 2013 Lease Revenue Bonds Refinancing) 4863-6504-4543.3 2 NOW, THEREFORE, in consideration of the premises and of the mutual agreements and covenants contained herein and for other valuable consideration, the parties do hereby agree as follows: PART 1 PARTICULAR AMENDMENTS Part 1.1. Amendments to Section 1.01 of the Original Indenture. The following definitions, if defined in Section 1.01 of the Original Indenture, are hereby amended and restated and, if not defined, are hereby added, all as follows: Affiliate The term “Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling or controlled by or under common control with such Person. Without limiting the foregoing, the definition of “affiliate” of any Person shall include any subsidiary of such Person and, with respect to the Series 2022A Bonds Purchaser, shall include Wells Fargo Securities (a trade name) and Wells Fargo Bank, National Association. Amortization End Date The term “Amortization End Date” means the earliest to occur of (a) the third (3rd) anniversary of receipt of written notice from the Purchaser of a Downgrade Redemption Event, and (b) the date on which all Series 2022A Bonds are redeemed, repaid, prepaid or cancelled in accordance with the terms of the Indenture. Amortization Payment Date The term “Amortization Payment Date” means (a) the six month anniversary of the date of receipt of written notice from the Purchaser of a Downgrade Redemption Event and each six-month anniversary thereafter which occurs prior to the Amortization End Date and (b) the Amortization End Date. Authorized Denominations The term “Authorized Denominations” means $5,000 or any integral multiple thereof. In the case of the Series 2022A Bonds, however, Authorized Denominations means $250,000 or any integral multiple of $1 in excess thereof. Bond Interest is Taxable The term “Bond Interest is Taxable” means that interest paid or to be paid on a Series 2022A Bond is or will be includable for federal income tax purposes in the gross income of the Series 2022A Bonds Purchaser or any other Owner thereof, but excluding the inclusion of interest on such Series 2022A Bond as an item of tax preference for purposes of the calculation of an alternative minimum tax imposed on the Series 2022A Bonds Purchaser or such other Owner. 11.5.b Packet Pg. 209 Attachment: First Supplement to Indenture (4070 : City - 2013 Lease Revenue Bonds Refinancing) 4863-6504-4543.3 3 Bond Purchase Agreement The term “Bond Purchase Agreement” means the Bond Purchase Agreement, dated [December __, 2022], by and among the Authority, the City and the Series 2022A Bonds Purchaser, as the same may be amended, modified or supplemented from time to time in accordance with its terms. Bonds The term “Bonds” means the Series 2020A Bonds, the Series 2022A Bonds and all Additional Bonds. BPA Credit Event The term “BPA Credit Event” has the meaning assigned to “Event of Default” in the Bond Purchase Agreement. Conversion Date The term “Conversion Date” shall mean the date on which the Series 2022A Bonds become Tax-Exempt. Default Rate The term “Default Rate” has the meaning assigned to such term in the Bond Purchase Agreement. Determination of Taxability The term “Determination of Taxability” means (a) any determination, decision, decree or advisement by the Commissioner of Internal Revenue, or any District Director of Internal Revenue or any court of competent jurisdiction to the effect that Bond Interest is Taxable, or (b) the delivery to the Series 2022A Bonds Purchaser, any Owner or the Trustee of an Opinion of Counsel, delivered by Bond Counsel, to the effect that Bond Interest is Taxable. A Determination of Taxability also shall be deemed to have occurred on the first to occur of the following: (i) the date when the Authority files any statement, supplemental statement, or other tax schedule, return or document, which discloses that Bond Interest is Taxable; (ii) the effective date of any federal legislation enacted or federal rule or regulation promulgated after the date of this Indenture which has the effect that Bond Interest is Taxable; or (iii) if upon sale, lease or other deliberate action within the meaning of Treas. Reg. § 1.141-2(d), the failure to receive an Approving Opinion. 11.5.b Packet Pg. 210 Attachment: First Supplement to Indenture (4070 : City - 2013 Lease Revenue Bonds Refinancing) 4863-6504-4543.3 4 Interest Fund The term “Interest Fund” means the Series 2020A Interest Fund, the Series 2022A Interest Fund and each additional fund established for the payment of interest of a Series of Additional Bonds within the Revenue Fund established in accordance with Section 5.01(a) hereof. Downgrade Redemption Event The term “Downgrade Redemption Event” has the meaning assigned to such term in the Bond Purchase Agreement. Interest Payment Date The term “Interest Payment Date” means May 1 and November 1 of each year, commencing November 1, 2020 in the case of Series 2020A Bonds and May 1, 2023 in the case of Series 2022A Bonds. Maximum Federal Corporate Tax Rate The term “Maximum Federal Corporate Tax Rate” means the maximum rate of income taxation imposed on corporations pursuant to Section 11(b) of the Code, as in effect from time to time or, if as a result of a change in the Code the rate of income taxation imposed on corporations generally shall not be applicable to the Series 2022A Bonds Purchaser, the maximum statutory rate of federal income taxation which could apply to the Series 2022A Bonds Purchaser. As of the Series 2022A Bonds Closing Date, the Maximum Federal Corporate Tax Rate is 21%. Principal Fund The term “Principal Fund” means the Series 2020A Principal Fund, the Series 2022A Principal Fund and each additional fund established for the payment of principal of a Series of Additional Bonds within the Revenue Fund established in accordance with Section 5.01(a) hereof. Principal Payment Date The term “Principal Payment Date” means November 1 of each year, commencing on the Principal Payment Date or Dates set forth in Section 2.02 hereof with respect to the Series 2020A Bonds and Section 14.02 hereof with respect to the Series 2022A Bonds. Series 2022A Bonds The term “Series 2022A Bonds” means the Gilroy Public Facilities Financing Authority Lease Revenue Refunding Bonds, Series 2022A (Convertible). Series 2022A Bonds Closing Date The term “Series 2022A Bonds Closing Date” means ________, 2022. 11.5.b Packet Pg. 211 Attachment: First Supplement to Indenture (4070 : City - 2013 Lease Revenue Bonds Refinancing) 4863-6504-4543.3 5 Series 2022A Bonds Purchaser The term “Series 2022A Bonds Purchaser” means Wells Fargo Municipal Capital Strategies, LLC, as the initial purchaser of the Series 2022A Bonds. Taxable Date The term “Taxable Date” means the date on which interest on the Series 2022A Bonds is first includable in gross income of an Owner (including, without limitation, any previous Owner) thereof as a result of a Determination of Taxability. Taxable Rate The term “Taxable Rate” means [__._]%, the rate of interest on the Series 2022A Bonds payable from the Series 2022A Bonds Closing Date to but not including the Conversion Date. Tax-Exempt Rate The term “Tax-Exempt Rate” means [__._]%, the rate of interest on the Series 2022A Bonds payable from and after the Conversion Date. Taxable Gross-Up Rate The term “Taxable Gross-Up Rate” means, for any date of determination, the rate of interest per annum equal to the product of the interest rate on the Series 2022A Bonds then in effect multiplied by the quotient of (a) one divided by (b) one minus the then current Maximum Federal Corporate Tax Rate in effect on the date of calculation. 2013 Escrow Agent The term “2013 Escrow Agent” means U.S. Bank Trust Company, National Association, as escrow agent under the 2013 Escrow Agreement. 2013 Escrow Agreement The term “2013 Escrow Agreement” means the Escrow Agreement, dated as of December 1, 2022, between the Authority and the Escrow Agent, providing for the defeasance and redemption of the Series 2013 Bonds. Part 1.2. Amendments to Section 5.01(a) of the Indenture. Section 5.01(a) of the Original Indenture is hereby amended to read as follows: There is hereby established a special fund designated as the “Revenue Fund” which shall be held by the Trustee and which shall be kept separate and apart from all other funds and moneys held by the Trustee. Within the Revenue Fund, the Trustee shall establish and maintain (i) a separate fund designated the “Series 2020A Interest Fund” and a separate fund designated the “Series 2020A Principal Fund,” and (ii) a separate fund designated the “Series 2022A Interest Fund” and a separate 11.5.b Packet Pg. 212 Attachment: First Supplement to Indenture (4070 : City - 2013 Lease Revenue Bonds Refinancing) 4863-6504-4543.3 6 fund designated the “Series 2022A Principal Fund.” Upon the issuance of Additional Bonds, the Trustee shall also establish and maintain, within the Revenue Fund, a separate Interest Fund and a separate Principal Fund for each Series of Additional Bonds. The City hereby irrevocably pledges and transfers to the Trustee, for the benefit of the Owners, all of its right, title and interest in and to all amounts on deposit from time to time in the funds and accounts established hereunder (other than the Rebate Fund), subject to the provisions hereof permitting the disbursement thereof for or to the purposes and on the conditions and terms set forth herein, and in and to the Revenues, which shall be used for the punctual payment of the interest and principal of the Bonds and the Revenues shall not be used for any other purpose while any of the Bonds remain Outstanding. It is the intent of the parties hereto that the Authority shall not have any right, title, in or to the Revenues. In the event, however, that it should be determined that the Authority has any right, title or interest in or to the Revenues, then the Authority hereby irrevocably pledges and transfers to the Trustee, for the benefit of the Owners, all of such right, title and interest, which shall be used for the punctual payment of the interest and principal of the Bonds. These pledges shall constitute a first and exclusive lien on the funds established hereunder and the Revenues in accordance with the terms hereof subject in all events to the power of the City and the Authority to cause the execution and delivery of Additional Bonds pursuant to Section 2.10 hereof which shall be on a parity with the Bonds Outstanding. PART 2 ADDITION OF ARTICLE XIV Part 2.1. Addition of Article XIV. The Original Indenture is hereby amended and supplemented by adding thereto an additional Article as follows: ARTICLE XIV TEMRS AND CONDITIONS OF SERIES 2022A BONDS Section 14.01. Authorization of Series 2022A Bonds. A second Series of Bonds is hereby created and designated “Gilroy Public Facilities Financing Authority Lease Revenue Refunding Bonds, Series 2022A (Convertible).” The aggregate principal amount of Series 2022A Bonds which may be issued and Outstanding under this Indenture shall not exceed $__________. The Authority has reviewed all proceedings heretofore taken relative to the authorization of the Series 2022A Bonds and has found, as a result of such review, and hereby finds and determines that all acts, conditions and things required by law to exist, to have happened and to have been performed precedent to and in the issuance of the Series 2022A Bonds do exist, have happened and have been performed in due time, form and manner as required by law, and that the Authority is now duly authorized, pursuant to each and every requirement of the Act, to issue the Series 2022A Bonds in the form and manner provided herein and that the Series 2022A Bonds shall be entitled to the benefit, protection and security of the provisions hereof. 11.5.b Packet Pg. 213 Attachment: First Supplement to Indenture (4070 : City - 2013 Lease Revenue Bonds Refinancing) 4863-6504-4543.3 7 The recital contained in the Series 2022A Bonds that the same are issued pursuant to the Act and pursuant hereto shall be conclusive evidence of their validity and of the regularity of their issuance, and all Series 2022A Bonds shall be incontestable from and after their issuance. The Series 2022A Bonds shall be deemed to be issued, within the meaning hereof, whenever the definitive Series 2022A Bonds (or any temporary Series 2022A Bonds exchangeable therefor) shall have been delivered to the purchaser thereof and the proceeds of sale thereof received. Section 14.02. Terms of Series 2022A Bonds. The Series 2022A Bonds shall be issued in the aggregate principal amount of $_________. The Series 2022A Bonds shall be dated as of the date of initial delivery, shall be executed and delivered in the form of fully registered Series 2022A Bonds in physical form, without coupons, in Authorized Denominations, shall be payable in lawful money of the United States of America, and shall mature on November 1, 2033 and initially bear interest at the Taxable Rate, subject to prior redemption as described in Article IV and Section 14.06 hereof. On or after August ___, 2023, the Authority and the City may request to the Series 2022A Bonds Purchaser that the Series 2022A Bonds be designated Tax-Exempt. Upon the consent of the Series 2022A Bonds Purchaser and receipt by the Series 2022A Bonds Purchaser of (i) a [Tax- Exempt Bond Conversion Agreement] in substantially the form of [Exhibit D], (ii) an Opinion of Counsel as to the tax-exempt status of the Series 2022A Bonds and (iii) written confirmation that no Event of Default or BPA Credit Event has occurred and is continuing and that all representations and warranties of the Authority and the City in the Bond Purchase Agreement, the Indenture and the Lease Agreement continue to be true and accurate, the Series 2022A Bonds shall bear interest at the Tax-Exempt Rate. Each Series 2022A Bond shall bear interest from the Interest Payment Date to which interest has been paid or duly provided for next preceding its date of authentication, unless such date of authentication shall be (i) prior to the close of business on May 1, 2023, in which case such Series 2022A Bond shall bear interest from its date of delivery, (ii) subsequent to a Record Date but before the related Interest Payment Date, in which case such Series 2022A Bond shall bear interest from such Interest Payment Date, or (iii) an Interest Payment Date to which interest has been paid in full or duly provided for, in which case such Series 2022A Bond shall bear interest from such date of authentication; provided, however, that if, as shown by the records of the Trustee, interest shall be in default, each Series 2022A Bond shall bear interest from the last Interest Payment Date to which such interest has been paid in full or duly provided for. Interest on the Series 2022A Bonds shall be computed on the basis of a 360-day year of twelve 30-day months. The interest on the Series 2022A Bonds shall be payable on each Interest Payment Date by check sent by first class mail by the Trustee to the respective Owners of the Series 2022A Bonds as of the Record Date for such Interest Payment Date at their addresses shown on the books required to be kept by the Trustee pursuant to the provisions of Section 2.08 hereof. Payments of defaulted interest on any Series 2022A Bond shall be paid by check to the Owner as of a special record date to be fixed by the Trustee, notice of which special record date shall be given to the Owner of the Series 2022A Bond not less than ten days prior thereto. The principal and premium, if any, of the Series 2022A Bonds shall be payable upon presentation and surrender thereof on maturity or on redemption prior thereto at the Principal Corporate Trust Office of the Trustee. Notwithstanding the foregoing, so long as Wells Fargo Municipal Capital Strategies, LLC is the 11.5.b Packet Pg. 214 Attachment: First Supplement to Indenture (4070 : City - 2013 Lease Revenue Bonds Refinancing) 4863-6504-4543.3 8 Owner of the Series 2022A Bonds, principal of, premium, if any, and interest on the Series 2022A Bonds shall be paid by wire transfer and without presentment or surrender of the Series 2022A Bonds. The Owner of $1,000,000 or more in aggregate principal amount of the Series 2022A Bonds may request in writing that the Trustee pay the interest on the Series 2022A Bonds by wire transfer to an account in the United States of America and the Trustee shall comply with such request for all Interest Payment Dates following the 15th day after receipt of such request. Notwithstanding anything to the contrary herein: (i) on or after the Conversion Date, to the extent the Series 2022A Bonds are Tax- Exempt, from and after any Taxable Date, the interest rate on the Series 2022A Bonds shall be established at a rate equal to the Taxable Gross-Up Rate; and (ii) upon the occurrence and during the continuation of any Event of Default, the interest rate on the Series 2022A Bonds shall be established at a rate equal to the Default Rate. Section 14.03. Form of Series 2022A Bonds. The Series 2022A Bonds and the assignment to appear thereon shall be in substantially the forms set forth in Exhibit A hereto, with necessary or appropriate insertions, omissions and variations as permitted or required hereby. Section 14.04. Execution of Series 2022A Bonds. The Chairman or Executive Director of the Authority is hereby authorized and directed to execute each of the Series 2022A Bonds on behalf of the Authority and the Secretary of the Authority is hereby authorized and directed to countersign each of the Series 2022A Bonds on behalf of the Authority. The signatures of such Chairman, Executive Director and Secretary may be by printed, lithographed or engraved by facsimile reproduction. In case any officer whose signature appears on the Series 2022A Bonds shall cease to be such officer before the delivery of the Series 2022A Bonds to the purchaser thereof, such signature shall nevertheless be valid and sufficient for all purposes as if such officer had remained in office until such delivery of the Series 2022A Bonds. Only those Series 2022A Bonds bearing thereon a certificate of authentication and registration in substantially the form set forth in Exhibit A hereto, executed manually and dated by the Trustee, shall be entitled to any benefit, protection or security hereunder or be valid or obligatory for any purpose, and such certificate of the Trustee shall be conclusive evidence that the Series 2022A Bonds so authenticated and registered have been duly authorized, executed, issued and delivered hereunder and are entitled to the benefit, protection and security hereof. The Series 2022A Bonds shall not be book-entry bonds but rather physical delivery bonds. Section 14.05. Deposit of Proceeds of Series 2022A Bonds; Other Moneys. The proceeds received from the sale of the Series 2022A Bonds in the amount of $__________ shall be transferred for deposit by the Trustee to the following respective funds or accounts: (a) The Trustee shall deposit in the Costs of Issuance Fund established pursuant to Section 3.04 hereof the amount of $_________; 11.5.b Packet Pg. 215 Attachment: First Supplement to Indenture (4070 : City - 2013 Lease Revenue Bonds Refinancing) 4863-6504-4543.3 9 (b) The Trustee shall transfer to the Escrow Agent the amount of $_______ for deposit in the Escrow Fund held under the Escrow Agreement. The deposits required of the Trustee set forth above into funds or accounts shall be deemed made by the transfer of funds by the Trustee in accordance with the instructions of the City. To facilitate any transfers to or for the benefit of the City required in this Section, the Trustee may, in its discretion open a temporary fund or account on its records which shall be closed upon completion of such transfers. Section 14.06. Redemption of Series 2022A Bonds. The Series 2022A Bonds shall be subject to redemption prior to their Maturity Date as set forth in this Section. (a) Optional Redemption. The Series 2022A Bond may be prepaid in whole at any time upon at least three Business Days’ prior written notice to the Series 2022A Bonds Purchaser specifying the amount of prepayment. In the event that the Authority pursuant to this Section 14.06(a) optionally redeems the Series 2022A Bonds, the Authority shall, at the time of such prepayment, pay to the Series 2022A Bonds Purchaser the principal of the Series 2022A Bonds plus interest accrued to the date of prepayment plus an additional fee or redemption premium equal to the Breakage Fee as described in Exhibit B. (b) Mandatory Sinking Account Redemption. The Series 2022A Bonds shall be subject to redemption from Mandatory Sinking Account Payments in part on November 1, 2023, and on each November 1 thereafter, at a redemption price equal to the principal amount thereof to be redeemed, together with accrued interest thereon to the date fixed for redemption, without premium, as follows; provided, however, that in lieu of redemption thereof, such Series 2022A Bonds may be purchased by the Authority and tendered to the Trustee: Sinking Fund Redemption Date (November 1) Principal Amount to be Redeemed or Purchased If some but not all of the Series 2022A Bonds have been redeemed pursuant to optional redemptions, the total amount of Mandatory Sinking Account Payments to be made subsequent to such redemption shall be reduced in an amount equal to the principal amount of the Series 2022A 11.5.b Packet Pg. 216 Attachment: First Supplement to Indenture (4070 : City - 2013 Lease Revenue Bonds Refinancing) 4863-6504-4543.3 10 Bonds so redeemed by reducing each such future Mandatory Sinking Account Payment on a pro rata basis (as nearly as practicable) in integral multiples of $5,000, as shall be designated pursuant to written notice which shall include a revised Mandatory Sinking Account Payment schedule filed by Authority with the Trustee. (a) Extraordinary Redemption. In the event that the Series 2022A Bonds are subject to extraordinary redemption in accordance with Section 4.01(a) of the Indenture, the Authority shall, at the time of such prepayment, pay to the Series 2022A Bonds Purchaser the principal of the Series 2022A Bonds plus interest accrued to the date of prepayment plus an additional fee or redemption premium equal to the Breakage Fee as described in Exhibit B. (b) Downgrade Redemption Event. Upon receipt of written notice from the Purchaser of a Downgrade Redemption Event and direction to redeem the Series 2022A Bonds, the Series 2022A Bonds shall be redeemed in equal (as nearly as possible) semiannual installments payable on each Amortization Payment Date (each such payment, an “Amortization Payment”) with the final installment in an amount equal to the entire then-outstanding principal amount of such Series 2022A Bonds to be redeemed on the Amortization End Date. Section 14.07. Transfer Restrictions. The Series 2022A Bonds may be transferred in Authorized Denominations without limitation to any Affiliate of the Series 2022A Bonds Purchaser or to a trust or custodial arrangement established by the Series 2022A Bonds Purchaser or an Affiliate of the Series 2022A Bonds Purchaser, each of the beneficial owners of which are “qualified institutional buyers” as defined in Rule 144A promulgated under the Securities Act of 1933, as amended (each a “Purchaser Transferee”) and subject to the limitations, if any, set forth in the Bond Purchase Agreement. On or after August 8, 2024, the Series 2022A Bonds may be transferred in Authorized Denominations to another purchaser (other than an Affiliate of the Series 2022A Bonds Purchaser or a trust or custodial arrangement as described in the preceding sentence) if (i) written notice of such transfer, together with addresses and related information with respect to such purchaser, is delivered to the Authority and the Trustee by such transferor and (ii) such purchaser shall have delivered to the Authority, the Trustee and the transferor a Purchaser Letter in the form attached hereto as Exhibit C executed by a duly authorized officer of such purchaser; provided that each such purchaser shall constitute (1) a “qualified institutional buyer” as defined in Rule 144A promulgated under the Securities Act of 1933, as amended, and (2) a commercial bank organized under the laws of the United States, or any state thereof, or any other country which is a member of the Organization for Economic Cooperation and Development, or a political subdivision of any such country, and, in any such case, having a combined capital and surplus, determined as of the date of any transfer pursuant to this Section, of not less than $5,000,000,000 (each a “Non-Purchaser Transferee”).. Notwithstanding the foregoing, the Series 2022A Bonds Purchaser shall not transfer the Series 2022A Bonds to a Non-Purchaser Transferee prior to [December __, 202_], without the prior written consent of the City and the Authority which shall not be unreasonably withheld. 11.5.b Packet Pg. 217 Attachment: First Supplement to Indenture (4070 : City - 2013 Lease Revenue Bonds Refinancing) 4863-6504-4543.3 11 PART 3 MISCELLANEOUS Part 3.1. Effect of First Supplement to Indenture. This First Supplement to Indenture and all of the terms and provisions herein contained shall form part of the Original Indenture as fully and with the same effect as if all such terms and provisions had been set forth in the Original Indenture. The Original Indenture is hereby ratified and confirmed and shall continue in full force and effect in accordance with the terms and provisions thereof, as heretofore amended and supplemented, and as amended and supplemented hereby. If there shall be any conflict between the terms of this First Supplement to Indenture and the terms of the Original Indenture (as in effect on the day prior to the effective date of this First Supplement to Indenture), the terms of this First Supplement to Indenture shall prevail. Part 3.2. Execution in Counterparts. This First Supplement to Indenture may be executed in several counterparts, each of which shall be deemed an original, and all of which shall constitute but one and the same instrument. The parties further agree that facsimile signatures or signatures scanned into .pdf (or signatures in another electronic format designated by the City) and sent by e-mail shall be deemed original signatures. Part 3.3. Effective Date. This First Supplement to Indenture shall become effective upon its execution and delivery. [This space intentionally left blank] 11.5.b Packet Pg. 218 Attachment: First Supplement to Indenture (4070 : City - 2013 Lease Revenue Bonds Refinancing) 4863-6504-4543.3 12 IN WITNESS WHEREOF, the parties hereto have executed and attested to this First Supplement to Indenture by their officers thereunto duly authorized as of the day and year first written above. U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, as Trustee By: Authorized Officer CITY OF GILROY By: Mayor Attest: By: City Clerk GILROY PUBLIC FACILITIES FINANCING AUTHORITY By: Executive Director Attest: By: Secretary 11.5.b Packet Pg. 219 Attachment: First Supplement to Indenture (4070 : City - 2013 Lease Revenue Bonds Refinancing) 4863-6504-4543.3 A-1 EXHIBIT A FORM OF SERIES 2022A BONDS The Transferability of the Bond is Restricted as Described in Section 14.07 of the Indenture UNITED STATES OF AMERICA STATE OF CALIFORNIA No. R-__ $___________ GILROY PUBLIC FACILITIES FINANCING AUTHORITY LEASE REVENUE REFUNDING BONDS, SERIES 2022A (CONVERTIBLE) Interest Rate Maturity Date Dated CUSIP % initially and __% after the Conversion Date November 1, 2033 _______, 2022 REGISTERED OWNER: WELLS FARGO MUNICIPAL CAPITAL STRATEGIES, LLC PRINCIPAL SUM: The GILROY PUBLIC FACILITIES FINANCING AUTHORITY, a joint powers authority, duly created and lawfully existing under the Constitution and laws of the State of California (the “Authority”), for value received, hereby promises to pay (but only out of the Revenues, as hereinafter defined) to the registered owner specified above or registered assigns on the maturity date specified above (subject to any right of prior redemption provided for) the principal sum specified above, together with interest thereon from the Interest Payment Date (as defined below) to which interest has been paid or duly provided for next preceding its date of execution, unless such date of authentication shall be (i) prior to the close of business on May 1, 2023, in which case such Bond shall bear interest from its date of delivery, (ii) subsequent to a Record Date but before the related Interest Payment Date, in which case such Bond shall bear interest from such Interest Payment Date, or (iii) an Interest Payment Date to which interest has been paid in full or duly provided for, in which case such Bond shall bear interest from such date of authentication; provided, however, that if, as shown by the records of the Trustee, interest shall be in default, each Bond shall bear interest from the last Interest Payment Date to which such interest has been paid in full or duly provided for. The term “Interest Payment Date” means May 1, 2023, and each May 1 and November 1 thereafter. The term “Record Date” means the close of business on the 15th day of the month preceding any Interest Payment Date, whether or not such day is a Business Day. 11.5.b Packet Pg. 220 Attachment: First Supplement to Indenture (4070 : City - 2013 Lease Revenue Bonds Refinancing) 4863-6504-4543.3 A-2 This Bond shall initially bear interest at the Taxable Rate. From and after the Conversion Date, this Bond shall bear interest at the Tax-Exempt Rate; provided that from and after any Taxable Date, the interest rate on this Bond shall be established at a rate equal to the Taxable Gross-Up Rate; provided, further, that upon the occurrence and during the continuation of any Event of Default, the interest rate on this Bond shall be established at a rate equal to the Default Rate. The principal of this Bond shall be payable in lawful money of the United States of America at the corporate trust office of U.S. Bank Trust Company, National Association (the “Trustee”) upon presentation and surrender of this Bond. Payment of interest on this Bond due on or before the maturity or prior redemption, thereof shall be made to the person in whose name such Bond is registered, as of the Record Date preceding the applicable interest payment date, on the registration books kept by the Trustee at its corporate trust office, such interest to be paid by check mailed by first class m ail on such interest payment date to the registered owner at his address as it appears on such books. Interest on this Bond shall be payable in lawful money of the United States of America and shall be calculated on the basis of a 360-day year consisting of twelve 30-day months. This Bond shall not be entitled to any benefit, protection or security under the Indenture, as hereinafter defined, or become valid or obligatory for any purpose until the certificate of authentication and registration hereon endorsed shall have been signed by the Trustee. Notwithstanding the foregoing, so long as Wells Fargo Municipal Capital Strategies, LLC is the Owner of this Bond, principal of, premium, if any, and interest on this Bond shall be paid by electronic transfer and without presentment or surrender of this Bond. The Owner of $1,000,000 or more in aggregate principal amount of the Bonds may request in writing that the Trustee pay the interest on such Bonds by wire transfer to an account in the United States of America and the Trustee shall comply with such request for all Interest Payment Dates following the 15th day after receipt of such request. This Bond is one of a duly authorized issue of bonds of the Authority designated as its “Gilroy Public Facilities Financing Authority Lease Revenue Refunding Bonds, Series 2022A (Convertible)” (the “Bonds”), in the aggregate principal amount $________, all of like tenor and date (except for such variations, if any, as may be required to designate varying numbers, maturities and interest rates), and is issued under and pursuant to the provisions of an Indenture, dated as of August 1, 2020, as amended by a First Supplement to Indenture, dated as of _______ 1, 2022 (collectively, the “Indenture”), by and among the Authority, the City of Gilroy (the “City”) and the Trustee (copies of which are on file at the corporate trust office of the Trustee). Unless the context otherwise requires, capitalized terms not defined herein shall have the meanings ascribed to them in the Indenture. The Bonds are limited obligations of the Authority and are payable, as to interest thereon and principal thereof, solely from the revenues derived from Base Payments paid by the City pursuant to a First Amended and Restated Lease Agreement, dated as of August 1, 2009, as amended, including as amended by a Fourth Amendment to Lease Agreement, dated as of _______ 1, 2022 (collectively, the “Lease”), between the Authority, as lessor, and the City, as lessee, for the use and possession of the Leased Property as long as the City has such use and possession of 11.5.b Packet Pg. 221 Attachment: First Supplement to Indenture (4070 : City - 2013 Lease Revenue Bonds Refinancing) 4863-6504-4543.3 A-3 the Leased Property, as well as from all other benefits, charges, income, proceeds, profits, receipts, rents and revenues derived by the Authority, as assignee of the City’s rights under the Lease, from operation or use of the Leased Property (the “Revenues”). All the Bonds (as defined in the Indenture) are equally and ratably secured by the Revenues and enjoy the benefits of a security interest in the money held in the funds established pursuant to the Indenture (other than the Rebate Fund), subject to the provisions of the Indenture permitting the disbursement thereof for or to the purposes and on the conditions and terms set forth therein. The obligation of the City to pay Base Payments does not constitute an indebtedness of the City for which the City is obligated to levy or pledge any form of taxation or for which the City has levied or pledged any form of taxation. The obligation of the City to pay Base Payments does not constitute an indebtedness of the City, the State of California, or any of its political subdivisions within the meaning of any constitutional or statutory debt limitation or restriction. The obligation of the City to make the Base Payments is subject to abatement during any period in which, by reason of material damage, destruction or title defect, there is substantial interference with the use and occupancy of the Leased Property or portions thereof or if the Leased Property or portions thereof are taken under the power of eminent domain, all as more particularly provided in the Lease to which reference is hereby made. To the extent and in the manner permitted by the terms of the Indenture, the provisions of the Indenture may be amended or supplemented by the parties thereto, in some instances without the consent of the registered owners of the Bonds. No such amendment or supplement shall (1) extend the Principal Payment Date of any Bond or reduce the rate of interest represented thereby or extend the time of payment of such interest or reduce the amount of principal represented thereby without the prior written consent of the registered owner of each Bond so affected, or (2) reduce the percentage of registered owners whose consent is required for the execution of any amendment hereof or supplement hereto without the prior written consent of the registered owners of all Bonds then Outstanding, or (3) modify any of the rights or obligations of the Trustee without its prior written consent thereto, or (4) amend the amendment provisions of the Indenture without the prior written consent of the registered owners of all Bonds then Outstanding. The Bonds are authorized to be executed and delivered in the form of fully registered Bonds without coupons, in denominations of two hundred fifty thousand dollars ($250,000) or any integral multiple of $1 in excess thereof (each, an “Authorized Denomination”). This Bond is transferable by the Owner hereof, in person or by his attorney duly authorized in writing, at the office of the Trustee in Los Angeles, California, but only in the manner, subject to the limitations and upon payment of the charges provided in the Indenture; and upon surrender of this Bond for cancellation, accompanied by delivery of a duly executed written instrument of transfer, a new Bond or Bonds of Authorized Denominations of the same Principal Payment Date equal to the principal amount hereof will be executed and delivered by the Trustee to the Owner thereof in exchange or transfer herefor. The Trustee shall not be required to transfer or exchange any Bond during any period in which it is selecting Bonds for redemption, nor shall the Trustee be required to transfer or exchange any Bond or portion thereof selected for redemption from and after the date of mailing the notice of redemption. The Trustee may treat the Owner hereof as the absolute owner hereof for all purposes, whether or not this Bond shall be overdue, and the Trustee shall not be affected by any knowledge or notice to the contrary; and payment of the principal of, 11.5.b Packet Pg. 222 Attachment: First Supplement to Indenture (4070 : City - 2013 Lease Revenue Bonds Refinancing) 4863-6504-4543.3 A-4 premium, if any, and interest on this Bond shall be made only to such Owner as above provided, which payments shall be valid and effectual to satisfy and discharge the liability on this Bond to the extent of the sum or sums so paid. The Bonds are subject to redemption prior to maturity as described in the Indenture , including as set forth in Article IV and Section 14.06 of the Indenture. As provided in the Indenture, notice of redemption hereof or of any part hereof shall be mailed, first class postage prepaid, not less than 30 nor more than 60 days before the redemption date, to the Owner of this Bond at his or her address as it appears in the registration books maintained by the Trustee and as specified in the Indenture, but neither failure to receive any such notice nor any defect contained therein shall affect the validity of the proceedings for the redemption of this Bond. If this Bond is called for redemption and payment is duly provided therefor as specified in the Indenture, the interest represented hereby shall cease to accrue from and after the designated redemption date. Notwithstanding the foregoing, this Bond may be prepaid in whole at any time upon at least three Business Days’ prior written notice to the Owner specifying the amount of prepayment. In the event that the Authority pursuant to Section 14.06(a) of the Indenture optionally redeems this is Bond, the Authority shall, at the time of such prepayment, pay to the Owner the principal of this Bond plus interest accrued to the date of prepayment plus an additional fee or redemption premium equal to the Breakage Fee as described in the Indenture. The Trustee has no obligation or liability to the registered owners of the Bonds for the payment of the interest or principal or redemption premiums, if any, on the Bonds; but rather the Trustee’s sole obligation is to administer, for the benefit of the City, the Authority and the registered owners of the Bonds, the various funds established under the Indenture. The Authority has no obligation or liability whatsoever to the registered owners of the Bonds. The Indenture provides that the occurrences of certain events constitute Events of Default. Subject to certain limitations and to the rights of the Trustee or the Owners of not less than a majority in aggregate principal amount of the Bonds at the time Outstanding shall be entitled to take whatever action at law or in equity may appear necessary or desirable to enforce its rights as assignee. 11.5.b Packet Pg. 223 Attachment: First Supplement to Indenture (4070 : City - 2013 Lease Revenue Bonds Refinancing) 4863-6504-4543.3 A-5 IN WITNESS WHEREOF, the Gilroy Public Facilities Financing Authority has caused this Bond to be executed in facsimile by its Chairman and by its Secretary all as of _____________, 2022. GILROY PUBLIC FACILITIES FINANCING AUTHORITY ____________________________ ____________________________ Secretary Chairman 11.5.b Packet Pg. 224 Attachment: First Supplement to Indenture (4070 : City - 2013 Lease Revenue Bonds Refinancing) 4863-6504-4543.3 A-6 CERTIFICATE OF AUTHENTICATION AND REGISTRATION This is one of the Bonds described in the within mentioned Indenture which has been authenticated and registered. Dated: ___________, 2022 U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, as Trustee By: Authorized Signatory 11.5.b Packet Pg. 225 Attachment: First Supplement to Indenture (4070 : City - 2013 Lease Revenue Bonds Refinancing) 4863-6504-4543.3 A-7 FORM OF ASSIGNMENT For value received, the undersigned do(es) hereby sell, assign and transfer unto __________________ the within Bond and do(es) hereby irrevocably constitute and appoint ______________________ attorney to transfer such Bond on the register of the Trustee, with full power of substitution in the premises. Dated: SIGNATURE GUARANTEED BY: Note: The signature(s) to this Assignment must correspond with the name(s) as written on the face of the within Bond in every particular, without alteration or enlargement or any change whatsoever, and the signature(s) must be guaranteed by an eligible guarantor institution. Social Security Number, Taxpayer Identification Number or other identifying number of Assignee: ________________________________ 11.5.b Packet Pg. 226 Attachment: First Supplement to Indenture (4070 : City - 2013 Lease Revenue Bonds Refinancing) 4863-6504-4543.3 B-1 EXHIBIT B BREAKAGE FEE CALCULATION Each capitalized term used herein and not otherwise defined herein shall have the meaning provided therefor in the Indenture, unless the context otherwise requires. Upon the occurrence of a Break Event, the Breakage Fee shall be calculated and paid as follows: “Break Date” means any date that an optional redemption is made. “Break Event” means any optional redemption or extraordinary redemption of the Bonds. “Calculation Agent” will be Wells Fargo Bank, National Association. If for any reason Wells Fargo Bank, National Association is unable or unwilling to calculate the Breakage Fee, the Calculation Agent shall be an independent financial advisor or investment banker appointed by the Authority with the consent of the Series 2022A Bonds Purchaser. “Day Count Fraction” is the anticipated basis on which interest at the Taxable Rate is to be computed on each of the Series 2022A Bonds. The Day Count Fraction utilizes a 360-day year and consisting of twelve 30-day months. “Maturity Date” means November 1, 2033. “Interest Rate” means the Taxable Rate. “Scheduled Due Date” means each date specified on the Amortization Schedule attached as Schedule I hereto. “Schedule of Principal Amount” is the anticipated principal amount of the Series 2022A Bonds scheduled to be outstanding on the date the Series 2022A Bond is funded and on the Scheduled Due Date. The Schedule of Principal Amounts for the Scheduled Due Dates is specified on the Amortization Schedule attached as Schedule I hereto. 1. In connection with any Break Event, a Breakage Fee shall be paid by the Authority if the Breakage Fee is a positive number. No Breakage Fee shall be payable for a Break Event if the Breakage Fee for that Break Event is a negative number. Breakage Fees will be determined by the Calculation Agent, on the Business Day next preceding any Break Date and will be calculated for the Series 2022A Bonds as follows: “Breakage Fee” for any Break Event is the difference of: (i) the sum of the present values of a series of amounts computed for each Scheduled Due Date after the Break Date through the Maturity Date for the Series 2022A Bond, each of which amounts is equal to the product of (A) the Affected Principal Amount for the Affected Principal Period ending on the 11.5.b Packet Pg. 227 Attachment: First Supplement to Indenture (4070 : City - 2013 Lease Revenue Bonds Refinancing) 4863-6504-4543.3 B-2 Scheduled Due Date, times (B) the Interest Rate, times (C) the Day Count Fraction for such Affected Principal Period, minus (ii) the sum of the present values of a series of amounts computed for each Scheduled Due Date after the Break Date through the Maturity Date for the Series 2022A Bond, each of which amounts is equal to the product of (A) the Affected Principal Amount for the Affected Principal Period ending on the Scheduled Due Date, times (B) the Break Rate, times (C) the Day Count Fraction for such Affected Principal Period, where: (1) the Calculation Agent computes such present values by discounting each such series of amounts described in clause (i) and (ii) above from the Scheduled Due Date to the Break Date using a series of discount factors corresponding to the Scheduled Due Date as determined by the Calculation Agent from the swap yield curve that the Calculation Agent would use as of the Break Date in valuing a series of fixed rate interest rate swap payments similar to such series of amounts; (2) the “Affected Principal Amount” for an Affected Principal Period is the principal amount of the Series 2022A Bonds reflected in the Schedule of Principal Amounts scheduled to be outstanding during that Affected Principal Period determined as of the relevant Break Date by the reference to such Schedule of Principal Amounts before giving effect to any Break Event on that Break Date, and for any Break Event, multiplying each such principal amount times the Prepayment Fraction; (3) “Affected Principal Period” is each period from and including a Scheduled Due Date to but excluding the next succeeding Scheduled Due Date; provided, however, if the Break Date is not a Scheduled Due Date, the initial Affected Principal Period shall be the period from and including the Break Date to but excluding the next succeeding Scheduled Due Date and the Affected Principal Period for such initial Affected Principal Period shall be the amount stated in the Schedule of Principal Amounts outstanding for the Scheduled Due Date next preceding the Break Date; (4) “Prepayment Fraction” means, for each Scheduled Due Date, a fraction the numerator of which is the amount of the credit to be applied pursuant to the applicable provisions of the Series 2022A Bond and the Indenture to reduce the amount of the prepayment otherwise due on such date and the denominator of which is the amount of the payment otherwise due on such date (without regard to such credit); and (5) “Break Rate” means, for any Break Date, and with respect to each Series 2022A Bond, the fixed rate the Calculation Agent determines is representative of what swap dealers would be willing to pay to the Calculation Agent (or, if required to be cleared under the Commodity 11.5.b Packet Pg. 228 Attachment: First Supplement to Indenture (4070 : City - 2013 Lease Revenue Bonds Refinancing) 4863-6504-4543.3 B-3 Exchange Act or a Commodity Futures Trading Commission rule or regulation promulgated thereunder, to a swap clearinghouse) as fixed rate payors on a semi-annual basis in return for receiving the daily average of SOFR over a one-month period (or such alternate rate index designated for use in lieu of SOFR by the International Swaps and Derivatives Association) based payments monthly under interest rate swap transactions that would commence on such Break Date, and mature on, or as close as commercially practicable to, the Maturity Date for such Series 2022A Bond; 2. The Calculation Agent shall determine the Breakage Fee hereunder in good faith using such methodology as the Calculation Agent deems appropriate under the circumstance, and the Calculation Agent’s determination shall be conclusive and binding in the absence of manifest error. 11.5.b Packet Pg. 229 Attachment: First Supplement to Indenture (4070 : City - 2013 Lease Revenue Bonds Refinancing) 4863-6504-4543.3 B-4 SCHEDULE I AMORTIZATION SCHEDULE1 Scheduled Due Date Schedule of Principal Amounts 1 Such amount to be the outstanding principal of the Bonds on each such date after the required amortization payment has been m ade. 11.5.b Packet Pg. 230 Attachment: First Supplement to Indenture (4070 : City - 2013 Lease Revenue Bonds Refinancing) 4863-6504-4543.3 C-1 EXHIBIT C FORM OF PURCHASER LETTER __________, 20__ City of Gilroy Gilroy, California Gilroy Public Facilities Financing Authority Gilroy, California U.S. Bank Trust Company, National Association Los Angeles, California Nixon Peabody LLP Los Angeles, California Re: Gilroy Public Facilities Financing Authority Lease Revenue Refunding Bonds, Series 2022A (Convertible) Ladies and Gentlemen: The undersigned, __________ (the “Purchaser”), hereby acknowledges receipt of the above-referenced bonds (the “Bonds”), dated ________, 2022, in fully registered form and in the aggregate principal amount of $__________. The Bonds have been checked, inspected and approved by the Purchaser. The undersigned further acknowledges that the Bonds are secured by a certain Indenture, dated as of August 1, 2020, as amended by the First Supplement to Indenture, dated as of December 1, 2022 (collectively, the “Indenture”), among the City of Gilroy (the “City”), the Gilroy Public Facilities Financing Authority (the “Authority”) and U.S. Bank Trust Company, National Association (the “Trustee”). In connection with the sale of the Bonds to the Purchaser, the Purchaser hereby makes the following representations upon which you may rely: 1. The Purchaser hereby certifies that it is a “qualified institutional buyer” within the meaning of Rule 144A(a)(1) promulgated under the Securities Act of 1933, as amended (the “Act”) and applicable state securities laws (a “Qualified Buyer”). 2. The Purchaser (a) is a bank, any entity directly or indirectly controlled by the bank or under common control with the bank, other than a broker, dealer or municipal securities dealer registered under the Securities Exchange Act of 1934, or a consortium of such entities; and (b) has the present intent to hold the Bonds to maturity; provided, however, that the Purchaser shall not be precluded from transferring, participating or assigning its interest in the Bonds in accordance with the terms and conditions set forth in 11.5.b Packet Pg. 231 Attachment: First Supplement to Indenture (4070 : City - 2013 Lease Revenue Bonds Refinancing) 4863-6504-4543.3 C-2 the Indenture. The Purchaser understands that it may need to bear the risks of this investment for an indefinite period of time, since a sale of the Bonds, or any portion thereof, may not be possible. The Purchaser is not participating, directly or indirectly, in a distribution of the Bonds and will not take, or cause to be taken, any action that would cause the Purchaser to be deemed an “underwriter” of such Bonds as defined in Section 2(a)(11) of the Act. The Purchaser understands that the Authority has no obligation to register the Bonds for resale under the Act. The Purchaser further understands that the Bonds are being sold in a transaction that is exempt from the registration requirements of the Act. The Purchaser acknowledges that the City will not be entering into a continuing disclosure undertaking for the Bonds pursuant to Section 15c2-12 of the Securities Exchange Act of 1934, as amended; provided, however, that the City has agreed in the Indenture to provide certain ongoing information to the Purchaser. 3. The Purchaser has received and carefully read all information and other items of disclosure relating to the City and the Bonds that the Purchaser has deemed material for it to make an informed lending decision with respect to its purchase of the Bonds and, in connection therewith, has had access to all other materials, books, records, documents, and information relating to the City and the Bonds, and has been able to verify the accuracy of, and supplement, the information contained therein. 4. The Purchaser acknowledges that it has either been supplied with or been given access to information, financial statements or other financial information, which it has requested from the City and to which a reasonable investor would attach significance in making an investment decision (collectively, the “Disclosure Items”). The Purchaser has had an opportunity to ask questions of, and receive satisfactory answers from, duly designated representatives of the City concerning the terms and conditions pursuant to which the offer to purchase the Bonds is being made, and is satisfied with the information provided in response to its requests, and is satisfied that its request for such information has been fully complied with by the City. 5. The Purchaser has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of purchasing the Bonds based upon (i) the information furnished to it by the City; (ii) its or such representative’s personal knowledge of the business and affairs of the City; (iii) such additional information as it or such representative may have requested and have received from the City; and (iv) the independent inquiries and investigations undertaken by it or such representative. 6. The Purchaser represents that it can bear the economic risk of loss of the Bonds. 7. No person has given any information or made any representation not contained in any Disclosure Items referred to above or otherwise provided to the Purchaser in writing by a person employed or authorized in writing by the City. The Purchaser understands and agrees that any information or representation not contained therein must not, and will not, be relied upon and that nothing contained therein should be construed as legal or tax advice to the Purchaser. 11.5.b Packet Pg. 232 Attachment: First Supplement to Indenture (4070 : City - 2013 Lease Revenue Bonds Refinancing) 4863-6504-4543.3 C-3 8. The signatory of this letter is a duly authorized officer of the Purchaser with the authority to sign this letter on behalf of the Purchaser, and this letter has been duly authorized, executed, and delivered by the Purchaser. 9. The Purchaser understands that the purchase of the Bonds involves significant credit risks. The Purchaser is aware that there are certain economic and regulatory variables and risks that could adversely affect the security for the Bonds. The Purchaser has reviewed the documents executed in conjunction with the issuance of Bonds, or summaries thereof, including, without limitation, the Indenture. 10. The Purchaser acknowledges and agrees that the Authority and the City take no responsibility for, and make no representation to the Purchaser, or any subsequent purchaser, with regard to, a sale, transfer or other disposition of the Bond in violation of the provisions of the Indenture, or any securities law or income tax law consequences thereof. The Purchaser also acknowledges that, with respect to the City’s obligations and liabilities, the Purchaser is solely responsible for compliance with the sales restrictions on the Bond in connection with any subsequent transfer of the Bonds made by the Purchaser. 11. The Purchaser has been informed that the Bonds (i) have not been and will not be registered or otherwise qualified for sale under the “Blue Sky” laws and regulations of any jurisdiction, (ii) will not be listed on any stock or other securities exchange and (iii) will carry no rating from any rating service. 12. The Purchaser acknowledges that the sale of the Bonds to the Purchaser is made in reliance upon the certifications, representations and warranties herein by the addresses hereto. Capitalized terms used herein and not otherwise defined have the meanings given such terms in the Indenture. [PURCHASER] By: ______________________________ Its: ______________________________ 11.5.b Packet Pg. 233 Attachment: First Supplement to Indenture (4070 : City - 2013 Lease Revenue Bonds Refinancing) 4863-6504-4543.3 D-1 EXHIBIT D FORM OF TAX-EXEMPT BOND CONVERSION AGREEMENT TAX-EXEMPT BOND CONVERSION AGREEMENT THIS TAX-EXEMPT BOND CONVERSION AGREEMENT (the “Agreement”) is made by and among the CITY OF GILROY, a political subdivision duly organized and existing under the laws of the State of California (the “City”), the GILROY PUBLIC FACILITIES FINANCING AUTHORITY, a joint powers authority duly organized and existing under and by virtue of the laws of the State of California (the “Authority”) and [__________] (the “Owner”). RECITALS WHEREAS, pursuant to the provisions of the Indenture, dated as of August 1, 2020, as amended by a First Supplement to Indenture, d ated as of December 1, 2022 (collectively, the “Indenture”), each by and among U.S. Bank Trust Company, National Association (the “Trustee”), the City and the Authority, the Authority issued its Lease Revenue Refunding Bonds, Series 2022A (Convertible) (th e “Bond”); WHEREAS, the Indenture provides that the Owner, the Authority and the City may agree to convert the rate at which the Bond bears interest from the Taxable Rate to the Tax-Exempt Rate effective as of the Conversion Date, subject to meeting certain conditions; WHEREAS, the Authority, the City, and the Owner now wish to enter into this Agreement in order to effectuate such conversion in accordance with Section 14.02 of the Indenture and to acknowledge that such conversion constitutes a “reissuance” of the Bond for federal income tax purposes, creating a new debt instrument the issuer of which is the Authority; NOW, THEREFORE, and in consideration of the respective promises and mutual covenants and benefits hereinafter set forth, the Authority, the City, and the Owner agree as follows: AGREEMENT Section 1. Definitions, Declarations, Findings and Determinations. The definitions, declarations, determinations and findings contained in the recitals to this Agreement are hereby adopted, restated and made a part of the operative provisions hereof. Capitalized terms used herein and not otherwise defined shall have the meanings assigned thereto in the Indenture. Section 2. Conversion to Tax-Exempt Rate. The Authority, the City, and the Owner hereby agree that the interest rate on the Bond will convert to the Tax-Exempt Rate on the Conversion Date (the “Conversion”), subject to compliance with the conditions set forth in Section 14.02 of the Indenture, including, particularly, the issuance of the Opinion of Counsel described therein. The Authority, the City, and the Owner acknowledge that the Conversion of the Bond 11.5.b Packet Pg. 234 Attachment: First Supplement to Indenture (4070 : City - 2013 Lease Revenue Bonds Refinancing) 4863-6504-4543.3 D-2 from the Taxable Rate to the Tax-Exempt Rate is intended to constitute a “reissuance” of the Bond for federal income tax purposes, creating a new debt instrument the issuer of which is the Authority. Section 3. Compliance with Covenants Regarding Tax Exemption and Filing of Form 8038-G. (a) The Authority and the City hereby agree that the covenants contained in the tax certificate, dated the date hereof, will become operative on the Conversion Date and shall be incorporated as operative terms of the Indenture. (b) The Authority agrees to file a Form 8038-G with the Internal Revenue Service in connection with Conversion and the deemed reissuance of the Bond, solely for federal tax purposes, as tax-exempt bonds. Section 4. Delivery of Agreement to Trustee. Upon compliance with the provisions of Section 14.02 of the Indenture, the Authority, the City, and the Owner hereby agree to deliver an executed copy of this Agreement to the Trustee for the Bond. Section 5. Multiple Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original instrument and each will have the force and effect of an original and all of which together constitute, and will be deemed to constitute, one and the same instrument. Section 6. Effective Date. This Agreement shall become effective upon satisfaction of all of the conditions described in Section 14.02 of the Indenture. Section 7. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California. Section 8. Severability. The provisions of this Agreement are severable, and if any provision or part of this Agreement or the application hereof to any person or circumstance shall ever be held by any court of competent jurisdiction to be invalid or unconstitutional for any reason, the remainder of this Agreement and the application of such provision or part of this Agreement to other persons or circumstances shall not be affected thereby. [Execution Page Follows] 11.5.b Packet Pg. 235 Attachment: First Supplement to Indenture (4070 : City - 2013 Lease Revenue Bonds Refinancing) 4863-6504-4543.3 D-3 EXECUTED in multiple counterparts as of ________ , 20__. CITY OF GILROY By: Name: _________________________________ Title: __________________________________ Attest: By: City Clerk GILROY PUBLIC FACILITIES FINANCING AUTHORITY By: Name: _________________________________ Title: __________________________________ Attest: By: Secretary [OWNER] By: Name: _________________________________ Title: __________________________________ 11.5.b Packet Pg. 236 Attachment: First Supplement to Indenture (4070 : City - 2013 Lease Revenue Bonds Refinancing) 4864-2749-7279.2 TO BE RECORDED AND WHEN RECORDED RETURN TO: Nixon Peabody LLP 300 South Grand Avenue, Suite 4100 Los Angeles, California 90071 Attention: Danny Kim, Esq. This document is recorded for the benefit of the City of Gilroy and the recording is fee-exempt under Section 6103 of the California Government Code and the recording is exempt under Section 27383 of the California Government Code and Section 11928 of the California Revenue and Taxation Code. FOURTH AMENDMENT TO LEASE AGREEMENT by and between GILROY PUBLIC FACILITIES FINANCING AUTHORITY as Lessor and CITY OF GILROY as Lessee Dated as of December 1, 2022 11.5.c Packet Pg. 237 Attachment: Fourth Amendment to Lease Agreement (4070 : City - 2013 Lease Revenue Bonds Refinancing) Table of Contents Page i SECTION 1 Definitions .................................................................................................. 2 SECTION 2 Revised Lease Payment Schedule ............................................................... 2 SECTION 3 Amendment of Section 3.5 Additional Payments ....................................... 2 SECTION 4 Recordation Hereof ..................................................................................... 3 SECTION 5 Amendments Authorized ............................................................................ 3 SECTION 6 Governing Law ........................................................................................... 3 SECTION 7 Binding Effect ............................................................................................. 3 SECTION 8 Severability of Invalid Provisions ............................................................... 3 SECTION 9 Third Party Beneficiary .............................................................................. 3 SECTION 10 Execution of Counterparts .......................................................................... 3 11.5.c Packet Pg. 238 Attachment: Fourth Amendment to Lease Agreement (4070 : City - 2013 Lease Revenue Bonds Refinancing) 4864-2749-7279.2 [Fourth Amendment to Lease Agreement] FOURTH AMENDMENT TO LEASE AGREEMENT This FOURTH AMENDMENT TO LEASE AGREEMENT (this “Fourth Amendment”), dated as of December 1, 2022, is between the GILROY PUBLIC FACILITIES FINANCING AUTHORITY, a joint powers authority duly organized and existing under the laws of the State of California (the “Authority”), as lessor, and the CITY OF GILROY, a charter city and municipal corporation duly organized and existing under the Constitution and laws of the State of California (the “City”), as lessee. BACKGROUND: 1. The Authority has been formed under a Joint Exercise of Powers Agreement dated as of March 21, 1994, between the City and the Community Development Agency of the City of Gilroy, as amended by a First Amendment to Joint Powers Agreement on July 1, 2013, among the City, the Successor Agency of the Community Development Agency of the City of Gilroy and the Industrial Development Authority of the City of Gilroy, and is authorized thereunder to finance the acquisition and construction of public capital improvements for its members. 2. In order to provide financing for the construction of a police station, a fire station, a corporation yard and a playfield sports complex (the “2003 Projects”), the Authority and the City have previously authorized the execution and delivery of Certificates of Participation (City of Gilroy — Public Buildings Project) Series 2003 (Auction Rate) in the aggregate principal amount of $45,900,000 (the “2003 Certificates”). 3. In connection with the refunding of the 2003 Certificates, the Authority issued its $46,370,000 aggregate principal amount of Gilroy Public Facilities Financing Authority 2009 Bond Anticipation Notes, Series 2009 (the “2009 Notes”) and the City and the Authority have previously entered into that certain First Amended and Restated Lease Agreement, dated as of August 1, 2009, which was recorded in the Official Records of Santa Clara County on August 25, 2009 as Document No. 20409795 (the “2009 Lease”). 4. In connection with the refunding of the 2009 Notes, the Authority issued its Gilroy Public Facilities Financing Authority Refunding Bond Anticipation Notes, Series 2010 (the “2010 Notes”), in the aggregate principal amount of $22,840,000, and its Gilroy Public Facilities Financing Authority Refunding Lease Revenue Bonds, Series 2010 (the “2010 Bonds”), in the aggregate principal amount of $24,475,000. 5. In connection with the refunding of the 2010 Notes, the Authority issued its Gilroy Public Facilities Financing Authority Refunding Lease Revenue Bonds, Series 2013 (the “2013 Bonds”) and the City and the Authority have previously entered into that certain Second Amendment to Lease Agreement, dated as of August 1, 2013 (the “Second Amendment”), which was recorded in the Official Records of Santa Clara County on August 1, 2013 as Document No. 22357436. 11.5.c Packet Pg. 239 Attachment: Fourth Amendment to Lease Agreement (4070 : City - 2013 Lease Revenue Bonds Refinancing) 4864-2749-7279.2 [Fourth Amendment to Lease Agreement] 6. In connection with the refunding of the 2010 Bonds, the Authority issued its Gilroy Public Facilities Financing Authority Lease Revenue Refunding Bonds, Series 2020A (the “2020A Bonds”) and the City and the Authority have previously entered into that certain Third Amendment to Lease Agreement, dated as of August 1, 2020 (the “Third Amendment”), which was recorded in the Official Records of Santa Clara County on August 6, 2020 as Document No. 24566122. 7. In connection with the refunding of the 2013 Bonds, the Authority intends to issue its Lease Revenue Refunding Bonds, Series 2022A (Convertible) (the “2022A Bonds”), in the aggregate principal amount of $________ pursuant to an Indenture, dated as of August 1, 2020, as amended by the First Supplement to Indenture, dated as of December 1, 2022 (collectively, the “Indenture”), by and among the Authority, the City and U.S. Bank Trust Company, National Association, as trustee (the “Trustee”). 8. The City and the Authority wish to further amend the 2009 Lease at this time for the purpose of revising the Lease Payment schedule to reflect the payment of Debt Service on the 2022A Bonds in addition to the payment of Debt Service on the 2020A Bonds. 9. Such amendments are permitted to be made under Section 7.3 of the 2009 Lease, since such amendments will not materially adversely affect the interests of the owners of any Authority Debt, in the opinion of bond counsel which has been filed with the Authority, the City and the Trustee. 10. The Authority and the City have each duly authorized the execution and delivery of this Second Amendment. AGREEMENT: In consideration of the above premises and of the mutual promises and covenants herein contained and for other valuable consideration, the parties hereto do hereby agree as follows: SECTION 1 Definitions. All capitalized terms in this Fourth Amendment and not otherwise defined herein have the respective meanings given them in the Indenture. SECTION 2 Revised Lease Payment Schedule. The Lease Payment schedule set forth in Exhibit C to the Third Amendment is hereby revised to reflect the payment of Debt Service on the 2022A Bonds in addition to the payment of Debt Service on the 2020A Bonds. Such Lease Payment schedule is attached to this Fourth Amendment as Exhibit B and is subject to adjustment upon the occurrence of a BPA Credit Event or a Determination of Taxability as more fully set forth in the Indenture. SECTION 3 Amendment of Section 3.5 Additional Payments. Section 3.5 of the 2009 Lease is hereby amended by the addition of a new paragraph (f) which shall appear immediately following paragraph (e) and shall read as follows: (f) All amounts due and owing under that certain Bond Purchase Agreement dated [December __, 2022], among the City, the Authority and Wells Fargo Municipal Capital Strategies, LLC, as purchaser of the 2022A Bonds, as the same may be amended, modified or supplemented from time to time in accordance with its terms. 11.5.c Packet Pg. 240 Attachment: Fourth Amendment to Lease Agreement (4070 : City - 2013 Lease Revenue Bonds Refinancing) 4864-2749-7279.2 [Fourth Amendment to Lease Agreement] SECTION 4 Recordation Hereof. On or before the Series 2022A Bonds Closing Date the City shall cause this Fourth Amendment to be recorded in the office of the Santa Clara County Recorder with respect to the Leased Property. SECTION 5 Amendments Authorized. The Authority and the City hereby find and determine that the amendments made under Section 1 and 2 are authorized to be made under Section 7.3 of the 2009 Lease. Such amendment is necessary to conform to the terms and conditions upon which the 2022A Bonds are issued, and such amendments to do not materially adversely affect the interests of the owners of the 2020A Bonds. SECTION 6 Governing Law. This Fourth Amendment shall be construed in accordance with and governed by the Constitution and laws of the State of California. SECTION 7 Binding Effect. This Fourth Amendment shall inure to the benefit of and shall be binding upon the Authority, the City and their respective successors and assigns, subject, however, to the limitations contained herein. SECTION 8 Severability of Invalid Provisions. If any one or more of the provisions contained in this Fourth Amendment are for any reason held to be invalid, illegal or unenforceable in any respect, then such provision or provisions shall be deemed severable from the remaining provisions contained in this Fourth Amendment and such invalidity, illegality or unenforceability shall not affect any other provision of this Fourth Amendment, and this Fourth Amendment shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein. The Authority and the City each hereby declares that it would have entered into this Fourth Amendment and each and every other Section, paragraph, sentence, clause or phrase hereof irrespective of the fact that any one or more Sections, paragraphs, sentences, clauses or phrases of this Fourth Amendment may be held illegal, invalid or unenforceable. SECTION 9 Third Party Beneficiary. The Trustee is hereby made a third party beneficiary under this Fourth Amendment with all rights of a third party beneficiary. SECTION 10 Execution of Counterparts. This Fourth Amendment may be executed in any number of counterparts, each of which shall for all purposes be deemed to be an original and all of which shall together constitute but one and the same instrument. 11.5.c Packet Pg. 241 Attachment: Fourth Amendment to Lease Agreement (4070 : City - 2013 Lease Revenue Bonds Refinancing) 4864-2749-7279.2 [Fourth Amendment to Lease Agreement] IN WITNESS WHEREOF, the Authority and the City have caused this Fourth Amendment to be executed in their respective names by their duly authorized officers, all as of the date first above written. GILROY PUBLIC FACILITIES FINANCING AUTHORITY, as Lessor By: Executive Director ATTEST: By: Secretary CITY OF GILROY, as Lessee By: City Administrator ATTEST: By: City Clerk 11.5.c Packet Pg. 242 Attachment: Fourth Amendment to Lease Agreement (4070 : City - 2013 Lease Revenue Bonds Refinancing) A-1 EXHIBIT A DESCRIPTION OF LEASED PROPERTY All that certain real property, situated in the City of Gilroy, County of Santa Clara, State of California, described on the attached pages. 11.5.c Packet Pg. 243 Attachment: Fourth Amendment to Lease Agreement (4070 : City - 2013 Lease Revenue Bonds Refinancing) B-1 EXHIBIT B BASE RENTAL PAYMENT SCHEDULE AS AMENDED (TAXABLE RATE) 2020A Lease Revenue Bonds 2022A Lease Revenue Bonds Payment Date Principal Interest Principal Interest1 Total Lease Payment 11/01/20 $790,000 $162,208.33 05/01/21 323,750.00 11/01/21 715,000 323,750.00 05/01/22 305,875.00 11/01/22 755,000 305,875.00 05/01/23 287,000.00 11/01/23 795,000 287,000.00 05/01/24 267,125.00 11/01/24 840,000 267,125.00 05/01/25 246,125.00 11/01/25 880,000 246,125.00 05/01/26 224,125.00 11/01/26 925,000 224,125.00 05/01/27 201,000.00 11/01/27 1,000,000 201,000.00 05/01/28 176,000.00 11/01/28 1,030,000 176,000.00 05/01/29 150,250.00 11/01/29 1,085,000 150,250.00 05/01/30 123,125.00 11/01/30 1,140,000 123,125.00 05/01/31 94,625.00 11/01/31 1,200,000 94,625.00 05/01/32 64,625.00 11/01/32 1,260,000 64,625.00 05/01/33 33,125.00 11/01/33 1,325,000 33,125.00 $13,740,000 $5,155,708.33 1 Subject to adjustment upon a BPA Credit Event as more fully set forth in the Indenture. 11.5.c Packet Pg. 244 Attachment: Fourth Amendment to Lease Agreement (4070 : City - 2013 Lease Revenue Bonds Refinancing) B-2 BASE RENTAL PAYMENT SCHEDULE AS AMENDED (TAX-EXEMPT RATE AFTER CONVERSION) 2020A Lease Revenue Bonds 2022A Lease Revenue Bonds Payment Date Principal Interest Principal Interest1 Total Lease Payment 11/01/20 $790,000 $162,208.33 05/01/21 323,750.00 11/01/21 715,000 323,750.00 05/01/22 305,875.00 11/01/22 755,000 305,875.00 05/01/23 287,000.00 11/01/23 795,000 287,000.00 05/01/24 267,125.00 11/01/24 840,000 267,125.00 05/01/25 246,125.00 11/01/25 880,000 246,125.00 05/01/26 224,125.00 11/01/26 925,000 224,125.00 05/01/27 201,000.00 11/01/27 1,000,000 201,000.00 05/01/28 176,000.00 11/01/28 1,030,000 176,000.00 05/01/29 150,250.00 11/01/29 1,085,000 150,250.00 05/01/30 123,125.00 11/01/30 1,140,000 123,125.00 05/01/31 94,625.00 11/01/31 1,200,000 94,625.00 05/01/32 64,625.00 11/01/32 1,260,000 64,625.00 05/01/33 33,125.00 11/01/33 1,325,000 33,125.00 $13,740,000 $5,155,708.33 1 Subject to adjustment upon a BPA Credit Event or a Determination of Taxability as more fully set forth in the Indenture. 11.5.c Packet Pg. 245 Attachment: Fourth Amendment to Lease Agreement (4070 : City - 2013 Lease Revenue Bonds Refinancing) 4864-2749-7279.2 CERTIFICATE OF ACCEPTANCE This is to certify that the interest in real property conveyed by the Fourth Amendment to Lease Agreement, dated as of December 1, 2022, by and between the Gilroy Public Facilities Financing Authority (the “Authority”) and the City of Gilroy (the “City”), from the Authority to the City, is hereby accepted by the undersigned on behalf of the City pursuant to authority conferred by resolution of the City Council of the City adopted on December 5, 2022, and the City consents to recordation thereof by its duly authorized officer. Dated as of December 1, 2022 CITY OF GILROY By: _______________________________ City Administrator 11.5.c Packet Pg. 246 Attachment: Fourth Amendment to Lease Agreement (4070 : City - 2013 Lease Revenue Bonds Refinancing) 4864-2749-7279.2 A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. STATE OF CALIFORNIA ) ) ss COUNTY OF SANTA CLARA ) On _________________, 2022, before me, ______________________________, Notary Public, personally appeared __________________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. 11.5.c Packet Pg. 247 Attachment: Fourth Amendment to Lease Agreement (4070 : City - 2013 Lease Revenue Bonds Refinancing) 4864-2749-7279.2 A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. STATE OF CALIFORNIA ) ) ss COUNTY OF SANTA CLARA ) On _________________, 2022, before me, ______________________________, Notary Public, personally appeared __________________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. 11.5.c Packet Pg. 248 Attachment: Fourth Amendment to Lease Agreement (4070 : City - 2013 Lease Revenue Bonds Refinancing) FORWARD FIXED RATE LOCK AGREEMENT This Forward Fixed Rate Lock Agreement is entered into as of December 6, 2022 (this “Agreement”), between the City of Gilroy, California (the “City”) and Wells Fargo Bank, National Association (the “Bank”), to provide the City with a forward rate commitment (the “Forward Rate”) for the extension of credit to the City in the form of a direct purchase by the Bank, or a wholly owned subsidiary of the Bank, of the Gilroy Public Facilities Financing Authority Lease Revenue Refunding Bonds, Series 2022A (Convertible) (the “Bonds”) to be issued pursuant to the Indenture, dated as of August 1, 2020, as amended by the First Supplement to Indenture, dated as of December 1, 2022 (the “Issuing Document”) and having the terms set forth in Exhibit A attached hereto. Subject to the satisfaction of the terms and conditions set forth herein and in Exhibit B attached hereto (the “Terms and Conditions”), the Bank hereby offers ta taxable fixed rate of [___%] per annum and a tax-exempt fixed rate of [___%] per annum (collectively, the “Forward Rates”) for a principal amount of [$________] (being the principal amount of the Bonds) through December 20, 2022 (the “Rate Lock Expiration Date”). Notwithstanding the foregoing, the Bank’s commitment to purchase the Bonds shall be subject to: (i) the satisfaction of the terms and conditions set forth in the term sheet attached as Exhibit C hereto (the “Term Sheet”), including, but not limited to, the execution and delivery of the definitive bond documentation (the “Bond Documentation”) with respect to the Bonds in form and substance satisfactory to the Bank on or prior to the Rate Lock Expiration Date (such date of execution and delivery, the “Closing Date”); and (ii) the occurrence of no change in law that would prohibit the purchase of the Bonds by the Bank. By entering into this Agreement, the City agrees that in the event that for any reason, other than by reason of the Bank’s failure to purchase the Bonds in accordance with the terms of the Bond Documentation, the Closing Date does not occur on or before the Rate Lock Expiration Date, the Bank shall not be obligated to provide the Forward Rates and the City shall pay to the Bank a Breakage Fee determined as provided in Exhibit D hereto. Such payment, if any, shall be due two (2) business days after the Bank gives written notice to the City of the amount thereof, setting forth in reasonable detail the basis for the calculation thereof. A certificate by the Bank as to such amount shall be conclusive if made in good faith, absent manifest error. The City acknowledges and agrees that such amount, if any, represents reasonable compensation for loss of bargain and is not a penalty. The City agrees that this Agreement may obligate the City to make a significant payment to the Bank in the event the Closing Date does not occur on or prior to the Rate Lock Expiration Date, and the amount of any such payment cannot be predicted in advance of such event. The City is fully informed of and is capable of evaluating, and has evaluated, the potential financial risks and benefits and the appropriateness in light of its individual circumstances, of this Agreement. The City is entering into this Agreement in reliance only upon its own judgment, and is not relying upon any representations, warranty, views or advice of the Bank. 11.5.d Packet Pg. 249 Attachment: Forward Fixed Rate Lock Agreement (4070 : City - 2013 Lease Revenue Bonds Refinancing) The City agrees that the Bank’s willingness to commit to and lock in the Forward Rates in advance of the Closing Date is sufficient consideration for the City’s agreement to pay the amounts due hereunder, if any. Any amount due hereunder which is not paid when due shall bear interest until paid at the default rate set forth in the Term Sheet. TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE PARTIES HERETO HEREBY WAIVES ITS RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, THE BONDS OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. IN THE EVENT SUCH WAIVER OF JURY TRIAL IS UNENFORCEABLE; EACH OF THE PARTIES HERETO AGREE TO JUDICIAL REFERENCE AS PROVIDED IN CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 638 This Agreement is governed by the laws of the State of California, without regard to conflict of law principles that would require the application of different governing law. No modification or waiver of any of the terms of this Agreement will be valid unless agreed to in writing by the Bank and the City. When accepted, this Agreement will constitute the entire agreement between the Bank and the City concerning the Forward Rates, and shall supersede all prior and contemporaneous understandings and agreements (written or oral) relating thereto. This Agreement may be delivered by the exchange of signed signature pages by email delivery of a pdf copy, and any printed or copied version of any signature page so delivered will have the same force and effect as an originally signed version of such signature page. This Agreement shall become effective upon satisfaction of the conditions set forth herein, execution by the Bank and the Bank’s receipt of counterpart hereof executed by the City. To accept this Agreement, please sign the enclosed copy where indicated below and return it to the Bank no later than the Bank’s close of business on December 6, 2022 (such date of execution and delivery, the “Rate Lock Closing Date”). If this Agreement is not accepted by said date, this Agreement will automatically terminate without liability or further obligation of the Bank. [Balance of Page Intentionally Left Blank] 11.5.d Packet Pg. 250 Attachment: Forward Fixed Rate Lock Agreement (4070 : City - 2013 Lease Revenue Bonds Refinancing) IN WITNESS WHEREOF, the parties hereto have caused this Forward Fixed Rate Lock Agreement to be duly executed and delivered by their respective officers as of the date first written above. CITY OF GILROY, CALIFORNIA By: ____________________________________ Name: _____________________________ Title: _____________________________ WELLS FARGO BANK, NATIONAL ASSOCIATION By: ____________________________________ Name: _____________________________ Title: _____________________________ 11.5.d Packet Pg. 251 Attachment: Forward Fixed Rate Lock Agreement (4070 : City - 2013 Lease Revenue Bonds Refinancing) EXHIBIT A SUMMARY OF TERMS FOR THE BOND 1. Principal Amount of Bond: [$________] 2. Maturity Date: November 1, 2033 3. Interest Payment Frequency: semi-annually 4. Interest Payment Dates: first business day of each May and November 5. Interest Accrual: 360-day year, consisting of twelve 30-day months 6. Optional Redemption: subject to make-whole 7. Taxable Rate: [___%] 8. Tax-Exempt Rate: [___%] 9. Mandatory Sinking Fund Redemption Schedule of the Bonds: Mandatory Sinking Account Payment Date Sinking Fund Installment November 1, 2023 [$________] November 1, 2024 [$________] November 1, 2025 [$________] November 1, 2026 [$________] November 1, 2027 [$________] November 1, 2028 [$________] November 1, 2029 [$________] November 1, 2030 [$________] November 1, 2031 [$________] November 1, 2032 [$________] November 1, 2033 [$________] 11.5.d Packet Pg. 252 Attachment: Forward Fixed Rate Lock Agreement (4070 : City - 2013 Lease Revenue Bonds Refinancing) EXHIBIT B TERMS AND CONDITIONS The obligation of the Bank to lock the Forward Rate is subject to the conditions precedent that the Bank shall have received, on or before the Rate Lock Closing Date, the items listed below, each dated and in form and substance as is satisfactory to the Bank: 1. an executed copy of this Forward Fixed Rate Lock Agreement and the Term Sheet; 2. a certificate by an authorized officer of the City certifying the names and signatures of the persons authorized to sign, on behalf of the City, this Forward Fixed Rate Lock Agreement; and 3. an opinion of counsel to the City as to the due authorization, execution, delivery and enforceability of this Forward Fixed Rate Lock Agreement, and such other customary matters as the Bank may reasonably request. 11.5.d Packet Pg. 253 Attachment: Forward Fixed Rate Lock Agreement (4070 : City - 2013 Lease Revenue Bonds Refinancing) EXHIBIT C TERM SHEET 11.5.d Packet Pg. 254 Attachment: Forward Fixed Rate Lock Agreement (4070 : City - 2013 Lease Revenue Bonds Refinancing) EXHIBIT D CALCULATION OF BREAKAGE FEE The Breakage Fee applicable to any failure for the Closing Date to occur on or prior to the Rate Lock Expiration Date, shall be calculated as set forth in this Exhibit D. 1. Capitalized terms used in this Exhibit D and not otherwise defined herein have the meanings assigned thereto in the Forward Fixed Rate Lock Agreement to which this Exhibit D is attached. The following defined terms are used in this Exhibit D: “Breakage Fee” means the amount required to be paid by the City in connection with any Termination Event, calculated as provided in this Exhibit D. “Calculation Agent” means Wells Fargo Bank, National Association or its affiliates or such other entity designated by the Bank. “Day Count Fraction” is the basis on which interest will be computed on the Bonds. The Day Count Fraction utilizes 30-day months and 360-day years. “Interest Payment Frequency” is the anticipated frequency of interest payments under the Bonds. The Interest Payment Frequency is semi-annually, with interest to be paid on the first business day of each May and November. “Fixed Rate” means [___%] per annum. “Maturity Date” means November 1, 2033. “Scheduled Date” means each date specified on Schedule 1 hereto in the columns labeled Scheduled Date. “Schedule of Principal Amounts” is the anticipated principal amount of the Bonds scheduled to be outstanding on the date the Bonds are funded and on the Scheduled Dates. The Schedule of Principal Amounts for the Scheduled Dates is specified in Schedule 1 to this Exhibit D. “Termination Date” means the Rate Lock Expiration Date or such earlier date on which the City informs the Bank in writing that it will not close the transaction contemplated herein with the Bank on or prior to the Rate Lock Expiration Date. “Termination Event” means the failure of the Closing Date to occur on or prior to the Rate Lock Expiration Date for any reason other than the Bank’s failure to comply with the Terms and Conditions, in whole or in part, as set forth in the Forward Fixed Rate Lock Agreement. 11.5.d Packet Pg. 255 Attachment: Forward Fixed Rate Lock Agreement (4070 : City - 2013 Lease Revenue Bonds Refinancing) 2. In connection with any Termination Event, a Breakage Fee shall be paid by the City to the Bank if the Breakage Fee is a positive number. No Breakage Fee shall be payable for a Termination Event if the Breakage Fee for that Termination Event is a negative number. Any Breakage Fee will be determined by the Calculation Agent, on the business day next preceding the Termination Date, as follows: “Breakage Fee” for any Termination Event is the difference of: (i) the sum of the present values of a series of amounts computed for each Scheduled Date after the Closing Date through the Maturity Date, each of which amounts is equal to the product of (A) the Affected Principal Amount for the Affected Principal Period ending on that Scheduled Date, times (B) the Fixed Rate times (C) the Day Count Fraction for such Affected Principal Period, minus (ii) the sum of the present values of a series of amounts computed for each Scheduled Date after the Closing Date through the Maturity Date, each of which amounts is equal to the product of (A) the Affected Principal Amount for the Affected Principal Period ending on that Scheduled Date, times (B) the Termination Rate, times (C) the Day Count Fraction for such Affected Principal Period, where: (1) the Calculation Agent computes such present values by discounting each such series of amounts described in clauses (i) and (ii) above from their respective Scheduled Date to the Maturity Date using a series of discount factors corresponding to those Scheduled Dates as determined by the Calculation Agent from the swap yield curve that the Calculation Agent would use as of the Termination Date in valuing a series of fixed rate interest rate swap payments similar to such series of amounts; (2) the “Affected Principal Amount” for an Affected Principal Period is the principal amount of the Bonds reflected in the Schedule of Principal Amounts scheduled to be outstanding during that Affected Principal Period determined as of the Termination Date by reference to such Schedule of Principal Amounts before giving effect to the Termination Event on that Termination Date; (3) the “Affected Principal Period” is each period from and including a Scheduled Date to but excluding the next succeeding Scheduled Date; provided, however, if the Termination Date occurs prior to the first Scheduled Date, the initial Affected Principal Period shall be the period from and including the first Scheduled Date to but excluding the Scheduled Date next succeeding the first Scheduled Date and the Affected Principal Amount for such initial Affected Principal Period shall be the initial amount stated in the Schedule of Principal Amounts outstanding; and 11.5.d Packet Pg. 256 Attachment: Forward Fixed Rate Lock Agreement (4070 : City - 2013 Lease Revenue Bonds Refinancing) (4) the “Termination Rate” for any Termination Date is the fixed rate the Calculation Agent determines is representative of what swap dealers would be willing to pay to the Calculation Agent (or, if required to be cleared under the Commodity Exchange Act or a Commodity Futures Trading Commission rule or regulation promulgated thereunder, to a swap clearinghouse) as fixed rate payors in accordance with the Interest Payment Frequency in return for receiving the daily average of SOFR over a one-month period (or such alternate rate index designated for use in lieu of SOFR by the International Swaps and Derivatives Association) based payments monthly under interest rate swap transactions that would commence on such Termination Date, and mature on, or as close as commercially practicable to, the Maturity Date. 3. The Calculation Agent shall determine the Breakage Fee hereunder in good faith using such methodology as the Calculation Agent deems appropriate under the circumstance, and the Calculation Agent’s determination shall be conclusive and binding in the absence of manifest error. 11.5.d Packet Pg. 257 Attachment: Forward Fixed Rate Lock Agreement (4070 : City - 2013 Lease Revenue Bonds Refinancing) SCHEDULE 1 Scheduled Date Schedule of Principal Amounts December 6, 2022 [$________] May 1, 2023 [$________] November 1, 2023 [$________] May 1, 2024 [$________] November 1, 2024 [$________] May 1, 2025 [$________] November 1, 2025 [$________] May 1, 2026 [$________] November 1, 2026 [$________] May 1, 2027 [$________] November 1, 2027 [$________] May 1, 2028 [$________] November 1, 2028 [$________] May 1, 2029 [$________] November 1, 2029 [$________] May 1, 2030 [$________] November 1, 2030 [$________] May 1, 2031 [$________] November 1, 2031 [$________] May 1, 2032 [$________] November 1, 2032 [$________] May 1, 2033 [$________] November 1, 2033* [$________] * Maturity Date 11.5.d Packet Pg. 258 Attachment: Forward Fixed Rate Lock Agreement (4070 : City - 2013 Lease Revenue Bonds Refinancing) BOND PURCHASE AGREEMENT among CITY OF GILROY, GILROY PUBLIC FACILITIES FINANCING AUTHORITY and WELLS FARGO MUNICIPAL CAPITAL STRATEGIES, LLC Relating to [$_________] Gilroy Public Facilities Financing Authority Lease Revenue Refunding Bonds Series 2022A (Convertible) Dated [December __, 2022] 11.5.e Packet Pg. 259 Attachment: Convertible Bond Purchase Agreement (City of Gilroy) (4070 : City - 2013 Lease Revenue Bonds Refinancing) ARTICLE I DEFINITIONS Section 1.01. Definitions........................................................................................................ 1 Section 1.02. Incorporation of Certain Definitions by Reference; Interpretation .................. 5 ARTICLE II PURCHASE OF OBLIGATION Section 2.01. Execution of this Agreement; Purchase of Bond ............................................. 6 ARTICLE III CONDITIONS PRECEDENT TO PURCHASE OF OBLIGATION Section 3.01. Conditions Precedent to Execution and Closing .............................................. 6 ARTICLE IV REPRESENTATION AND WARRANTIES Section 4.01. The City represents and warrants to the Purchaser as follows: ....................... 8 Section 4.02. The Authority represents and warrants to the Purchaser as follows: ............. 12 ARTICLE V COVENANTS Section 5.01. Covenants ....................................................................................................... 15 ARTICLE VI EVENTS OF DEFAULT Section 6.01. Events of Default ........................................................................................... 18 Section 6.02. Consequences of an Event of Default ............................................................ 20 Section 6.03. Downgrade Redemption Event ...................................................................... 20 ARTICLE VII MISCELLANEOUS Section 7.01. Amendments and Waivers ............................................................................. 20 Section 7.02. Counterparts ................................................................................................... 20 Section 7.03. Notices ........................................................................................................... 20 Section 7.04. Severability .................................................................................................... 21 Section 7.05. Governing Law; Waiver of Jury Trial ........................................................... 22 Section 7.06. Complete and Controlling Agreement ........................................................... 22 Section 7.07. Indemnification .............................................................................................. 22 Section 7.08. Patriot Act ...................................................................................................... 22 Section 7.09. No Advisory or Fiduciary Responsibility ...................................................... 23 Section 7.10. Excess Interest ............................................................................................... 23 Section 7.11. Contractual Interpretation .............................................................................. 23 11.5.e Packet Pg. 260 Attachment: Convertible Bond Purchase Agreement (City of Gilroy) (4070 : City - 2013 Lease Revenue Bonds Refinancing) Section 7.12. EMMA Posting .............................................................................................. 24 Section 7.13. Electronic Signatures ..................................................................................... 24 11.5.e Packet Pg. 261 Attachment: Convertible Bond Purchase Agreement (City of Gilroy) (4070 : City - 2013 Lease Revenue Bonds Refinancing) BOND PURCHASE AGREEMENT THIS BOND PURCHASE AGREEMENT is dated [December __, 2022] (as amended, modified or restated from time to time, this “Agreement”), among the CITY OF GILROY (the “City”), the GILROY PUBLIC FACILITIES FINANCING AUTHORITY (the “Authority”) and WELLS FARGO MUNICIPAL CAPITAL STRATEGIES, LLC (the “Purchaser”). W I T N E S E T H: WHEREAS, pursuant to that certain Resolution No. [_____] adopted by the City on [December __, 2022] (the “Resolution”) and the certain Resolution No. [_____] adopted by the Authority on [December __, 2022] (the “Authority Resolution”), the City has approved (i) the issuance of the Gilroy Public Facilities Financing Authority Lease Revenue Refunding Bonds, Series 2022A (Convertible) (the “Bond”) for the purpose of refunding a portion of the Gilroy Public Facilities Financing Authority Refunding Lease Revenue Bonds, Series 2013 (the “Refunded Bond”) and the payment of costs associated with the issuance of the Bond and (ii) the execution and delivery of a purchase agreement and other documentation related to the issuance of the Bond and the purchase of the Bond in advance of its issuance on [December __, 2022]; and WHEREAS, the Bonds will be issued pursuant to the Indenture, dated as of August 1, 2020, as supplemented by the First Supplement to Indenture, dated as of [December __, 2022], each by and among U.S. Bank Trust Company, National Association (the “Trustee”), the City and the Authority; and WHEREAS, the Purchaser hereby agrees to purchase the Bond when issued in compliance with the requirements and conditions set forth herein. NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, including the covenants, terms and conditions hereinafter contained, and to induce the Purchaser to purchase the Bond, the Purchaser, the Authority and the City agree as follows: ARTICLE I DEFINITIONS Section 1.01. Definitions. In addition to terms defined at other places in this Agreement, the following defined terms are used throughout this Agreement with the following meanings: “affiliate” means, with respect to any Person, any other Person directly or indirectly controlling or controlled by or under common control with such Person. Without limiting the foregoing, the definition of “affiliate” of any Person shall include any subsidiary of such Person and, with respect to the Purchaser, shall include Wells Fargo Securities (a trade name) and Wells Fargo Bank, National Association. “Additional Payments” has the meaning set forth in the Lease Agreement. 11.5.e Packet Pg. 262 Attachment: Convertible Bond Purchase Agreement (City of Gilroy) (4070 : City - 2013 Lease Revenue Bonds Refinancing) 2 “Agreement” means this Bond Purchase Agreement as originally executed and as it may from time to time be amended or supplemented in accordance with the term hereof. “Anti-Corruption Laws” means (a) the U.S. Foreign Corrupt Practices Act of 1977, as amended, (b) the U.K. Bribery Act of 2010, as amended, and (c) any other anti-bribery or anti- corruption laws, regulations or ordinances in any jurisdiction in which the City is located or doing business. “Anti-Money Laundering Laws” means applicable laws or regulations in any jurisdiction in which the City is located or doing business that relate to money laundering, any predicate crime to money laundering, or any financial record keeping and reporting requirements related thereto. “Assignment Agreement” has the meaning set forth in the Indenture. “Authority” means the Gilroy Public Facilities Financing Authority, a joint powers authority duly organized and existing under and by virtue of the laws of the State of California. “Base Payments” has the meaning set forth in the Lease Agreement. “Bond” means the Gilroy Public Facilities Financing Authority Lease Revenue Refunding Bonds, Series 2022A (Convertible). “Bond Counsel” means Nixon Peabody LLP. “Bond Documents” means, collectively, this Agreement, the Resolution, the Authority Resolution, the Bond, the Indenture, the First Supplement to Indenture, the Lease Agreement, the Fourth Amendment to Lease Agreement, the Assignment Agreement and the Site Lease. “Business Day” means a day which is not (a) a Saturday, Sunday or legal holiday on which banking institutions in Gilroy, California or New York, New York are authorized by law to close or (b) a day on which the New York Stock Exchange or the Federal Reserve Bank is closed. “City” means the City of Gilroy, a charter city duly organized and existing under the Constitution and laws of the State of California. “Conversion Date” means the date on which the conditions to the conversion of the interest rate on the Bond from the Taxable Fixed Rate to the Tax-Exempt Fixed Rate pursuant to Section 3.01(b) hereof have been satisfied, which such date shall be on or after [August 8, 2023]. “City Representative” means the Mayor, City Administrator, Finance Director or City Clerk of the City, or such other person designated in writing by the City. “Closing Date” means the date of issuance of the Bond, [December __, 2022], or such other date if acceptable to the Purchaser, subject to the satisfaction of the conditions precedent set forth in Section 3.01(a). “Confidential Information” means any sensitive or confidential information regarding the Purchaser or any affiliate of the Purchaser including, without limitation, address and account 11.5.e Packet Pg. 263 Attachment: Convertible Bond Purchase Agreement (City of Gilroy) (4070 : City - 2013 Lease Revenue Bonds Refinancing) 3 information, e-mail addresses, telephone numbers, facsimile numbers, and names and signatures of officers and employees. “Default Rate” means, for any day, a fluctuating rate of interest per annum equal to the greatest of (i) the Prime Rate in effect at such time plus four percent (4.0%), (ii) the Federal Funds Rate in effect at such time plus five percent (5.0%), and (iii) ten percent (10.0%). “Determination of Taxability” has the meaning set forth in the Indenture. “EMMA” means Electronic Municipal Market Access as provided by the Municipal Securities Rulemaking Board. “Event of Default” with respect to this Agreement shall have the meaning set forth in Section 6 of this Agreement. “Federal Funds Rate” means, for any day, the rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided that: (a) if such day is not a Business Day, then the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day; and (b) if no such rate is so published on such next succeeding Business Day, then the Federal Funds Rate for such day shall be the average rate (rounded upward, if necessary, to a whole multiple of one-hundredth of one percent) charged to the Purchaser on such day on such transactions as determined by the Purchaser. If the Federal Funds Rate determined as provided above would be less than zero percent (0.0%), then the Federal Funds Rate shall be deemed to be zero percent (0.0%). “Fitch” means Fitch Ratings, Inc., and any successor rating agency. “First Supplement to Indenture” means the First Supplement to Indenture, dated as of December 1, 2022, by and among the Trustee, the City and the Authority. “Fourth Amendment to Lease Agreement” means the Fourth Amendment to Lease Agreement, dated as of December 1, 2022, between the Authority, as lessor, and the City, as lessee. “Indenture” means the Indenture by and among the Trustee, the City and the Authority, dated as of August 1, 2020, as originally executed and as it may from time to time be amended or supplemented in accordance therewith. “Lease Agreement” means the First Amended and Restated Lease Agreement dated as of August 1, 2009, by and between the City, as sublessee, and the Authority, as sublessor, as originally executed and as it may be amended or supplemented in accordance therewith. “Lease Payments” has the meaning set forth in the Lease Agreement. “Leased Property” has the meaning set forth in the Indenture. 11.5.e Packet Pg. 264 Attachment: Convertible Bond Purchase Agreement (City of Gilroy) (4070 : City - 2013 Lease Revenue Bonds Refinancing) 4 “Lease Obligation Debt” means any debt of the City and/or the Authority, the payment of which is payable from and/or secured by lease revenue rental payments payable under real property (but not equipment) leases from the general fund of the City. “Material City Debt” means any debt of the City that is outstanding in a principal amount of $5,000,000 or more. “Maximum Federal Corporate Tax Rate” has the meaning set forth in the Indenture. “Moody’s” means Moody’s Investors Service, Inc. and any successor rating agency. “Owner” means the registered owner of the Bond. “Patriot Act” means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Title III of Pub. L. 107 56 (signed into law October 26, 2001). “Person” means any individual, corporation, not for profit corporation, partnership, limited liability company, joint venture, association, professional association, joint stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other form of entity. “Prime Rate” means on any day, the rate of interest per annum then most recently established by Wells Fargo Bank, National Association as its “prime rate.” Any such rate is a general reference rate of interest, need not be related to any other rate, and need not be the lowest or best rate actually charged by Wells Fargo Bank, National Association to any customer or a favored rate and need not correspond with future increases or decreases in interest rates charged by other lenders or market rates in general; Wells Fargo Bank, National Association may make various business or other loans at rates of interest having no relationship to such rate. If Wells Fargo Bank, National Association ceases to establish or publish a prime rate from which the Prime Rate is then determined, the applicable variable rate from which the Prime Rate is determined thereafter shall be instead the prime rate reported in The Wall Street Journal (or the average prime rate if a high and a low prime rate are therein reported), and the Prime Rate shall change without notice with each change in such prime rate as of the date such change is reported. If the Prime Rate determined as provided above would be less than zero percent (0.0%), then the Prime Rate shall be deemed to be zero percent (0.0%). “Property” means, when used in connection with any Person, any and all rights, title and interests of such Person in and to any and all property (including cash) whether real, personal or mixed, or tangible or intangible, and wherever situated. “Purchaser” means Wells Fargo Municipal Capital Strategies, LLC, and its successors and assigns. “Purchase Price” has the meaning assigned in Section 2.01(a). “Refunded Bond” means the Gilroy Public Facilities Financing Authority Refunding Lease Revenue Bonds, Series 2013. 11.5.e Packet Pg. 265 Attachment: Convertible Bond Purchase Agreement (City of Gilroy) (4070 : City - 2013 Lease Revenue Bonds Refinancing) 5 “Rating Agency” means any of S&P, Moody’s and Fitch, as applicable. “Rental Payments” has the meaning set forth in the Indenture. “Revenues” has the meaning set forth in the Indenture. “S&P” means S&P Global Ratings, and any successor rating agency. “Sanction” or “Sanctions” means any and all economic or financial sanctions, sectoral sanctions, secondary sanctions, trade embargoes and restrictions and anti-terrorism laws imposed, administered or enforced from time to time by: (a) the United States of America, including those administered by the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC), the U.S. Department of State, the U.S. Department of Commerce, or through any existing or future statute or Executive Order, (b) the United Nations Security Council, (c) the European Union, (d) the United Kingdom, or (e) any other governmental authority with jurisdiction over the City. “Sanctioned Target” means any target of Sanctions, including: (a) Persons on any list of targets identified or designated pursuant to any Sanctions, (b) Persons, countries or territories that are the target of any territorial or country-based Sanctions program, (c) Persons that are a target of Sanctions due to their ownership or control by any Sanctioned Target(s), or (d) otherwise a target of Sanctions, including vessels and aircraft, that are designated under any Sanctions program. “Site Lease” has the meaning set forth in the Indenture. “State” means the State of California. “Taxable Date” has the meaning set forth in the Indenture. “Taxable Gross-Up Rate” has the meaning set forth in the Indenture. “Taxable Rate” means [__._]%, the rate of interest on the Bond payable from the Closing Date to but not including the Conversion Date. “Tax-Exempt Rate” means [__._]%, the rate of interest on the Bond payable from and after the Conversion Date. “Trustee” means U.S. Bank Trust Company, National Association. Section 1.02. Incorporation of Certain Definitions by Reference; Interpretation . Each capitalized term used herein and not otherwise defined herein shall have the meaning provided therefor in the Indenture, unless the context otherwise requires. In the event of any conflict between the terms and provisions of this Agreement and the provisions of the Indenture, the provisions of the Indenture shall be controlling. 11.5.e Packet Pg. 266 Attachment: Convertible Bond Purchase Agreement (City of Gilroy) (4070 : City - 2013 Lease Revenue Bonds Refinancing) 6 ARTICLE II PURCHASE OF OBLIGATION Section 2.01. Execution of this Agreement; Purchase of Bond. (a) Purchase. Upon the terms and conditions and based on the representations, warranties and covenants of the Authority and the City set forth herein and in the Bond Documents, the Purchaser hereby agrees to purchase from the Authority, and the Authority hereby agrees to issue and sell to the Purchaser, the Bond at the purchase price of [$________] representing the aggregate principal amount of the Bond (the “Purchase Price”). (b) Closing. On the Closing Date, the Authority and the City, as applicable, shall deliver to the Purchaser the documents described in and that satisfy the conditions set forth in Section 3.01(a). Upon delivery of such documents and satisfaction of such conditions, the Purchaser will pay the Purchase Price for the Bond in immediately available federal funds at the direction of the Authority. One fully registered Bond, in the aggregate principal amount equal to the Purchase Price, shall be issued to and registered in the name of the Purchaser, and shall be delivered at the direction of the Purchaser. (c) Conversion Date. On the Conversion Date, the City shall deliver to the Purchaser the documents described in and satisfy the conditions set forth in Section 3.01(b) hereof. Upon delivery of such documents and satisfaction of such conditions, the interest rate on the Bond shall convert to the Tax-Exempt Rate; provided that from and after any Taxable Date, the interest rate on the Bond shall be established at a rate at all times equal to the Taxable Gross-Up Rate. ARTICLE III CONDITIONS PRECEDENT TO PURCHASE OF OBLIGATION Section 3.01. Conditions Precedent to Execution and Closing. The Purchaser has entered into this Agreement in reliance upon the representations, warranties and covenants of the City and the Authority contained herein and the Bonds Documents and to be contained in the documents and instruments to be delivered on the Closing Date and upon the agreement of the City to perform its obligations hereunder and thereunder. Accordingly, the Purchaser’s obligation under this Agreement to purchase and pay for the Bond shall be subject to the performance by the City and the Authority of their obligations to be performed hereunder and under such other documents and instruments to be delivered at or prior to the Closing Date, and shall also be subject to the requirements of the Indenture and the following conditions: (a) Conditions to Effectiveness of this Agreement. On or prior to the Closing Date, the Purchaser shall have received the following documents in form and substance satisfactory to the Purchaser: 11.5.e Packet Pg. 267 Attachment: Convertible Bond Purchase Agreement (City of Gilroy) (4070 : City - 2013 Lease Revenue Bonds Refinancing) 7 (i) an executed original or certified copy, as applicable, of this Agreement, the Indenture, the First Supplement to Indenture, the Lease Agreement, the Fourth Amendment to Lease Agreement, the Site Lease, the Assignment Agreement, the Resolution and the Authority Resolution; (ii) the fully executed and authenticated Bond in physical form and registered in the name of the Purchaser; provided that the Bond may bear a CUSIP number, but it shall not carry a rating from any ratings service or be offered pursuant to an offering statement (or other disclosure document) or by a placement agent; (iii) a certificate executed by a City Representative certifying that on and as of the Closing Date: (1) each representation and warranty of the City in this Agreement is true and correct in all material respects (except to the extent that such representation and warranty expressly relates to an earlier date), (2) no Event of Default has occurred and is continuing or would result from the execution or performance of the Bond Documents; (3) since June 30, 2021, no event has occurred or condition arisen, either individually or in the aggregate, that has had or could reasonably be expected to have a material impairment of the ability of the City to perform its obligations under the Bond Documents; and (4) the names and signatures of the persons authorized to sign the Bond Documents executed on the Closing Date on behalf of the City; (iv) a certificate executed by an authorized representative of the Authority certifying, on and as of the Closing Date, the names and signatures of the persons authorized to sign the Bond Documents executed on the Closing Date on behalf of the Authority; (v) evidence satisfactory to the Purchaser that the long-term unenhanced rating assigned to Lease Obligation Debt is not less than “AA” from S&P; (vi) a certificate of the City that the requirements of Section 2.10 of the Indenture have been met, including a certificate of the City as to the annual fair rental value of the Leased Property; (vii) certified copies of the policies of insurance required by Article IV of the Lease Agreement or certificates thereof, which shall evidence that the amounts of the insurance required under Section 4.4 and 4.5 of the Lease Agreement have been increased, if necessary, to cover the amount of the Bond; (viii) a CLTA or ALTA title insurance policy or other appropriate form of policy in the amount of the Bond of the type and with the endorsements described in Section 4.6 of the Lease Agreement; (ix) an opinion of counsel to the City, in form and substance satisfactory to the Purchaser addressing the due authorization, execution, adoption, delivery and 11.5.e Packet Pg. 268 Attachment: Convertible Bond Purchase Agreement (City of Gilroy) (4070 : City - 2013 Lease Revenue Bonds Refinancing) 8 enforceability of this Agreement and the other Bond Documents to which the City is a party and such other matters as the Purchaser may require; (x) an Opinion of Counsel as required under Section 2.11(a) of the Indenture addressed to the Purchaser or on which the Purchaser is otherwise expressly authorized to rely; (xi) the City will cause to be delivered to the Purchaser a copy of the City’s audited financial statements for the fiscal year ended June 30, 2021; (xii) the Purchaser shall have received reimbursement of the fees and expenses of Kutak Rock LLP, as counsel to the Purchaser, incurred in connection with the preparation, review, negotiation, execution and delivery of this Agreement and the Bond Documents, which fees may be paid directly to Kutak Rock LLP; and (xiii) such additional certificates, instruments, opinions or other documents as the Purchaser may reasonably request. (b) Conditions to Conversion of Interest Rate. The interest rate on the Bond shall convert to the Tax-Exempt Rate, subject to the conditions precedent set forth in this Section 3.01(b), and the Purchaser shall have received, on or before the applicable Conversion Date, the items listed below in this Section, each dated and in form and substance as is satisfactory to the Purchaser: (i) the City, the Authority and the Purchaser shall have delivered to the Trustee a [Tax-Exempt Bond Conversion Agreement] in substantially the form of [Exhibit E] to the First Supplement to Indenture; (ii) the Purchaser shall have received an opinion of Bond Counsel addressed to the Purchaser to the effect that, as of the Conversion Date, interest on the Bond is excludable from gross income for federal income tax purposes; and (iii) A certificate from the authorized officers of the City and the Authority, certifying that: (A) the representations and warranties of the City and the Authority contained in this Agreement and in the Bond Documents are true and correct as of the Conversion Date; and (B) no Event of Default has occurred and is continuing. In the event the conditions to the conversion of the interest rate set forth in Section 3.01(b) are not satisfied on the Conversion Date, the interest rate on the Bond shall remain at the Taxable Rate. ARTICLE IV REPRESENTATION AND WARRANTIES Section 4.01. The City represents and warrants to the Purchaser as follows: 11.5.e Packet Pg. 269 Attachment: Convertible Bond Purchase Agreement (City of Gilroy) (4070 : City - 2013 Lease Revenue Bonds Refinancing) 9 (a) Organization and Power. The City (a) is a charter city and is validly existing under the laws of the State under and pursuant to the Constitution of the State and (b) has all governmental power and authority, and all governmental licenses, authorizations, consents and approvals, to execute, deliver and perform its obligations under this Agreement and, as of the Closing Date, will have all g overnmental power and authority, and all governmental licenses, authorizations, consents and approvals, to execute, deliver and perform its obligations under the other Bond Documents. (b) Consents. No consent, approval, authorization or order of any court or governmental body is required for the performance by the City of its obligations under the Bond Documents. (c) No Conflict With Other Instruments or Law. Neither the execution and delivery of this Agreement or the other Bond Documents, nor compliance with the provisions thereof, or the issuance of the Bond conflicts with or will result in a breach of or default under (i) any indenture, mortgage, commitment, note or other agreement or instrument to which the City is a party or by which it is bound or (ii) to the best of the City’s knowledge, any other law, rule, regulation or ordinance or judgment, order or decree of any court or governmental agency or body having jurisdiction over the City or any of its activities or properties. (d) Power and Authority; Enforceability. (i) The City has taken all action required to be taken by it to authorize the issuance and delivery of the Bond and the performance of its obligations thereunder, (ii) the City has full legal right, power and authority to enter into this Agreement and the other Bond Documents and to perform its obligations hereunder and thereunder, and (iii) this Agreement and the other Bond Documents have been duly authorized and (assuming due authorization, execution and delivery by the other parties thereto) when executed, constitute valid and binding obligations of the City enforceable against the City in accordance with their respective terms, subject to equitable principles, bankruptcy, insolvency and similar laws. (e) No Material Litigation; Pending Legislation. (i) There is no action, suit, proceeding, inquiry or investigation at law or in equity or before or by any court, public board or body pending, or, to the best knowledge of the City, threatened against or affecting the City wherein an unfavorable decision, ruling or finding would have a material adverse effect on (1) the transactions contemplated by, or the validity or enforceability of, this Agreement or the other Bond Documents or (2) the tax-exempt status of interest on the Bond on or after the Conversion Date, if applicable. (ii) There is no amendment, or to the knowledge of the City, proposed amendment to the Constitution of the State or any State law or any administrative interpretation of the Constitution of the State or any State law, or any legislation that has passed either house of the legislature of the State, or any judicial decision interpreting any of the foregoing, the effect of which will materially adversely affect the issuance of the Bond, the security for the Bond or the City’s obligations under this Agreement, the Indenture, the Bond or the other Bond Documents, or the City’s ability to repay when due its obligations under the Lease Agreement. 11.5.e Packet Pg. 270 Attachment: Convertible Bond Purchase Agreement (City of Gilroy) (4070 : City - 2013 Lease Revenue Bonds Refinancing) 10 (f) Financial Statements. The audited financial statements of the City for the fiscal year ended June 30, 2021, heretofore furnished to the Purchaser, fairly present the financial condition of the City in all material respects as of such date and the results of its operations for the period then ended in conformity with generally accepted accounting principles applicable to State political subdivisions, except as otherwise expressly noted therein. Since June 30, 2021, there has been no change in the financial condition or operations of the City that could reasonably be expected to result in a material adverse change in the operations, business, properties, liabilities or condition of the City or the ability of the City to perform its obligations under any Bond Document. (g) No Default. No Event of Default or any event that, with the giving of notice or the lapse of time or both, would constitute an Event of Default has occurred and is continuing. (h) Usury. Under State law, the City may not plead the defense of usury or maintain any action thereon or therefor. (i) Anti-Corruption Laws and Anti-Money Laundering Laws. To the best of City’s knowledge, after due care and inquiry, no affiliate, officer, director or agent acting on behalf of the City is under investigation for an alleged violation of Anti-Money Laundering Laws or Anti-Corruption Laws by a governmental authority that enforces such laws. (j) Sanctions. (i) The City is not a Sanctioned Target and (ii) to the best of City’s knowledge, after due care and inquiry, no affiliate, officer, director or agent acting on behalf of the City is under investigation for an alleged violation of Sanction(s) by a governmental authority that enforces Sanctions. (k) Security. The Bond is a limited obligation of the Authority and is payable, as to interest thereon and principal thereof, solely from the revenues derived from Base Payments paid by the City pursuant to Lease Agreement. The Bond is equally and ratably secured by the Revenues and enjoys the benefits of a security interest in the money held in the funds established pursuant to the Indenture (other than the Rebate Fund (as defined in the Indenture)), subject to the provisions of the Indenture permitting the disbursement thereof for or to the purposes and on the conditions and terms set forth therein. The obligation of the City to pay Base Payments does not constitute an indebtedness of the City for which the City is obligated to levy or pledge any form of taxation or for which the City has levied or pledged any form of taxation. The obligation of the City to pay Base Payments does not constitute an indebtedness of the City, the State of California, or any of its political subdivisions within the meaning of any constitutional or statutory debt limitation or restriction. The obligation of the City to make the Base Payments is subject to abatement during any period in which, by reason of material damage, destruction or title defect, there is substantial interference with the use and occupancy of the Leased Property or portions thereof or if the Leased Property or portions thereof are taken under the power of eminent domain. 11.5.e Packet Pg. 271 Attachment: Convertible Bond Purchase Agreement (City of Gilroy) (4070 : City - 2013 Lease Revenue Bonds Refinancing) 11 (l) Immunity. Under State law, an action may be maintained against the City upon a contract made by the City, including the Bond Documents, and the City agrees not to assert the defense of sovereign immunity in any legal proceeding arising under or relating to the enforcement of the obligations of the City under the Bond Documents. (m) Investment Company. The City is not an “investment company” or a company “controlled” by an “investment company,” as such terms are defined in the Investment Company Act of 1940, as amended. (n) Margin Stock. The City is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock, and no part of the proceeds from the issuance of the Bond will be used to purchase or carry any such margin stock or extend credit to others for the purpose of purchasing or carrying any such margin stock. (o) Environmental Matters. The operations of the City are in material compliance with all of the requirements of applicable federal, state and local environmental, health and safety statutes and regulations and are not the subject of any governmental investigation evaluating whether any remedial action is needed to respond to a release of any toxic or hazardous waste or substance into the environment, where a failure to comply with any such requirement or the need for any such remedial action could reasonably be expected to result in a material adverse effect on its obligations under the Bond Documents. (p) Insurance. The City currently maintains insurance coverage with insurance companies believed by the City to be capable of performing their obligations under the respective insurance policies issued by such insurance companies to the City (as determined in its reasonable discretion) and in full compliance with the Lease Agreement and the other Bond Documents. (q) Title to Property; Site Lease; Lease Agreement. The City has good and marketable fee simple title to all Leased Property, subject only to Permitted Encumbrances (as defined in the Lease Agreement). The Lease Agreement and Site Lease are in full force and effect. The City, as lessee under the Lease Agreement, is in peaceable possession of the Leased Property. No waiver, indulgence or postponement of any of the City’s obligations under the Lease Agreement has been granted by the Authority. There exists no event of default or event, occurrence, condition or act that, with the giving of notice, the lapse of time or the happening of any further event or condition, would become a default under the Lease Agreement or Site Lease. (r) Essentiality. The Leased Property is an essential asset of the City necessary to serve the needs of the residents of the City. The City believes that at all times while any Rental Payments or any obligation of the City under the Bond Documents remains unpaid, the Leased Property will remain an essential asset of the City. (s) Fair Rental Value. The total Base Payments for the Leased Property do not exceed the annual fair rental value of the Leased Property. In making such determination of annual fair rental value, consideration has been given to the uses and purposes which 11.5.e Packet Pg. 272 Attachment: Convertible Bond Purchase Agreement (City of Gilroy) (4070 : City - 2013 Lease Revenue Bonds Refinancing) 12 may be served by the Leased Property and the benefits therefrom which will accrue to the City and the general public. (t) Additional Rentals. All obligations of the City hereunder, other than the principal of and interest with respect to the Bond, shall be paid as Additional Payments pursuant to Section 3.5 of the Lease Agreement. Section 4.02. The Authority represents and warrants to the Purchaser as follows: (a) Organization and Power. The Authority (a) is a joint powers authority duly organized and existing under and by virtue of the laws of the State of California and (b) has all governmental power and authority, and all governmental licenses, authorizations, consents and approvals, to execute, deliver and perform its obligations under this Agreement and, as of the Closing Date, will have all governmental power and authority, and all governmental licenses, authorizations, consents and approvals, to execute, deliver and perform its obligations under the other Bond Documents. (b) Consents. No consent, approval, authorization or order of any court or governmental body is required for the performance by the Authority of its obligations under the Bond Documents. (c) No Conflict With Other Instruments or Law. Neither the execution and delivery of this Agreement or the other Bond Documents, nor compliance with the provisions thereof, or the issuance of the Bond conflicts with or will result in a breach of or default under (i) any indenture, mortgage, commitment, note or other agreement or instrument to which the Authority is a party or by which it is bound or (ii) to the best of the Authority’s knowledge, any other law, rule, regulation or ordinance or judgment, order or decree of any court or governmental agency or body having jurisdiction over the Authority or any of its activities or properties. (d) Power and Authority; Enforceability. (i) The Authority has taken all action required to be taken by it to authorize the issuance and delivery of the Bond and the performance of its obligations thereunder, (ii) the Authority has full legal right, power and authority to enter into this Agreement and the other Bond Documents and to perform its obligations hereunder and thereunder, and (iii) this Agreement and the other Bond Documents have been duly authorized and (assuming due authorization, execution and delivery by the other parties thereto) when executed, constitute valid and binding obligations of the Authority enforceable against the Authority in accordance with their respective terms, subject to equitable principles, bankruptcy, insolvency and similar laws. (e) No Material Litigation; Pending Legislation. (i)There is no action, suit, proceeding, inquiry or investigation at law or in equity or before or by any court, public board or body pending, or, to the best knowledge of the Authority, threatened against or affecting the Authority wherein an unfavorable decision, ruling or finding would have a material adverse effect on (1) the transactions contemplated by, or the validity or enforceability of, this Agreement or the other Bond Documents or (2) the tax-exempt status of interest on the Bond upon the Conversion Date, if applicable. 11.5.e Packet Pg. 273 Attachment: Convertible Bond Purchase Agreement (City of Gilroy) (4070 : City - 2013 Lease Revenue Bonds Refinancing) 13 (ii) There is no amendment, or to the knowledge of the Authority, proposed amendment to the Constitution of the State or any State law or any administrative interpretation of the Constitution of the State or any State law, or any legislation that has passed either house of the legislature of the State, or any judicial decision interpreting any of the foregoing, the effect of which will materially adversely affect the issuance of the Bond, the security for the Bond or the Authority’s obligations under this Agreement, the Bond or the other Bond Documents, or the Authority’s ability to repay when due its obligations under the Bond. (f) No Default. No Event of Default or any event that, with the giving of notice or the lapse of time or both, would constitute an Event of Default has occurred and is continuing. (g) Usury. Under State law, the Authority may not plead the defense of usury or maintain any action thereon or therefor. (h) Anti-Corruption Laws and Anti-Money Laundering Laws. To the best of Authority’s knowledge, after due care and inquiry, no affiliate, officer, director or agent acting on behalf of the Authority is under investigation for an alleged violation of Anti- Money Laundering Laws or Anti-Corruption Laws by a governmental authority that enforces such laws. (i) Sanctions. (i) The Authority is not a Sanctioned Target and (ii) to the best of Authority’s knowledge, after due care and inquiry, no affiliate, officer, director or agent acting on behalf of the Authority is under investigation for an alleged violation of Sanction(s) by a governmental authority that enforces Sanctions. (j) Security. The Bond is a limited obligation of the Authority and is payable, as to interest thereon and principal thereof, solely from the revenues derived from Base Payments paid by the City pursuant to Lease Agreement. The Bond is equally and ratably secured by the Revenues and enjoys the benefits of a security interest in the money held in the funds established pursuant to the Indenture (other than the Rebate Fund (as defined in the Indenture)), subject to the provisions of the Indenture permitting the disbursement thereof for or to the purposes and on the conditions and terms set forth therein. The obligation of the City to pay Base Payments does not constitute an indebtedness of the City for which the City is obligated to levy or pledge any form of taxation or for which the City has levied or pledged any form of taxation. The obligation of the City to pay Base Payments does not constitute an indebtedness of the City, the State of California, or any of its political subdivisions within the meaning of any constitutional or statutory debt limitation or restriction. The obligation of the City to make the Base Payments is subject to abatement during any period in which, by reason of material damage, destruction or title defect, there is substantial interference with the use and occupancy of the Leased Property or portions thereof or if the Leased Property or portions thereof are taken under the power of eminent domain. 11.5.e Packet Pg. 274 Attachment: Convertible Bond Purchase Agreement (City of Gilroy) (4070 : City - 2013 Lease Revenue Bonds Refinancing) 14 (k) Immunity. Under State law, an action may be maintained against the Authority upon a contract made by the Authority, including the Bond Documents, and the Authority agrees not to assert the defense of sovereign immunity in any legal proceeding arising under or relating to the enforcement of the obligations of the Authority under the Bond Documents. (l) Investment Company. The Authority is not an “investment company” or a company “controlled” by an “investment company,” as such terms are defined in the Investment Company Act of 1940, as amended. (m) Margin Stock. The Authority is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock, and no part of the proceeds from the issuance of the Bond will be used to purchase or carry any such margin stock or extend credit to others for the purpose of purchasing or carrying any such margin stock. (n) Environmental Matters. The operations of the Authority are in material compliance with all of the requirements of applicable federal, state and local environmental, health and safety statutes and regulations and are not the subject of any governmental investigation evaluating whether any remedial action is needed to respond to a release of any toxic or hazardous waste or substance into the environment, where a failure to comply with any such requirement or the need for any such remedial action could reasonably be expected to result in a material adverse effect on its obligations under the Bond Documents. (o) Insurance. The Authority currently maintains insurance coverage with insurance companies believed by the Authority to be capable of performing their obligations under the respective insurance policies issued by such insurance companies to the Authority (as determined in its reasonable discretion) and in full compliance with the Lease Agreement and the other Bond Documents. (p) Title to Property; Site Lease; Lease Agreement; Assignment Agreement. The Authority has good and marketable leasehold title to all of the Leased Property pursuant to the Site Lease. The Lease Agreement and Site Lease are in full force and effect. The Authority, as lessee under the Site Lease, is in peaceable possession of the Leased Property. No waiver, indulgence or postponement of any of the Authority’s obligations under the Site Lease has been granted by the City. There exists no event of default or event, occurrence, condition or act that, with the giving of notice, the lapse of time or the happening of any further event or condition, would become a default under the Lease Agreement or the Site Lease. Pursuant to the Assignment Agreement, the Authority has assigned without recourse all its rights to receive Base Payments scheduled to be paid by the City under and pursuant to the Lease Agreement to the Trustee for the benefit of the owners of the Bond. (q) Pledged Revenues. The Indenture creates a valid pledge of the Revenues as security for the punctual payment and performance of the obligations of the Authority under the Bond. 11.5.e Packet Pg. 275 Attachment: Convertible Bond Purchase Agreement (City of Gilroy) (4070 : City - 2013 Lease Revenue Bonds Refinancing) 15 ARTICLE V COVENANTS Section 5.01. Covenants. The City and the Authority covenant and agree that they will comply with the following covenants until the date on which no amount is due or owing to the Purchaser under this Agreement or the other Bond Documents, unless the Purchaser shall otherwise consent in writing. (a) Financial Reporting and Notices. The City and the Authority will prepare or cause to be prepared and delivered to the Purchaser the following: (i) The City shall provide to the Purchaser within two hundred seventy (270) days of the end of each fiscal year of the City, a copy of its audited financial statements for such fiscal year along with a certificate executed by an authorized officer of the City certifying that no Event of Default or event that with the lapse of time or the giving of notice would constitute an Event of Default has occurred, or if any such default has occurred, specifying the nature of such default, the period of its existence, the nature and status thereof and any remedial steps taken or proposed to correct such default. (ii) The City shall provide to the Purchaser the City’s annual budget within sixty (60) days of the end of each fiscal year of the City. (iii) The City and the Authority shall provide prompt written notice to the Purchaser of (1) any Event of Default or event that with the lapse of time or the giving of notice would constitute an Event of Default, and (2) all actions, suits or proceedings pending against the City or the Authority in any court before any governmental authority which could reasonably be expected to result in a material adverse effect upon the operations, business, properties, liabilities or condition of the City or the Authority or a material impairment of the ability of the City or the Authority to perform its obligation under the Bond Documents. (b) Existence, Etc. The Authority shall maintain its existence as a joint powers authority duly organized and existing under and by virtue of the laws of the State of California. The City shall maintain its existence as a municipal corporation duly organized and existing under the Constitution and laws of the State of California. (c) Defaults. The Authority and the City will promptly (and in any event within five Business Days after becoming aware thereof) notify the Purchaser of the occurrence of any Event of Default, specifying the details of such Event of Default and, to the extent a determination has been made, the action that the Authority and the City propose to take with respect thereto. (d) Litigation; Material Change. The Authority and the City shall promptly notify the Purchaser of (i) the existence and status of any litigation which individually or in the aggregate could, in the event of an unfavorable outcome, have a material adverse effect on, or (ii) the occurrence of any other event or change which could have a material 11.5.e Packet Pg. 276 Attachment: Convertible Bond Purchase Agreement (City of Gilroy) (4070 : City - 2013 Lease Revenue Bonds Refinancing) 16 adverse effect on, (A) the ability of the Authority or the City to perform their respective obligations hereunder or under the other the Bond Documents or (B) the enforceability or validity of this Agreement or any of the other Bond Documents. (e) Compliance with Laws. The City and the Authority shall comply in all material respects with all applicable laws, ordinances, rules, regulations and requirements of any governmental authority unless noncompliance would not have a material impairment on the ability of the City or the Authority to perform its obligations under this Agreement or the other Bond Documents or a material adverse effect upon the legality, validity, binding effect or enforceability against the City or the Authority of this Agreement or the other Bond Documents including, without limitation, environmental laws, Anti- Money Laundering Laws, Anti-Corruption Laws and Sanctions. (f) Maintenance of Books and Records; Inspections. The City and the Authority shall maintain adequate books, accounts and records, and prepare all financial statements required under this Agreement in accordance with generally accepted accounting principles applicable to State political subdivisions and joint powers authorities and in compliance with the regulations of any governmental authority having jurisdiction over it. The City and the Authority shall permit any employee or representative of the Purchaser to visit and inspect any of their properties, to examine and audit their books of account, records, reports and other papers, to make copies and extracts therefrom, and to discuss its affairs, finances and accounts with its officers and, upon prior notice to the City or the Authority, its independent public accountants (and by this provision the City and Authority authorize said accountants to discuss their finances and affairs with the Purchaser and to provide the Purchaser with access to such accountants’ work papers), all upon reasonable notice and during business hours and as often as may be reasonably requested. (g) Modifications. The City and the Authority shall not enter into or consent to any alteration, modification, supplement or amendment to this Agreement or the other Bond Documents, without the prior written consent of the Purchaser, except in connection with the issuance of Additional Bonds under the Indenture, which shall not require written consent of the Purchaser. (h) [Maintenance of Rating. The City and the Authority shall at all times maintain a long-term unenhanced rating on Lease Obligation Debt from any of Moody’s, S&P or Fitch.] (i) Other Agreements. In the event that the City or the Authority has entered into or shall enter into any credit agreement, purchase agreement, liquidity agreement or other agreement (each an “Other Agreement”) under which any person or entity undertakes to purchase Lease Obligation Debt from the City or Authority or extend credit or liquidity to the City or the Authority or provides credit enhancement for Lease Obligation Debt of the City or the Authority, and such Other Agreement provides such person or entity with different or more restrictive covenants, different or additional events of default and/or greater rights and remedies than are provided to the Purchaser in this Agreement or the other Bond Documents, the City and the Authority shall provide the Purchaser with a copy of each such Other Agreement and such different or more restrictive covenants, different 11.5.e Packet Pg. 277 Attachment: Convertible Bond Purchase Agreement (City of Gilroy) (4070 : City - 2013 Lease Revenue Bonds Refinancing) 17 or additional events of default and/or greater rights and remedies shall automatically be deemed to be incorporated into this Agreement and the Purchaser shall have the benefits of such different or more restrictive covenants, different or additional events of default and/or greater rights and remedies as if specifically set forth herein. The City and the Authority shall promptly enter into an amendment to this Agreement to include different or more restrictive covenants, different or additional events of default and/or greater rights and remedies; provided that the Purchaser shall have and maintain the benefit of such different or more restrictive covenants, different or additional events of default and/or greater rights and remedies even if the City or the Authority fails to provide such amendment. (j) Anti-Money Laundering Laws; Anti-Corruption Laws; Sanctions. The City and the Authority shall not use any proceeds of the Bond to fund, finance or facilitate any activities, business or transactions that would be prohibited by Anti-Money Laundering Laws, Anti-Corruption Laws or Sanctions. (k) Source of Repayment. The City and the Authority shall not fund any repayment of the Bond with proceeds, or provide as collateral any Property, that is directly or indirectly derived from any transaction or activity that is prohibited by Sanctions, Anti- Money Laundering Laws or Anti-Corruption Laws, or that could otherwise cause the Purchaser or any other party to this Agreement to be in violation of Sanctions, Anti-Money Laundering Laws or Anti-Corruption Laws. (l) Limitation on Liens. The Authority and the City shall not create a pledge, lien or charge on any part of the Revenues, other than the lien in favor of the holders of the Series 2020A Bonds (as defined in the Indenture), Additional Bonds (as defined in the Indenture) and the Purchaser. The Authority and the City shall not create a pledge, lien or charge on any part of the Leased Property other than Permitted Encumbrances (as defined in the Lease Agreement). The City and the Authority covenant (i) to keep the Leased Property and all parts thereof free from judgments, and materialmen’s and mechanics’ liens, claims, demands, encumbrances, liabilities and other liens of whatever nature or character, which, in each case, might hamper the City or the Authority in utilizing the Leased Property; and (ii) promptly, upon request of the Purchaser, to take such action from time to time as may be reasonably necessary or proper to remedy or cure any cloud upon or defect in the title to the Leased Property or any part thereof, whether now existing or hereafter developing, to prosecute all actions, suits, or other proceedings as may be reasonably appropriate for such purpose. (m) Lease Payments. The City and the Authority will not issue or authorize the issuance of any obligation payable from Revenues other than as permitted under the Indenture and the Lease Agreement. (n) Maintenance of Title Insurance. Throughout the term of the Lease Agreement, the City and the Authority shall maintain or cause to be maintained title insurance in the manner and in form and substance as required by the Lease Agreement and the other Bond Documents. 11.5.e Packet Pg. 278 Attachment: Convertible Bond Purchase Agreement (City of Gilroy) (4070 : City - 2013 Lease Revenue Bonds Refinancing) 18 (o) Maintenance of Insurance. Throughout the term of the Lease Agreement, the City and the Authority shall maintain or cause to be maintained insurance in the manner and in form and substance as required by the Lease Agreement and the other Bond Documents. (p) Incorporation of Covenants by Reference. The Authority and the City each agrees that it will perform and comply with each and every covenant and agreement required to be performed or observed by it in the Bond Documents to which it is a party, which provisions, as well as related defined terms contained herein, are hereby incorporated by reference herein with the same effect as if each and every such provision were set forth herein in its entirety. To the extent that any such incorporated provision permits any person to waive compliance with or consent to such provision or requires that a document, opinion or other instrument or any event or condition be acceptable or satisfactory to any person, for purposes of this Agreement, such provision shall be complied with only if it is waived or consented to by the Purchaser and such document, opinion or other instrument shall be acceptable or satisfactory only if it is acceptable or satisfactory to the Purchaser. (q) Covenants and Legal Duties. Subject to the Lease Agreement, the City covenants to take such action as may be necessary to include all Lease Payments and all estimated Additional Payments due under the Lease Agreement in each of its final approved budgets for the general fund of the City and to make the necessary appropriations (including any supplemental appropriations) from the general fund of the City for all such Lease Payments and Additional Payments coming due and payable during the period covered by each such budget. (r) Voluntary Rent Abatement. Except as required by law and the terms of the Lease Agreement, the City shall not seek or assert a claim for abatement of any of the Lease Payments under the Lease Agreement. (s) Immunity. To the fullest extent permitted by law, the City and the Authority agree not to assert the defense of immunity (on the grounds of sovereignty or otherwise) in any proceeding by the Purchaser to enforce any of the obligations of the City and the Authority under this Agreement or any other Bond Document. ARTICLE VI EVENTS OF DEFAULT Section 6.01. Events of Default. The occurrence of any of the following events (whatever the reason for such event and whether voluntary, involuntary, or effected by operation of law) shall be an “Event of Default”, unless waived in writing by Purchaser: (a) the City or the Authority shall fail to pay the principal of or interest on the Bond when due; 11.5.e Packet Pg. 279 Attachment: Convertible Bond Purchase Agreement (City of Gilroy) (4070 : City - 2013 Lease Revenue Bonds Refinancing) 19 (b) any representation or warranty made by or on behalf of the City or the Authority in this Agreement or any certificate or document delivered to the Purchaser related thereto shall provide to have been incorrect or untrue in any material respect when made; (c) the City or the Authority shall default in the performance of any of the covenants set forth in Section 5.01(b), (c), (g), (j), (k), (l), (m), (n), (o), (q), (r) or (s) hereof. (d) the City or the Authority shall fail to observe or perform any other covenant, restriction or agreement set forth in this Agreement or the other Bond Documents and such failure shall remain unremedied for a period of thirty days after the occurrence thereof; (e) the City or the Authority shall (i) have entered involuntarily against it an order for relief under the United States Bankruptcy Code, as amended, (ii) become insolvent or shall not pay, or be unable to pay, or admit in writing its inability to pay, its debts generally as they become due, (iii) make a general assignment for the benefit of creditors, (iv) apply for, seek, consent to, or acquiesce in, the appointment of a receiver, custodian, trustee, examiner, liquidator or similar official for it or any substantial part of its property, (v) institute any proceeding seeking to have entered against it an order for relief under the United States Bankruptcy Code, as amended, to adjudicate it insolvent, or seeking dissolution, winding up, liquidation, reorganization, arrangement, marshalling of assets, adjustment or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors or fail to file an answer or other pleading denying the material allegations of any such proceeding filed against it, (vi) take any corporate action in furtherance of any matter described in parts (i) through (v) above, or (vii) fail to contest in good faith any appointment or proceeding described in paragraph (e) below; (f) a custodian, receiver, trustee, examiner, liquidator or similar official shall be appointed for the City or the Authority or any substantial part of its respective property, or a proceeding described in paragraph (d)(v) above shall be instituted against the City or the Authority and such proceeding continues undischarged or any such proceeding continues undismissed or unstayed for a period of thirty (30) or more days; (g) a debt moratorium, debt restructuring, debt adjustment or comparable restriction is imposed on the repayment when due and payable of the principal of or interest on any indebtedness of the City or the Authority by the City or the Authority or any governmental authority with appropriate jurisdiction; (h) the City shall (i) default on the payment of the principal of or interest on any Material City Debt, beyond the period of grace, if any, provided in the instrument or agreement under which such Material City Debt was created or incurred; or (ii) default in the observance or performance of any agreement or condition relating to any Material City Debt or contained in any instrument or agreement evidencing, securing or relating thereto, or any other default, event of default or similar event shall occur or condition ex ist, the effect of which default, event of default or similar event or condition is to permit remedial action to be taken with respect to such Material City Debt; 11.5.e Packet Pg. 280 Attachment: Convertible Bond Purchase Agreement (City of Gilroy) (4070 : City - 2013 Lease Revenue Bonds Refinancing) 20 (i) any final, unappealable judgment or judgments, writ or writs or warrant or warrants of attachment, or any similar process or processes, which are not covered in full by insurance, with written acknowledgement of such coverage having been provided by the provider of such insurance coverage to the Purchaser, in an aggregate amount not less than $5,000,000 shall be entered or filed against the City or the Authority or against any of its property and remain unpaid, unvacated, unbonded or unstayed for a period of sixty (60) days; or (j) any material provision of this Agreement or any other Bond Documents shall at any time for any reason cease to be valid and binding on the City or the Authority or shall be declared in a final non-appealable judgment by any court with competent jurisdiction to be null and void, invalid, or unenforceable, or the validity or en forceability thereof shall be publicly contested by the City or the Authority. Section 6.02.Consequences of an Event of Default. Upon the occurrence and during the continuance of an Event of Default the interest rate on the Bond shall increase to the Default Rate as more fully set forth in the Bond and the Indenture, and the Purchaser may exercise, or cause to be exercised, any and all remedies as it may have under the other Bond Documents and as otherwise available at law and at equity. Section 6.03. [Downgrade Redemption Event. In the event that any of Fitch, Moody’s or S&P shall have downgraded its rating of any Lease Obligation Debt to below “A-” (or its equivalent), “A3” (or its equivalent), or “A-” (or its equivalent) respectively, or suspended or withdrawn its rating of the same (a “Downgrade Redemption Event”), the Purchaser may provide written notice of such Downgrade Redemption Event to the Trustee and the City and direct a mandatory redemption of the Bonds in accordance with [Section 14.06(d)] of the First Supplement to Indenture.] ARTICLE VII MISCELLANEOUS Section 7.01. Amendments and Waivers. No amendment or waiver of any provision of this Agreement or consent to any departure by the City or the Authority from any such provision shall in any event be effective unless the same shall be in writing and signed by the Purchaser. Any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. In the event any agreement contained in this Agreement should be breached by the City or the Authority and thereafter waived by the Purchaser, such waiver shall be limited to the particular breach so waived for the specific period set out in such waiver and such waiver shall not constitute a waiver of such breach for any other period and shall not waive any other or similar breach hereunder. Section 7.02. Counterparts. This Agreement may be signed in any number of counterpart copies (and by different parties on different counterparts), each of which shall constitute an original but all such copies shall constitute one and the same instrument. Section 7.03. Notices. All notices, requests, demands, directions and other communications (collectively “notices”) under the provisions of this Agreement shall be in writing 11.5.e Packet Pg. 281 Attachment: Convertible Bond Purchase Agreement (City of Gilroy) (4070 : City - 2013 Lease Revenue Bonds Refinancing) 21 (including facsimile communication), unless otherwise expressly permitted hereunder, and shall be properly addressed and sent by registered or certified mail or by express courier for next Business Day delivery and shall be deemed received as follows: (a) if by registered or certified mail, five (5) days after mailing; (b) if by express courier, on the next Business Day; and (c) if by facsimile, when confirmation of transmission is obtained if prior to 5:00 p.m. local time on a Business Day, and otherwise, on the next Business Day; provided that service of a notice prescribed by any applicable law shall be considered complete when the requirements of such applicable law are met. Notices by electronic mail (e mail) shall not constitute notice under this Agreement and are only to be used in addition to notice given as prescribed under subsections (a), (b) or (c) of this Section. All notices shall be sent to the applicable party at the following address or in accordance with the last unrevoked written direction from such party to the other party hereto: if to the City, addressed to it at: City of Gilroy 7351 Rosanna Street Gilroy, California 95020 Attention: Finance Director Email: jimmy.forbis@ci.gilroy.ca.us if to the Authority, addressed to it at: Gilroy Public Facilities Financing Authority 7351 Rosanna Street Gilroy, California 95020 Attention: Treasurer Email: jimmy.forbis@ci.gilroy.ca.us or if to the Purchaser, addressed to if at: Wells Fargo Municipal Capital Strategies, LLC c/o Wells Fargo Bank, National Association 1655 Grant Street, 3rd Floor Concord, California 94520 Attention: Zina Monroe Telephone: (925) 852-1061 Email: monroez@wellsfargo.com The Purchaser may in its sole discretion rely on any notice (including telephone communication or e-mail communication) purportedly made by or on behalf of the City or the Authority, but it shall have no duty to accept any notice not given as prescribed in this Section and shall have no duty to verify the identity or authority of the Person giving such notice, unless such actions or omissions would amount to gross negligence or intentional misconduct. Section 7.04. Severability. Any provision of this Agreement which is prohibited, unenforceable or not authorized in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition, unenforceability or nonauthorization without invalidating the 11.5.e Packet Pg. 282 Attachment: Convertible Bond Purchase Agreement (City of Gilroy) (4070 : City - 2013 Lease Revenue Bonds Refinancing) 22 remaining provisions hereof or affecting the validity, enforceability or legality of such provision in any other jurisdiction. Section 7.05. Governing Law; Waiver of Jury Trial. (a) This Agreement shall be governed by, and construed in accordance with, the laws of the State without giving effect to conflicts of laws provisions. (b) To the extent permitted by applicable laws, each of the parties hereto hereby waives its right to a jury trial of any claim or cause of action based upon or arising out of this Agreement, the Bond Documents or any of the transactions contemplated hereby or thereby, including contract claims, tort claims, breach of duty claims, and all other common law or statutory claims. If and to the extent that the foregoing waiver of the right to a jury trial is unenforceable for any reason in such forum, each of the parties hereto hereby consents to the adjudication of all claims pursuant to judicial reference as provided in California Code of Civil Procedure Section 638, and the judicial referee shall be empowered to hear and determine all issues in such reference, whether fact or law. Each of the parties hereto represents that each has reviewed this waiver and consent and each knowingly and voluntarily waives its jury trial rights and consents to judicial reference following consultation with legal counsel on such matters. In the event of litigation, a copy of this Agreement may be filed as a written consent to a trial by the court or to judicial reference under California Code of Civil Procedure Section 638 as provided herein. Section 7.06. Complete and Controlling Agreement. This Agreement and the other Bond Documents completely set forth the agreements between the Purchaser, the Authority and the City and fully supersede all prior agreements, both written and oral, between the Purchaser, the Authority and the City relating to all matters set forth herein and in the other Bond Documents. Section 7.07. Indemnification. In addition to any and all rights of reimbursement, indemnification, subrogation or any other rights pursuant hereto or under law or equity, the City and the Authority hereby agree (to the extent permitted by law) to indemnify and hold harmless the Purchaser and its officers, directors and agents (each, an “Indemnitee”) from and against any and all claims, damages, losses, liabilities, reasonable costs or expenses whatsoever (including reasonable attorneys’ fees) which may incur or which may be claimed against an Indemnitee by any Person or entity whatsoever (collectively, the “Liabilities”) by reason of or in connection with (a) the execution and delivery of, or payment or failure to pay under, this Agreement or any other Bond Document; (b) the issuance and sale of the Bond; and (c) the use of the proceeds of the Bond; provided that the City and the Authority shall not be required to indemnify an Indemnitee for any claims, damages, losses, liabilities, costs or expenses to the extent, but only to the extent, caused by the willful misconduct or gross negligence of such Indemnitee. The obligations of the City and the Authority under this Section shall survive the payment of the Bond and the termination of this Agreement. Section 7.08. Patriot Act. The Purchaser hereby notifies the City and the Authority that pursuant to the requirements of the Patriot Act it is required to obtain, verify and record information that identifies the City and the Authority, which information includes the name and address of the City and the Authority and other information that is necessary for the Purchaser to identify the City and the Authority in accordance with the requirements of the Patriot Act. The 11.5.e Packet Pg. 283 Attachment: Convertible Bond Purchase Agreement (City of Gilroy) (4070 : City - 2013 Lease Revenue Bonds Refinancing) 23 City and the Authority hereby agree that they shall promptly provide such information upon request by the Purchaser. Section 7.09. No Advisory or Fiduciary Responsibility. In connection with all aspects of the transactions contemplated by this Agreement and the other Bond Documents (including in connection with any amendment, waiver or other modification of this Agreement or of any Bond Document), the City and the Authority acknowledge and agree that: (a)(i) any arranging, structuring and other services regarding this Agreement and the Bond Documents provided by the Purchaser or any affiliate of the Purchaser are arm’s length commercial transactions between the City and the Authority on the one hand, and the Purchaser and any affiliate of the Purchaser on the other hand, (ii) the City and the Authority have consulted their own legal, accounting, regulatory and tax advisors to the extent they have deemed appropriate, and (iii) the City and the Authority are capable of evaluating, and understand and accept, the terms, risks and conditions of the transactions contemplated by this Agreement and the Bond Documents; (b)(i) the Purchaser and each affiliate of the Purchaser is and has been acting solely as a principal and has not been, is not, and will not be acting as an advisor, agent or fiduciary for the City or the Authority or any other Person and (ii) neither the Purchaser nor any affiliate of the Purchaser has any obligation to the City or the Authority with respect to the transactions contemplated by this Agreement and the Bond Documents, except those obligations expressly set forth herein; and (c) the Purchaser and each affiliate of the Purchaser may be engaged in a broad range of transactions that involve interests that differ from those of the City and the Authority, and neither the Purchaser nor any affiliate of the Purchaser has any obligation to disclose any of such interests to the City or the Authority. To the fullest extent permitted by applicable laws, the City and the Authority hereby waive and release any claims that it may have against the Purchaser and each affiliate of the Purchaser with respect to any breach or alleged breach of agency or fiduciary duty in connection with any aspect of the transactions contemplated by this Agreement and the Bond Documents. Section 7.10. Excess Interest. If the amount of interest payable for any period in accordance with the terms of the Bond or the Bond Documents exceeds the amount of interest that would be payable for such period had interest for such period been calculated at the maximum interest rate permitted by law, then interest for such period shall be payable in an amount calculated at the maximum interest rate permitted by law. Any interest that would have been due and payable for any period but for the operation of the immediately preceding sentence shall accrue and be payable as provided in the foregoing sentence and shall, less interest actually paid to the Purchaser for such period, constitute the “Excess Interest Amount.” If there is any accrued and unpaid Excess Interest Amount as of any date, then the principal amount with respect to which interest is payable shall bear interest at the maximum interest rate permitted by law until payment to the Purchaser of the entire Excess Interest Amount. Notwithstanding the foregoing, on the date on which no principal amount with respect to the Bond remains unpaid, the City shall pay to the Purchaser a fee equal to any accrued and unpaid Excess Interest Amount. Section 7.11. Contractual Interpretation. The parties acknowledge that they have read and fully understand the terms of this Agreement, have consulted with such attorneys, accountants, advisors, or other professionals as they have deemed appropriate prior to executing this Agreement with adequate opportunity and time for review thereof, and are fully aware of its contents and of its legal effect. Accordingly, neither this Agreement nor any ambiguity herein shall be construed 11.5.e Packet Pg. 284 Attachment: Convertible Bond Purchase Agreement (City of Gilroy) (4070 : City - 2013 Lease Revenue Bonds Refinancing) 24 against any party on the grounds that such party drafted this Agreement and instead, this Agreement shall be interpreted as though drafted equally by all parties. Section 7.12. EMMA Posting. In the event the City or the Authority files with EMMA this Agreement or any other Bond Document or any description of the material terms thereof or notice of any agreement to covenants, events of default, remedies, priority rights or other similar terms, either voluntarily or as required pursuant a continuing disclosure agreement or Rule 15c2- 12 promulgated pursuant to the Securities and Exchange Act of 1934, as amended (the “Rule”) (each such posting, an “EMMA Posting”), the City and the Authority shall (i) provide the Purchaser with a copy of each EMMA Posting prior to submitting or posting on EMMA and (ii) shall not file or permit the filing of any EMMA Posting that includes Confidential Information. The City and the Authority acknowledge and agree that although the Purchaser may request review, edits or redactions of such materials prior to filing, the Purchaser is not responsible for the City’s or the Authority’s or any other entity’s (including, but not limited to, any broker-dealer’s) compliance or noncompliance (or any claims, losses or liabilities arising therefrom) with any continuing disclosure agreement or any applicable securities or other laws, including, but not limited to, those relating to the Rule. Section 7.13. Electronic Signatures. The parties agree that the electronic signature of a party to this Agreement shall be as valid as an original signature of such party and shall be effective to bind such party to this Agreement. The parties agree that any electronically signed document (including this Agreement) shall be deemed (i) to be “written” or “in writing,” (ii) to have been signed and (iii) to constitute a record established and maintained in the ordinary course of business and an original written record when printed from electronic files. Such paper copies or “printouts”, if introduced as evidence in any judicial, arbitral, mediation or administrative proceeding, will be admissible as between the parties to the same extent and under the same conditions as other original business records created and maintained in documentary form. Neither party shall contest the admissibility of true and accurate copies of electronically signed documents on the basis of the best evidence rule or as not satisfying the business records exception to the hearsay rule. For purposes hereof, “electronic signature” means a manually signed original signature that is then transmitted by electronic means; “transmitted by electronic means” means sent in the form of a facsimile or sent via the internet as a “pdf” (portable document format) or other replicating image attached to an e mail message; and, “electronically signed document” means a document transmitted by electronic means and containing, or to which there is affixed, an electronic signature. [Signatures Begin on the Following Page] 11.5.e Packet Pg. 285 Attachment: Convertible Bond Purchase Agreement (City of Gilroy) (4070 : City - 2013 Lease Revenue Bonds Refinancing) Signature Page to Bond Purchase Agreement IN WITNESS WHEREOF, the parties hereto have caused this Bond Purchase Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first above written. CITY OF GILROY By: Mayor Attest: By: City Clerk GILROY PUBLIC FACILITIES FINANCING AUTHORITY By: Executive Director Attest: By: Secretary 11.5.e Packet Pg. 286 Attachment: Convertible Bond Purchase Agreement (City of Gilroy) (4070 : City - 2013 Lease Revenue Bonds Refinancing) Signature Page to Bond Purchase Agreement WELLS FARGO MUNICIPAL CAPITAL STRATEGIES, LLC By Name: Brian Goins Title: Vice President 11.5.e Packet Pg. 287 Attachment: Convertible Bond Purchase Agreement (City of Gilroy) (4070 : City - 2013 Lease Revenue Bonds Refinancing) 11.5.e Packet Pg. 288 Attachment: Convertible Bond Purchase Agreement (City of Gilroy) (4070 : City - 2013 Lease Revenue Bonds Refinancing) City of Gilroy STAFF REPORT Agenda Item Title: Approval of the Refinancing of Gilroy Public Facilities Financing Authority's 2013 Refunding Lease Revenue Bonds Meeting Date: December 5, 2022 From: Jimmy Forbis, City Administrator Department: Finance Department Submitted By: Harjot Sangha, Finance Director Prepared By: Harjot Sangha, Finance Director Strategic Plan Goals Develop a Financially Resilient Organization ☐ Ensure Neighborhood Equity from City Services ☐ Promote Economic Development Activities ☐ Promote Safe, Affordable Housing for All ☐ Maintain and Improve City Infrastructure RECOMMENDATION Adopt a resolution of the Board of Directors of the Gilroy Public Facilities Financing Authority approving the issuance by the Gilroy Public Facilities Financing Authority of not to exceed $15 million of Gilroy Public Facilities Financing Authority Lease Revenue Refunding Bonds, Series 2022A; approving the execution and delivery of various related documents in connection with the offering and sale of such bonds; and authorizing the taking of certain other matters related thereto. 13.2.1 Packet Pg. 289 EXECUTIVE SUMMARY The Gilroy Public Facilities Financing Authority (“Authority”) and the City of Gilroy (“City”) issued $23,120,000 of bonds in 2013 (the “2013 Bonds”) to refund prior bonds and notes issued for the construction of the police station, improvements to the corporation yard, fire stations, sports park and joint use gymnasium/recreation facility and aquatics center for the Christopher High School campus. The Authority and City have the opportunity to refund the outstanding 2013 Bonds with new Lease Revenue Refunding Bonds, Series 2022A (Convertible) (the “2022 Bonds”) to capture savings and reduce the annual lease payments from the City. BACKGROUND In 2013, the Authority and City issued the 2013 Bonds at a fixed average interest rate of 4.53% and a 21-year amortization period with debt service secured by General Fund lease payments. The leased assets are comprised of the City’s Police Station, Sunrise Fire Station, Corporation Yard, and Sports Park site. At the time of the issuance of the Authority’s Lease Revenue Refunding Bonds, Series 2020A, it was written into the documents that the Corporation Yard and Sports Park site would be released when the 2013 Bonds were refunded. Since 2013, the City has made lease payments to the Authority, which in turn has made debt service payments on the 2013 Bonds. The outstanding principal amount is $15,185,000 as of December 1, 2022. ANALYSIS Current tax law does not allow for an advanced tax-exempt refunding of the 2013 Bonds prior to August 3, 2023 (90 days prior to November 1, 2023 , first optional redemption date). However, the Authority and City have the ability to issue taxable refunding bonds that convert to tax-exempt bonds once we are within the 90 -day redemption window. This is often referred to as a “convertible” or “Cinderella” structure. Such a structure provides the Authority and City with the ability to approve the refunding of the 2013 Bonds with the 2022 Bonds, lock in interest rates, and capture savings based on current taxable and tax-exempt rates. NHA Advisors, the City’s independent financial advisor and fiduciary, advised the City that a convertible transaction is best suited for a private placement, which is expected to provide greater savings than a public offering. A private placement is the sale of bonds to a pre-selected bank rather than a public offering sold to many investors through an underwriter. Following the receipt of several interest rate and structure proposals, NHA Advisors determined that Wells Fargo offered the best combination of interest rates and terms. Based on preliminary interest rates provided by Wells Fargo on November 18, 2022, the City can realize approximately $1,135,000 of net present value savings over the 13.2.1 Packet Pg. 290 remaining 11-year term of the bonds, which is a 7.45% reduction to total debt service. This exceeds the standard 5% threshold for minimum savings that is generally used in the municipal finance industry. It should be noted, however, that the interest rates cannot be locked until the rate lock agreement is executed, which will only occur if the Authority and Council approve the refinancing, and legal due diligence is complete. At that time, the final savings amount will be determined. In order to comply with the tax laws, Wells Fargo will have consent rights to the conversion of taxable bonds to tax-exempt bonds. In the event Wells Fargo was to withhold consent, which is unlikely, the 2022 Bonds would remain taxable, and accordingly, the net present value savings would decrease to $372,000 (a 2.45% reduction to total debt service). The attached resolutions and draft financing documents permit the Authority and City to proceed with all steps necessary for the issuance of the 2022 Bonds. The resolution authorizes the issuance of bonds not to exceed $15 million, requires a minimum of 5% savings, and limits the repayment term not to exceed the existing debt’s term, November 1, 2033. ALTERNATIVES The Authority and City Council could decide not to approve the resolution and draft financing documents, maintaining the 2013 Bond debt service terms and conditions. This is not recommended because the issuance of the 2022 Bonds will provide considerable savings to the City. FISCAL IMPACT/FUNDING SOURCE The current annual debt service on the bonds is approximately $1.8 million. The estimated annual debt service on new bonds will be approximately $1.6 million, resulting in a net savings of about $200,000 annually through the term of the bonds. The exhibit to the Authority’s Resolution includes information required to be disclosed in a meeting open to the public pursuant to SB 450. Such information includes the true interest cost of the bonds, finance charges of the bonds, the number of proceeds received by the Authority and the City, and the total payment amount. NEXT STEPS Should the Authority and Council approve the resolution and draft financing documents, the rate lock agreement will be executed, and the interest rates will be locked. Attachments: 1. Draft Resolution (Gilroy Public Facilities Financing Authority) 2. First Supplement to Indenture 3. Fourth Amendment to Lease Agreement 13.2.1 Packet Pg. 291 4. Convertible Bond Purchase Agreement (City of Gilroy) 5. Escrow Agreement 13.2.1 Packet Pg. 292 RESOLUTION NO. GPFFA 2022-XX A RESOLUTION OF THE BOARD OF DIRECTORS OF THE GILROY PUBLIC FACILITIES FINANCING AUTHORITY AUTHORIZING THE ISSUANCE OF NOT TO EXCEED $15,000,000 OF GILROY PUBLIC FACILITIES FINANCING AUTHORITY LEASE REVENUE REFUNDING BONDS, SERIES 2022A (CONVERTIBLE); APPROVING THE EXECUTION AND DELIVERY OF VARIOUS RELATED DOCUMENTS IN CONNECTION WITH THE ISSUANCE AND DELIVERY OF SUCH BONDS; AND AUTHORIZING THE TAKING OF CERTAIN OTHER MATTERS RELATED THERETO WHEREAS, the Gilroy Public Facilities Financing Authority (the “Authority”) was established for the purpose, among others, of providing for the financing and refinancing of public capital improvements for the City of Gilroy (the “City”); and WHEREAS, the Authority has previously issued its $23,120,000 Gilroy Public Facilities Financing Authority Refunding Lease Revenue Bonds, Series 2013 (the “Series 2013 Bonds”), of which $15,185,000 are currently outstanding; and WHEREAS, the Authority and the City have determined, that it is necessary and desirable in order to refund the Series 2013 Bonds to authorize the issuance, sale and delivery of the Gilroy Public Facilities Financing Authority Lease Revenue Refunding Bonds, Series 2022A (Convertible) (the “Series 2022A Bonds”) in the aggregate principal amount of not to exceed $15,000,000; and WHEREAS, the Authority desires to approve in connection with the sale of the Series 2022A Bonds, the form of a Bond Purchase Agreement (the “Bond Purchase Agreement”), among the Authority, the City and Wells Fargo Municipal Capital Strategies, LLC (including any affiliate thereof, the “Purchaser”); and WHEREAS, there have been presented to this meeting the proposed forms of the following documents: (a) the First Supplement to Indenture, dated as of December 1, 2022 (the “First Supplement to Indenture”), among the Authority, the City and U.S. Bank Trust Company, National Association, as trustee (the “Trustee”); and (b) the Fourth Amendment to Lease Agreement, dated as of December 1, 2022 (the “Fourth Amendment to Lease”) between the City and the Authority; (c) the Bond Purchase Agreement; and (d) the Escrow Agreement, dated as of December 1, 2022 (the “Escrow Agreement”), between the Authority and U.S. Bank Trust Company, National Association, as escrow agent; 13.2.1.a Packet Pg. 293 Attachment: Draft Resolution (Gilroy Public Facilities Financing Authority) (4078 : GPFFA - 2013 LRBs Refunding) Resolution No. GPFFA 2022-XX 2013 Lease Revenue Bonds Refinancing Gilroy Public Facilities Financing Authority Regular Meeting | December 5, 2022 Page 2 of 3 NOW, THEREFORE, BE IT RESOLVED, DETERMINED AND ORDERED BY THE GILROY PUBLIC FACILITIES FINANCING AUTHORITY AS FOLLOWS: SECTION 1. Approval of Issuance of Series 2022A Bonds by the Authority. The issuance of the Series 2022A Bonds by the Authority on the terms and conditions set forth in, and subject to the limitations specified in the Indenture, dated as of August 1, 2020, by and among the Authority, the City and the Trustee, as amended by the First Supplement to Indenture, and this Resolution, is hereby approved; provided, however, that (i) the aggregate principal amount of Series 2022A Bonds shall not exceed $15,000,000, (ii) the maturity of the Series 2022A Bonds shall not exceed November 1, 2033, and (iii) there shall be expected present value savings with respect to the refunding of the Series 2013 Bonds of at least 5% (assuming a successful conversion from a taxable rate to a tax-exempt rate on or about August 8, 2022) of the principal amount of the Series 2013 Bonds using the yield on the Series 2022A Bonds as the discount rate. SECTION 2. Approval of First Supplement to Indenture. The form of First Supplement to Indenture presented at this meeting is hereby approved and the Chairman, the Vice-Chairman, the Executive Director, the Treasurer, the Secretary of the Authority (each an “Authorized Officer”) are hereby authorized and directed, for and in the name of and on behalf of the Authority, to execute, acknowledge and deliver the First Supplement to Indenture in substantially the form presented at this meeting with such changes therein as the officers executing the same may approve, such approval to be conclusively evidenced by the execution and delivery thereof. SECTION 3. Approval of Fourth Amendment to Lease. The form of Fourth Amendment to Lease presented at this meeting is hereby approved and each Authorized Officer is hereby authorized and directed, for and in the name of and on behalf of the Authority, to execute, acknowledge and deliver the Fourth Amendment in substantially the form presented at this meeting with such changes therein as the Authorized Officer executing the same may approve, such approval to be conclusively evidenced by the execution and delivery thereof. SECTION 4. Approval of Bond Purchase Agreement. The Authority is hereby authorized to enter into the Bond Purchase Agreement and each Authorized Officer is hereby authorized and directed to execute and deliver the Bond Purchase Agreement on behalf of the Authority, in substantially the form presented to this meeting, with such changes therein, deletions therefrom and additions thereto as the Authorized Officer shall approve in consultation with the Authority’s financial and legal consultants, which approval shall be conclusively evidenced by the execution and delivery thereof. SECTION 5. Approval of Escrow Agreement. The Authority is hereby authorized to enter into the Escrow Agreement and each Authorized Officer is hereby authorized and directed to execute and deliver the Escrow Agreement on behalf of the Authority, in substantially the form presented to this meeting, with such changes therein, deletions therefrom and additions thereto as the Authorized Officer shall approve in consultation with the Authority’s financial and legal consultants, which approval shall be conclusively evidenced by the execution and delivery thereof. 13.2.1.a Packet Pg. 294 Attachment: Draft Resolution (Gilroy Public Facilities Financing Authority) (4078 : GPFFA - 2013 LRBs Refunding) Resolution No. GPFFA 2022-XX 2013 Lease Revenue Bonds Refinancing Gilroy Public Facilities Financing Authority Regular Meeting | December 5, 2022 Page 3 of 3 SECTION 6. SB 450 and SB 1029 Representation. The Authority adopts and approves the Good Faith Estimates required by Senate Bill 450 (Chapter 625 of the 2017-2018 Session of the California Legislature) (“SB 450”) and obtained by the City from NHA Advisors, as Municipal Advisor. The Authority confirms, that to the extent applicable, it has adopted the City’s stated debt management policies required by Senate Bill 1029 (“SB 1029”), and further represents that it is in compliance with the applicable SB 1029 pre-issuance requirements and that it expects to comply with all post-issuance requirements of SB 1029 applicable to the Series 2022A Bonds. SECTION 7. Other Acts. The officers and staff of the Authority are hereby authorized and directed, jointly and severally, to do any and all things, to execute and deliver any and all documents, which in consultation with Authority Counsel and with Nixon Peabody LLP, the Authority’s bond counsel, they may deem necessary or advisable in order to effectuate the purposes of this Resolution, and any and all such actions previously taken by such officers or staff members are hereby ratified and confirmed. SECTION 8. Effective Date. This Resolution shall take effect upon adoption. PASSED and ADOPTED this 5th day of December 2022 by the following roll call vote: AYES: BOARD MEMBERS: NOES: BOARD MEMBERS: ABSTAIN: BOARD MEMBERS: ABSENT: BOARD MEMBERS: APPROVED: Marie Blankley, Chair ATTEST: _______________________ Thai Nam Pham, Secretary 13.2.1.a Packet Pg. 295 Attachment: Draft Resolution (Gilroy Public Facilities Financing Authority) (4078 : GPFFA - 2013 LRBs Refunding) 4863-6504-4543.3 FIRST SUPPLEMENT TO INDENTURE by and among U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION , as Trustee, CITY OF GILROY and GILROY PUBLIC FACILITIES FINANCING AUTHORITY Dated as of ______, 2022 Relating to the $_________ Gilroy Public Facilities Financing Authority Lease Revenue Refunding Bonds, Series 2022A (Convertible) 13.2.1.b Packet Pg. 296 Attachment: First Supplement to Indenture (4078 : GPFFA - 2013 LRBs Refunding) 4863-6504-4543.3 TABLE OF CONTENTS Page -i- PART 1 PARTICULAR AMENDMENTS Part 1.1. Amendments to Section 1.01 of the Original Indenture .................................................. 2 Part 1.2. Amendments to Section 5.01(a) of the Indenture ............................................................ 5 PART 2 ADDITION OF ARTICLE XIV Part 2.1. Addition of Article XIV .................................................................................................. 6 ARTICLE XIV TEMRS AND CONDITIONS OF SERIES 2022A BONDS Section 14.01. Authorization of Series 2022A Bonds ................................................................... 6 Section 14.02. Terms of Series 2022A Bonds ............................................................................... 7 Section 14.03. Form of Series 2022A Bonds ................................................................................. 8 Section 14.04. Execution of Series 2022A Bonds ......................................................................... 8 Section 14.05. Deposit of Proceeds of Series 2022A Bonds; Other Moneys ................................ 8 Section 14.06. Redemption of Series 2022A Bonds ...................................................................... 9 Section 14.07. Transfer Restrictions ............................................................................................ 10 PART 3 MISCELLANEOUS Part 3.1. Effect of First Supplement to Indenture ........................................................................ 11 Part 3.2. Execution in Counterparts ............................................................................................. 11 Part 3.3. Effective Date ................................................................................................................ 11 EXHIBIT A FORM OF SERIES 2022A BONDS .................................................................... A-1 EXHIBIT B BREAKAGE FEE CALCULATION.................................................................... B-1 EXHIBIT C FORM OF PURCHASER LETTER ..................................................................... C-1 EXHIBIT D FORM OF TAX-EXEMPT BOND CONVERSION AGREEMENT .... D-ERROR! BOOKMARK NOT DEFINED. 13.2.1.b Packet Pg. 297 Attachment: First Supplement to Indenture (4078 : GPFFA - 2013 LRBs Refunding) 4863-6504-4543.3 FIRST SUPPLEMENT TO INDENTURE THIS FIRST SUPPLEMENT TO INDENTURE (this “First Supplement to Indenture”), is made and entered into as of _______ 1, 2022, by and among U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, a national banking association duly organized and existing under and by virtue of the laws of the United States of America, as successor trustee (the “Trustee”), the CITY OF GILROY, a political subdivision duly organized and existing under the laws of the State of California (the “City”), and GILROY PUBLIC FACILITIES FINANCING AUTHORITY, a joint powers authority duly organized and existing under and by virtue of the laws of the State of California (the “Authority”); W I T N E S S E T H: WHEREAS, the Authority previously issued its Lease Revenue Refunding Bonds, Series 2020A (the “Series 2020A Bonds”), in the aggregate principal amount of $13,740,000, pursuant to an Indenture, dated as of August 1, 2020 (the “Original Indenture”) by and among the Trustee, the City and the Authority, and in accordance with the Joint Exercise of Powers Agreement and its powers thereunder and under the laws of the State of California; WHEREAS, the Original Indenture provides that, subject to the conditions set forth therein, in addition to the Series 2020A Bonds, the Authority may by execution of a Supplemental Indenture without the consent of the Owners, provide for the execution and delivery of Additional Bonds; WHEREAS, the Authority intends to issue its Lease Revenue Refunding Bonds, Series 2022A (Convertible) (the “Series 2022A Bonds”) pursuant to this First Supplement to Indenture and the Original Indenture (as so amended the “Indenture”), and in accordance with the Joint Exercise of Powers Agreement and its powers thereunder and under the laws of the State of California; WHEREAS, the proceeds of the Series 2022A Bonds will be applied by the City to (i) refund the Authority’s Refunding Lease Revenue Bonds, Series 2013 (the “Series 2013 Bonds”) and (ii) pay the costs incurred in connection with the issuance of the Series 2022A Bonds; WHEREAS, in order to accomplish such refunding, the Authority and the City are entering into a Fourth Amendment to Lease Agreement, dated as of ________ 1, 2022, in order to amend the First Amended and Restated Lease Agreement, dated as of August 1, 2009, as amended, between the Authority and the City, the “Lease” (i) to increase the amount of Base Payments payable thereunder and (ii) to make certain other modifications in order to provide for the execution and delivery of the Series 2022A Bonds in accordance with the provisions of the Indenture; and WHEREAS, all acts, conditions and things required by law to exist, to have happened and to have been performed precedent to and in connection with the execution and entering into of this First Supplement to Indenture do exist, have happened and have been performed in regular and due time, form and manner as required by law, and the parties hereto are now duly authorized to execute and enter into this First Supplement to Indenture; 13.2.1.b Packet Pg. 298 Attachment: First Supplement to Indenture (4078 : GPFFA - 2013 LRBs Refunding) 4863-6504-4543.3 2 NOW, THEREFORE, in consideration of the premises and of the mutual agreements and covenants contained herein and for other valuable consideration, the parties do hereby agree as follows: PART 1 PARTICULAR AMENDMENTS Part 1.1. Amendments to Section 1.01 of the Original Indenture. The following definitions, if defined in Section 1.01 of the Original Indenture, are hereby amended and restated and, if not defined, are hereby added, all as follows: Affiliate The term “Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling or controlled by or under common control with such Person. Without limiting the foregoing, the definition of “affiliate” of any Person shall include any subsidiary of such Person and, with respect to the Series 2022A Bonds Purchaser, shall include Wells Fargo Securities (a trade name) and Wells Fargo Bank, National Association. Amortization End Date The term “Amortization End Date” means the earliest to occur of (a) the third (3rd) anniversary of receipt of written notice from the Purchaser of a Downgrade Redemption Event, and (b) the date on which all Series 2022A Bonds are redeemed, repaid, prepaid or cancelled in accordance with the terms of the Indenture. Amortization Payment Date The term “Amortization Payment Date” means (a) the six month anniversary of the date of receipt of written notice from the Purchaser of a Downgrade Redemption Event and each six-month anniversary thereafter which occurs prior to the Amortization End Date and (b) the Amortization End Date. Authorized Denominations The term “Authorized Denominations” means $5,000 or any integral multiple thereof. In the case of the Series 2022A Bonds, however, Authorized Denominations means $250,000 or any integral multiple of $1 in excess thereof. Bond Interest is Taxable The term “Bond Interest is Taxable” means that interest paid or to be paid on a Series 2022A Bond is or will be includable for federal income tax purposes in the gross income of the Series 2022A Bonds Purchaser or any other Owner thereof, but excluding the inclusion of interest on such Series 2022A Bond as an item of tax preference for purposes of the calculation of an alternative minimum tax imposed on the Series 2022A Bonds Purchaser or such other Owner. 13.2.1.b Packet Pg. 299 Attachment: First Supplement to Indenture (4078 : GPFFA - 2013 LRBs Refunding) 4863-6504-4543.3 3 Bond Purchase Agreement The term “Bond Purchase Agreement” means the Bond Purchase Agreement, dated [December __, 2022], by and among the Authority, the City and the Series 2022A Bonds Purchaser, as the same may be amended, modified or supplemented from time to time in accordance with its terms. Bonds The term “Bonds” means the Series 2020A Bonds, the Series 2022A Bonds and all Additional Bonds. BPA Credit Event The term “BPA Credit Event” has the meaning assigned to “Event of Default” in the Bond Purchase Agreement. Conversion Date The term “Conversion Date” shall mean the date on which the Series 2022A Bonds become Tax-Exempt. Default Rate The term “Default Rate” has the meaning assigned to such term in the Bond Purchase Agreement. Determination of Taxability The term “Determination of Taxability” means (a) any determination, decision, decree or advisement by the Commissioner of Internal Revenue, or any District Director of Internal Revenue or any court of competent jurisdiction to the effect that Bond Interest is Taxable, or (b) the delivery to the Series 2022A Bonds Purchaser, any Owner or the Trustee of an Opinion of Counsel, delivered by Bond Counsel, to the effect that Bond Interest is Taxable. A Determination of Taxability also shall be deemed to have occurred on the first to occur of the following: (i) the date when the Authority files any statement, supplemental statement, or other tax schedule, return or document, which discloses that Bond Interest is Taxable; (ii) the effective date of any federal legislation enacted or federal rule or regulation promulgated after the date of this Indenture which has the effect that Bond Interest is Taxable; or (iii) if upon sale, lease or other deliberate action within the meaning of Treas. Reg. § 1.141-2(d), the failure to receive an Approving Opinion. 13.2.1.b Packet Pg. 300 Attachment: First Supplement to Indenture (4078 : GPFFA - 2013 LRBs Refunding) 4863-6504-4543.3 4 Interest Fund The term “Interest Fund” means the Series 2020A Interest Fund, the Series 2022A Interest Fund and each additional fund established for the payment of interest of a Series of Additional Bonds within the Revenue Fund established in accordance with Section 5.01(a) hereof. Downgrade Redemption Event The term “Downgrade Redemption Event” has the meaning assigned to such term in the Bond Purchase Agreement. Interest Payment Date The term “Interest Payment Date” means May 1 and November 1 of each year, commencing November 1, 2020 in the case of Series 2020A Bonds and May 1, 2023 in the case of Series 2022A Bonds. Maximum Federal Corporate Tax Rate The term “Maximum Federal Corporate Tax Rate” means the maximum rate of income taxation imposed on corporations pursuant to Section 11(b) of the Code, as in effect from time to time or, if as a result of a change in the Code the rate of income taxation imposed on corporations generally shall not be applicable to the Series 2022A Bonds Purchaser, the maximum statutory rate of federal income taxation which could apply to the Series 2022A Bonds Purchaser. As of the Series 2022A Bonds Closing Date, the Maximum Federal Corporate Tax Rate is 21%. Principal Fund The term “Principal Fund” means the Series 2020A Principal Fund, the Series 2022A Principal Fund and each additional fund established for the payment of principal of a Series of Additional Bonds within the Revenue Fund established in accordance with Section 5.01(a) hereof. Principal Payment Date The term “Principal Payment Date” means November 1 of each year, commencing on the Principal Payment Date or Dates set forth in Section 2.02 hereof with respect to the Series 2020A Bonds and Section 14.02 hereof with respect to the Series 2022A Bonds. Series 2022A Bonds The term “Series 2022A Bonds” means the Gilroy Public Facilities Financing Authority Lease Revenue Refunding Bonds, Series 2022A (Convertible). Series 2022A Bonds Closing Date The term “Series 2022A Bonds Closing Date” means ________, 2022. 13.2.1.b Packet Pg. 301 Attachment: First Supplement to Indenture (4078 : GPFFA - 2013 LRBs Refunding) 4863-6504-4543.3 5 Series 2022A Bonds Purchaser The term “Series 2022A Bonds Purchaser” means Wells Fargo Municipal Capital Strategies, LLC, as the initial purchaser of the Series 2022A Bonds. Taxable Date The term “Taxable Date” means the date on which interest on the Series 2022A Bonds is first includable in gross income of an Owner (including, without limitation, any previous Owner) thereof as a result of a Determination of Taxability. Taxable Rate The term “Taxable Rate” means [__._]%, the rate of interest on the Series 2022A Bonds payable from the Series 2022A Bonds Closing Date to but not including the Conversion Date. Tax-Exempt Rate The term “Tax-Exempt Rate” means [__._]%, the rate of interest on the Series 2022A Bonds payable from and after the Conversion Date. Taxable Gross-Up Rate The term “Taxable Gross-Up Rate” means, for any date of determination, the rate of interest per annum equal to the product of the interest rate on the Series 2022A Bonds then in effect multiplied by the quotient of (a) one divided by (b) one minus the then current Maximum Federal Corporate Tax Rate in effect on the date of calculation. 2013 Escrow Agent The term “2013 Escrow Agent” means U.S. Bank Trust Company, National Association, as escrow agent under the 2013 Escrow Agreement. 2013 Escrow Agreement The term “2013 Escrow Agreement” means the Escrow Agreement, dated as of December 1, 2022, between the Authority and the Escrow Agent, providing for the defeasance and redemption of the Series 2013 Bonds. Part 1.2. Amendments to Section 5.01(a) of the Indenture. Section 5.01(a) of the Original Indenture is hereby amended to read as follows: There is hereby established a special fund designated as the “Revenue Fund” which shall be held by the Trustee and which shall be kept separate and apart from all other funds and moneys held by the Trustee. Within the Revenue Fund, the Trustee shall establish and maintain (i) a separate fund designated the “Series 2020A Interest Fund” and a separate fund designated the “Series 2020A Principal Fund,” and (ii) a separate fund designated the “Series 2022A Interest Fund” and a separate 13.2.1.b Packet Pg. 302 Attachment: First Supplement to Indenture (4078 : GPFFA - 2013 LRBs Refunding) 4863-6504-4543.3 6 fund designated the “Series 2022A Principal Fund.” Upon the issuance of Additional Bonds, the Trustee shall also establish and maintain, within the Revenue Fund, a separate Interest Fund and a separate Principal Fund for each Series of Additional Bonds. The City hereby irrevocably pledges and transfers to the Trustee, for the benefit of the Owners, all of its right, title and interest in and to all amounts on deposit from time to time in the funds and accounts established hereunder (other than the Rebate Fund), subject to the provisions hereof permitting the disbursement thereof for or to the purposes and on the conditions and terms set forth herein, and in and to the Revenues, which shall be used for the punctual payment of the interest and principal of the Bonds and the Revenues shall not be used for any other purpose while any of the Bonds remain Outstanding. It is the intent of the parties hereto that the Authority shall not have any right, title, in or to the Revenues. In the event, however, that it should be determined that the Authority has any right, title or interest in or to the Revenues, then the Authority hereby irrevocably pledges and transfers to the Trustee, for the benefit of the Owners, all of such right, title and interest, which shall be used for the punctual payment of the interest and principal of the Bonds. These pledges shall constitute a first and exclusive lien on the funds established hereunder and the Revenues in accordance with the terms hereof subject in all events to the power of the City and the Authority to cause the execution and delivery of Additional Bonds pursuant to Section 2.10 hereof which shall be on a parity with the Bonds Outstanding. PART 2 ADDITION OF ARTICLE XIV Part 2.1. Addition of Article XIV. The Original Indenture is hereby amended and supplemented by adding thereto an additional Article as follows: ARTICLE XIV TEMRS AND CONDITIONS OF SERIES 2022A BONDS Section 14.01. Authorization of Series 2022A Bonds. A second Series of Bonds is hereby created and designated “Gilroy Public Facilities Financing Authority Lease Revenue Refunding Bonds, Series 2022A (Convertible).” The aggregate principal amount of Series 2022A Bonds which may be issued and Outstanding under this Indenture shall not exceed $__________. The Authority has reviewed all proceedings heretofore taken relative to the authorization of the Series 2022A Bonds and has found, as a result of such review, and hereby finds and determines that all acts, conditions and things required by law to exist, to have happened and to have been performed precedent to and in the issuance of the Series 2022A Bonds do exist, have happened and have been performed in due time, form and manner as required by law, and that the Authority is now duly authorized, pursuant to each and every requirement of the Act, to issue the Series 2022A Bonds in the form and manner provided herein and that the Series 2022A Bonds shall be entitled to the benefit, protection and security of the provisions hereof. 13.2.1.b Packet Pg. 303 Attachment: First Supplement to Indenture (4078 : GPFFA - 2013 LRBs Refunding) 4863-6504-4543.3 7 The recital contained in the Series 2022A Bonds that the same are issued pursuant to the Act and pursuant hereto shall be conclusive evidence of their validity and of the regularity of their issuance, and all Series 2022A Bonds shall be incontestable from and after their issuance. The Series 2022A Bonds shall be deemed to be issued, within the meaning hereof, whenever the definitive Series 2022A Bonds (or any temporary Series 2022A Bonds exchangeable therefor) shall have been delivered to the purchaser thereof and the proceeds of sale thereof received. Section 14.02. Terms of Series 2022A Bonds. The Series 2022A Bonds shall be issued in the aggregate principal amount of $_________. The Series 2022A Bonds shall be dated as of the date of initial delivery, shall be executed and delivered in the form of fully registered Series 2022A Bonds in physical form, without coupons, in Authorized Denominations, shall be payable in lawful money of the United States of America, and shall mature on November 1, 2033 and initially bear interest at the Taxable Rate, subject to prior redemption as described in Article IV and Section 14.06 hereof. On or after August ___, 2023, the Authority and the City may request to the Series 2022A Bonds Purchaser that the Series 2022A Bonds be designated Tax-Exempt. Upon the consent of the Series 2022A Bonds Purchaser and receipt by the Series 2022A Bonds Purchaser of (i) a [Tax- Exempt Bond Conversion Agreement] in substantially the form of [Exhibit D], (ii) an Opinion of Counsel as to the tax-exempt status of the Series 2022A Bonds and (iii) written confirmation that no Event of Default or BPA Credit Event has occurred and is continuing and that all representations and warranties of the Authority and the City in the Bond Purchase Agreement, the Indenture and the Lease Agreement continue to be true and accurate, the Series 2022A Bonds shall bear interest at the Tax-Exempt Rate. Each Series 2022A Bond shall bear interest from the Interest Payment Date to which interest has been paid or duly provided for next preceding its date of authentication, unless such date of authentication shall be (i) prior to the close of business on May 1, 2023, in which case such Series 2022A Bond shall bear interest from its date of delivery, (ii) subsequent to a Record Date but before the related Interest Payment Date, in which case such Series 2022A Bond shall bear interest from such Interest Payment Date, or (iii) an Interest Payment Date to which interest has been paid in full or duly provided for, in which case such Series 2022A Bond shall bear interest from such date of authentication; provided, however, that if, as shown by the records of the Trustee, interest shall be in default, each Series 2022A Bond shall bear interest from the last Interest Payment Date to which such interest has been paid in full or duly provided for. Interest on the Series 2022A Bonds shall be computed on the basis of a 360-day year of twelve 30-day months. The interest on the Series 2022A Bonds shall be payable on each Interest Payment Date by check sent by first class mail by the Trustee to the respective Owners of the Series 2022A Bonds as of the Record Date for such Interest Payment Date at their addresses shown on the books required to be kept by the Trustee pursuant to the provisions of Section 2.08 hereof. Payments of defaulted interest on any Series 2022A Bond shall be paid by check to the Owner as of a special record date to be fixed by the Trustee, notice of which special record date shall be given to the Owner of the Series 2022A Bond not less than ten days prior thereto. The principal and premium, if any, of the Series 2022A Bonds shall be payable upon presentation and surrender thereof on maturity or on redemption prior thereto at the Principal Corporate Trust Office of the Trustee. Notwithstanding the foregoing, so long as Wells Fargo Municipal Capital Strategies, LLC is the 13.2.1.b Packet Pg. 304 Attachment: First Supplement to Indenture (4078 : GPFFA - 2013 LRBs Refunding) 4863-6504-4543.3 8 Owner of the Series 2022A Bonds, principal of, premium, if any, and interest on the Series 2022A Bonds shall be paid by wire transfer and without presentment or surrender of the Series 2022A Bonds. The Owner of $1,000,000 or more in aggregate principal amount of the Series 2022A Bonds may request in writing that the Trustee pay the interest on the Series 2022A Bonds by wire transfer to an account in the United States of America and the Trustee shall comply with such request for all Interest Payment Dates following the 15th day after receipt of such request. Notwithstanding anything to the contrary herein: (i) on or after the Conversion Date, to the extent the Series 2022A Bonds are Tax- Exempt, from and after any Taxable Date, the interest rate on the Series 2022A Bonds shall be established at a rate equal to the Taxable Gross-Up Rate; and (ii) upon the occurrence and during the continuation of any Event of Default, the interest rate on the Series 2022A Bonds shall be established at a rate equal to the Default Rate. Section 14.03. Form of Series 2022A Bonds. The Series 2022A Bonds and the assignment to appear thereon shall be in substantially the forms set forth in Exhibit A hereto, with necessary or appropriate insertions, omissions and variations as permitted or required hereby. Section 14.04. Execution of Series 2022A Bonds. The Chairman or Executive Director of the Authority is hereby authorized and directed to execute each of the Series 2022A Bonds on behalf of the Authority and the Secretary of the Authority is hereby authorized and directed to countersign each of the Series 2022A Bonds on behalf of the Authority. The signatures of such Chairman, Executive Director and Secretary may be by printed, lithographed or engraved by facsimile reproduction. In case any officer whose signature appears on the Series 2022A Bonds shall cease to be such officer before the delivery of the Series 2022A Bonds to the purchaser thereof, such signature shall nevertheless be valid and sufficient for all purposes as if such officer had remained in office until such delivery of the Series 2022A Bonds. Only those Series 2022A Bonds bearing thereon a certificate of authentication and registration in substantially the form set forth in Exhibit A hereto, executed manually and dated by the Trustee, shall be entitled to any benefit, protection or security hereunder or be valid or obligatory for any purpose, and such certificate of the Trustee shall be conclusive evidence that the Series 2022A Bonds so authenticated and registered have been duly authorized, executed, issued and delivered hereunder and are entitled to the benefit, protection and security hereof. The Series 2022A Bonds shall not be book-entry bonds but rather physical delivery bonds. Section 14.05. Deposit of Proceeds of Series 2022A Bonds; Other Moneys. The proceeds received from the sale of the Series 2022A Bonds in the amount of $__________ shall be transferred for deposit by the Trustee to the following respective funds or accounts: (a) The Trustee shall deposit in the Costs of Issuance Fund established pursuant to Section 3.04 hereof the amount of $_________; 13.2.1.b Packet Pg. 305 Attachment: First Supplement to Indenture (4078 : GPFFA - 2013 LRBs Refunding) 4863-6504-4543.3 9 (b) The Trustee shall transfer to the Escrow Agent the amount of $_______ for deposit in the Escrow Fund held under the Escrow Agreement. The deposits required of the Trustee set forth above into funds or accounts shall be deemed made by the transfer of funds by the Trustee in accordance with the instructions of the City. To facilitate any transfers to or for the benefit of the City required in this Section, the Trustee may, in its discretion open a temporary fund or account on its records which shall be closed upon completion of such transfers. Section 14.06. Redemption of Series 2022A Bonds. The Series 2022A Bonds shall be subject to redemption prior to their Maturity Date as set forth in this Section. (a) Optional Redemption. The Series 2022A Bond may be prepaid in whole at any time upon at least three Business Days’ prior written notice to the Series 2022A Bonds Purchaser specifying the amount of prepayment. In the event that the Authority pursuant to this Section 14.06(a) optionally redeems the Series 2022A Bonds, the Authority shall, at the time of such prepayment, pay to the Series 2022A Bonds Purchaser the principal of the Series 2022A Bonds plus interest accrued to the date of prepayment plus an additional fee or redemption premium equal to the Breakage Fee as described in Exhibit B. (b) Mandatory Sinking Account Redemption. The Series 2022A Bonds shall be subject to redemption from Mandatory Sinking Account Payments in part on November 1, 2023, and on each November 1 thereafter, at a redemption price equal to the principal amount thereof to be redeemed, together with accrued interest thereon to the date fixed for redemption, without premium, as follows; provided, however, that in lieu of redemption thereof, such Series 2022A Bonds may be purchased by the Authority and tendered to the Trustee: Sinking Fund Redemption Date (November 1) Principal Amount to be Redeemed or Purchased If some but not all of the Series 2022A Bonds have been redeemed pursuant to optional redemptions, the total amount of Mandatory Sinking Account Payments to be made subsequent to such redemption shall be reduced in an amount equal to the principal amount of the Series 2022A 13.2.1.b Packet Pg. 306 Attachment: First Supplement to Indenture (4078 : GPFFA - 2013 LRBs Refunding) 4863-6504-4543.3 10 Bonds so redeemed by reducing each such future Mandatory Sinking Account Payment on a pro rata basis (as nearly as practicable) in integral multiples of $5,000, as shall be designated pursuant to written notice which shall include a revised Mandatory Sinking Account Payment schedule filed by Authority with the Trustee. (a) Extraordinary Redemption. In the event that the Series 2022A Bonds are subject to extraordinary redemption in accordance with Section 4.01(a) of the Indenture, the Authority shall, at the time of such prepayment, pay to the Series 2022A Bonds Purchaser the principal of the Series 2022A Bonds plus interest accrued to the date of prepayment plus an additional fee or redemption premium equal to the Breakage Fee as described in Exhibit B. (b) Downgrade Redemption Event. Upon receipt of written notice from the Purchaser of a Downgrade Redemption Event and direction to redeem the Series 2022A Bonds, the Series 2022A Bonds shall be redeemed in equal (as nearly as possible) semiannual installments payable on each Amortization Payment Date (each such payment, an “Amortization Payment”) with the final installment in an amount equal to the entire then-outstanding principal amount of such Series 2022A Bonds to be redeemed on the Amortization End Date. Section 14.07. Transfer Restrictions. The Series 2022A Bonds may be transferred in Authorized Denominations without limitation to any Affiliate of the Series 2022A Bonds Purchaser or to a trust or custodial arrangement established by the Series 2022A Bonds Purchaser or an Affiliate of the Series 2022A Bonds Purchaser, each of the beneficial owners of which are “qualified institutional buyers” as defined in Rule 144A promulgated under the Securities Act of 1933, as amended (each a “Purchaser Transferee”) and subject to the limitations, if any, set forth in the Bond Purchase Agreement. On or after August 8, 2024, the Series 2022A Bonds may be transferred in Authorized Denominations to another purchaser (other than an Affiliate of the Series 2022A Bonds Purchaser or a trust or custodial arrangement as described in the preceding sentence) if (i) written notice of such transfer, together with addresses and related information with respect to such purchaser, is delivered to the Authority and the Trustee by such transferor and (ii) such purchaser shall have delivered to the Authority, the Trustee and the transferor a Purchaser Letter in the form attached hereto as Exhibit C executed by a duly authorized officer of such purchaser; provided that each such purchaser shall constitute (1) a “qualified institutional buyer” as defined in Rule 144A promulgated under the Securities Act of 1933, as amended, and (2) a commercial bank organized under the laws of the United States, or any state thereof, or any other country which is a member of the Organization for Economic Cooperation and Development, or a political subdivision of any such country, and, in any such case, having a combined capital and surplus, determined as of the date of any transfer pursuant to this Section, of not less than $5,000,000,000 (each a “Non-Purchaser Transferee”).. Notwithstanding the foregoing, the Series 2022A Bonds Purchaser shall not transfer the Series 2022A Bonds to a Non-Purchaser Transferee prior to [December __, 202_], without the prior written consent of the City and the Authority which shall not be unreasonably withheld. 13.2.1.b Packet Pg. 307 Attachment: First Supplement to Indenture (4078 : GPFFA - 2013 LRBs Refunding) 4863-6504-4543.3 11 PART 3 MISCELLANEOUS Part 3.1. Effect of First Supplement to Indenture. This First Supplement to Indenture and all of the terms and provisions herein contained shall form part of the Original Indenture as fully and with the same effect as if all such terms and provisions had been set forth in the Original Indenture. The Original Indenture is hereby ratified and confirmed and shall continue in full force and effect in accordance with the terms and provisions thereof, as heretofore amended and supplemented, and as amended and supplemented hereby. If there shall be any conflict between the terms of this First Supplement to Indenture and the terms of the Original Indenture (as in effect on the day prior to the effective date of this First Supplement to Indenture), the terms of this First Supplement to Indenture shall prevail. Part 3.2. Execution in Counterparts. This First Supplement to Indenture may be executed in several counterparts, each of which shall be deemed an original, and all of which shall constitute but one and the same instrument. The parties further agree that facsimile signatures or signatures scanned into .pdf (or signatures in another electronic format designated by the City) and sent by e-mail shall be deemed original signatures. Part 3.3. Effective Date. This First Supplement to Indenture shall become effective upon its execution and delivery. [This space intentionally left blank] 13.2.1.b Packet Pg. 308 Attachment: First Supplement to Indenture (4078 : GPFFA - 2013 LRBs Refunding) 4863-6504-4543.3 12 IN WITNESS WHEREOF, the parties hereto have executed and attested to this First Supplement to Indenture by their officers thereunto duly authorized as of the day and year first written above. U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, as Trustee By: Authorized Officer CITY OF GILROY By: Mayor Attest: By: City Clerk GILROY PUBLIC FACILITIES FINANCING AUTHORITY By: Executive Director Attest: By: Secretary 13.2.1.b Packet Pg. 309 Attachment: First Supplement to Indenture (4078 : GPFFA - 2013 LRBs Refunding) 4863-6504-4543.3 A-1 EXHIBIT A FORM OF SERIES 2022A BONDS The Transferability of the Bond is Restricted as Described in Section 14.07 of the Indenture UNITED STATES OF AMERICA STATE OF CALIFORNIA No. R-__ $___________ GILROY PUBLIC FACILITIES FINANCING AUTHORITY LEASE REVENUE REFUNDING BONDS, SERIES 2022A (CONVERTIBLE) Interest Rate Maturity Date Dated CUSIP % initially and __% after the Conversion Date November 1, 2033 _______, 2022 REGISTERED OWNER: WELLS FARGO MUNICIPAL CAPITAL STRATEGIES, LLC PRINCIPAL SUM: The GILROY PUBLIC FACILITIES FINANCING AUTHORITY, a joint powers authority, duly created and lawfully existing under the Constitution and laws of the State of California (the “Authority”), for value received, hereby promises to pay (but only out of the Revenues, as hereinafter defined) to the registered owner specified above or registered assigns on the maturity date specified above (subject to any right of prior redemption provided for) the principal sum specified above, together with interest thereon from the Interest Payment Date (as defined below) to which interest has been paid or duly provided for next preceding its date of execution, unless such date of authentication shall be (i) prior to the close of business on May 1, 2023, in which case such Bond shall bear interest from its date of delivery, (ii) subsequent to a Record Date but before the related Interest Payment Date, in which case such Bond shall bear interest from such Interest Payment Date, or (iii) an Interest Payment Date to which interest has been paid in full or duly provided for, in which case such Bond shall bear interest from such date of authentication; provided, however, that if, as shown by the records of the Trustee, interest shall be in default, each Bond shall bear interest from the last Interest Payment Date to which such interest has been paid in full or duly provided for. The term “Interest Payment Date” means May 1, 2023, and each May 1 and November 1 thereafter. The term “Record Date” means the close of business on the 15th day of the month preceding any Interest Payment Date, whether or not such day is a Business Day. 13.2.1.b Packet Pg. 310 Attachment: First Supplement to Indenture (4078 : GPFFA - 2013 LRBs Refunding) 4863-6504-4543.3 A-2 This Bond shall initially bear interest at the Taxable Rate. From and after the Conversion Date, this Bond shall bear interest at the Tax-Exempt Rate; provided that from and after any Taxable Date, the interest rate on this Bond shall be established at a rate equal to the Taxable Gross-Up Rate; provided, further, that upon the occurrence and during the continuation of any Event of Default, the interest rate on this Bond shall be established at a rate equal to the Default Rate. The principal of this Bond shall be payable in lawful money of the United States of America at the corporate trust office of U.S. Bank Trust Company, National Association (the “Trustee”) upon presentation and surrender of this Bond. Payment of interest on this Bond due on or before the maturity or prior redemption, thereof shall be made to the person in whose name such Bond is registered, as of the Record Date preceding the applicable interest payment date, on the registration books kept by the Trustee at its corporate trust office, such interest to be paid by check mailed by first class m ail on such interest payment date to the registered owner at his address as it appears on such books. Interest on this Bond shall be payable in lawful money of the United States of America and shall be calculated on the basis of a 360-day year consisting of twelve 30-day months. This Bond shall not be entitled to any benefit, protection or security under the Indenture, as hereinafter defined, or become valid or obligatory for any purpose until the certificate of authentication and registration hereon endorsed shall have been signed by the Trustee. Notwithstanding the foregoing, so long as Wells Fargo Municipal Capital Strategies, LLC is the Owner of this Bond, principal of, premium, if any, and interest on this Bond shall be paid by electronic transfer and without presentment or surrender of this Bond. The Owner of $1,000,000 or more in aggregate principal amount of the Bonds may request in writing that the Trustee pay the interest on such Bonds by wire transfer to an account in the United States of America and the Trustee shall comply with such request for all Interest Payment Dates following the 15th day after receipt of such request. This Bond is one of a duly authorized issue of bonds of the Authority designated as its “Gilroy Public Facilities Financing Authority Lease Revenue Refunding Bonds, Series 2022A (Convertible)” (the “Bonds”), in the aggregate principal amount $________, all of like tenor and date (except for such variations, if any, as may be required to designate varying numbers, maturities and interest rates), and is issued under and pursuant to the provisions of an Indenture, dated as of August 1, 2020, as amended by a First Supplement to Indenture, dated as of _______ 1, 2022 (collectively, the “Indenture”), by and among the Authority, the City of Gilroy (the “City”) and the Trustee (copies of which are on file at the corporate trust office of the Trustee). Unless the context otherwise requires, capitalized terms not defined herein shall have the meanings ascribed to them in the Indenture. The Bonds are limited obligations of the Authority and are payable, as to interest thereon and principal thereof, solely from the revenues derived from Base Payments paid by the City pursuant to a First Amended and Restated Lease Agreement, dated as of August 1, 2009, as amended, including as amended by a Fourth Amendment to Lease Agreement, dated as of _______ 1, 2022 (collectively, the “Lease”), between the Authority, as lessor, and the City, as lessee, for the use and possession of the Leased Property as long as the City has such use and possession of 13.2.1.b Packet Pg. 311 Attachment: First Supplement to Indenture (4078 : GPFFA - 2013 LRBs Refunding) 4863-6504-4543.3 A-3 the Leased Property, as well as from all other benefits, charges, income, proceeds, profits, receipts, rents and revenues derived by the Authority, as assignee of the City’s rights under the Lease, from operation or use of the Leased Property (the “Revenues”). All the Bonds (as defined in the Indenture) are equally and ratably secured by the Revenues and enjoy the benefits of a security interest in the money held in the funds established pursuant to the Indenture (other than the Rebate Fund), subject to the provisions of the Indenture permitting the disbursement thereof for or to the purposes and on the conditions and terms set forth therein. The obligation of the City to pay Base Payments does not constitute an indebtedness of the City for which the City is obligated to levy or pledge any form of taxation or for which the City has levied or pledged any form of taxation. The obligation of the City to pay Base Payments does not constitute an indebtedness of the City, the State of California, or any of its political subdivisions within the meaning of any constitutional or statutory debt limitation or restriction. The obligation of the City to make the Base Payments is subject to abatement during any period in which, by reason of material damage, destruction or title defect, there is substantial interference with the use and occupancy of the Leased Property or portions thereof or if the Leased Property or portions thereof are taken under the power of eminent domain, all as more particularly provided in the Lease to which reference is hereby made. To the extent and in the manner permitted by the terms of the Indenture, the provisions of the Indenture may be amended or supplemented by the parties thereto, in some instances without the consent of the registered owners of the Bonds. No such amendment or supplement shall (1) extend the Principal Payment Date of any Bond or reduce the rate of interest represented thereby or extend the time of payment of such interest or reduce the amount of principal represented thereby without the prior written consent of the registered owner of each Bond so affected, or (2) reduce the percentage of registered owners whose consent is required for the execution of any amendment hereof or supplement hereto without the prior written consent of the registered owners of all Bonds then Outstanding, or (3) modify any of the rights or obligations of the Trustee without its prior written consent thereto, or (4) amend the amendment provisions of the Indenture without the prior written consent of the registered owners of all Bonds then Outstanding. The Bonds are authorized to be executed and delivered in the form of fully registered Bonds without coupons, in denominations of two hundred fifty thousand dollars ($250,000) or any integral multiple of $1 in excess thereof (each, an “Authorized Denomination”). This Bond is transferable by the Owner hereof, in person or by his attorney duly authorized in writing, at the office of the Trustee in Los Angeles, California, but only in the manner, subject to the limitations and upon payment of the charges provided in the Indenture; and upon surrender of this Bond for cancellation, accompanied by delivery of a duly executed written instrument of transfer, a new Bond or Bonds of Authorized Denominations of the same Principal Payment Date equal to the principal amount hereof will be executed and delivered by the Trustee to the Owner thereof in exchange or transfer herefor. The Trustee shall not be required to transfer or exchange any Bond during any period in which it is selecting Bonds for redemption, nor shall the Trustee be required to transfer or exchange any Bond or portion thereof selected for redemption from and after the date of mailing the notice of redemption. The Trustee may treat the Owner hereof as the absolute owner hereof for all purposes, whether or not this Bond shall be overdue, and the Trustee shall not be affected by any knowledge or notice to the contrary; and payment of the principal of, 13.2.1.b Packet Pg. 312 Attachment: First Supplement to Indenture (4078 : GPFFA - 2013 LRBs Refunding) 4863-6504-4543.3 A-4 premium, if any, and interest on this Bond shall be made only to such Owner as above provided, which payments shall be valid and effectual to satisfy and discharge the liability on this Bond to the extent of the sum or sums so paid. The Bonds are subject to redemption prior to maturity as described in the Indenture , including as set forth in Article IV and Section 14.06 of the Indenture. As provided in the Indenture, notice of redemption hereof or of any part hereof shall be mailed, first class postage prepaid, not less than 30 nor more than 60 days before the redemption date, to the Owner of this Bond at his or her address as it appears in the registration books maintained by the Trustee and as specified in the Indenture, but neither failure to receive any such notice nor any defect contained therein shall affect the validity of the proceedings for the redemption of this Bond. If this Bond is called for redemption and payment is duly provided therefor as specified in the Indenture, the interest represented hereby shall cease to accrue from and after the designated redemption date. Notwithstanding the foregoing, this Bond may be prepaid in whole at any time upon at least three Business Days’ prior written notice to the Owner specifying the amount of prepayment. In the event that the Authority pursuant to Section 14.06(a) of the Indenture optionally redeems this is Bond, the Authority shall, at the time of such prepayment, pay to the Owner the principal of this Bond plus interest accrued to the date of prepayment plus an additional fee or redemption premium equal to the Breakage Fee as described in the Indenture. The Trustee has no obligation or liability to the registered owners of the Bonds for the payment of the interest or principal or redemption premiums, if any, on the Bonds; but rather the Trustee’s sole obligation is to administer, for the benefit of the City, the Authority and the registered owners of the Bonds, the various funds established under the Indenture. The Authority has no obligation or liability whatsoever to the registered owners of the Bonds. The Indenture provides that the occurrences of certain events constitute Events of Default. Subject to certain limitations and to the rights of the Trustee or the Owners of not less than a majority in aggregate principal amount of the Bonds at the time Outstanding shall be entitled to take whatever action at law or in equity may appear necessary or desirable to enforce its rights as assignee. 13.2.1.b Packet Pg. 313 Attachment: First Supplement to Indenture (4078 : GPFFA - 2013 LRBs Refunding) 4863-6504-4543.3 A-5 IN WITNESS WHEREOF, the Gilroy Public Facilities Financing Authority has caused this Bond to be executed in facsimile by its Chairman and by its Secretary all as of _____________, 2022. GILROY PUBLIC FACILITIES FINANCING AUTHORITY ____________________________ ____________________________ Secretary Chairman 13.2.1.b Packet Pg. 314 Attachment: First Supplement to Indenture (4078 : GPFFA - 2013 LRBs Refunding) 4863-6504-4543.3 A-6 CERTIFICATE OF AUTHENTICATION AND REGISTRATION This is one of the Bonds described in the within mentioned Indenture which has been authenticated and registered. Dated: ___________, 2022 U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, as Trustee By: Authorized Signatory 13.2.1.b Packet Pg. 315 Attachment: First Supplement to Indenture (4078 : GPFFA - 2013 LRBs Refunding) 4863-6504-4543.3 A-7 FORM OF ASSIGNMENT For value received, the undersigned do(es) hereby sell, assign and transfer unto __________________ the within Bond and do(es) hereby irrevocably constitute and appoint ______________________ attorney to transfer such Bond on the register of the Trustee, with full power of substitution in the premises. Dated: SIGNATURE GUARANTEED BY: Note: The signature(s) to this Assignment must correspond with the name(s) as written on the face of the within Bond in every particular, without alteration or enlargement or any change whatsoever, and the signature(s) must be guaranteed by an eligible guarantor institution. Social Security Number, Taxpayer Identification Number or other identifying number of Assignee: ________________________________ 13.2.1.b Packet Pg. 316 Attachment: First Supplement to Indenture (4078 : GPFFA - 2013 LRBs Refunding) 4863-6504-4543.3 B-1 EXHIBIT B BREAKAGE FEE CALCULATION Each capitalized term used herein and not otherwise defined herein shall have the meaning provided therefor in the Indenture, unless the context otherwise requires. Upon the occurrence of a Break Event, the Breakage Fee shall be calculated and paid as follows: “Break Date” means any date that an optional redemption is made. “Break Event” means any optional redemption or extraordinary redemption of the Bonds. “Calculation Agent” will be Wells Fargo Bank, National Association. If for any reason Wells Fargo Bank, National Association is unable or unwilling to calculate the Breakage Fee, the Calculation Agent shall be an independent financial advisor or investment banker appointed by the Authority with the consent of the Series 2022A Bonds Purchaser. “Day Count Fraction” is the anticipated basis on which interest at the Taxable Rate is to be computed on each of the Series 2022A Bonds. The Day Count Fraction utilizes a 360-day year and consisting of twelve 30-day months. “Maturity Date” means November 1, 2033. “Interest Rate” means the Taxable Rate. “Scheduled Due Date” means each date specified on the Amortization Schedule attached as Schedule I hereto. “Schedule of Principal Amount” is the anticipated principal amount of the Series 2022A Bonds scheduled to be outstanding on the date the Series 2022A Bond is funded and on the Scheduled Due Date. The Schedule of Principal Amounts for the Scheduled Due Dates is specified on the Amortization Schedule attached as Schedule I hereto. 1. In connection with any Break Event, a Breakage Fee shall be paid by the Authority if the Breakage Fee is a positive number. No Breakage Fee shall be payable for a Break Event if the Breakage Fee for that Break Event is a negative number. Breakage Fees will be determined by the Calculation Agent, on the Business Day next preceding any Break Date and will be calculated for the Series 2022A Bonds as follows: “Breakage Fee” for any Break Event is the difference of: (i) the sum of the present values of a series of amounts computed for each Scheduled Due Date after the Break Date through the Maturity Date for the Series 2022A Bond, each of which amounts is equal to the product of (A) the Affected Principal Amount for the Affected Principal Period ending on the 13.2.1.b Packet Pg. 317 Attachment: First Supplement to Indenture (4078 : GPFFA - 2013 LRBs Refunding) 4863-6504-4543.3 B-2 Scheduled Due Date, times (B) the Interest Rate, times (C) the Day Count Fraction for such Affected Principal Period, minus (ii) the sum of the present values of a series of amounts computed for each Scheduled Due Date after the Break Date through the Maturity Date for the Series 2022A Bond, each of which amounts is equal to the product of (A) the Affected Principal Amount for the Affected Principal Period ending on the Scheduled Due Date, times (B) the Break Rate, times (C) the Day Count Fraction for such Affected Principal Period, where: (1) the Calculation Agent computes such present values by discounting each such series of amounts described in clause (i) and (ii) above from the Scheduled Due Date to the Break Date using a series of discount factors corresponding to the Scheduled Due Date as determined by the Calculation Agent from the swap yield curve that the Calculation Agent would use as of the Break Date in valuing a series of fixed rate interest rate swap payments similar to such series of amounts; (2) the “Affected Principal Amount” for an Affected Principal Period is the principal amount of the Series 2022A Bonds reflected in the Schedule of Principal Amounts scheduled to be outstanding during that Affected Principal Period determined as of the relevant Break Date by the reference to such Schedule of Principal Amounts before giving effect to any Break Event on that Break Date, and for any Break Event, multiplying each such principal amount times the Prepayment Fraction; (3) “Affected Principal Period” is each period from and including a Scheduled Due Date to but excluding the next succeeding Scheduled Due Date; provided, however, if the Break Date is not a Scheduled Due Date, the initial Affected Principal Period shall be the period from and including the Break Date to but excluding the next succeeding Scheduled Due Date and the Affected Principal Period for such initial Affected Principal Period shall be the amount stated in the Schedule of Principal Amounts outstanding for the Scheduled Due Date next preceding the Break Date; (4) “Prepayment Fraction” means, for each Scheduled Due Date, a fraction the numerator of which is the amount of the credit to be applied pursuant to the applicable provisions of the Series 2022A Bond and the Indenture to reduce the amount of the prepayment otherwise due on such date and the denominator of which is the amount of the payment otherwise due on such date (without regard to such credit); and (5) “Break Rate” means, for any Break Date, and with respect to each Series 2022A Bond, the fixed rate the Calculation Agent determines is representative of what swap dealers would be willing to pay to the Calculation Agent (or, if required to be cleared under the Commodity 13.2.1.b Packet Pg. 318 Attachment: First Supplement to Indenture (4078 : GPFFA - 2013 LRBs Refunding) 4863-6504-4543.3 B-3 Exchange Act or a Commodity Futures Trading Commission rule or regulation promulgated thereunder, to a swap clearinghouse) as fixed rate payors on a semi-annual basis in return for receiving the daily average of SOFR over a one-month period (or such alternate rate index designated for use in lieu of SOFR by the International Swaps and Derivatives Association) based payments monthly under interest rate swap transactions that would commence on such Break Date, and mature on, or as close as commercially practicable to, the Maturity Date for such Series 2022A Bond; 2. The Calculation Agent shall determine the Breakage Fee hereunder in good faith using such methodology as the Calculation Agent deems appropriate under the circumstance, and the Calculation Agent’s determination shall be conclusive and binding in the absence of manifest error. 13.2.1.b Packet Pg. 319 Attachment: First Supplement to Indenture (4078 : GPFFA - 2013 LRBs Refunding) 4863-6504-4543.3 B-4 SCHEDULE I AMORTIZATION SCHEDULE1 Scheduled Due Date Schedule of Principal Amounts 1 Such amount to be the outstanding principal of the Bonds on each such date after the required amortization payment has been m ade. 13.2.1.b Packet Pg. 320 Attachment: First Supplement to Indenture (4078 : GPFFA - 2013 LRBs Refunding) 4863-6504-4543.3 C-1 EXHIBIT C FORM OF PURCHASER LETTER __________, 20__ City of Gilroy Gilroy, California Gilroy Public Facilities Financing Authority Gilroy, California U.S. Bank Trust Company, National Association Los Angeles, California Nixon Peabody LLP Los Angeles, California Re: Gilroy Public Facilities Financing Authority Lease Revenue Refunding Bonds, Series 2022A (Convertible) Ladies and Gentlemen: The undersigned, __________ (the “Purchaser”), hereby acknowledges receipt of the above-referenced bonds (the “Bonds”), dated ________, 2022, in fully registered form and in the aggregate principal amount of $__________. The Bonds have been checked, inspected and approved by the Purchaser. The undersigned further acknowledges that the Bonds are secured by a certain Indenture, dated as of August 1, 2020, as amended by the First Supplement to Indenture, dated as of December 1, 2022 (collectively, the “Indenture”), among the City of Gilroy (the “City”), the Gilroy Public Facilities Financing Authority (the “Authority”) and U.S. Bank Trust Company, National Association (the “Trustee”). In connection with the sale of the Bonds to the Purchaser, the Purchaser hereby makes the following representations upon which you may rely: 1. The Purchaser hereby certifies that it is a “qualified institutional buyer” within the meaning of Rule 144A(a)(1) promulgated under the Securities Act of 1933, as amended (the “Act”) and applicable state securities laws (a “Qualified Buyer”). 2. The Purchaser (a) is a bank, any entity directly or indirectly controlled by the bank or under common control with the bank, other than a broker, dealer or municipal securities dealer registered under the Securities Exchange Act of 1934, or a consortium of such entities; and (b) has the present intent to hold the Bonds to maturity; provided, however, that the Purchaser shall not be precluded from transferring, participating or assigning its interest in the Bonds in accordance with the terms and conditions set forth in 13.2.1.b Packet Pg. 321 Attachment: First Supplement to Indenture (4078 : GPFFA - 2013 LRBs Refunding) 4863-6504-4543.3 C-2 the Indenture. The Purchaser understands that it may need to bear the risks of this investment for an indefinite period of time, since a sale of the Bonds, or any portion thereof, may not be possible. The Purchaser is not participating, directly or indirectly, in a distribution of the Bonds and will not take, or cause to be taken, any action that would cause the Purchaser to be deemed an “underwriter” of such Bonds as defined in Section 2(a)(11) of the Act. The Purchaser understands that the Authority has no obligation to register the Bonds for resale under the Act. The Purchaser further understands that the Bonds are being sold in a transaction that is exempt from the registration requirements of the Act. The Purchaser acknowledges that the City will not be entering into a continuing disclosure undertaking for the Bonds pursuant to Section 15c2-12 of the Securities Exchange Act of 1934, as amended; provided, however, that the City has agreed in the Indenture to provide certain ongoing information to the Purchaser. 3. The Purchaser has received and carefully read all information and other items of disclosure relating to the City and the Bonds that the Purchaser has deemed material for it to make an informed lending decision with respect to its purchase of the Bonds and, in connection therewith, has had access to all other materials, books, records, documents, and information relating to the City and the Bonds, and has been able to verify the accuracy of, and supplement, the information contained therein. 4. The Purchaser acknowledges that it has either been supplied with or been given access to information, financial statements or other financial information, which it has requested from the City and to which a reasonable investor would attach significance in making an investment decision (collectively, the “Disclosure Items”). The Purchaser has had an opportunity to ask questions of, and receive satisfactory answers from, duly designated representatives of the City concerning the terms and conditions pursuant to which the offer to purchase the Bonds is being made, and is satisfied with the information provided in response to its requests, and is satisfied that its request for such information has been fully complied with by the City. 5. The Purchaser has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of purchasing the Bonds based upon (i) the information furnished to it by the City; (ii) its or such representative’s personal knowledge of the business and affairs of the City; (iii) such additional information as it or such representative may have requested and have received from the City; and (iv) the independent inquiries and investigations undertaken by it or such representative. 6. The Purchaser represents that it can bear the economic risk of loss of the Bonds. 7. No person has given any information or made any representation not contained in any Disclosure Items referred to above or otherwise provided to the Purchaser in writing by a person employed or authorized in writing by the City. The Purchaser understands and agrees that any information or representation not contained therein must not, and will not, be relied upon and that nothing contained therein should be construed as legal or tax advice to the Purchaser. 13.2.1.b Packet Pg. 322 Attachment: First Supplement to Indenture (4078 : GPFFA - 2013 LRBs Refunding) 4863-6504-4543.3 C-3 8. The signatory of this letter is a duly authorized officer of the Purchaser with the authority to sign this letter on behalf of the Purchaser, and this letter has been duly authorized, executed, and delivered by the Purchaser. 9. The Purchaser understands that the purchase of the Bonds involves significant credit risks. The Purchaser is aware that there are certain economic and regulatory variables and risks that could adversely affect the security for the Bonds. The Purchaser has reviewed the documents executed in conjunction with the issuance of Bonds, or summaries thereof, including, without limitation, the Indenture. 10. The Purchaser acknowledges and agrees that the Authority and the City take no responsibility for, and make no representation to the Purchaser, or any subsequent purchaser, with regard to, a sale, transfer or other disposition of the Bond in violation of the provisions of the Indenture, or any securities law or income tax law consequences thereof. The Purchaser also acknowledges that, with respect to the City’s obligations and liabilities, the Purchaser is solely responsible for compliance with the sales restrictions on the Bond in connection with any subsequent transfer of the Bonds made by the Purchaser. 11. The Purchaser has been informed that the Bonds (i) have not been and will not be registered or otherwise qualified for sale under the “Blue Sky” laws and regulations of any jurisdiction, (ii) will not be listed on any stock or other securities exchange and (iii) will carry no rating from any rating service. 12. The Purchaser acknowledges that the sale of the Bonds to the Purchaser is made in reliance upon the certifications, representations and warranties herein by the addresses hereto. Capitalized terms used herein and not otherwise defined have the meanings given such terms in the Indenture. [PURCHASER] By: ______________________________ Its: ______________________________ 13.2.1.b Packet Pg. 323 Attachment: First Supplement to Indenture (4078 : GPFFA - 2013 LRBs Refunding) 4863-6504-4543.3 D-1 EXHIBIT D FORM OF TAX-EXEMPT BOND CONVERSION AGREEMENT TAX-EXEMPT BOND CONVERSION AGREEMENT THIS TAX-EXEMPT BOND CONVERSION AGREEMENT (the “Agreement”) is made by and among the CITY OF GILROY, a political subdivision duly organized and existing under the laws of the State of California (the “City”), the GILROY PUBLIC FACILITIES FINANCING AUTHORITY, a joint powers authority duly organized and existing under and by virtue of the laws of the State of California (the “Authority”) and [__________] (the “Owner”). RECITALS WHEREAS, pursuant to the provisions of the Indenture, dated as of August 1, 2020, as amended by a First Supplement to Indenture, d ated as of December 1, 2022 (collectively, the “Indenture”), each by and among U.S. Bank Trust Company, National Association (the “Trustee”), the City and the Authority, the Authority issued its Lease Revenue Refunding Bonds, Series 2022A (Convertible) (th e “Bond”); WHEREAS, the Indenture provides that the Owner, the Authority and the City may agree to convert the rate at which the Bond bears interest from the Taxable Rate to the Tax-Exempt Rate effective as of the Conversion Date, subject to meeting certain conditions; WHEREAS, the Authority, the City, and the Owner now wish to enter into this Agreement in order to effectuate such conversion in accordance with Section 14.02 of the Indenture and to acknowledge that such conversion constitutes a “reissuance” of the Bond for federal income tax purposes, creating a new debt instrument the issuer of which is the Authority; NOW, THEREFORE, and in consideration of the respective promises and mutual covenants and benefits hereinafter set forth, the Authority, the City, and the Owner agree as follows: AGREEMENT Section 1. Definitions, Declarations, Findings and Determinations. The definitions, declarations, determinations and findings contained in the recitals to this Agreement are hereby adopted, restated and made a part of the operative provisions hereof. Capitalized terms used herein and not otherwise defined shall have the meanings assigned thereto in the Indenture. Section 2. Conversion to Tax-Exempt Rate. The Authority, the City, and the Owner hereby agree that the interest rate on the Bond will convert to the Tax-Exempt Rate on the Conversion Date (the “Conversion”), subject to compliance with the conditions set forth in Section 14.02 of the Indenture, including, particularly, the issuance of the Opinion of Counsel described therein. The Authority, the City, and the Owner acknowledge that the Conversion of the Bond 13.2.1.b Packet Pg. 324 Attachment: First Supplement to Indenture (4078 : GPFFA - 2013 LRBs Refunding) 4863-6504-4543.3 D-2 from the Taxable Rate to the Tax-Exempt Rate is intended to constitute a “reissuance” of the Bond for federal income tax purposes, creating a new debt instrument the issuer of which is the Authority. Section 3. Compliance with Covenants Regarding Tax Exemption and Filing of Form 8038-G. (a) The Authority and the City hereby agree that the covenants contained in the tax certificate, dated the date hereof, will become operative on the Conversion Date and shall be incorporated as operative terms of the Indenture. (b) The Authority agrees to file a Form 8038-G with the Internal Revenue Service in connection with Conversion and the deemed reissuance of the Bond, solely for federal tax purposes, as tax-exempt bonds. Section 4. Delivery of Agreement to Trustee. Upon compliance with the provisions of Section 14.02 of the Indenture, the Authority, the City, and the Owner hereby agree to deliver an executed copy of this Agreement to the Trustee for the Bond. Section 5. Multiple Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original instrument and each will have the force and effect of an original and all of which together constitute, and will be deemed to constitute, one and the same instrument. Section 6. Effective Date. This Agreement shall become effective upon satisfaction of all of the conditions described in Section 14.02 of the Indenture. Section 7. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California. Section 8. Severability. The provisions of this Agreement are severable, and if any provision or part of this Agreement or the application hereof to any person or circumstance shall ever be held by any court of competent jurisdiction to be invalid or unconstitutional for any reason, the remainder of this Agreement and the application of such provision or part of this Agreement to other persons or circumstances shall not be affected thereby. [Execution Page Follows] 13.2.1.b Packet Pg. 325 Attachment: First Supplement to Indenture (4078 : GPFFA - 2013 LRBs Refunding) 4863-6504-4543.3 D-3 EXECUTED in multiple counterparts as of ________ , 20__. CITY OF GILROY By: Name: _________________________________ Title: __________________________________ Attest: By: City Clerk GILROY PUBLIC FACILITIES FINANCING AUTHORITY By: Name: _________________________________ Title: __________________________________ Attest: By: Secretary [OWNER] By: Name: _________________________________ Title: __________________________________ 13.2.1.b Packet Pg. 326 Attachment: First Supplement to Indenture (4078 : GPFFA - 2013 LRBs Refunding) 4864-2749-7279.2 TO BE RECORDED AND WHEN RECORDED RETURN TO: Nixon Peabody LLP 300 South Grand Avenue, Suite 4100 Los Angeles, California 90071 Attention: Danny Kim, Esq. This document is recorded for the benefit of the City of Gilroy and the recording is fee-exempt under Section 6103 of the California Government Code and the recording is exempt under Section 27383 of the California Government Code and Section 11928 of the California Revenue and Taxation Code. FOURTH AMENDMENT TO LEASE AGREEMENT by and between GILROY PUBLIC FACILITIES FINANCING AUTHORITY as Lessor and CITY OF GILROY as Lessee Dated as of December 1, 2022 13.2.1.c Packet Pg. 327 Attachment: Fourth Amendment to Lease Agreement (4078 : GPFFA - 2013 LRBs Refunding) Table of Contents Page i SECTION 1 Definitions .................................................................................................. 2 SECTION 2 Revised Lease Payment Schedule ............................................................... 2 SECTION 3 Amendment of Section 3.5 Additional Payments ....................................... 2 SECTION 4 Recordation Hereof ..................................................................................... 3 SECTION 5 Amendments Authorized ............................................................................ 3 SECTION 6 Governing Law ........................................................................................... 3 SECTION 7 Binding Effect ............................................................................................. 3 SECTION 8 Severability of Invalid Provisions ............................................................... 3 SECTION 9 Third Party Beneficiary .............................................................................. 3 SECTION 10 Execution of Counterparts .......................................................................... 3 13.2.1.c Packet Pg. 328 Attachment: Fourth Amendment to Lease Agreement (4078 : GPFFA - 2013 LRBs Refunding) 4864-2749-7279.2 [Fourth Amendment to Lease Agreement] FOURTH AMENDMENT TO LEASE AGREEMENT This FOURTH AMENDMENT TO LEASE AGREEMENT (this “Fourth Amendment”), dated as of December 1, 2022, is between the GILROY PUBLIC FACILITIES FINANCING AUTHORITY, a joint powers authority duly organized and existing under the laws of the State of California (the “Authority”), as lessor, and the CITY OF GILROY, a charter city and municipal corporation duly organized and existing under the Constitution and laws of the State of California (the “City”), as lessee. BACKGROUND: 1. The Authority has been formed under a Joint Exercise of Powers Agreement dated as of March 21, 1994, between the City and the Community Development Agency of the City of Gilroy, as amended by a First Amendment to Joint Powers Agreement on July 1, 2013, among the City, the Successor Agency of the Community Development Agency of the City of Gilroy and the Industrial Development Authority of the City of Gilroy, and is authorized thereunder to finance the acquisition and construction of public capital improvements for its members. 2. In order to provide financing for the construction of a police station, a fire station, a corporation yard and a playfield sports complex (the “2003 Projects”), the Authority and the City have previously authorized the execution and delivery of Certificates of Participation (City of Gilroy — Public Buildings Project) Series 2003 (Auction Rate) in the aggregate principal amount of $45,900,000 (the “2003 Certificates”). 3. In connection with the refunding of the 2003 Certificates, the Authority issued its $46,370,000 aggregate principal amount of Gilroy Public Facilities Financing Authority 2009 Bond Anticipation Notes, Series 2009 (the “2009 Notes”) and the City and the Authority have previously entered into that certain First Amended and Restated Lease Agreement, dated as of August 1, 2009, which was recorded in the Official Records of Santa Clara County on August 25, 2009 as Document No. 20409795 (the “2009 Lease”). 4. In connection with the refunding of the 2009 Notes, the Authority issued its Gilroy Public Facilities Financing Authority Refunding Bond Anticipation Notes, Series 2010 (the “2010 Notes”), in the aggregate principal amount of $22,840,000, and its Gilroy Public Facilities Financing Authority Refunding Lease Revenue Bonds, Series 2010 (the “2010 Bonds”), in the aggregate principal amount of $24,475,000. 5. In connection with the refunding of the 2010 Notes, the Authority issued its Gilroy Public Facilities Financing Authority Refunding Lease Revenue Bonds, Series 2013 (the “2013 Bonds”) and the City and the Authority have previously entered into that certain Second Amendment to Lease Agreement, dated as of August 1, 2013 (the “Second Amendment”), which was recorded in the Official Records of Santa Clara County on August 1, 2013 as Document No. 22357436. 13.2.1.c Packet Pg. 329 Attachment: Fourth Amendment to Lease Agreement (4078 : GPFFA - 2013 LRBs Refunding) 4864-2749-7279.2 [Fourth Amendment to Lease Agreement] 6. In connection with the refunding of the 2010 Bonds, the Authority issued its Gilroy Public Facilities Financing Authority Lease Revenue Refunding Bonds, Series 2020A (the “2020A Bonds”) and the City and the Authority have previously entered into that certain Third Amendment to Lease Agreement, dated as of August 1, 2020 (the “Third Amendment”), which was recorded in the Official Records of Santa Clara County on August 6, 2020 as Document No. 24566122. 7. In connection with the refunding of the 2013 Bonds, the Authority intends to issue its Lease Revenue Refunding Bonds, Series 2022A (Convertible) (the “2022A Bonds”), in the aggregate principal amount of $________ pursuant to an Indenture, dated as of August 1, 2020, as amended by the First Supplement to Indenture, dated as of December 1, 2022 (collectively, the “Indenture”), by and among the Authority, the City and U.S. Bank Trust Company, National Association, as trustee (the “Trustee”). 8. The City and the Authority wish to further amend the 2009 Lease at this time for the purpose of revising the Lease Payment schedule to reflect the payment of Debt Service on the 2022A Bonds in addition to the payment of Debt Service on the 2020A Bonds. 9. Such amendments are permitted to be made under Section 7.3 of the 2009 Lease, since such amendments will not materially adversely affect the interests of the owners of any Authority Debt, in the opinion of bond counsel which has been filed with the Authority, the City and the Trustee. 10. The Authority and the City have each duly authorized the execution and delivery of this Second Amendment. AGREEMENT: In consideration of the above premises and of the mutual promises and covenants herein contained and for other valuable consideration, the parties hereto do hereby agree as follows: SECTION 1 Definitions. All capitalized terms in this Fourth Amendment and not otherwise defined herein have the respective meanings given them in the Indenture. SECTION 2 Revised Lease Payment Schedule. The Lease Payment schedule set forth in Exhibit C to the Third Amendment is hereby revised to reflect the payment of Debt Service on the 2022A Bonds in addition to the payment of Debt Service on the 2020A Bonds. Such Lease Payment schedule is attached to this Fourth Amendment as Exhibit B and is subject to adjustment upon the occurrence of a BPA Credit Event or a Determination of Taxability as more fully set forth in the Indenture. SECTION 3 Amendment of Section 3.5 Additional Payments. Section 3.5 of the 2009 Lease is hereby amended by the addition of a new paragraph (f) which shall appear immediately following paragraph (e) and shall read as follows: (f) All amounts due and owing under that certain Bond Purchase Agreement dated [December __, 2022], among the City, the Authority and Wells Fargo Municipal Capital Strategies, LLC, as purchaser of the 2022A Bonds, as the same may be amended, modified or supplemented from time to time in accordance with its terms. 13.2.1.c Packet Pg. 330 Attachment: Fourth Amendment to Lease Agreement (4078 : GPFFA - 2013 LRBs Refunding) 4864-2749-7279.2 [Fourth Amendment to Lease Agreement] SECTION 4 Recordation Hereof. On or before the Series 2022A Bonds Closing Date the City shall cause this Fourth Amendment to be recorded in the office of the Santa Clara County Recorder with respect to the Leased Property. SECTION 5 Amendments Authorized. The Authority and the City hereby find and determine that the amendments made under Section 1 and 2 are authorized to be made under Section 7.3 of the 2009 Lease. Such amendment is necessary to conform to the terms and conditions upon which the 2022A Bonds are issued, and such amendments to do not materially adversely affect the interests of the owners of the 2020A Bonds. SECTION 6 Governing Law. This Fourth Amendment shall be construed in accordance with and governed by the Constitution and laws of the State of California. SECTION 7 Binding Effect. This Fourth Amendment shall inure to the benefit of and shall be binding upon the Authority, the City and their respective successors and assigns, subject, however, to the limitations contained herein. SECTION 8 Severability of Invalid Provisions. If any one or more of the provisions contained in this Fourth Amendment are for any reason held to be invalid, illegal or unenforceable in any respect, then such provision or provisions shall be deemed severable from the remaining provisions contained in this Fourth Amendment and such invalidity, illegality or unenforceability shall not affect any other provision of this Fourth Amendment, and this Fourth Amendment shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein. The Authority and the City each hereby declares that it would have entered into this Fourth Amendment and each and every other Section, paragraph, sentence, clause or phrase hereof irrespective of the fact that any one or more Sections, paragraphs, sentences, clauses or phrases of this Fourth Amendment may be held illegal, invalid or unenforceable. SECTION 9 Third Party Beneficiary. The Trustee is hereby made a third party beneficiary under this Fourth Amendment with all rights of a third party beneficiary. SECTION 10 Execution of Counterparts. This Fourth Amendment may be executed in any number of counterparts, each of which shall for all purposes be deemed to be an original and all of which shall together constitute but one and the same instrument. 13.2.1.c Packet Pg. 331 Attachment: Fourth Amendment to Lease Agreement (4078 : GPFFA - 2013 LRBs Refunding) 4864-2749-7279.2 [Fourth Amendment to Lease Agreement] IN WITNESS WHEREOF, the Authority and the City have caused this Fourth Amendment to be executed in their respective names by their duly authorized officers, all as of the date first above written. GILROY PUBLIC FACILITIES FINANCING AUTHORITY, as Lessor By: Executive Director ATTEST: By: Secretary CITY OF GILROY, as Lessee By: City Administrator ATTEST: By: City Clerk 13.2.1.c Packet Pg. 332 Attachment: Fourth Amendment to Lease Agreement (4078 : GPFFA - 2013 LRBs Refunding) A-1 EXHIBIT A DESCRIPTION OF LEASED PROPERTY All that certain real property, situated in the City of Gilroy, County of Santa Clara, State of California, described on the attached pages. 13.2.1.c Packet Pg. 333 Attachment: Fourth Amendment to Lease Agreement (4078 : GPFFA - 2013 LRBs Refunding) B-1 EXHIBIT B BASE RENTAL PAYMENT SCHEDULE AS AMENDED (TAXABLE RATE) 2020A Lease Revenue Bonds 2022A Lease Revenue Bonds Payment Date Principal Interest Principal Interest1 Total Lease Payment 11/01/20 $790,000 $162,208.33 05/01/21 323,750.00 11/01/21 715,000 323,750.00 05/01/22 305,875.00 11/01/22 755,000 305,875.00 05/01/23 287,000.00 11/01/23 795,000 287,000.00 05/01/24 267,125.00 11/01/24 840,000 267,125.00 05/01/25 246,125.00 11/01/25 880,000 246,125.00 05/01/26 224,125.00 11/01/26 925,000 224,125.00 05/01/27 201,000.00 11/01/27 1,000,000 201,000.00 05/01/28 176,000.00 11/01/28 1,030,000 176,000.00 05/01/29 150,250.00 11/01/29 1,085,000 150,250.00 05/01/30 123,125.00 11/01/30 1,140,000 123,125.00 05/01/31 94,625.00 11/01/31 1,200,000 94,625.00 05/01/32 64,625.00 11/01/32 1,260,000 64,625.00 05/01/33 33,125.00 11/01/33 1,325,000 33,125.00 $13,740,000 $5,155,708.33 1 Subject to adjustment upon a BPA Credit Event as more fully set forth in the Indenture. 13.2.1.c Packet Pg. 334 Attachment: Fourth Amendment to Lease Agreement (4078 : GPFFA - 2013 LRBs Refunding) B-2 BASE RENTAL PAYMENT SCHEDULE AS AMENDED (TAX-EXEMPT RATE AFTER CONVERSION) 2020A Lease Revenue Bonds 2022A Lease Revenue Bonds Payment Date Principal Interest Principal Interest1 Total Lease Payment 11/01/20 $790,000 $162,208.33 05/01/21 323,750.00 11/01/21 715,000 323,750.00 05/01/22 305,875.00 11/01/22 755,000 305,875.00 05/01/23 287,000.00 11/01/23 795,000 287,000.00 05/01/24 267,125.00 11/01/24 840,000 267,125.00 05/01/25 246,125.00 11/01/25 880,000 246,125.00 05/01/26 224,125.00 11/01/26 925,000 224,125.00 05/01/27 201,000.00 11/01/27 1,000,000 201,000.00 05/01/28 176,000.00 11/01/28 1,030,000 176,000.00 05/01/29 150,250.00 11/01/29 1,085,000 150,250.00 05/01/30 123,125.00 11/01/30 1,140,000 123,125.00 05/01/31 94,625.00 11/01/31 1,200,000 94,625.00 05/01/32 64,625.00 11/01/32 1,260,000 64,625.00 05/01/33 33,125.00 11/01/33 1,325,000 33,125.00 $13,740,000 $5,155,708.33 1 Subject to adjustment upon a BPA Credit Event or a Determination of Taxability as more fully set forth in the Indenture. 13.2.1.c Packet Pg. 335 Attachment: Fourth Amendment to Lease Agreement (4078 : GPFFA - 2013 LRBs Refunding) 4864-2749-7279.2 CERTIFICATE OF ACCEPTANCE This is to certify that the interest in real property conveyed by the Fourth Amendment to Lease Agreement, dated as of December 1, 2022, by and between the Gilroy Public Facilities Financing Authority (the “Authority”) and the City of Gilroy (the “City”), from the Authority to the City, is hereby accepted by the undersigned on behalf of the City pursuant to authority conferred by resolution of the City Council of the City adopted on December 5, 2022, and the City consents to recordation thereof by its duly authorized officer. Dated as of December 1, 2022 CITY OF GILROY By: _______________________________ City Administrator 13.2.1.c Packet Pg. 336 Attachment: Fourth Amendment to Lease Agreement (4078 : GPFFA - 2013 LRBs Refunding) 4864-2749-7279.2 A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. STATE OF CALIFORNIA ) ) ss COUNTY OF SANTA CLARA ) On _________________, 2022, before me, ______________________________, Notary Public, personally appeared __________________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. 13.2.1.c Packet Pg. 337 Attachment: Fourth Amendment to Lease Agreement (4078 : GPFFA - 2013 LRBs Refunding) 4864-2749-7279.2 A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. STATE OF CALIFORNIA ) ) ss COUNTY OF SANTA CLARA ) On _________________, 2022, before me, ______________________________, Notary Public, personally appeared __________________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. 13.2.1.c Packet Pg. 338 Attachment: Fourth Amendment to Lease Agreement (4078 : GPFFA - 2013 LRBs Refunding) BOND PURCHASE AGREEMENT among CITY OF GILROY, GILROY PUBLIC FACILITIES FINANCING AUTHORITY and WELLS FARGO MUNICIPAL CAPITAL STRATEGIES, LLC Relating to [$_________] Gilroy Public Facilities Financing Authority Lease Revenue Refunding Bonds Series 2022A (Convertible) Dated [December __, 2022] 13.2.1.d Packet Pg. 339 Attachment: Convertible Bond Purchase Agreement (City of Gilroy) (4078 : GPFFA - 2013 LRBs Refunding) ARTICLE I DEFINITIONS Section 1.01. Definitions........................................................................................................ 1 Section 1.02. Incorporation of Certain Definitions by Reference; Interpretation .................. 5 ARTICLE II PURCHASE OF OBLIGATION Section 2.01. Execution of this Agreement; Purchase of Bond ............................................. 6 ARTICLE III CONDITIONS PRECEDENT TO PURCHASE OF OBLIGATION Section 3.01. Conditions Precedent to Execution and Closing .............................................. 6 ARTICLE IV REPRESENTATION AND WARRANTIES Section 4.01. The City represents and warrants to the Purchaser as follows: ....................... 8 Section 4.02. The Authority represents and warrants to the Purchaser as follows: ............. 12 ARTICLE V COVENANTS Section 5.01. Covenants ....................................................................................................... 15 ARTICLE VI EVENTS OF DEFAULT Section 6.01. Events of Default ........................................................................................... 18 Section 6.02. Consequences of an Event of Default ............................................................ 20 Section 6.03. Downgrade Redemption Event ...................................................................... 20 ARTICLE VII MISCELLANEOUS Section 7.01. Amendments and Waivers ............................................................................. 20 Section 7.02. Counterparts ................................................................................................... 20 Section 7.03. Notices ........................................................................................................... 20 Section 7.04. Severability .................................................................................................... 21 Section 7.05. Governing Law; Waiver of Jury Trial ........................................................... 22 Section 7.06. Complete and Controlling Agreement ........................................................... 22 Section 7.07. Indemnification .............................................................................................. 22 Section 7.08. Patriot Act ...................................................................................................... 22 Section 7.09. No Advisory or Fiduciary Responsibility ...................................................... 23 Section 7.10. Excess Interest ............................................................................................... 23 Section 7.11. Contractual Interpretation .............................................................................. 23 13.2.1.d Packet Pg. 340 Attachment: Convertible Bond Purchase Agreement (City of Gilroy) (4078 : GPFFA - 2013 LRBs Refunding) Section 7.12. EMMA Posting .............................................................................................. 24 Section 7.13. Electronic Signatures ..................................................................................... 24 13.2.1.d Packet Pg. 341 Attachment: Convertible Bond Purchase Agreement (City of Gilroy) (4078 : GPFFA - 2013 LRBs Refunding) BOND PURCHASE AGREEMENT THIS BOND PURCHASE AGREEMENT is dated [December __, 2022] (as amended, modified or restated from time to time, this “Agreement”), among the CITY OF GILROY (the “City”), the GILROY PUBLIC FACILITIES FINANCING AUTHORITY (the “Authority”) and WELLS FARGO MUNICIPAL CAPITAL STRATEGIES, LLC (the “Purchaser”). W I T N E S E T H: WHEREAS, pursuant to that certain Resolution No. [_____] adopted by the City on [December __, 2022] (the “Resolution”) and the certain Resolution No. [_____] adopted by the Authority on [December __, 2022] (the “Authority Resolution”), the City has approved (i) the issuance of the Gilroy Public Facilities Financing Authority Lease Revenue Refunding Bonds, Series 2022A (Convertible) (the “Bond”) for the purpose of refunding a portion of the Gilroy Public Facilities Financing Authority Refunding Lease Revenue Bonds, Series 2013 (the “Refunded Bond”) and the payment of costs associated with the issuance of the Bond and (ii) the execution and delivery of a purchase agreement and other documentation related to the issuance of the Bond and the purchase of the Bond in advance of its issuance on [December __, 2022]; and WHEREAS, the Bonds will be issued pursuant to the Indenture, dated as of August 1, 2020, as supplemented by the First Supplement to Indenture, dated as of [December __, 2022], each by and among U.S. Bank Trust Company, National Association (the “Trustee”), the City and the Authority; and WHEREAS, the Purchaser hereby agrees to purchase the Bond when issued in compliance with the requirements and conditions set forth herein. NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, including the covenants, terms and conditions hereinafter contained, and to induce the Purchaser to purchase the Bond, the Purchaser, the Authority and the City agree as follows: ARTICLE I DEFINITIONS Section 1.01. Definitions. In addition to terms defined at other places in this Agreement, the following defined terms are used throughout this Agreement with the following meanings: “affiliate” means, with respect to any Person, any other Person directly or indirectly controlling or controlled by or under common control with such Person. Without limiting the foregoing, the definition of “affiliate” of any Person shall include any subsidiary of such Person and, with respect to the Purchaser, shall include Wells Fargo Securities (a trade name) and Wells Fargo Bank, National Association. “Additional Payments” has the meaning set forth in the Lease Agreement. 13.2.1.d Packet Pg. 342 Attachment: Convertible Bond Purchase Agreement (City of Gilroy) (4078 : GPFFA - 2013 LRBs Refunding) 2 “Agreement” means this Bond Purchase Agreement as originally executed and as it may from time to time be amended or supplemented in accordance with the term hereof. “Anti-Corruption Laws” means (a) the U.S. Foreign Corrupt Practices Act of 1977, as amended, (b) the U.K. Bribery Act of 2010, as amended, and (c) any other anti-bribery or anti- corruption laws, regulations or ordinances in any jurisdiction in which the City is located or doing business. “Anti-Money Laundering Laws” means applicable laws or regulations in any jurisdiction in which the City is located or doing business that relate to money laundering, any predicate crime to money laundering, or any financial record keeping and reporting requirements related thereto. “Assignment Agreement” has the meaning set forth in the Indenture. “Authority” means the Gilroy Public Facilities Financing Authority, a joint powers authority duly organized and existing under and by virtue of the laws of the State of California. “Base Payments” has the meaning set forth in the Lease Agreement. “Bond” means the Gilroy Public Facilities Financing Authority Lease Revenue Refunding Bonds, Series 2022A (Convertible). “Bond Counsel” means Nixon Peabody LLP. “Bond Documents” means, collectively, this Agreement, the Resolution, the Authority Resolution, the Bond, the Indenture, the First Supplement to Indenture, the Lease Agreement, the Fourth Amendment to Lease Agreement, the Assignment Agreement and the Site Lease. “Business Day” means a day which is not (a) a Saturday, Sunday or legal holiday on which banking institutions in Gilroy, California or New York, New York are authorized by law to close or (b) a day on which the New York Stock Exchange or the Federal Reserve Bank is closed. “City” means the City of Gilroy, a charter city duly organized and existing under the Constitution and laws of the State of California. “Conversion Date” means the date on which the conditions to the conversion of the interest rate on the Bond from the Taxable Fixed Rate to the Tax-Exempt Fixed Rate pursuant to Section 3.01(b) hereof have been satisfied, which such date shall be on or after [August 8, 2023]. “City Representative” means the Mayor, City Administrator, Finance Director or City Clerk of the City, or such other person designated in writing by the City. “Closing Date” means the date of issuance of the Bond, [December __, 2022], or such other date if acceptable to the Purchaser, subject to the satisfaction of the conditions precedent set forth in Section 3.01(a). “Confidential Information” means any sensitive or confidential information regarding the Purchaser or any affiliate of the Purchaser including, without limitation, address and account 13.2.1.d Packet Pg. 343 Attachment: Convertible Bond Purchase Agreement (City of Gilroy) (4078 : GPFFA - 2013 LRBs Refunding) 3 information, e-mail addresses, telephone numbers, facsimile numbers, and names and signatures of officers and employees. “Default Rate” means, for any day, a fluctuating rate of interest per annum equal to the greatest of (i) the Prime Rate in effect at such time plus four percent (4.0%), (ii) the Federal Funds Rate in effect at such time plus five percent (5.0%), and (iii) ten percent (10.0%). “Determination of Taxability” has the meaning set forth in the Indenture. “EMMA” means Electronic Municipal Market Access as provided by the Municipal Securities Rulemaking Board. “Event of Default” with respect to this Agreement shall have the meaning set forth in Section 6 of this Agreement. “Federal Funds Rate” means, for any day, the rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided that: (a) if such day is not a Business Day, then the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day; and (b) if no such rate is so published on such next succeeding Business Day, then the Federal Funds Rate for such day shall be the average rate (rounded upward, if necessary, to a whole multiple of one-hundredth of one percent) charged to the Purchaser on such day on such transactions as determined by the Purchaser. If the Federal Funds Rate determined as provided above would be less than zero percent (0.0%), then the Federal Funds Rate shall be deemed to be zero percent (0.0%). “Fitch” means Fitch Ratings, Inc., and any successor rating agency. “First Supplement to Indenture” means the First Supplement to Indenture, dated as of December 1, 2022, by and among the Trustee, the City and the Authority. “Fourth Amendment to Lease Agreement” means the Fourth Amendment to Lease Agreement, dated as of December 1, 2022, between the Authority, as lessor, and the City, as lessee. “Indenture” means the Indenture by and among the Trustee, the City and the Authority, dated as of August 1, 2020, as originally executed and as it may from time to time be amended or supplemented in accordance therewith. “Lease Agreement” means the First Amended and Restated Lease Agreement dated as of August 1, 2009, by and between the City, as sublessee, and the Authority, as sublessor, as originally executed and as it may be amended or supplemented in accordance therewith. “Lease Payments” has the meaning set forth in the Lease Agreement. “Leased Property” has the meaning set forth in the Indenture. 13.2.1.d Packet Pg. 344 Attachment: Convertible Bond Purchase Agreement (City of Gilroy) (4078 : GPFFA - 2013 LRBs Refunding) 4 “Lease Obligation Debt” means any debt of the City and/or the Authority, the payment of which is payable from and/or secured by lease revenue rental payments payable under real property (but not equipment) leases from the general fund of the City. “Material City Debt” means any debt of the City that is outstanding in a principal amount of $5,000,000 or more. “Maximum Federal Corporate Tax Rate” has the meaning set forth in the Indenture. “Moody’s” means Moody’s Investors Service, Inc. and any successor rating agency. “Owner” means the registered owner of the Bond. “Patriot Act” means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Title III of Pub. L. 107 56 (signed into law October 26, 2001). “Person” means any individual, corporation, not for profit corporation, partnership, limited liability company, joint venture, association, professional association, joint stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other form of entity. “Prime Rate” means on any day, the rate of interest per annum then most recently established by Wells Fargo Bank, National Association as its “prime rate.” Any such rate is a general reference rate of interest, need not be related to any other rate, and need not be the lowest or best rate actually charged by Wells Fargo Bank, National Association to any customer or a favored rate and need not correspond with future increases or decreases in interest rates charged by other lenders or market rates in general; Wells Fargo Bank, National Association may make various business or other loans at rates of interest having no relationship to such rate. If Wells Fargo Bank, National Association ceases to establish or publish a prime rate from which the Prime Rate is then determined, the applicable variable rate from which the Prime Rate is determined thereafter shall be instead the prime rate reported in The Wall Street Journal (or the average prime rate if a high and a low prime rate are therein reported), and the Prime Rate shall change without notice with each change in such prime rate as of the date such change is reported. If the Prime Rate determined as provided above would be less than zero percent (0.0%), then the Prime Rate shall be deemed to be zero percent (0.0%). “Property” means, when used in connection with any Person, any and all rights, title and interests of such Person in and to any and all property (including cash) whether real, personal or mixed, or tangible or intangible, and wherever situated. “Purchaser” means Wells Fargo Municipal Capital Strategies, LLC, and its successors and assigns. “Purchase Price” has the meaning assigned in Section 2.01(a). “Refunded Bond” means the Gilroy Public Facilities Financing Authority Refunding Lease Revenue Bonds, Series 2013. 13.2.1.d Packet Pg. 345 Attachment: Convertible Bond Purchase Agreement (City of Gilroy) (4078 : GPFFA - 2013 LRBs Refunding) 5 “Rating Agency” means any of S&P, Moody’s and Fitch, as applicable. “Rental Payments” has the meaning set forth in the Indenture. “Revenues” has the meaning set forth in the Indenture. “S&P” means S&P Global Ratings, and any successor rating agency. “Sanction” or “Sanctions” means any and all economic or financial sanctions, sectoral sanctions, secondary sanctions, trade embargoes and restrictions and anti-terrorism laws imposed, administered or enforced from time to time by: (a) the United States of America, including those administered by the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC), the U.S. Department of State, the U.S. Department of Commerce, or through any existing or future statute or Executive Order, (b) the United Nations Security Council, (c) the European Union, (d) the United Kingdom, or (e) any other governmental authority with jurisdiction over the City. “Sanctioned Target” means any target of Sanctions, including: (a) Persons on any list of targets identified or designated pursuant to any Sanctions, (b) Persons, countries or territories that are the target of any territorial or country-based Sanctions program, (c) Persons that are a target of Sanctions due to their ownership or control by any Sanctioned Target(s), or (d) otherwise a target of Sanctions, including vessels and aircraft, that are designated under any Sanctions program. “Site Lease” has the meaning set forth in the Indenture. “State” means the State of California. “Taxable Date” has the meaning set forth in the Indenture. “Taxable Gross-Up Rate” has the meaning set forth in the Indenture. “Taxable Rate” means [__._]%, the rate of interest on the Bond payable from the Closing Date to but not including the Conversion Date. “Tax-Exempt Rate” means [__._]%, the rate of interest on the Bond payable from and after the Conversion Date. “Trustee” means U.S. Bank Trust Company, National Association. Section 1.02. Incorporation of Certain Definitions by Reference; Interpretation . Each capitalized term used herein and not otherwise defined herein shall have the meaning provided therefor in the Indenture, unless the context otherwise requires. In the event of any conflict between the terms and provisions of this Agreement and the provisions of the Indenture, the provisions of the Indenture shall be controlling. 13.2.1.d Packet Pg. 346 Attachment: Convertible Bond Purchase Agreement (City of Gilroy) (4078 : GPFFA - 2013 LRBs Refunding) 6 ARTICLE II PURCHASE OF OBLIGATION Section 2.01. Execution of this Agreement; Purchase of Bond. (a) Purchase. Upon the terms and conditions and based on the representations, warranties and covenants of the Authority and the City set forth herein and in the Bond Documents, the Purchaser hereby agrees to purchase from the Authority, and the Authority hereby agrees to issue and sell to the Purchaser, the Bond at the purchase price of [$________] representing the aggregate principal amount of the Bond (the “Purchase Price”). (b) Closing. On the Closing Date, the Authority and the City, as applicable, shall deliver to the Purchaser the documents described in and that satisfy the conditions set forth in Section 3.01(a). Upon delivery of such documents and satisfaction of such conditions, the Purchaser will pay the Purchase Price for the Bond in immediately available federal funds at the direction of the Authority. One fully registered Bond, in the aggregate principal amount equal to the Purchase Price, shall be issued to and registered in the name of the Purchaser, and shall be delivered at the direction of the Purchaser. (c) Conversion Date. On the Conversion Date, the City shall deliver to the Purchaser the documents described in and satisfy the conditions set forth in Section 3.01(b) hereof. Upon delivery of such documents and satisfaction of such conditions, the interest rate on the Bond shall convert to the Tax-Exempt Rate; provided that from and after any Taxable Date, the interest rate on the Bond shall be established at a rate at all times equal to the Taxable Gross-Up Rate. ARTICLE III CONDITIONS PRECEDENT TO PURCHASE OF OBLIGATION Section 3.01. Conditions Precedent to Execution and Closing. The Purchaser has entered into this Agreement in reliance upon the representations, warranties and covenants of the City and the Authority contained herein and the Bonds Documents and to be contained in the documents and instruments to be delivered on the Closing Date and upon the agreement of the City to perform its obligations hereunder and thereunder. Accordingly, the Purchaser’s obligation under this Agreement to purchase and pay for the Bond shall be subject to the performance by the City and the Authority of their obligations to be performed hereunder and under such other documents and instruments to be delivered at or prior to the Closing Date, and shall also be subject to the requirements of the Indenture and the following conditions: (a) Conditions to Effectiveness of this Agreement. On or prior to the Closing Date, the Purchaser shall have received the following documents in form and substance satisfactory to the Purchaser: 13.2.1.d Packet Pg. 347 Attachment: Convertible Bond Purchase Agreement (City of Gilroy) (4078 : GPFFA - 2013 LRBs Refunding) 7 (i) an executed original or certified copy, as applicable, of this Agreement, the Indenture, the First Supplement to Indenture, the Lease Agreement, the Fourth Amendment to Lease Agreement, the Site Lease, the Assignment Agreement, the Resolution and the Authority Resolution; (ii) the fully executed and authenticated Bond in physical form and registered in the name of the Purchaser; provided that the Bond may bear a CUSIP number, but it shall not carry a rating from any ratings service or be offered pursuant to an offering statement (or other disclosure document) or by a placement agent; (iii) a certificate executed by a City Representative certifying that on and as of the Closing Date: (1) each representation and warranty of the City in this Agreement is true and correct in all material respects (except to the extent that such representation and warranty expressly relates to an earlier date), (2) no Event of Default has occurred and is continuing or would result from the execution or performance of the Bond Documents; (3) since June 30, 2021, no event has occurred or condition arisen, either individually or in the aggregate, that has had or could reasonably be expected to have a material impairment of the ability of the City to perform its obligations under the Bond Documents; and (4) the names and signatures of the persons authorized to sign the Bond Documents executed on the Closing Date on behalf of the City; (iv) a certificate executed by an authorized representative of the Authority certifying, on and as of the Closing Date, the names and signatures of the persons authorized to sign the Bond Documents executed on the Closing Date on behalf of the Authority; (v) evidence satisfactory to the Purchaser that the long-term unenhanced rating assigned to Lease Obligation Debt is not less than “AA” from S&P; (vi) a certificate of the City that the requirements of Section 2.10 of the Indenture have been met, including a certificate of the City as to the annual fair rental value of the Leased Property; (vii) certified copies of the policies of insurance required by Article IV of the Lease Agreement or certificates thereof, which shall evidence that the amounts of the insurance required under Section 4.4 and 4.5 of the Lease Agreement have been increased, if necessary, to cover the amount of the Bond; (viii) a CLTA or ALTA title insurance policy or other appropriate form of policy in the amount of the Bond of the type and with the endorsements described in Section 4.6 of the Lease Agreement; (ix) an opinion of counsel to the City, in form and substance satisfactory to the Purchaser addressing the due authorization, execution, adoption, delivery and 13.2.1.d Packet Pg. 348 Attachment: Convertible Bond Purchase Agreement (City of Gilroy) (4078 : GPFFA - 2013 LRBs Refunding) 8 enforceability of this Agreement and the other Bond Documents to which the City is a party and such other matters as the Purchaser may require; (x) an Opinion of Counsel as required under Section 2.11(a) of the Indenture addressed to the Purchaser or on which the Purchaser is otherwise expressly authorized to rely; (xi) the City will cause to be delivered to the Purchaser a copy of the City’s audited financial statements for the fiscal year ended June 30, 2021; (xii) the Purchaser shall have received reimbursement of the fees and expenses of Kutak Rock LLP, as counsel to the Purchaser, incurred in connection with the preparation, review, negotiation, execution and delivery of this Agreement and the Bond Documents, which fees may be paid directly to Kutak Rock LLP; and (xiii) such additional certificates, instruments, opinions or other documents as the Purchaser may reasonably request. (b) Conditions to Conversion of Interest Rate. The interest rate on the Bond shall convert to the Tax-Exempt Rate, subject to the conditions precedent set forth in this Section 3.01(b), and the Purchaser shall have received, on or before the applicable Conversion Date, the items listed below in this Section, each dated and in form and substance as is satisfactory to the Purchaser: (i) the City, the Authority and the Purchaser shall have delivered to the Trustee a [Tax-Exempt Bond Conversion Agreement] in substantially the form of [Exhibit E] to the First Supplement to Indenture; (ii) the Purchaser shall have received an opinion of Bond Counsel addressed to the Purchaser to the effect that, as of the Conversion Date, interest on the Bond is excludable from gross income for federal income tax purposes; and (iii) A certificate from the authorized officers of the City and the Authority, certifying that: (A) the representations and warranties of the City and the Authority contained in this Agreement and in the Bond Documents are true and correct as of the Conversion Date; and (B) no Event of Default has occurred and is continuing. In the event the conditions to the conversion of the interest rate set forth in Section 3.01(b) are not satisfied on the Conversion Date, the interest rate on the Bond shall remain at the Taxable Rate. ARTICLE IV REPRESENTATION AND WARRANTIES Section 4.01. The City represents and warrants to the Purchaser as follows: 13.2.1.d Packet Pg. 349 Attachment: Convertible Bond Purchase Agreement (City of Gilroy) (4078 : GPFFA - 2013 LRBs Refunding) 9 (a) Organization and Power. The City (a) is a charter city and is validly existing under the laws of the State under and pursuant to the Constitution of the State and (b) has all governmental power and authority, and all governmental licenses, authorizations, consents and approvals, to execute, deliver and perform its obligations under this Agreement and, as of the Closing Date, will have all g overnmental power and authority, and all governmental licenses, authorizations, consents and approvals, to execute, deliver and perform its obligations under the other Bond Documents. (b) Consents. No consent, approval, authorization or order of any court or governmental body is required for the performance by the City of its obligations under the Bond Documents. (c) No Conflict With Other Instruments or Law. Neither the execution and delivery of this Agreement or the other Bond Documents, nor compliance with the provisions thereof, or the issuance of the Bond conflicts with or will result in a breach of or default under (i) any indenture, mortgage, commitment, note or other agreement or instrument to which the City is a party or by which it is bound or (ii) to the best of the City’s knowledge, any other law, rule, regulation or ordinance or judgment, order or decree of any court or governmental agency or body having jurisdiction over the City or any of its activities or properties. (d) Power and Authority; Enforceability. (i) The City has taken all action required to be taken by it to authorize the issuance and delivery of the Bond and the performance of its obligations thereunder, (ii) the City has full legal right, power and authority to enter into this Agreement and the other Bond Documents and to perform its obligations hereunder and thereunder, and (iii) this Agreement and the other Bond Documents have been duly authorized and (assuming due authorization, execution and delivery by the other parties thereto) when executed, constitute valid and binding obligations of the City enforceable against the City in accordance with their respective terms, subject to equitable principles, bankruptcy, insolvency and similar laws. (e) No Material Litigation; Pending Legislation. (i) There is no action, suit, proceeding, inquiry or investigation at law or in equity or before or by any court, public board or body pending, or, to the best knowledge of the City, threatened against or affecting the City wherein an unfavorable decision, ruling or finding would have a material adverse effect on (1) the transactions contemplated by, or the validity or enforceability of, this Agreement or the other Bond Documents or (2) the tax-exempt status of interest on the Bond on or after the Conversion Date, if applicable. (ii) There is no amendment, or to the knowledge of the City, proposed amendment to the Constitution of the State or any State law or any administrative interpretation of the Constitution of the State or any State law, or any legislation that has passed either house of the legislature of the State, or any judicial decision interpreting any of the foregoing, the effect of which will materially adversely affect the issuance of the Bond, the security for the Bond or the City’s obligations under this Agreement, the Indenture, the Bond or the other Bond Documents, or the City’s ability to repay when due its obligations under the Lease Agreement. 13.2.1.d Packet Pg. 350 Attachment: Convertible Bond Purchase Agreement (City of Gilroy) (4078 : GPFFA - 2013 LRBs Refunding) 10 (f) Financial Statements. The audited financial statements of the City for the fiscal year ended June 30, 2021, heretofore furnished to the Purchaser, fairly present the financial condition of the City in all material respects as of such date and the results of its operations for the period then ended in conformity with generally accepted accounting principles applicable to State political subdivisions, except as otherwise expressly noted therein. Since June 30, 2021, there has been no change in the financial condition or operations of the City that could reasonably be expected to result in a material adverse change in the operations, business, properties, liabilities or condition of the City or the ability of the City to perform its obligations under any Bond Document. (g) No Default. No Event of Default or any event that, with the giving of notice or the lapse of time or both, would constitute an Event of Default has occurred and is continuing. (h) Usury. Under State law, the City may not plead the defense of usury or maintain any action thereon or therefor. (i) Anti-Corruption Laws and Anti-Money Laundering Laws. To the best of City’s knowledge, after due care and inquiry, no affiliate, officer, director or agent acting on behalf of the City is under investigation for an alleged violation of Anti-Money Laundering Laws or Anti-Corruption Laws by a governmental authority that enforces such laws. (j) Sanctions. (i) The City is not a Sanctioned Target and (ii) to the best of City’s knowledge, after due care and inquiry, no affiliate, officer, director or agent acting on behalf of the City is under investigation for an alleged violation of Sanction(s) by a governmental authority that enforces Sanctions. (k) Security. The Bond is a limited obligation of the Authority and is payable, as to interest thereon and principal thereof, solely from the revenues derived from Base Payments paid by the City pursuant to Lease Agreement. The Bond is equally and ratably secured by the Revenues and enjoys the benefits of a security interest in the money held in the funds established pursuant to the Indenture (other than the Rebate Fund (as defined in the Indenture)), subject to the provisions of the Indenture permitting the disbursement thereof for or to the purposes and on the conditions and terms set forth therein. The obligation of the City to pay Base Payments does not constitute an indebtedness of the City for which the City is obligated to levy or pledge any form of taxation or for which the City has levied or pledged any form of taxation. The obligation of the City to pay Base Payments does not constitute an indebtedness of the City, the State of California, or any of its political subdivisions within the meaning of any constitutional or statutory debt limitation or restriction. The obligation of the City to make the Base Payments is subject to abatement during any period in which, by reason of material damage, destruction or title defect, there is substantial interference with the use and occupancy of the Leased Property or portions thereof or if the Leased Property or portions thereof are taken under the power of eminent domain. 13.2.1.d Packet Pg. 351 Attachment: Convertible Bond Purchase Agreement (City of Gilroy) (4078 : GPFFA - 2013 LRBs Refunding) 11 (l) Immunity. Under State law, an action may be maintained against the City upon a contract made by the City, including the Bond Documents, and the City agrees not to assert the defense of sovereign immunity in any legal proceeding arising under or relating to the enforcement of the obligations of the City under the Bond Documents. (m) Investment Company. The City is not an “investment company” or a company “controlled” by an “investment company,” as such terms are defined in the Investment Company Act of 1940, as amended. (n) Margin Stock. The City is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock, and no part of the proceeds from the issuance of the Bond will be used to purchase or carry any such margin stock or extend credit to others for the purpose of purchasing or carrying any such margin stock. (o) Environmental Matters. The operations of the City are in material compliance with all of the requirements of applicable federal, state and local environmental, health and safety statutes and regulations and are not the subject of any governmental investigation evaluating whether any remedial action is needed to respond to a release of any toxic or hazardous waste or substance into the environment, where a failure to comply with any such requirement or the need for any such remedial action could reasonably be expected to result in a material adverse effect on its obligations under the Bond Documents. (p) Insurance. The City currently maintains insurance coverage with insurance companies believed by the City to be capable of performing their obligations under the respective insurance policies issued by such insurance companies to the City (as determined in its reasonable discretion) and in full compliance with the Lease Agreement and the other Bond Documents. (q) Title to Property; Site Lease; Lease Agreement. The City has good and marketable fee simple title to all Leased Property, subject only to Permitted Encumbrances (as defined in the Lease Agreement). The Lease Agreement and Site Lease are in full force and effect. The City, as lessee under the Lease Agreement, is in peaceable possession of the Leased Property. No waiver, indulgence or postponement of any of the City’s obligations under the Lease Agreement has been granted by the Authority. There exists no event of default or event, occurrence, condition or act that, with the giving of notice, the lapse of time or the happening of any further event or condition, would become a default under the Lease Agreement or Site Lease. (r) Essentiality. The Leased Property is an essential asset of the City necessary to serve the needs of the residents of the City. The City believes that at all times while any Rental Payments or any obligation of the City under the Bond Documents remains unpaid, the Leased Property will remain an essential asset of the City. (s) Fair Rental Value. The total Base Payments for the Leased Property do not exceed the annual fair rental value of the Leased Property. In making such determination of annual fair rental value, consideration has been given to the uses and purposes which 13.2.1.d Packet Pg. 352 Attachment: Convertible Bond Purchase Agreement (City of Gilroy) (4078 : GPFFA - 2013 LRBs Refunding) 12 may be served by the Leased Property and the benefits therefrom which will accrue to the City and the general public. (t) Additional Rentals. All obligations of the City hereunder, other than the principal of and interest with respect to the Bond, shall be paid as Additional Payments pursuant to Section 3.5 of the Lease Agreement. Section 4.02. The Authority represents and warrants to the Purchaser as follows: (a) Organization and Power. The Authority (a) is a joint powers authority duly organized and existing under and by virtue of the laws of the State of California and (b) has all governmental power and authority, and all governmental licenses, authorizations, consents and approvals, to execute, deliver and perform its obligations under this Agreement and, as of the Closing Date, will have all governmental power and authority, and all governmental licenses, authorizations, consents and approvals, to execute, deliver and perform its obligations under the other Bond Documents. (b) Consents. No consent, approval, authorization or order of any court or governmental body is required for the performance by the Authority of its obligations under the Bond Documents. (c) No Conflict With Other Instruments or Law. Neither the execution and delivery of this Agreement or the other Bond Documents, nor compliance with the provisions thereof, or the issuance of the Bond conflicts with or will result in a breach of or default under (i) any indenture, mortgage, commitment, note or other agreement or instrument to which the Authority is a party or by which it is bound or (ii) to the best of the Authority’s knowledge, any other law, rule, regulation or ordinance or judgment, order or decree of any court or governmental agency or body having jurisdiction over the Authority or any of its activities or properties. (d) Power and Authority; Enforceability. (i) The Authority has taken all action required to be taken by it to authorize the issuance and delivery of the Bond and the performance of its obligations thereunder, (ii) the Authority has full legal right, power and authority to enter into this Agreement and the other Bond Documents and to perform its obligations hereunder and thereunder, and (iii) this Agreement and the other Bond Documents have been duly authorized and (assuming due authorization, execution and delivery by the other parties thereto) when executed, constitute valid and binding obligations of the Authority enforceable against the Authority in accordance with their respective terms, subject to equitable principles, bankruptcy, insolvency and similar laws. (e) No Material Litigation; Pending Legislation. (i)There is no action, suit, proceeding, inquiry or investigation at law or in equity or before or by any court, public board or body pending, or, to the best knowledge of the Authority, threatened against or affecting the Authority wherein an unfavorable decision, ruling or finding would have a material adverse effect on (1) the transactions contemplated by, or the validity or enforceability of, this Agreement or the other Bond Documents or (2) the tax-exempt status of interest on the Bond upon the Conversion Date, if applicable. 13.2.1.d Packet Pg. 353 Attachment: Convertible Bond Purchase Agreement (City of Gilroy) (4078 : GPFFA - 2013 LRBs Refunding) 13 (ii) There is no amendment, or to the knowledge of the Authority, proposed amendment to the Constitution of the State or any State law or any administrative interpretation of the Constitution of the State or any State law, or any legislation that has passed either house of the legislature of the State, or any judicial decision interpreting any of the foregoing, the effect of which will materially adversely affect the issuance of the Bond, the security for the Bond or the Authority’s obligations under this Agreement, the Bond or the other Bond Documents, or the Authority’s ability to repay when due its obligations under the Bond. (f) No Default. No Event of Default or any event that, with the giving of notice or the lapse of time or both, would constitute an Event of Default has occurred and is continuing. (g) Usury. Under State law, the Authority may not plead the defense of usury or maintain any action thereon or therefor. (h) Anti-Corruption Laws and Anti-Money Laundering Laws. To the best of Authority’s knowledge, after due care and inquiry, no affiliate, officer, director or agent acting on behalf of the Authority is under investigation for an alleged violation of Anti- Money Laundering Laws or Anti-Corruption Laws by a governmental authority that enforces such laws. (i) Sanctions. (i) The Authority is not a Sanctioned Target and (ii) to the best of Authority’s knowledge, after due care and inquiry, no affiliate, officer, director or agent acting on behalf of the Authority is under investigation for an alleged violation of Sanction(s) by a governmental authority that enforces Sanctions. (j) Security. The Bond is a limited obligation of the Authority and is payable, as to interest thereon and principal thereof, solely from the revenues derived from Base Payments paid by the City pursuant to Lease Agreement. The Bond is equally and ratably secured by the Revenues and enjoys the benefits of a security interest in the money held in the funds established pursuant to the Indenture (other than the Rebate Fund (as defined in the Indenture)), subject to the provisions of the Indenture permitting the disbursement thereof for or to the purposes and on the conditions and terms set forth therein. The obligation of the City to pay Base Payments does not constitute an indebtedness of the City for which the City is obligated to levy or pledge any form of taxation or for which the City has levied or pledged any form of taxation. The obligation of the City to pay Base Payments does not constitute an indebtedness of the City, the State of California, or any of its political subdivisions within the meaning of any constitutional or statutory debt limitation or restriction. The obligation of the City to make the Base Payments is subject to abatement during any period in which, by reason of material damage, destruction or title defect, there is substantial interference with the use and occupancy of the Leased Property or portions thereof or if the Leased Property or portions thereof are taken under the power of eminent domain. 13.2.1.d Packet Pg. 354 Attachment: Convertible Bond Purchase Agreement (City of Gilroy) (4078 : GPFFA - 2013 LRBs Refunding) 14 (k) Immunity. Under State law, an action may be maintained against the Authority upon a contract made by the Authority, including the Bond Documents, and the Authority agrees not to assert the defense of sovereign immunity in any legal proceeding arising under or relating to the enforcement of the obligations of the Authority under the Bond Documents. (l) Investment Company. The Authority is not an “investment company” or a company “controlled” by an “investment company,” as such terms are defined in the Investment Company Act of 1940, as amended. (m) Margin Stock. The Authority is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock, and no part of the proceeds from the issuance of the Bond will be used to purchase or carry any such margin stock or extend credit to others for the purpose of purchasing or carrying any such margin stock. (n) Environmental Matters. The operations of the Authority are in material compliance with all of the requirements of applicable federal, state and local environmental, health and safety statutes and regulations and are not the subject of any governmental investigation evaluating whether any remedial action is needed to respond to a release of any toxic or hazardous waste or substance into the environment, where a failure to comply with any such requirement or the need for any such remedial action could reasonably be expected to result in a material adverse effect on its obligations under the Bond Documents. (o) Insurance. The Authority currently maintains insurance coverage with insurance companies believed by the Authority to be capable of performing their obligations under the respective insurance policies issued by such insurance companies to the Authority (as determined in its reasonable discretion) and in full compliance with the Lease Agreement and the other Bond Documents. (p) Title to Property; Site Lease; Lease Agreement; Assignment Agreement. The Authority has good and marketable leasehold title to all of the Leased Property pursuant to the Site Lease. The Lease Agreement and Site Lease are in full force and effect. The Authority, as lessee under the Site Lease, is in peaceable possession of the Leased Property. No waiver, indulgence or postponement of any of the Authority’s obligations under the Site Lease has been granted by the City. There exists no event of default or event, occurrence, condition or act that, with the giving of notice, the lapse of time or the happening of any further event or condition, would become a default under the Lease Agreement or the Site Lease. Pursuant to the Assignment Agreement, the Authority has assigned without recourse all its rights to receive Base Payments scheduled to be paid by the City under and pursuant to the Lease Agreement to the Trustee for the benefit of the owners of the Bond. (q) Pledged Revenues. The Indenture creates a valid pledge of the Revenues as security for the punctual payment and performance of the obligations of the Authority under the Bond. 13.2.1.d Packet Pg. 355 Attachment: Convertible Bond Purchase Agreement (City of Gilroy) (4078 : GPFFA - 2013 LRBs Refunding) 15 ARTICLE V COVENANTS Section 5.01. Covenants. The City and the Authority covenant and agree that they will comply with the following covenants until the date on which no amount is due or owing to the Purchaser under this Agreement or the other Bond Documents, unless the Purchaser shall otherwise consent in writing. (a) Financial Reporting and Notices. The City and the Authority will prepare or cause to be prepared and delivered to the Purchaser the following: (i) The City shall provide to the Purchaser within two hundred seventy (270) days of the end of each fiscal year of the City, a copy of its audited financial statements for such fiscal year along with a certificate executed by an authorized officer of the City certifying that no Event of Default or event that with the lapse of time or the giving of notice would constitute an Event of Default has occurred, or if any such default has occurred, specifying the nature of such default, the period of its existence, the nature and status thereof and any remedial steps taken or proposed to correct such default. (ii) The City shall provide to the Purchaser the City’s annual budget within sixty (60) days of the end of each fiscal year of the City. (iii) The City and the Authority shall provide prompt written notice to the Purchaser of (1) any Event of Default or event that with the lapse of time or the giving of notice would constitute an Event of Default, and (2) all actions, suits or proceedings pending against the City or the Authority in any court before any governmental authority which could reasonably be expected to result in a material adverse effect upon the operations, business, properties, liabilities or condition of the City or the Authority or a material impairment of the ability of the City or the Authority to perform its obligation under the Bond Documents. (b) Existence, Etc. The Authority shall maintain its existence as a joint powers authority duly organized and existing under and by virtue of the laws of the State of California. The City shall maintain its existence as a municipal corporation duly organized and existing under the Constitution and laws of the State of California. (c) Defaults. The Authority and the City will promptly (and in any event within five Business Days after becoming aware thereof) notify the Purchaser of the occurrence of any Event of Default, specifying the details of such Event of Default and, to the extent a determination has been made, the action that the Authority and the City propose to take with respect thereto. (d) Litigation; Material Change. The Authority and the City shall promptly notify the Purchaser of (i) the existence and status of any litigation which individually or in the aggregate could, in the event of an unfavorable outcome, have a material adverse effect on, or (ii) the occurrence of any other event or change which could have a material 13.2.1.d Packet Pg. 356 Attachment: Convertible Bond Purchase Agreement (City of Gilroy) (4078 : GPFFA - 2013 LRBs Refunding) 16 adverse effect on, (A) the ability of the Authority or the City to perform their respective obligations hereunder or under the other the Bond Documents or (B) the enforceability or validity of this Agreement or any of the other Bond Documents. (e) Compliance with Laws. The City and the Authority shall comply in all material respects with all applicable laws, ordinances, rules, regulations and requirements of any governmental authority unless noncompliance would not have a material impairment on the ability of the City or the Authority to perform its obligations under this Agreement or the other Bond Documents or a material adverse effect upon the legality, validity, binding effect or enforceability against the City or the Authority of this Agreement or the other Bond Documents including, without limitation, environmental laws, Anti- Money Laundering Laws, Anti-Corruption Laws and Sanctions. (f) Maintenance of Books and Records; Inspections. The City and the Authority shall maintain adequate books, accounts and records, and prepare all financial statements required under this Agreement in accordance with generally accepted accounting principles applicable to State political subdivisions and joint powers authorities and in compliance with the regulations of any governmental authority having jurisdiction over it. The City and the Authority shall permit any employee or representative of the Purchaser to visit and inspect any of their properties, to examine and audit their books of account, records, reports and other papers, to make copies and extracts therefrom, and to discuss its affairs, finances and accounts with its officers and, upon prior notice to the City or the Authority, its independent public accountants (and by this provision the City and Authority authorize said accountants to discuss their finances and affairs with the Purchaser and to provide the Purchaser with access to such accountants’ work papers), all upon reasonable notice and during business hours and as often as may be reasonably requested. (g) Modifications. The City and the Authority shall not enter into or consent to any alteration, modification, supplement or amendment to this Agreement or the other Bond Documents, without the prior written consent of the Purchaser, except in connection with the issuance of Additional Bonds under the Indenture, which shall not require written consent of the Purchaser. (h) [Maintenance of Rating. The City and the Authority shall at all times maintain a long-term unenhanced rating on Lease Obligation Debt from any of Moody’s, S&P or Fitch.] (i) Other Agreements. In the event that the City or the Authority has entered into or shall enter into any credit agreement, purchase agreement, liquidity agreement or other agreement (each an “Other Agreement”) under which any person or entity undertakes to purchase Lease Obligation Debt from the City or Authority or extend credit or liquidity to the City or the Authority or provides credit enhancement for Lease Obligation Debt of the City or the Authority, and such Other Agreement provides such person or entity with different or more restrictive covenants, different or additional events of default and/or greater rights and remedies than are provided to the Purchaser in this Agreement or the other Bond Documents, the City and the Authority shall provide the Purchaser with a copy of each such Other Agreement and such different or more restrictive covenants, different 13.2.1.d Packet Pg. 357 Attachment: Convertible Bond Purchase Agreement (City of Gilroy) (4078 : GPFFA - 2013 LRBs Refunding) 17 or additional events of default and/or greater rights and remedies shall automatically be deemed to be incorporated into this Agreement and the Purchaser shall have the benefits of such different or more restrictive covenants, different or additional events of default and/or greater rights and remedies as if specifically set forth herein. The City and the Authority shall promptly enter into an amendment to this Agreement to include different or more restrictive covenants, different or additional events of default and/or greater rights and remedies; provided that the Purchaser shall have and maintain the benefit of such different or more restrictive covenants, different or additional events of default and/or greater rights and remedies even if the City or the Authority fails to provide such amendment. (j) Anti-Money Laundering Laws; Anti-Corruption Laws; Sanctions. The City and the Authority shall not use any proceeds of the Bond to fund, finance or facilitate any activities, business or transactions that would be prohibited by Anti-Money Laundering Laws, Anti-Corruption Laws or Sanctions. (k) Source of Repayment. The City and the Authority shall not fund any repayment of the Bond with proceeds, or provide as collateral any Property, that is directly or indirectly derived from any transaction or activity that is prohibited by Sanctions, Anti- Money Laundering Laws or Anti-Corruption Laws, or that could otherwise cause the Purchaser or any other party to this Agreement to be in violation of Sanctions, Anti-Money Laundering Laws or Anti-Corruption Laws. (l) Limitation on Liens. The Authority and the City shall not create a pledge, lien or charge on any part of the Revenues, other than the lien in favor of the holders of the Series 2020A Bonds (as defined in the Indenture), Additional Bonds (as defined in the Indenture) and the Purchaser. The Authority and the City shall not create a pledge, lien or charge on any part of the Leased Property other than Permitted Encumbrances (as defined in the Lease Agreement). The City and the Authority covenant (i) to keep the Leased Property and all parts thereof free from judgments, and materialmen’s and mechanics’ liens, claims, demands, encumbrances, liabilities and other liens of whatever nature or character, which, in each case, might hamper the City or the Authority in utilizing the Leased Property; and (ii) promptly, upon request of the Purchaser, to take such action from time to time as may be reasonably necessary or proper to remedy or cure any cloud upon or defect in the title to the Leased Property or any part thereof, whether now existing or hereafter developing, to prosecute all actions, suits, or other proceedings as may be reasonably appropriate for such purpose. (m) Lease Payments. The City and the Authority will not issue or authorize the issuance of any obligation payable from Revenues other than as permitted under the Indenture and the Lease Agreement. (n) Maintenance of Title Insurance. Throughout the term of the Lease Agreement, the City and the Authority shall maintain or cause to be maintained title insurance in the manner and in form and substance as required by the Lease Agreement and the other Bond Documents. 13.2.1.d Packet Pg. 358 Attachment: Convertible Bond Purchase Agreement (City of Gilroy) (4078 : GPFFA - 2013 LRBs Refunding) 18 (o) Maintenance of Insurance. Throughout the term of the Lease Agreement, the City and the Authority shall maintain or cause to be maintained insurance in the manner and in form and substance as required by the Lease Agreement and the other Bond Documents. (p) Incorporation of Covenants by Reference. The Authority and the City each agrees that it will perform and comply with each and every covenant and agreement required to be performed or observed by it in the Bond Documents to which it is a party, which provisions, as well as related defined terms contained herein, are hereby incorporated by reference herein with the same effect as if each and every such provision were set forth herein in its entirety. To the extent that any such incorporated provision permits any person to waive compliance with or consent to such provision or requires that a document, opinion or other instrument or any event or condition be acceptable or satisfactory to any person, for purposes of this Agreement, such provision shall be complied with only if it is waived or consented to by the Purchaser and such document, opinion or other instrument shall be acceptable or satisfactory only if it is acceptable or satisfactory to the Purchaser. (q) Covenants and Legal Duties. Subject to the Lease Agreement, the City covenants to take such action as may be necessary to include all Lease Payments and all estimated Additional Payments due under the Lease Agreement in each of its final approved budgets for the general fund of the City and to make the necessary appropriations (including any supplemental appropriations) from the general fund of the City for all such Lease Payments and Additional Payments coming due and payable during the period covered by each such budget. (r) Voluntary Rent Abatement. Except as required by law and the terms of the Lease Agreement, the City shall not seek or assert a claim for abatement of any of the Lease Payments under the Lease Agreement. (s) Immunity. To the fullest extent permitted by law, the City and the Authority agree not to assert the defense of immunity (on the grounds of sovereignty or otherwise) in any proceeding by the Purchaser to enforce any of the obligations of the City and the Authority under this Agreement or any other Bond Document. ARTICLE VI EVENTS OF DEFAULT Section 6.01. Events of Default. The occurrence of any of the following events (whatever the reason for such event and whether voluntary, involuntary, or effected by operation of law) shall be an “Event of Default”, unless waived in writing by Purchaser: (a) the City or the Authority shall fail to pay the principal of or interest on the Bond when due; 13.2.1.d Packet Pg. 359 Attachment: Convertible Bond Purchase Agreement (City of Gilroy) (4078 : GPFFA - 2013 LRBs Refunding) 19 (b) any representation or warranty made by or on behalf of the City or the Authority in this Agreement or any certificate or document delivered to the Purchaser related thereto shall provide to have been incorrect or untrue in any material respect when made; (c) the City or the Authority shall default in the performance of any of the covenants set forth in Section 5.01(b), (c), (g), (j), (k), (l), (m), (n), (o), (q), (r) or (s) hereof. (d) the City or the Authority shall fail to observe or perform any other covenant, restriction or agreement set forth in this Agreement or the other Bond Documents and such failure shall remain unremedied for a period of thirty days after the occurrence thereof; (e) the City or the Authority shall (i) have entered involuntarily against it an order for relief under the United States Bankruptcy Code, as amended, (ii) become insolvent or shall not pay, or be unable to pay, or admit in writing its inability to pay, its debts generally as they become due, (iii) make a general assignment for the benefit of creditors, (iv) apply for, seek, consent to, or acquiesce in, the appointment of a receiver, custodian, trustee, examiner, liquidator or similar official for it or any substantial part of its property, (v) institute any proceeding seeking to have entered against it an order for relief under the United States Bankruptcy Code, as amended, to adjudicate it insolvent, or seeking dissolution, winding up, liquidation, reorganization, arrangement, marshalling of assets, adjustment or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors or fail to file an answer or other pleading denying the material allegations of any such proceeding filed against it, (vi) take any corporate action in furtherance of any matter described in parts (i) through (v) above, or (vii) fail to contest in good faith any appointment or proceeding described in paragraph (e) below; (f) a custodian, receiver, trustee, examiner, liquidator or similar official shall be appointed for the City or the Authority or any substantial part of its respective property, or a proceeding described in paragraph (d)(v) above shall be instituted against the City or the Authority and such proceeding continues undischarged or any such proceeding continues undismissed or unstayed for a period of thirty (30) or more days; (g) a debt moratorium, debt restructuring, debt adjustment or comparable restriction is imposed on the repayment when due and payable of the principal of or interest on any indebtedness of the City or the Authority by the City or the Authority or any governmental authority with appropriate jurisdiction; (h) the City shall (i) default on the payment of the principal of or interest on any Material City Debt, beyond the period of grace, if any, provided in the instrument or agreement under which such Material City Debt was created or incurred; or (ii) default in the observance or performance of any agreement or condition relating to any Material City Debt or contained in any instrument or agreement evidencing, securing or relating thereto, or any other default, event of default or similar event shall occur or condition ex ist, the effect of which default, event of default or similar event or condition is to permit remedial action to be taken with respect to such Material City Debt; 13.2.1.d Packet Pg. 360 Attachment: Convertible Bond Purchase Agreement (City of Gilroy) (4078 : GPFFA - 2013 LRBs Refunding) 20 (i) any final, unappealable judgment or judgments, writ or writs or warrant or warrants of attachment, or any similar process or processes, which are not covered in full by insurance, with written acknowledgement of such coverage having been provided by the provider of such insurance coverage to the Purchaser, in an aggregate amount not less than $5,000,000 shall be entered or filed against the City or the Authority or against any of its property and remain unpaid, unvacated, unbonded or unstayed for a period of sixty (60) days; or (j) any material provision of this Agreement or any other Bond Documents shall at any time for any reason cease to be valid and binding on the City or the Authority or shall be declared in a final non-appealable judgment by any court with competent jurisdiction to be null and void, invalid, or unenforceable, or the validity or en forceability thereof shall be publicly contested by the City or the Authority. Section 6.02.Consequences of an Event of Default. Upon the occurrence and during the continuance of an Event of Default the interest rate on the Bond shall increase to the Default Rate as more fully set forth in the Bond and the Indenture, and the Purchaser may exercise, or cause to be exercised, any and all remedies as it may have under the other Bond Documents and as otherwise available at law and at equity. Section 6.03. [Downgrade Redemption Event. In the event that any of Fitch, Moody’s or S&P shall have downgraded its rating of any Lease Obligation Debt to below “A-” (or its equivalent), “A3” (or its equivalent), or “A-” (or its equivalent) respectively, or suspended or withdrawn its rating of the same (a “Downgrade Redemption Event”), the Purchaser may provide written notice of such Downgrade Redemption Event to the Trustee and the City and direct a mandatory redemption of the Bonds in accordance with [Section 14.06(d)] of the First Supplement to Indenture.] ARTICLE VII MISCELLANEOUS Section 7.01. Amendments and Waivers. No amendment or waiver of any provision of this Agreement or consent to any departure by the City or the Authority from any such provision shall in any event be effective unless the same shall be in writing and signed by the Purchaser. Any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. In the event any agreement contained in this Agreement should be breached by the City or the Authority and thereafter waived by the Purchaser, such waiver shall be limited to the particular breach so waived for the specific period set out in such waiver and such waiver shall not constitute a waiver of such breach for any other period and shall not waive any other or similar breach hereunder. Section 7.02. Counterparts. This Agreement may be signed in any number of counterpart copies (and by different parties on different counterparts), each of which shall constitute an original but all such copies shall constitute one and the same instrument. Section 7.03. Notices. All notices, requests, demands, directions and other communications (collectively “notices”) under the provisions of this Agreement shall be in writing 13.2.1.d Packet Pg. 361 Attachment: Convertible Bond Purchase Agreement (City of Gilroy) (4078 : GPFFA - 2013 LRBs Refunding) 21 (including facsimile communication), unless otherwise expressly permitted hereunder, and shall be properly addressed and sent by registered or certified mail or by express courier for next Business Day delivery and shall be deemed received as follows: (a) if by registered or certified mail, five (5) days after mailing; (b) if by express courier, on the next Business Day; and (c) if by facsimile, when confirmation of transmission is obtained if prior to 5:00 p.m. local time on a Business Day, and otherwise, on the next Business Day; provided that service of a notice prescribed by any applicable law shall be considered complete when the requirements of such applicable law are met. Notices by electronic mail (e mail) shall not constitute notice under this Agreement and are only to be used in addition to notice given as prescribed under subsections (a), (b) or (c) of this Section. All notices shall be sent to the applicable party at the following address or in accordance with the last unrevoked written direction from such party to the other party hereto: if to the City, addressed to it at: City of Gilroy 7351 Rosanna Street Gilroy, California 95020 Attention: Finance Director Email: jimmy.forbis@ci.gilroy.ca.us if to the Authority, addressed to it at: Gilroy Public Facilities Financing Authority 7351 Rosanna Street Gilroy, California 95020 Attention: Treasurer Email: jimmy.forbis@ci.gilroy.ca.us or if to the Purchaser, addressed to if at: Wells Fargo Municipal Capital Strategies, LLC c/o Wells Fargo Bank, National Association 1655 Grant Street, 3rd Floor Concord, California 94520 Attention: Zina Monroe Telephone: (925) 852-1061 Email: monroez@wellsfargo.com The Purchaser may in its sole discretion rely on any notice (including telephone communication or e-mail communication) purportedly made by or on behalf of the City or the Authority, but it shall have no duty to accept any notice not given as prescribed in this Section and shall have no duty to verify the identity or authority of the Person giving such notice, unless such actions or omissions would amount to gross negligence or intentional misconduct. Section 7.04. Severability. Any provision of this Agreement which is prohibited, unenforceable or not authorized in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition, unenforceability or nonauthorization without invalidating the 13.2.1.d Packet Pg. 362 Attachment: Convertible Bond Purchase Agreement (City of Gilroy) (4078 : GPFFA - 2013 LRBs Refunding) 22 remaining provisions hereof or affecting the validity, enforceability or legality of such provision in any other jurisdiction. Section 7.05. Governing Law; Waiver of Jury Trial. (a) This Agreement shall be governed by, and construed in accordance with, the laws of the State without giving effect to conflicts of laws provisions. (b) To the extent permitted by applicable laws, each of the parties hereto hereby waives its right to a jury trial of any claim or cause of action based upon or arising out of this Agreement, the Bond Documents or any of the transactions contemplated hereby or thereby, including contract claims, tort claims, breach of duty claims, and all other common law or statutory claims. If and to the extent that the foregoing waiver of the right to a jury trial is unenforceable for any reason in such forum, each of the parties hereto hereby consents to the adjudication of all claims pursuant to judicial reference as provided in California Code of Civil Procedure Section 638, and the judicial referee shall be empowered to hear and determine all issues in such reference, whether fact or law. Each of the parties hereto represents that each has reviewed this waiver and consent and each knowingly and voluntarily waives its jury trial rights and consents to judicial reference following consultation with legal counsel on such matters. In the event of litigation, a copy of this Agreement may be filed as a written consent to a trial by the court or to judicial reference under California Code of Civil Procedure Section 638 as provided herein. Section 7.06. Complete and Controlling Agreement. This Agreement and the other Bond Documents completely set forth the agreements between the Purchaser, the Authority and the City and fully supersede all prior agreements, both written and oral, between the Purchaser, the Authority and the City relating to all matters set forth herein and in the other Bond Documents. Section 7.07. Indemnification. In addition to any and all rights of reimbursement, indemnification, subrogation or any other rights pursuant hereto or under law or equity, the City and the Authority hereby agree (to the extent permitted by law) to indemnify and hold harmless the Purchaser and its officers, directors and agents (each, an “Indemnitee”) from and against any and all claims, damages, losses, liabilities, reasonable costs or expenses whatsoever (including reasonable attorneys’ fees) which may incur or which may be claimed against an Indemnitee by any Person or entity whatsoever (collectively, the “Liabilities”) by reason of or in connection with (a) the execution and delivery of, or payment or failure to pay under, this Agreement or any other Bond Document; (b) the issuance and sale of the Bond; and (c) the use of the proceeds of the Bond; provided that the City and the Authority shall not be required to indemnify an Indemnitee for any claims, damages, losses, liabilities, costs or expenses to the extent, but only to the extent, caused by the willful misconduct or gross negligence of such Indemnitee. The obligations of the City and the Authority under this Section shall survive the payment of the Bond and the termination of this Agreement. Section 7.08. Patriot Act. The Purchaser hereby notifies the City and the Authority that pursuant to the requirements of the Patriot Act it is required to obtain, verify and record information that identifies the City and the Authority, which information includes the name and address of the City and the Authority and other information that is necessary for the Purchaser to identify the City and the Authority in accordance with the requirements of the Patriot Act. The 13.2.1.d Packet Pg. 363 Attachment: Convertible Bond Purchase Agreement (City of Gilroy) (4078 : GPFFA - 2013 LRBs Refunding) 23 City and the Authority hereby agree that they shall promptly provide such information upon request by the Purchaser. Section 7.09. No Advisory or Fiduciary Responsibility. In connection with all aspects of the transactions contemplated by this Agreement and the other Bond Documents (including in connection with any amendment, waiver or other modification of this Agreement or of any Bond Document), the City and the Authority acknowledge and agree that: (a)(i) any arranging, structuring and other services regarding this Agreement and the Bond Documents provided by the Purchaser or any affiliate of the Purchaser are arm’s length commercial transactions between the City and the Authority on the one hand, and the Purchaser and any affiliate of the Purchaser on the other hand, (ii) the City and the Authority have consulted their own legal, accounting, regulatory and tax advisors to the extent they have deemed appropriate, and (iii) the City and the Authority are capable of evaluating, and understand and accept, the terms, risks and conditions of the transactions contemplated by this Agreement and the Bond Documents; (b)(i) the Purchaser and each affiliate of the Purchaser is and has been acting solely as a principal and has not been, is not, and will not be acting as an advisor, agent or fiduciary for the City or the Authority or any other Person and (ii) neither the Purchaser nor any affiliate of the Purchaser has any obligation to the City or the Authority with respect to the transactions contemplated by this Agreement and the Bond Documents, except those obligations expressly set forth herein; and (c) the Purchaser and each affiliate of the Purchaser may be engaged in a broad range of transactions that involve interests that differ from those of the City and the Authority, and neither the Purchaser nor any affiliate of the Purchaser has any obligation to disclose any of such interests to the City or the Authority. To the fullest extent permitted by applicable laws, the City and the Authority hereby waive and release any claims that it may have against the Purchaser and each affiliate of the Purchaser with respect to any breach or alleged breach of agency or fiduciary duty in connection with any aspect of the transactions contemplated by this Agreement and the Bond Documents. Section 7.10. Excess Interest. If the amount of interest payable for any period in accordance with the terms of the Bond or the Bond Documents exceeds the amount of interest that would be payable for such period had interest for such period been calculated at the maximum interest rate permitted by law, then interest for such period shall be payable in an amount calculated at the maximum interest rate permitted by law. Any interest that would have been due and payable for any period but for the operation of the immediately preceding sentence shall accrue and be payable as provided in the foregoing sentence and shall, less interest actually paid to the Purchaser for such period, constitute the “Excess Interest Amount.” If there is any accrued and unpaid Excess Interest Amount as of any date, then the principal amount with respect to which interest is payable shall bear interest at the maximum interest rate permitted by law until payment to the Purchaser of the entire Excess Interest Amount. Notwithstanding the foregoing, on the date on which no principal amount with respect to the Bond remains unpaid, the City shall pay to the Purchaser a fee equal to any accrued and unpaid Excess Interest Amount. Section 7.11. Contractual Interpretation. The parties acknowledge that they have read and fully understand the terms of this Agreement, have consulted with such attorneys, accountants, advisors, or other professionals as they have deemed appropriate prior to executing this Agreement with adequate opportunity and time for review thereof, and are fully aware of its contents and of its legal effect. Accordingly, neither this Agreement nor any ambiguity herein shall be construed 13.2.1.d Packet Pg. 364 Attachment: Convertible Bond Purchase Agreement (City of Gilroy) (4078 : GPFFA - 2013 LRBs Refunding) 24 against any party on the grounds that such party drafted this Agreement and instead, this Agreement shall be interpreted as though drafted equally by all parties. Section 7.12. EMMA Posting. In the event the City or the Authority files with EMMA this Agreement or any other Bond Document or any description of the material terms thereof or notice of any agreement to covenants, events of default, remedies, priority rights or other similar terms, either voluntarily or as required pursuant a continuing disclosure agreement or Rule 15c2- 12 promulgated pursuant to the Securities and Exchange Act of 1934, as amended (the “Rule”) (each such posting, an “EMMA Posting”), the City and the Authority shall (i) provide the Purchaser with a copy of each EMMA Posting prior to submitting or posting on EMMA and (ii) shall not file or permit the filing of any EMMA Posting that includes Confidential Information. The City and the Authority acknowledge and agree that although the Purchaser may request review, edits or redactions of such materials prior to filing, the Purchaser is not responsible for the City’s or the Authority’s or any other entity’s (including, but not limited to, any broker-dealer’s) compliance or noncompliance (or any claims, losses or liabilities arising therefrom) with any continuing disclosure agreement or any applicable securities or other laws, including, but not limited to, those relating to the Rule. Section 7.13. Electronic Signatures. The parties agree that the electronic signature of a party to this Agreement shall be as valid as an original signature of such party and shall be effective to bind such party to this Agreement. The parties agree that any electronically signed document (including this Agreement) shall be deemed (i) to be “written” or “in writing,” (ii) to have been signed and (iii) to constitute a record established and maintained in the ordinary course of business and an original written record when printed from electronic files. Such paper copies or “printouts”, if introduced as evidence in any judicial, arbitral, mediation or administrative proceeding, will be admissible as between the parties to the same extent and under the same conditions as other original business records created and maintained in documentary form. Neither party shall contest the admissibility of true and accurate copies of electronically signed documents on the basis of the best evidence rule or as not satisfying the business records exception to the hearsay rule. For purposes hereof, “electronic signature” means a manually signed original signature that is then transmitted by electronic means; “transmitted by electronic means” means sent in the form of a facsimile or sent via the internet as a “pdf” (portable document format) or other replicating image attached to an e mail message; and, “electronically signed document” means a document transmitted by electronic means and containing, or to which there is affixed, an electronic signature. [Signatures Begin on the Following Page] 13.2.1.d Packet Pg. 365 Attachment: Convertible Bond Purchase Agreement (City of Gilroy) (4078 : GPFFA - 2013 LRBs Refunding) Signature Page to Bond Purchase Agreement IN WITNESS WHEREOF, the parties hereto have caused this Bond Purchase Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first above written. CITY OF GILROY By: Mayor Attest: By: City Clerk GILROY PUBLIC FACILITIES FINANCING AUTHORITY By: Executive Director Attest: By: Secretary 13.2.1.d Packet Pg. 366 Attachment: Convertible Bond Purchase Agreement (City of Gilroy) (4078 : GPFFA - 2013 LRBs Refunding) Signature Page to Bond Purchase Agreement WELLS FARGO MUNICIPAL CAPITAL STRATEGIES, LLC By Name: Brian Goins Title: Vice President 13.2.1.d Packet Pg. 367 Attachment: Convertible Bond Purchase Agreement (City of Gilroy) (4078 : GPFFA - 2013 LRBs Refunding) 13.2.1.d Packet Pg. 368 Attachment: Convertible Bond Purchase Agreement (City of Gilroy) (4078 : GPFFA - 2013 LRBs Refunding) 4874-8329-4527.4 NP DRAFT 11/29/22 ESCROW AGREEMENT by and between the GILROY PUBLIC FACILITIES FINANCING AUTHORITY and U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, AS PRIOR TRUSTEE AND AS ESCROW AGENT Dated as of [December 1, 2022] Relating to the Defeasance of Gilroy Public Facilities Financing Authority Refunding Lease Revenue Bonds, Series 2013 13.2.1.e Packet Pg. 369 Attachment: Escrow Agreement (4078 : GPFFA - 2013 LRBs Refunding) 4874-8329-4527.4 ESCROW AGREEMENT THIS ESCROW AGREEMENT (this “Escrow Agreement”), executed and entered into as of [December 1, 2022], is by and between the GILROY PUBLIC FACILITIES FINANCING AUTHORITY, a joint exercise of power authority duly organized and existing under the laws of the State of California (the “Authority ”) and U.S. Bank Trust Company, National Association, a national banking association organized and existing under the laws of the United States of America, as successor to MUFG UNION BANK, N.A., as Prior Trustee (as defined herein) and as Escrow Agent (the “Escrow Agent”). W I T N E S S E T H: WHEREAS, there are currently outstanding Gilroy Public Facilities Financing Authority Refunding Lease Revenue Bonds, Series 2013 (the “Prior Bonds”); WHEREAS, the Prior Bonds were issued under the Trust Agreement, dated as of August 1, 2013 (the “2013 Trust Agreement”), by and between the Authority and U.S. Bank Trust Company, National Association, as successor to MUFG Union Bank, N.A., as trustee (the “Prior Trustee”); WHEREAS, the Escrow Agent is the Prior Trustee under the 2013 Trust Agreement; WHEREAS, the Authority has determined that a savings will be realized by the City of Gilroy (the “City”) exercising its options to prepay its obligations under the Lease Agreement (as defined in the 2013 Trust Agreement) and redeem and to cause the Authority to defease, pay and redeem the Prior Bonds on November 1, 2023 (the “Redemption Date”) at a redemption price (the “Redemption Price”) equal to the principal amount of the Prior Bonds, plus the accrued but unpaid interest on the Prior Bonds to the Redemption Date; WHEREAS, the Prior Bonds maturing on or before November 1, 2023 (the “Non-Callable Bonds”) are not subject to optional redemption prior to their stated maturity dates; WHEREAS, the Prior Bonds maturing on or after November 1, 2024 (the “Callable Bonds”) are subject to optional redemption prior to their stated maturity dates; WHEREAS, in order to provide the funds necessary to exercise said option, on [December __, 2022], the Authority has caused to be sold, $[________] aggregate principal amount of Gilroy Public Facilities Financing Authority Lease Revenue Refunding Bonds, Series 2022A (Convertible) (the “Series 2022A Bonds”), pursuant to an Indenture, dated as of August 1, 2020 (the “ Original Indenture”), by and among U.S. Bank Trust Company, National Association, as successor trustee (the “Trustee”), the City and the Authority, as supplemented by the First Supplement to Indenture, dated as of [________] 1, 2022, by and among the Trustee, the City and the Authority (the “First Supplement to Indenture,” and together with the Original Indenture, the “Indenture”) and will use the proceeds to defease, pay and redeem the Prior Bonds; and WHEREAS, the Callable Bonds are subject to redemption on the Redemption Date and the Authority has determined to provide for the call for redemption on the Redemption Date of the Callable Bonds outstanding on the Redemption Date; NOW THEREFORE, in consideration of the mutual covenants and agreements herein contained, the Authority and the Escrow Agent agree as follows: 13.2.1.e Packet Pg. 370 Attachment: Escrow Agreement (4078 : GPFFA - 2013 LRBs Refunding) 4874-8329-4527.4 2 Section 1. Definitions. Unless otherwise defined herein, capitalized terms used herein shall have the meanings ascribed to such terms in the 2013 Trust Agreement. Section 2. The Escrow Fund. (a) There is hereby established a fund (the “Escrow Fund”) to be held as an irrevocably pledged escrow by the Escrow Agent, which the Escrow Agent shall keep separate and apart from all other funds of the Authority and the Escrow Agent and to be applied solely as provided in this Escrow Agreement. Pending application as provided in this Escrow Agreement, amounts on deposit in the Escrow Fund are hereby pledged solely to the payment of interest due on the Prior Bonds on each May 1 and November 1 of 2023, the principal payable on the Non-Callable Bonds on November 1, 2023, and the Redemption Price on the Redemption Date for the Callable Bonds, which amounts shall be held in trust by the Escrow Agent for the Owners of the Prior Bonds. (b) The Prior Trustee was previously instructed and is hereby instructed to liquidate the investments held in the funds and accounts established under the 2013 Trust Agreement. Upon the authentication and issuance of the Series 2022A Bonds, there shall be deposited in the Escrow Fund the following (1) $[___________] received from the proceeds of the sale of the Series 2022A Bonds and (2) $[_________] from the Reserve Account established under the 2013 Trust Agreement. (c) The Authority represents, and [_______] (the “Verification Agent”) has verified, that upon the deposit of moneys pursuant to Section 2(b) hereof, the moneys on deposit in the Escrow Fund will be at least equal to an amount sufficient to purchase the aggregate principal amount of non-callable Federal Securities set forth in Exhibit A hereto (the “Exhibit A Securities”), which principal, together with all interest due or to become due on such Exhibit A Securities, and any uninvested cash held by the Escrow Agent in the Escrow Fund, will be sufficient to make the payments required by Section 4 hereof. Section 3. Use and Investment of Moneys. (a) The Escrow Agent hereby acknowledges deposit of the moneys described in Section 2(b) hereof and agrees to invest $[________] of such moneys in the Exhibit A Securities. Except as provided in Section 3(b) or Section 3(c) hereof, the balance of the moneys described in Section 2 hereof shall be held uninvested in the Escrow Fund. (b) Upon the written request of the Authority, but subject to the conditions and limitations herein set forth, the Escrow Agent shall purchase substitute non-callable Federal Securities, for the non- callable Federal Securities then held in the Escrow Fund with the proceeds derived from the sale, transfer, redemption or other disposition of non-callable Federal Securities then on deposit in the Escrow Fund and any uninvested money then held by the Escrow Agent hereunder in accordance with the provisions of this Section. Such sale, transfer, redemption or other disposition of non-callable Federal Securities then on deposit in the Escrow Fund and substitution of other non-callable Federal Securities shall be effected by the Escrow Agent upon the written request of the Authority but only by a simultaneous transaction and only upon receipt of (i) certification by a nationally recognized firm of independent certified public accountants that the non-callable Federal Securities to be substituted, together with the non-callable Federal Securities which will continue to be held in the Escrow Fund, will mature in such principal amounts and earn interest in such amounts and, in each case, at such times so that sufficient moneys will be available from maturing principal and interest on such non-callable Federal Securities held in the Escrow Fund, together with any uninvested moneys, to make all payments required by Section 4 hereof, which have not previously been made, and (ii) receipt by the Escrow Agent of an opinion of counsel of recognized standing in the field of law relating to municipal bonds to the effect that the sale, transfer, redemption or other disposition and substitution of non-callable Federal Securities will not adversely affect the exclusion of interest on any Prior Bonds or any Series 2022A Bonds from gross income for purposes of federal income taxation. 13.2.1.e Packet Pg. 371 Attachment: Escrow Agreement (4078 : GPFFA - 2013 LRBs Refunding) 4874-8329-4527.4 3 (c) Upon the written request of the Authority, but subject to the conditions and limitations herein set forth, the Escrow Agent will apply any moneys received from the maturing principal of or interest or other investment income on any non-callable Federal Securities held in the Escrow Fund, or the proceeds from any sale, transfer, redemption or other disposition of non-callable Federal Securities pursuant to Section 3(b) hereof not required for the purposes of said Section: (i) to the extent such moneys will not be required at any time for the purpose of making a payment required by Section 4 hereof, as certified by a nationally recognized firm of independent certified public accountants delivered to the Escrow Agent, such moneys shall, upon the written request of the Authority, be transferred to the Trustee for deposit in the Series 2022A Interest Fund established under the Indenture as received by the Escrow Agent, free and clear of any trust, lien, pledge or assignment securing the Prior Bonds or otherwise existing hereunder, and (ii) to the extent such moneys will be required for such purpose at a later date, shall, to the extent practicable, be invested or reinvested in non-callable Federal Securities maturing at times and in amounts sufficient, as certified by a nationally recognized firm of independent certified public accountants delivered to the Escrow Agent, to make such payment required by Section 4 hereof. (d) All non-callable Federal Securities purchased pursuant to this Escrow Agreement shall be deposited in and held for the credit of the Escrow Fund. Except as provided in this Section 3 hereof, no moneys or non-callable Federal Securities deposited with the Escrow Agent pursuant to this Escrow Agreement nor principal of, or interest payments or other investment income on, any such non-callable Federal Securities shall be withdrawn or used for any purpose other than, and shall be held in trust for, the payment of the Prior Bonds as provided in Section 4 hereof. (e) The Owners of the Prior Bonds shall have a first and exclusive lien on the moneys and non- callable Federal Securities in the Escrow Fund until such moneys and non-callable Federal Securities are used and applied as provided in this Escrow Agreement. (f) The Escrow Agent shall not be held liable for investment, reinvestment or liquidation of investment losses, tax, fees or other charges resulting from compliance with the provisions of this Escrow Agreement. (g) Absent such written requests by the Authority, the Escrow Agent shall hold moneys uninvested. Section 4. Payment of Prior Bonds. From the maturing principal of the non-callable Federal Securities held in the Escrow Fund and the investment income and other earnings thereon and any uninvested money then held in the Escrow Fund, the Escrow Agent shall apply such amounts as follows: (a) on May 1, 2023, the Escrow Agent, as the Prior Trustee, shall pay the interest on the Prior Bonds in accordance with the terms of the 2013 Trust Agreement; (b) on the Redemption Date, the Escrow Agent, as the Prior Trustee, shall pay the interest on the Non-Callable Bonds in accordance with the terms of the 2013 Trust Agreement; (c) on the Redemption Date, the Escrow Agent, as the Prior Trustee, shall pay the principal of the Non-Callable Bonds in accordance with the terms of the 2013 Trust Agreement; and (d) on the Redemption Date, the Escrow Agent, as the Prior Trustee, shall pay the Redemption Price for the Callable Bonds in accordance with the terms of the 2013 Trust Agreement. To the extent that the amount on deposit in the Escrow Fund on the Redemption Date is in excess of the amount necessary to make the required payments with respect to the Prior Bonds, as shown in the 13.2.1.e Packet Pg. 372 Attachment: Escrow Agreement (4078 : GPFFA - 2013 LRBs Refunding) 4874-8329-4527.4 4 then applicable escrow verification of the nationally recognized firm of independent certified public accountants, such excess shall be transferred to the Trustee for deposit in the Series 2022A Interest Fund established under the Indenture. Section 5. Irrevocable Instructions to Mail Notices. The Authority hereby designates the Prior Bonds for defeasance, payment and optional redemption on the Redemption Date as indicated in Section 4 hereof and hereby irrevocably instructs the Escrow Agent, as the Prior Trustee, (1) to post notice with EMMA of defeasance of the Prior Bonds (substantially in the form of Exhibit B hereto) and (2) to timely provide mailed notice of redemption of the Prior Bonds (substantially in the form of Exhibit C hereto) in accordance with Section 2.03 of the 2013 Trust Agreement. Section 6. Performance of Duties; Acknowledgement with Respect to Irrevocable Instructions. The Escrow Agent agrees to perform the duties set forth herein and agrees that the irrevocable instructions to the Escrow Agent, as the Prior Trustee, herein provided are in a form satisfactory to it. Section 7. Escrow Agent’s Authority to Make Investments. The Escrow Agent shall have no power or duty to invest any funds held under this Escrow Agreement except as provided in Section 3 hereof. The Escrow Agent shall have no power or duty to transfer or otherwise dispose of the moneys held hereunder except as provided in this Escrow Agreement. Section 8. Indemnity. To the extent permitted by law, the Authority hereby assumes liability for, and hereby agrees to indemnify, protect, save and keep harmless the Escrow Agent and its respective successors, assigns, agents, employees and servants, from and against any and all liabilities, obligations, losses, damages, penalties, claims, actions, suits, costs, expenses and disbursements (including reasonable legal fees, expenses and disbursements) of whatsoever kind and nature which may be imposed on, incurred by, or asserted against, the Escrow Agent at any time in any way relating to or arising out of the execution, delivery and performance of this Escrow Agreement, the establishment hereunder of the Escrow Fund, the acceptance of the funds and securities deposited therein, the purchase of any securities to be purchased pursuant thereto, the retention of such securities or the proceeds thereof and any payment, transfer or other application of moneys or securities by the Escrow Agent in accordance with the provisions of this Escrow Agreement; provided, however, that the Authority shall not be required to indemnify the Escrow Agent against the Escrow Agent’s own gross negligence or willful misconduct or the gross negligence or willful misconduct of the Escrow Agent’s respective successors, assigns, agents and employees or the material breach by the Escrow Agent of the terms of this Escrow Agreement. In no event shall the Authority or the Escrow Agent be liable to any person by reason of the transactions contemplated hereby other than to each other as set forth in this Section. The indemnities contained in this Section shall survive the termination of this Escrow Agreement and the resignation or removal of the Escrow Agent. Section 9. Responsibilities of Escrow Agent. The Escrow Agent makes no representation as to the sufficiency of the securities to be purchased pursuant hereto and any uninvested moneys to accomplish the redemption of the Prior Bonds pursuant to the 2013 Trust Agreement or to the validity of this Escrow Agreement as to the Authority and, except as otherwise provided herein, the Escrow Agent shall incur no liability in respect thereof. The Escrow Agent shall not be liable in connection with the performance of its duties under this Escrow Agreement except for its own gross negligence, willful misconduct or default, and the duties and obligations of the Escrow Agent shall be determined by the express provisions of this Escrow Agreement. The Escrow Agent may consult with counsel of its selection and in reliance upon the written opinion of such counsel shall have full and complete authorization and protection in respect of any action taken, suffered or omitted by it in good faith in accordance therewith. Whenever the Escrow Agent shall deem it necessary or desirable that a matter be proved or established prior to taking, suffering, or omitting any action under this Escrow Agreement, such matter (except the matters set forth herein as specifically requiring a certificate of a nationally recognized firm of independent 13.2.1.e Packet Pg. 373 Attachment: Escrow Agreement (4078 : GPFFA - 2013 LRBs Refunding) 4874-8329-4527.4 5 certified public accountants or an opinion of counsel of recognized standing in the field of law relating to municipal bonds) may be deemed to be conclusively established by a written certification of the Authority. Whenever the Escrow Agent shall deem it necessary or desirable that a matter specifically requiring a certificate of a nationally recognized firm of independent certified public accountants or an opinion of counsel of recognized standing in the field of law relating to municipal bonds be proved or established prior to taking, suffering, or omitting any such action, such matter may be established only by a certificate signed by a nationally recognized firm of certified public accountants or such opinion of counsel of recognized standing in the field of law relating to municipal bonds. The Escrow Agent undertakes to perform only such duties as are expressly set forth in this Escrow Agreement and no implied duties, covenants or obligations shall be read into this Agreement against the Escrow Agent. The Escrow Agent may resign by giving written notice to the Authority, and upon receipt of such notice the Authority shall promptly appoint a successor Escrow Agent. If the Authority does not appoint a successor Escrow Agent within thirty days of receipt of such notice, the resigning Escrow Agent may petition a court of competent jurisdiction for the appointment of a successor Escrow Agent, which court may thereupon, upon such notice as it shall deem proper, appoint a successor Escrow Agent. Upon acceptance of appointment by a successor Escrow Agent, the resigning Escrow Agent shall transfer all amounts held by it in the Escrow Fund to such successor Escrow Agent and be discharged of any further obligation or responsibility hereunder. Section 10. Amendments. The Authority and the Escrow Agent may (but only with the consent of the Owners of all of the Prior Bonds) amend this Escrow Agreement or enter into agreements supplemental to this Escrow Agreement. Section 11. Term. This Escrow Agreement shall commence upon its execution and delivery and shall terminate on the date upon which (i) the Prior Bonds have been paid in accordance with this Escrow Agreement and (ii) any remaining amounts on deposit in the Escrow Fund have been transferred to the Authority, in accordance with this Escrow Agreement. Section 12. Compensation. The Authority shall from time to time pay or cause to be paid to the Escrow Agent the agreed upon compensation for its services to be rendered hereunder, and reimburse the Escrow Agent for all of its advances in the exercise and performance of its duties mutually agreed upon in writing hereunder; provided, however, that under no circumstances shall the Escrow Agent be entitled to any lien whatsoever on any moneys or obligations in the Escrow Fund for the payment of fees and expenses for services rendered or expenses incurred by the Escrow Agent under this Escrow Agreement or otherwise. The provisions contained in this Section shall survive the termination of this Escrow Agreement and the resignation or removal of the Escrow Agent. Section 13. Severability. If any one or more of the covenants or agreements provided in this Escrow Agreement on the part of the Authority or the Escrow Agent to be performed should be determined by a court of competent jurisdiction to be contrary to law, such covenants or agreements shall be null and void and shall be deemed separate from the remaining covenants and agreements herein contained and shall in no way affect the validity of the remaining provisions of this Escrow Agreement. Section 14. Counterparts. This Escrow Agreement may be executed in several counterparts, all or any of which shall be regarded for all purposes as an original but all of which shall constitute and be but one and the same instrument. The exchange of copies of this Escrow Agreement and of signature pages by facsimile or PDF transmission shall constitute effective execution and delivery of this Escrow Agreement as to the parties hereto and may be used in lieu of the original Escrow Agreement and signature 13.2.1.e Packet Pg. 374 Attachment: Escrow Agreement (4078 : GPFFA - 2013 LRBs Refunding) 4874-8329-4527.4 6 pages for all purposes. Each party agrees that the electronic signatures, whether digital or encrypted, of the parties included in this Escrow Agreement are intended to authenticate this writing and to have the same force and effect as manual signatures. Electronic signature means any electronic sound, symbol, or process attached to or logically associated with a record and executed and adopted by a party with the intent to sign such record, including facsimile or email electronic signatures. The words “execution,” “signed,” “signature,” “delivery,” and words of like import in or relating to the Escrow Agreement or any document to be signed in connection with the Escrow Agreement shall be deemed to include electronic signatures, deliveries or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature, physical delivery thereof or the use of a paper- based recordkeeping system, as the case may be, and the parties hereto consent to conduct the transactions contemplated hereunder by electronic means. Section 15. Governing Law. This Escrow Agreement shall be construed under the laws of the State of California. Section 16. Force Majeure. In no event shall the Escrow Agent be responsible or liable for any failure or delay in the performance of its obligations hereunder arising out of or caused b y, directly or indirectly, forces beyond its control, including, without limitation, strikes, work stoppages, accidents, acts of war or terrorism, pandemics, epidemics, recognized public emergencies, quarantine restrictions, civil or military disturbances, nuclear or natural catastrophes or acts of God, and interruptions, loss or malfunctions of utilities, communications or computer (software and hardware) services; it being understood that the Escrow Agent shall use reasonable efforts which are consistent with accepted practices in the banking industry to resume performance as soon as practicable under the circumstances. Section 17. U.S.A. Patriot Act. The parties hereto acknowledge that in accordance with Section 326 of the U.S.A. Patriot Act, the Escrow Agent like all financial institutions and in order to help fight the funding of terrorism and money laundering, is required to obtain, verify, and record information that identifies each person or legal entity that establishes a relationship or opens an account with the Escrow Agent. The parties to this Escrow Agreement agree that they will provide the Escrow Agent with such information as it may request in order for the Trustee to satisfy the requirements of the U.S.A. Patriot Act. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 13.2.1.e Packet Pg. 375 Attachment: Escrow Agreement (4078 : GPFFA - 2013 LRBs Refunding) 4874-8329-4527.4 7 IN WITNESS WHEREOF, the parties hereto have executed this Escrow Agreement as of the date first above written. U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, AS PRIOR TRUSTEE AND AS ESCROW AGENT By: Authorized Signatory GILROY PUBLIC FACILITIES FINANCING AUTHORITY By: Executive Director 13.2.1.e Packet Pg. 376 Attachment: Escrow Agreement (4078 : GPFFA - 2013 LRBs Refunding) 4874-8329-4527.4 A-1 EXHIBIT A Type Maturity Date Par Amount Interest Rate Purchase Price 13.2.1.e Packet Pg. 377 Attachment: Escrow Agreement (4078 : GPFFA - 2013 LRBs Refunding) 4874-8329-4527.4 B-1 EXHIBIT B NOTICE OF DEFEASANCE GILROY PUBLIC FACILITIES FINANCING AUTHORITY REFUNDING LEASE REVENUE BONDS, SERIES 2013 Date of Issuance: August 14, 2013 CUSIP No.* Maturity (November 1) Rate Amount 376060CN7 2023 5.000% $1,080,000 376060CP2 2024 4.000 1,130,000 376060CQ0 2025 4.250 1,175,000 376060CR8 2026 4.375 1,225,000 376060CS6 2027 4.500 1,285,000 376060CT4 2028 4.750 1,345,000 376060CU1 2029 5.000 1,410,000 376060CV9 2033 6.000 6,535,000 NOTICE IS HEREBY G IVEN, on behalf of the Gilroy Public Facilities Financing Authority (the “Authority”) to the owners of the outstanding Gilroy Public Facilities Financing Authority Refunding Lease Revenue Bonds, Series 2013 (the “Bonds”), that pursuant to the Trust Agreement, dated as of August 1, 2013 (the “Trust Agreement ”), by and between the Authority and U.S. Bank Trust Company, National Association, as successor to MUFG Union Bank, N.A., as trustee, authorizing the issuance of Bonds, the lien of the Trust Agreement with respect to the Bonds has been discharged through the irrevocable deposit of cash and federal securities into the escrow fund (the “Escrow Fund”). The Escrow Fund has been established and is being maintained pursuant to that certain Escrow Agreement, dated as of [December 1, 2022], by and between the Authority and U.S. Bank Trust Company, National Association, as Escrow Agent (the “Escrow Agent”). As a result of such deposit, the Bonds are deemed to have been paid and defeased in accordance with the Trust Agreement. The pledge of the funds provided for under the Trust Agreement and all other obligations of the Authority to the owners of the Bonds shall hereafter be limited to the application of moneys in the Escrow Fund for the payment of the principal of and interest on the Bonds as such payments become due and payable and the payment of the redemption price of the Bonds as described below. The cash and federal securities held in the Escrow Fund are calculated to provide sufficient moneys to pay the principal of interest as such payments becomes due and payable and to redeem the Bonds in full on November 1, 2023 at a redemption price equal to 100% of the principal thereof plus accrued interest to such date. Dated: [December __, 2022] U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, as Escrow Agent * CUSIP numbers are provided for convenience of reference only. None of the Authority nor the Escrow Agent shall be held responsible for the selection or use of the CUSIP numbers, nor is any representation made as to their correctness in this Notice. 13.2.1.e Packet Pg. 378 Attachment: Escrow Agreement (4078 : GPFFA - 2013 LRBs Refunding) 4874-8329-4527.4 C-1 EXHIBIT C NOTICE OF FULL OPTIONAL REDEMPTION GILROY PUBLIC FACILITIES FINANCING AUTHORITY REFUNDING LEASE REVENUE BONDS, SERIES 2013 Date of Issuance: August 14, 2013 NOTICE IS HEREBY GIVEN by U.S. Bank Trust Company, National Association, as Escrow Agent for the Gilroy Public Facilities Financing Authority, that the Authority intends to exercise its option to redeem the maturities identified below of its outstanding Gilroy Public Facilities Financing Authority Refunding Lease Revenue Bonds, Series 2013 (the “Series 2013 Bonds” and the maturities thereof being redeemed, the “Refunded Bonds”) on November 1, 2023 (the “Redemption Date”) prior to their stated maturity, at a redemption price equal to 100% of the principal amount of the Refunded Bonds plus accrued interest thereon to the Redemption Date, without premium (the “Redemption Price”). The Series 2013 Bonds were originally issued on August 14, 2013. CUSIP No.* Maturity (November 1) Rate Amount Price 376060CP2 2024 4.000% $1,130,000 100.00 376060CQ0 2025 4.250 1,175,000 100.00 376060CR8 2026 4.375 1,225,000 100.00 376060CS6 2027 4.500 1,285,000 100.00 376060CT4 2028 4.750 1,345,000 100.00 376060CU1 2029 5.000 1,410,000 100.00 376060CV9 2033 6.000 6,535,000 100.00 To receive payment of the Redemption Price, the Refunded Bonds described above must be presented to: BY MAIL OR BY HAND [U.S. Bank National Association Global Corporate Trust Services 111 Fillmore Avenue E St. Paul, MN 55107] On the Redemption Date, there shall become due and payable upon the Refunded Bonds the Redemption Price, and from and after the Redemption Date interest on the Refunded Bonds shall cease to accrue and be payable. This notice and such redemption may be rescinded by the Authority on or prior to the date set for redemption. This notice of redemption shall be cancelled and annulled if for any reason funds are not available on the date fixed for redemption for the payment in full of the Bonds then called for redemption, and such cancellation shall not const itute an Event of Default under the Trust Agreement. Bondholders presenting their bonds in person for same day payment must surrender their bond(s) by 1:00 P.M. CST on the Redemption Date and a check will be available for pick up after 2:00 P.M. CST. Checks not picked up by 4:30 P.M. CST will be mailed out to the bondholder via first class mail. If payment of the Redemption Price is to be made to the registered owner of the Bond, you are not required to endorse the Bond to collect the Redemption Price. 13.2.1.e Packet Pg. 379 Attachment: Escrow Agreement (4078 : GPFFA - 2013 LRBs Refunding) 4874-8329-4527.4 C-2 For a list of redemption requirements please visit our website at www.usbank.com/corporatetrust and click on the “Bondholder Information” link for Redemption instructions. You may also contact our Bondholder Communications team at 1-800-934-6802 Monday through Friday from 8 AM to 6 PM CST. IMPORTANT NOTICE Federal law requires the Agent to withhold taxes at the applicable rate from the payment if an IRS Form W-9 or applicable IRS Form W-8 is not provided. Please visit www.irs.gov for additional information on the tax forms and instructions. Dated: ________, 2023 U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, as Escrow Agent 13.2.1.e Packet Pg. 380 Attachment: Escrow Agreement (4078 : GPFFA - 2013 LRBs Refunding)