2019 Bonds - CA.gov

NEW ISSUE- BOOK-ENTRY RATING: S&P:"A" See "RATING" herein.

In the opinion of Norton Rose Fulbright US LL!', Los Angeles, California, Bond Counsel under existing statutes, regulations, rulings and court decisions, and subject to the matters described in "TAX MATTERS" herein, interest on the 2019 Bonds is excluded pursuant to seaion 103(a) of the Internal Revenue Code of 1986 from the gross income of the owners thereof for federal income tax purposes and will not be included in computing the alternative minimum taxable income of the owners thereof It is also the opinion of Bond Counsel that under existing law interest on the 2019 Bonds is exempt from personal income taxes of the State of California. See "TAX MATTERS" herein.

Dated: Delivery Date

$10,200,000 MONTEBELLO PUBLIC FINANCING AUTHORITY

Lease Revenue Refunding Bonds, 2019 Series A (Hilton Garden Inn Project)

Due: December 1, as shown in the inside cover

The $10,200,000 aggregate principal amount of Montebello Public Financing Authority Lease Revenue Refunding Bonds, 2019 Series A (Hilton Garden Inn Project) (the "2019 Bonds") are being issued by the Montebello Public Financing Authority (the" Authority") pursuant to an Indenture, dated as of December 1, 2019 (the "Indenture"), by and between the Authority and The Bank of New York Mellon Trust Company, N.A., as trustee (the "Trustee").

The 2019 Bonds are being issued to (i) refinance the acquisition, construction and equipping of the Hilton Garden Inn, as described herein and, therefore, to refund the outstanding Montebello Public Financing Authority Lease Revenue Bonds, 2004 Series A (Montebello Hotel Project); (ii) fund a reserve fund for the 2019 Bonds, and (iii) pay costs ofissuance of the 2019 Bonds. See "ESTIMATED SOURCES AND USES OF FUNDS" and "THE REFUNDING PLAN" herein.

The 2019 Bonds will be delivered as fully registered bonds, registered in the name of Cede & Co. as nominee of The Depository Trust Company, New York, New York ("DTC"), and will be available to ultimate purchasers ("Beneficial Owners") in the denomination of $5,000 or any integral multiple thereof, under the bookentry system maintained by DTC. Beneficial Owners will not be entitled to receive delivery of bonds representing their ownership interest in the 2019 Bonds. Interest on the 2019 Bonds is due semiannually on June 1 and December 1 of each year, commencing June 1, 2020, payable by the Trustee, to DTC for subsequent disbursement to DTC participants, so long as DTC or its nominee remains the registered owner of the 2019 Bonds. See "THE 2019 BONDS" herein.

The 2019 Bonds are subject to redemption prior to maturity as described herein. See "THE 2019 BONDS-Redemption" herein.

The 2019 Bonds are limited obligations of the Authority, issued under and secured by the Indenture, payable solely from Revenues. "Revenues" means (i) all payments to the Trustee (as assignee of the Authority) pursuant to a Lease Agreement, dated as of December 1, 2019 (the "Lease"), by and between the Authority and the City of Montebello (the "City"), the components of which are described herein, to be paid by the City; (ii) all amounts held in the funds and accounts created under the Indenture, together with earnings thereon; and (iii) all other receipts of the Trustee (as assignee of the Authority) attributable to the ownership, leasing or operation of the Project.

Pursuant to the Lease, the City has irrevocably pledged all Project Gross Revenues and agrees to make payments of the Base Rental thereunder (as each such term is defined therein) and, if required, such further amount as may be required from its general fund. The City is required under the Lease to make payments in each fiscal year in consideration of the use and possession of the Leased Property (as defined herein), subject to abatement. See "SOURCES OF PAYMENT FOR THE 2019 BONDS" and "RISK FACTORS" herein.

The obligation of the City to pay Base Rental (as defined in the Lease) 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. Neither the 2019 Bonds nor the obligation of the City to pay Base Rental constitutes 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.

MATURITIES. PRINCIPAL AMOUNTS. INTEREST RA TES. YIELDS AND PRICES

SEE THE INSIDE COVER

This cover page contains certain information for quick reference only. It is not a summary of the issue. Investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision. See "RISK FACTORS" herein for a discussion of special risk factors that should be considered in evaluating the investment quality of the 2019 Bonds.

The 2019 Bonds are offered by the Underwriter when, as and if issued by the Authority, subject to approval of legality by Norton Rose Fulbright US LL!', Los Angeles, California, Bond Counsel to the Authority, and certain other conditions. Certain legal matters will be passed on for the Authority by Counsel to the Authority and by Quint & Thimmig LL!', Larkspur, California, Disclosure Counsel to the Authority, and for the Underwriter by its counsel Nixon Peabody LL!', Los Angeles, California. It is anticipated that the 2019 Bonds will be available for delivery through the book-entry facilities of DTC on or about December 19, 2019.

Dated: December 12, 2019



CUSIPt Prefix: 612286

Maturity Principal Interest CUSIPt (December 1) Amount Rate Yield Price Suffix

2022 $ 650,000 4.000% 1.400% 107.487 DV3 2023 685,000 4.000 1.460 109.714 DWI 2024 700,000 4.000 1.520 111.781 DX9 2025 715,000 4.000 1.650 113.265 DY7 2026 730,000 4.000 1.750 114.662 DZ4 2027 750,000 4.000 1.830 115.986 EA8 2028 765,000 4.000 1.930 116.939 EB6 2029 790,000 4.000 2.020 117.765 EC4 2030 820,000 4.000 2.090 117.077c ED2 2031 840,000 4.000 2.230 115.715c EEO 2032 865,000 4.000 2.370 114.371c EF7 2033 885,000 4.000 2.500 113.140c EG5 2034 1,005,ooo 4.000 2.650 lll.738c EH3

t Copyright 2019, American Bankers Association. CUSIP® is a registered trademark of the American Bankers Association. CU SIP data herein is provided by CU SIP Global Services, operated by S&P Capital IQ This data is not intended to create a database and does not serve in any way as a substitute for CUSIP Global Services. CUSIP numbers have been assigned by an independent company not affiliated with the Authority or the City and are included solely for the convenience of the registered owners of the 2019 Bonds. None of the Authority, the City or the Underwriter is responsible for the selection or uses of these CUSIP numbers and no representation is made as to their correctness on the 2019 Bonds or as included herein. The CUSIP number for a specific maturity is subject to being changed after the delivery of the 2019 Bonds as a result of various subsequent actions including, but not limited to, a refunding in whole or in part or as a result of the procurement of secondary market portfolio insurance or other similar enhancement by investors that is applicable to all or a portion of certain maturities of the 2019 Bonds.

c Priced to the December 1, 2029, par call date.

No dealer, salesman or any other person has been authorized by the Montebello Public Financing Authority (the "Authority") or Cabrera Capital Markets, LLC, underwriter of the 2019 Bonds (the "Underwriter"), to give any information or to make any representations, other than those contained in this Official Statement, and, if given or made, such other information or representations must not be relied upon as having been authorized by the Authority or the Underwriter.

This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the 2019 Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale. This Official Statement is not to be construed as a contract with the purchasers of the 2019 Bonds. Neither the delivery of this Official Statement nor the sale of any of the 2019 Bonds implies that the information herein is correct as of any time subsequent to the date hereof. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create the implication that there has been no change in the matters described herein since the date hereof. This Official Statement is submitted in connection with the sale of securities referred to herein and may not be reproduced or be used, as a whole or in part, for any other purpose.

The information set forth herein has been obtained from the Authority and other sources believed to be reliable. All summaries contained herein of the Indenture (as defined herein) or other documents are made subject to the provisions of such documents and do not purport to be complete statements of any or all of such provisions. All statements made herein are made as of the date of this document by the Authority except statistical information or other statements where some other date is indicated in the text.

The Underwriter has provided the following sentence for inclusion in this Official Statement. The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE 2019 BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL ON THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE UNDERWRITER MAY OFFER AND SELL THE 2019 BONDS TO CERTAIN DEALERS AND OTHERS AT PRICES LOWER THAN THE PUBLIC OFFERING PRICES STATED ON THE INSIDE COVER PAGE HEREOF AND SUCH PUBLIC OFFERING PRICES MAY BE CHANGED FROM TIME TO TIME BY THE UNDERWRITER.

FORWARD-LOOKING STATEMENTS

Certain statements included or incorporated by reference in this Official Statement constitute forward-looking statements. Such statements are generally identifiable by the terminology used such as "plan," "expect," "estimate," "project," "budget" or other similar words. The achievement of certain results or other expectations contained in such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements described to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. No assurance is given that actual results will meet the forecasts of the Authority in any way, regardless of the level of optimism communicated in the information. Such forward-looking statements include, but are not limited to, the projections of any future operating results of the Authority included herein.

THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED IN SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS DESCRIBED TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THE AUTHORITY DOES NOT PLAN TO ISSUE ANY UPDATES OR REVISIONS TO THOSE FORWARD-LOOKING STATEMENTS IF OR WHEN ANY OF ITS EXPECTATIONS, OR EVENTS, CONDITIONS OR CIRCUMSTANCES ON WHICH SUCH STATEMENTS ARE BASED OCCUR.

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TABLE OF CONTENTS

INTRODUCTION ................................................................................ 1 Tax Levies and Delinquencies ......................................................... 31

General ............................................................................................ 1 No Teeter Plan ................................................................................ 32

Security ............................................................................................ 1 Other Revenue Sources ................................................................... 32

Limited Obligation ............................................................................ 2 OTHER CITY FINANCIAL INFORMATION ................................. 33 The Authority ................................................................................... 2 Labor Relations ............................................................................... 33 The City

............................................................................................ 2 References ......................................................................................... 3

Risk Management ............................................................................ 33 Employee Retirement Plans ............................................................ 34 Other Post-Employment Benefits ................................................... 38

ESTIMATED SOURCES AND USES OF FUNDS ............................ 3 Outstanding Debt ............................................................................ 39

THE REFUNDING PLAN ................................................................... 3 Overlapping Debt ........................................................................... .40

THE 2019 BONDS ................................................................................ 4 STA TE BUDGET INFORMATION ................................................ .42

General ............................................................................................ 4 2019-20 State Budget ...................................................................... 42

Redemption ....................................................................................... 4 Future State Budgets ....................................................................... 44

DEBT SERVICE SCHEDULE ............................................................. 6 CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS ................................................... .44

SOURCES OF PAYMENT FOR THE 2019 BONDS ......................... 7 Article XIIIA of the California Constitution ................................... .44

General. ............................................................................................. 7 Article XIIIB of the California Constitution ................................... .45 Revenue Fund ................................................................................... 7 Articles XIIIC and XIIID of the California Constitution ................ .46 Reserve Fund .................................................................................. 10 Certain Funds Established Under the Indenture ............................. 11 Lease Agreement .............................................................................. 11

Proposition lA; Proposition 22 ...................................................... .47 Proposition 26 ................................................................................. 47 Possible Future Initiatives ............................................................... 48

City Obligation to Contribute Special Tax Revenues ...................... 13 Property Insurance .......................................................................... 13 RISKFACTORS ................................................................................. 48

Reentering and Re-letting; No Foreclosure .................................... 14 Operational Risks ............................................................................ 48 Encumbrances ................................................................................. 14 Limited Recourse on Default; No Acceleration of Base Rental.. ..... 50

THE PROJECT ................................................................................... 15 Limitations on Remedies Available; Bankruptcy ............................. 51 Natural Disasters ............................................................................. 52

General.. .......................................................................................... 15 Operation of the Hotel .................................................................... 15 The Montebello Country Club ........................................................ 16 The Quiet Cannon .......................................................................... 17 Home2 Suites by Hilton Los Angeles Montebello .......................... 17 Historical Revenues and Expenses of the Hotel.. ............................ 18

Cybersecurity Risks ......................................................................... 53 Loss of Tax Exemption .................................................................... 54 No Liability of Authority to the Owners .......................................... 54 Limited Secondary Market .............................................................. 54

FINANCIAL ST A TEMENTS ........................................................... 54

Projected Revenues and Expenses of the Hotel .............................. 19 NO LITIGATION ............................................................................... 55 Hotel Occupancy Rates ................................................................... 20 Competitors .................................................................................... 21 Historical and Projected Hotel Improvements ................................ 21

The Authority ................................................................................. 55 The City .......................................................................................... 55

TAX MATTERS ................................................................................. 55 THEAUTHORITY ............................................................................ 22

General .......................................................................................... 55 THE CITY .......................................................................................... 23 Tax Accounting Treatment of Discount and Premium on Certain

General .......................................................................................... 23 2019 Bonds ...................................................................................... 56 State Audit ...................................................................................... 23 LEGAL MATTERS ............................................................................ 57

CITY FINANCIAL INFORMATION ............................................... 24 RATING .......................................................................................... 58 Financial Statements and Budgetary Process .................................. 24 UNDERWRITING ............................................................................. 58 City Financial Management Policies ............................................... 27 Current Investments ....................................................................... 27 MUNICIPAL ADVISOR .................................................................... 58

Principal Sources of General Fund Revenues ................................. 27 CONTINUING DISCLOSURE ......................................................... 58 Sales and Use Taxes ........................................................................ 28 VERIFICATION OF MA THEMA TI CAL ACCURACY .................. 59 Property Taxes ................................................................................ 29 Assessed Valuation ......................................................................... 30 ADDITIONAL INFORMATION ...................................................... 59

APPENDIXA- COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY OF

APPENDIXB-

APPENDIXCAPPENDIXDAPPENDIXEAPPENDIXF-

MONTEBELLO FOR THE FISCAL YEAR ENDED JUNE 30, 2018 .................................................. A-1 GENERAL INFORMATION REGARDING THE CITY OF MONTEBELLO AND LOS ANGELES COUNTY .............................................................................................................................. B-1 SUMMARY OF CERTAIN PROVISIONS OF THE LEGAL DOCUMENTS .................................... C-1 FORM OF CONTINUING DISCLOSURE AGREEMENT ................................................................. D-1 BOOK-ENTRY SYSTEM ....................................................................................................................... E-1 FORM OF OPINION OF BOND COUNSEL. ........................................................................................ F-1

CITY OF MONTEBELLO MONTEBELLO PUBLIC FINANCING AUTHORITY

1600 West Beverly Boulevard Montebello, CA 90640

(323) 887-1200

CITY COUNCIL/AUTHORITY BOARD Salvador Melendez, Mayor /Chair of the Board

Kimberly Ann Cobos-Cawthorne, Mayor Pro Tem/Vice Chair of the Board Jack Hadjinian, Councilmember/Director

David N. Torres, Councilmember/Director Angie M. Jimenez, Councilmember/Director

CITY STAFF I AUTHORITY STAFF Rene Bobadilla, City Manager/Executive Director

Rafael Gutierrez, City Treasurer/Treasurer Robert Mescher, City Finance Director/ Chief Financial Officer

Arnold M. Alvarez-Glasman, City Attorney Irma-Bernal Barajas, City Clerk/Secretary

PROFESSIONAL SERVICES

Municipal Advisor Hilltop Securities Inc.

Encino, California

Bond Counsel Norton Rose Fulbright US LLP

Los Angeles, California

Disclosure Counsel Quint & Thimmig LLP

Larkspur, California

Trustee The Bank of New York Mellon Trust Company, N .A.

Los Angeles, California

Verification Agent Causey Demgen & Moore, P.C.

Denver, Colorado

General

OFFICIAL STATEMENT



INTRODUCTION

This Official Statement, which includes the cover page and the appendices hereto, sets forth certain information in connection with the offering by the Montebello Public Financing Authority (the "Authority") of its $10,200,000 Lease Revenue Refunding Bonds, 2019 Series A (Hilton Garden Inn Project) (the "2019 Bonds"). The 2019 Bonds are being issued pursuant to an Indenture, dated as of December 1, 2019 (the "Indenture"), by and between the Authority and The Bank of New York Mellon Trust Company, N.A., as trustee (the "Trustee").

The 2019 Bonds are being issued to (i) refinance the acquisition, construction and equipping of the Hilton Garden Inn, as described herein (the "Hotel") and, therefore, to refund the outstanding Montebello Public Financing Authority Lease Revenue Bonds, 2004 Series A (Montebello Hotel Project) (the "2004 Bonds"); (ii) fund a reserve fund for the 2019 Bonds, and (iii) pay costs of issuance of the 2019 Bonds. See "ESTIMATED SOURCES AND USES OF FUNDS" and "THE REFUNDING PLAN."

Capitalized terms used, but not otherwise defined herein, shall have the meanings assigned thereto as set forth in APPENDIX C-SUMMARY OF CERTAIN PROVISIONS OF THE LEGAL DOCUMENTS-DEFINITIONS-Certain Definitions.

Security

The 2019 Bonds are limited obligations of the Authority, issued under and secured by the Indenture, payable solely from Revenues. "Revenues" means (i) all payments to the Trustee ( as assignee of the Authority) pursuant to a Lease Agreement, dated as of December 1, 2019 (the "Lease"), by and between the Authority and the City of Montebello (the "City"), the components of which are described herein, to be paid by the City; (ii) all amounts held in the funds and accounts created under the Indenture, together with earnings thereon; and (iii) all other receipts of the Trustee (as assignee of the Authority) attributable to the ownership, leasing or operation of the Hotel.

Pursuant to the Lease, the City is leasing the Hotel and the underlying land (the "Leased Property") from the Authority and has irrevocably pledged all Project Gross Revenues and agrees to make Base Rental payments thereunder (as such term is defined therein) and, ifrequired, such further amount as may be required from its general fund. The City is required under the Lease to make payments in each fiscal year in consideration of the use and possession of the Leased Property, subject to abatement. See "SOURCES OF PAYMENT FOR THE 2019 BONDS" and "RISK FACTORS."

The obligation of the City to pay Base Rental (as defined in the Lease) 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. Neither the 2019 Bonds nor the obligation of the City to pay Base Rental constitutes an indebtedness of the City, the County, the State of California, or any of its political subdivisions within the meaning of any constitutional or statutory debt limitation or restriction.

Limited Obligation

The 2019 Bonds are limited obligations of the Authority and are payable as to principal of, premium, if any, and interest thereof, exclusively from payments made by the City under the Lease. Neither the faith and credit nor the taxing power of the County, the State or any political subdivision or public agency thereof, other than the Authority, to the extent of payments made by the City under the Lease and other amounts held under the Indenture, is pledged to the payment of the principal of, redemption price or interest on the 2019 Bonds.

The Authority

The Authority is a joint exercise of powers entity organized and existing under and by virtue of the Joint Exercise of Powers Act, constituting Articles 1 through 4 ( commencing with Section 6500) of Chapter 5, Division 7, Title 1 of the California Government Code (the "Joint Powers Act"). The City and the Community Redevelopment Agency of the City of Montebello formed the Authority by the execution of a joint exercise of powers agreement on September 2, 1997. In July 2014, the Parking Authority of the City of Montebello replaced the Successor Agency to the Former Redevelopment Agency (as successor to the Community Redevelopment Agency of the City of Montebello) as a member of the Authority. Pursuant to the Joint Powers Act, the Authority is authorized to issue lease revenue bonds to provide funds to acquire or construct public capital improvements, such revenue bonds to be repaid from the lease payments for such improvements, such as the lease payments described herein. The members of the City Council of the City comprise the Authority's Board of Directors.

The City

The City is situated in eastern Los Angeles County, California. The City encompasses 8.2 square miles and is located 9 miles east of downtown Los Angeles. The City has access to three freeways: the San Gabriel River Freeway (State Highway 605) to the east, the Santa Ana Freeway (Interstate 5) to the south and the Pomona Freeway (State Highway 60) to the north. The City is a balanced community with light industry, residential areas, and commercial centers. It is bordered to the north by the cities of Monterey Park and Rosemead, to the east by the City of Pico Rivera, and to the west by the City of Commerce. Other surrounding cities include the cities of Bell Gardens, Whittier, South El Monte and Los Angeles.

The City was incorporated as a general law city in 1920. The City operates under the CouncilManager member form of government. The five City Council members, including the Mayor, are elected to four-year terms on alternate slates every two years. The Mayor and the Mayor Pro Tern are selected by the City Council to serve two-year terms. The City Council appoints a City Manager. The population of the City was estimated to be 64,247 as of January 1, 2019.

See APPENDIX B-GENERAL INFORMATION REGARDING THE CITY OF MONTEBELLO AND LOS ANGELES COUNTY.

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References

The descriptions and summaries of various documents hereinafter set forth, including the Lease, the Indenture, and the 2019 Bonds do not purport to be comprehensive or definitive, and reference is made to each such document for the complete details of all terms and conditions. All statements herein are qualified in their entirety by reference to each such document, copies of which are available for inspection at the offices of the Authority.

ESTIMATED SOURCES AND USES OF FUNDS

The estimated sources and uses of the funds are as follows:

Sources of Funds: Principal Amount of 2019 Bonds Plus: Original Issue Premium Plus: Funds released from 2004 Bonds Indenture

Total Sources:

Uses of Funds: Deposit to the Escrow FundC1l

Deposit to the Reserve Fund Costs oflssuanceC2l

Total Uses:

C1l Represents amounts required to defease the 2004 Bonds.

$10,200,000.00 1,419,975.05

47,000.00

$11,666,975.05

$10,323,875.32 1,067,000.00

276,099.73

$11,666,975.05

(z) Includes the underwriter's discount, rating agency, bond counsel, disclosure counsel, municipal advisor, trustee, and trustee's counsel fees, and other miscellaneous costs of issuance.

THE REFUNDING PLAN

The net proceeds of the 2019 Bonds will be deposited into an escrow fund (the "Escrow Fund") established under an escrow agreement (the "Escrow Agreement") by and between the Authority and The Bank of New York Mellon Trust Company, N.A., as escrow agent. A portion of the amounts in the Escrow Fund will be invested in U.S. Treasury Securities-State and Local Series (the "SLGS") and the remaining amount will be held in cash, uninvested. The maturing SLGS, the interest thereon and the uninvested cash in the Escrow Fund will be sufficient to redeem the 2004 Bonds on January 21, 2020 (the "Redemption Date"), at a redemption price equal to the principal amount thereof, together with accrued interest to the Redemption Date, without premium (the "Redemption Price").

Causey, Demgen & Moore, P.C., certified public accounts (the "Verification Agent"), will verify as to the Escrow Fund that the cash and any obligations on deposit therein will be sufficient to pay the Redemption Price on the Redemption Date. See "VERIFICATION OF MATHEMATICAL COMPUTATIONS."

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The 2004 Bonds to be refunded are shown in the following table:

Principal Maturity Amount Redemption Redemption cus1pt

Date Refunded Date Price Number 12/1/20 $ 585,000 1/21/20 100.000 612286CN2 12/1/21 610,000 1/21/20 100.000 612286 CP7 12/1/22 630,000 1/21/20 100.000 612286CQ5 12/1/23 650,000 1/21/20 100.000 612286 CR3 12/1/24 670,000 1/21/20 100.000 612286 CSl 12/1/25 690,000 1/21/20 100.000 612286 CT9 12/1/26 715,000 1/21/20 100.000 612286CU6 12/1/28 1,505,000 1/21/20 100.000 612286 CY8 12/1/29 790,000 1/21/20 100.000 612286 CV4 12/1/30 815,000 1/21/20 100.000 612286CW2 12/1/33 2,610,000 1/21/20 100.000 612286 cxo

The cash and any obligations on deposit held in the Escrow Fund will be pledged only to the redemption of the 2004 Bonds and will not be available for the payment of the 2019 Bonds.

THE 2019 BONDS

General

The 2019 Bonds will be dated their date of delivery, will bear interest at the rates and will mature on the dates set forth on the inside cover of this Official Statement. Interest on the 2019 Bonds will be payable on each June 1 and December 1 (each an "Interest Payment Date"), commencing on June 1, 2020. Interest on each Series will be computed on the basis of a 360-day year of twelve 30-day months.

The 2019 Bonds will be issued in fully registered form and will initially be registered in the name of Cede & Co., as nominee ofThe Depository Trust Company ("DTC"), New York, New York, the securities depository for the 2019 Bonds. Purchases of the 2019 Bonds are to be made in book-entry form in the principal amount of $5,000 or any integral multiple thereof. See APPENDIX E-BOOK-ENTRY SYSTEM.

Redemption

Special Mandatory Redemption From Net Proceeds. The 2019 Bonds are subject to mandatory redemption on any Bond Payment Date, in whole or in part, from moneys in the Lease Prepayment Account of the Redemption Fund of Net Proceeds, at least 45 days prior to a Bond Payment Date which have been credited towards the Prepayment made by the City pursuant to the Lease, at a redemption price equal to the principal amount of the Bonds to be redeemed, together with accrued interest to the date fixed for redemption, without premium.

Optional Redemption. The 2019 Bonds are subject to optional redemption on any day on and after December 1, 2029, in whole or in part (in integral multiples of $5,000) at the option of the Authority at a

t Copyright 2019, American Bankers Association. CU SIP® is a registered trademark of the American Bankers Association. CU SIP data herein is provided by CUSIP Global Services, operated by S&P Capital IQ. This data is not intended to create a database and does not serve in any way as a substitute for CUSIP Global Services. CUSIP numbers have been assigned by an independent company not affiliated with the Authority or the City.

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redemption price equal to the principal amount thereof together with accrued interest to the date fixed for redemption.

Selection of 2019 Bonds for Redemption. Whenever provision is made in the Indenture for the redemption of 2019 Bonds and less than all Outstanding 2019 Bonds are called for redemption, the Trustee shall select 2019 Bonds for redemption, from the Outstanding 2019 Bonds not previously called for redemption, in Authorized Denominations on a pro rata basis among maturities and by lot within a maturity. The Trustee shall promptly notify the City and the Authority in writing of the 2019 Bonds so selected for redemption.

Notice of Redemption. When redemption is authorized or required, the Trustee shall give notice of the redemption of the 2019 Bonds. Such notice shall specify: (a) that the 2019 Bonds or a designated portion thereof are to be redeemed, (b) the CUSIP numbers and, if less than all of the 2019 Bonds of a maturity are to be redeemed, the serial numbers of the 2019 Bonds to be redeemed, (c) the date of redemption, (d) the place or places where the redemption will be made, (e) the following descriptive information regarding the 2019 Bonds: date, interest rates and stated maturity dates, and (f) that a new 2019 Bond in an amount equal to that portion not so redeemed will be executed by the Trustee and delivered to the Owner in the event of a partial redemption. Such notice shall further state that on the specified date there shall become due and payable upon each 2019 Bond to be redeemed, the portion of the principal amount of such 2019 Bond to be redeemed, together with interest accrued to said date, and that from and after such date, provided that moneys therefore have been deposited with the Trustee, interest with respect thereto shall cease to accrue and be payable.

Notice of such redemption shall be mailed by first class mail or other means acceptable to the recipient thereof, to the City, to all municipal Securities Depositories and to at least one national Information Service which the City shall designate to the Trustee, and the respective Owners of any 2019 Bonds designated for redemption at their addresses appearing on the 2019 Bond registration books, at least 20 days, but not more than 60 days, prior to the redemption date; provided, that neither failure to receive such notice nor any defect in any notice so mailed or otherwise transmitted shall affect the sufficiency of the proceedings for the redemption of such 2019 Bonds.

Notice of such redemption may be rescinded by the Authority prior to the specified date for redemption by notice of such rescission given by the Trustee to the City, to all municipal Securities Depositories and to the applicable national Information Service in the same manner the original notice was provided.

Partial Redemption of 2019 Bonds. Upon surrender by the Owner of a 2019 Bond for partial redemption at the Principal Office, payment of such partial redemption of the principal amount of a 2019 Bond will be made to such Owner by check mailed by first class mail to the Owner at his address as it appears on the registration books of the Trustee. Upon surrender of any 2019 Bond redeemed in part only, the Trustee or the Tender Agent shall authenticate and deliver to the Owner thereof, at the expense of the City, a new 2019 Bond or 2019 Bonds which shall be of Authorized Denominations equal in aggregate principal amount to the unredeemed portion of the 2019 Bond surrendered and of the same interest rate and the same maturity. Such partial redemption shall be valid upon payment of the amount thereby required to be paid to such Owner, and the City, the Authority and the Trustee shall be released and discharged from all liability to the extent of such payment.

Effect of Notice of Redemption. Notice having been given as aforesaid, and the moneys for the redemption (including the interest to the applicable date of redemption), having been set aside in the

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Redemption Fund, the 2019 Bonds shall become due and payable on said date of redemption, and, upon presentation and surrender thereof at the Principal Office, said 2019 Bonds shall be paid at the unpaid principal price with respect thereto, plus interest accrued and unpaid to said date of redemption.

If, on said date of redemption, moneys for the redemption of all the 2019 Bonds to be redeemed, together with interest to said date of redemption, shall be held by the Trustee so as to be available therefor on such date of redemption, and, if notice of redemption thereof shall have been given as aforesaid, then, from and after said date of redemption, interest with respect to the 2019 Bonds shall cease to accrue and become payable. All moneys held by or on behalf of the Trustee for the redemption of 2019 Bonds shall be held in trust for the account of the Owners of the 2019 Bonds so to be redeemed.

All 2019 Bonds paid at maturity or redeemed prior to maturity pursuant to the provisions of this Article shall be canceled upon surrender thereof and delivered to or upon the order of the City

Surplus. Any funds remaining in the Redemption Fund after redemption and payment of all 2019 Bonds outstanding, or provision made therefor satisfactory to the Trustee, including accrued interest, shall be withdrawn by the Trustee and remitted first to the Trustee for the payment of any applicable fees and expenses to the Trustee (including the Trustee's legal fees and expenses), with the remainder, if any, being remitted to the City.

DEBT SERVICE SCHEDULE

The following table sets forth the annualized debt service requirements for the 2019 Bonds, assuming no optional redemptions.

Fiscal Year Ending June 30

2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035

Total

Principal

$ 650,000 685,000 700,000 715,000 730,000 750,000 765,000 790,000 820,000 840,000 865,000 885,000

1,005,000

$10,200,000

Interest $ 183,600.00

408,000.00 408,000.00 395,000.00 368,300.00 340,600.00 312,300.00 283,400.00 253,800.00 223,500.00 192,400.00 160,200.00 127,000.00 92,900.00 57,900.00 20,100.00

$3 ,827 ,000.00

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Annual Debt Service

$ 183,600.00 408,000.00 408,000.00

1,045,000.00 1,053,300.00 1,040,600.00 1,027,300.00 1,013,400.00 1,003,800.00

988,500.00 982,400.00 980,200.00 967,000.00 957,900.00 942,900.00

1,025,100.00

$14,027,000.00

SOURCES OF PAYMENT FOR THE 2019 BONDS

General

The 2019 Bonds are limited obligations of the Authority, issued under and secured by the Indenture, payable solely from Revenues. "Revenues" means (i) all payments to the Trustee (as assignee of the Authority) pursuant to the Lease; (ii) all amounts held in the funds and accounts created under the Indenture, together with earnings thereon; and (iii) all other receipts of the Trustee (as assignee of the Authority) attributable to the ownership, leasing or operation of the Hotel.

The Authority and the City, as their interests may appear, hereby grant to the Trustee, for the benefit of the Owners, a lien on and a security interest in the Lease and the Revenues, including all moneys in the funds held by the Trustee under the Indenture ( excepting only the moneys set aside by the Trustee to satisfy the requirements of the Indenture as to the discharge thereof, including, without limitation, the Debt Service Fund, and all such moneys shall be held by the Trustee in trust and applied to the respective purposes specified herein and in the Lease; provide~ however, that no security interest is granted to the Trustee for the purpose of paying its fees or expenses in money drawn by the Trustee to the extent such moneys are applied to the payment of the amounts due to the Owners. The Trustee shall be entitled to and shall collect and receive all of the Revenues, and any Revenues collected or received by the Authority shall be deemed to be held, and to have been collected or received, by the Authority as the agent of the Trustee and shall forthwith be paid by the Authority to the Trustee. The Trustee also shall be entitled to and subject to the provisions of the Indenture, shall take all steps, actions and proceedings reasonably necessary in its judgment to enforce, either jointly with the Authority or separately, all of the rights of the Authority that have been assigned to the Trustee and all of the obligations of the City under the Lease.

In consideration of the acceptance of the 2019 Bonds by those who shall own them from time to time, the Indenture shall be deemed to be and shall constitute a contract between the Authority and the Owners from time to time of the 2019 Bonds and the covenants and agreements herein set forth to be performed on behalf of the Authority shall be for the equal and proportionate security and protection of all Owners of the 2019 Bonds without preference, priority or distinction as to security or otherwise of any of the 2019 Bonds over any of the others by reason of the number or date thereof, of the time of sale, execution and delivery thereof, or otherwise for any cause whatsoever, except as expressly provided in the Indenture.

Revenue Fund

All Revenues shall be deposited when received into the Revenue Fund, and other payments made by or on behalf of the City under the Lease, shall be paid directly to the Trustee and shall, except as otherwise expressly provided in the Indenture, be deposited in the Revenue Fund.

Except as otherwise provided in the Indenture, moneys in the Revenue Fund shall be paid by the Trustee as follows and in the following order of priority:

FIRST: to the Trustee, on each December 1, the reasonable Administrative Expenditures of the Trustee, upon receipt of an invoice or other request for payment submitted by the Trustee and approved by an Authorized Officer of the City;

SECOND: if Project Gross Revenues and other amounts on deposit in the Operating Account are to be deposited directly to the Revenue Fund pursuant to Section 5.03 of the Lease, to the payment of Project Operating Expenses and the Franchise Fee, as

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they come due, pursuant to a requisition of the City stating that the party to whom the amount is payable, the invoice or other billing advice to which it pertains, the amount, and stating that the amount so requisitioned and that the obligations in the stated amounts have been incurred by the Hotel and are presently due and payable or are properly reimbursable to the Hotel and each item thereofis a necessary Project Operating Expense and is a proper charge against the Revenue Fund and has not been paid from amounts previously disbursed from the Revenue Fund; provided, that if no requisition of the City is received by the Trustee by the second Business Day prior to the first Business Day of each month, Revenues shall be applied as set forth below;

THIRD: not later than the first Business Day of each month, commencing April 2020: (A) to the Interest Component Subaccount of the Lease Payment Account, onefourth (1/ 4) of the total amount required to make the amount on deposit in such Subaccount equal to the amount of accrued and unpaid interest on the Bonds due and payable on the next Bond Payment Date (provided that for the months of April 2020 and May 2020, the deposit shall be one-half (1/2) of the amount required to make the amount on deposit in such Subaccount equal to the amount of accrued and unpaid interest on the Bonds due and payable on the next Bond Payment Date) and (B) not later than two (2) Business Days prior to the first Business Day of each month, to the Principal Component Subaccount of the Lease Payment Account, one-eighth (1/8) of the amount required to make the amount on deposit in such Subaccount equal to the amount of principal coming due on the Bonds on the next December 1;

FOURTH: to the Reserve Fund such amount as may be necessary to maintain a balance therein equal to the Reserve Requirement;

FIFTH: to the Authority, on the first Business Day of each month, the reasonable Administrative Expenditures of the Authority, upon receipt of an invoice or other request for payment submitted by the Authority and approved by an Authorized Officer of the City in the case of any Administrative Expenditures; provided, that if no invoice or request is received by the Trustee by the second Business Day prior to the first Business Day of each month, Revenues shall be applied by the Trustee as set forth below;

SIXTH: on the first Business Day of each month, to the Base Rental Payment Reimbursement Fund, reimbursement for the Reimbursable Portion of Base Rental payments pursuant to Section 5.07 hereof, as set forth in a City Certificate delivered to the Trustee by November 15; provided, that if the Trustee has not received a City Certificate by the second Business Day prior to the first Business Day of the month, no reimbursement shall be made and Revenues shall be applied by the Trustee as set forth below;

SEVENTH: on the first Business Day of each month, into the Renewal and Replacement Fund, the lesser of the balance of the Revenues or an amount equal to onetwelfth of the then applicable Renewal and Replacement Requirement, plus any accrued deficiency in the amount necessary to satisfy the Renewal and Replacement Requirement resulting from insufficient Revenues in any prior month;

EIGHTH: on the fifth day of January and July of each year, and on the following Business Day if either such date fall on a day which is not a Business Day, to the Facilities Manager, the Facilities Management Fee (including any accrued and unpaid Facilities

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Management Fees, and accrued interest thereon); less the amount of the Facilities Management Fee applied by the Facilities Manager to the payment of the Franchise Fee paid out of the Operating Account during the same period, as set forth in a City Certificate (which the City covenants to provide to the Trustee no later than December 15th and June 15th of each year and any month during which an adjustment is necessary based on the amount paid out of the Operating Account; provided, that in no event shall failure to comply with such covenant give rise to any default or an Event of Default hereunder or under the Lease); provided that if no City Certificate is received by the Trustee by the second Business Day prior to the first Business Day of each month, Revenues shall be applied as set forth below; and

NINTH: into the Operating Reserve Fund, the amount required to bring the balance in the Operating Reserve Fund to the Operating Reserve Requirement.

After making the payments required above, any balance remaining in the Revenue Fund on each December znd shall be deposited at the direction of the City (as approved by the Facilities Manager, if and to the extend required under the Hotel Management Agreement, as represented to the Trustee by the City) into the Renewal and Replacement Fund, or into the Lease Prepayment Account of the Redemption Fund for the redemption of the Bonds at the next available redemption date, or, upon or in the absence of such direction of the City ( as approved by the Facilities Manager, if and to the extent required under the Hotel Management Agreement), remain in the Revenue Fund; provided that, if all amounts payable pursuant to FIRST through NINTH above have been fully funded and there are no unpaid accruals in any of such accounts for the current or any prior year and the City certifies in a City Certificate that all such required amounts have been paid or deposited in the full amounts required, then any surplus amounts may be released to the City upon the Authority's written request to the Trustee for deposit in the City's General Fund and applied for any lawful purpose.

Notwithstanding anything to the contrary in this Indenture, after the deposit required by SEVENTH above, any Revenues to be applied under EIGHTH above shall be applied first to any accrued but unpaid balance owed to the Facilities Manager, if after such application the Revenue Fund will have a minimum balance of $300,000, and then to the current calendar year's amount due under EIGHTH. If the Facilities Manager is replaced, such manager shall be paid in full prior to any Revenues being disbursed to pay management fees to the new Facilities Manager. All disbursements to be made pursuant to this paragraph shall be made as set forth in a City Certificate delivered to the Trustee. The Trustee shall be under no obligation to make any such disbursement in the absence of a City Certificate.

Notwithstanding anything in the Indenture to the contrary, the Trustee shall accept direction from the City in a City Certificate (which City Certificate must be provided to the Trustee at least two Business Days in advance of the desired date of payment) to disburse on any Business Day amounts held under the Indenture that are available, as represented by the City in the City Certificate, for payment of accrued and unpaid Facilities Management Fees and accrued interest thereon.

Anything contained in the Indenture to the contrary notwithstanding, moneys deposited at any time in the Revenue Fund as the result of payments by the Authority, the Trustee or the City of (i) the proceeds of all or any part of the Leased Property taken in the exercise of the power of eminent domain ( or similar proceedings or related agreements) and related payments, insurance proceeds payable in connection with the loss, damage or destruction of the Leased Property and related payments with respect to the Leased

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Property as provided by the Lease shall be paid to the Insurance and Condemnation Award Fund by the Trustee on or prior to the fifth Business Day after the deposit thereof and (ii) the proceeds of any business interruption policy in accordance with the Lease shall be deposited in the Lease Payment Account to be used to pay principal and interest on the 2019 Bonds when due.

Anything herein contained to the contrary notwithstanding, for purposes of Bond redemption moneys deposited at any time in the Insurance and Condemnation Award Fund from payments made to the Trustee pursuant to the Lease shall be transferred to the Lease Prepayment Account of the Redemption Fund by the Trustee as specified in the Lease.

Reserve Fund

All moneys in the Reserve Fund in excess of the Reserve Requirement shall be transferred to the Lease Payment Account. All money in the Reserve Fund shall be used and withdrawn by the Trustee solely for the purpose of reimbursing the provider of the Qualified Reserve Fund Credit Instrument for amounts owed under a Qualified Reserve Fund Credit Instrument to the extent necessary or paying the principal of and interest on the 2019 Bonds as the same shall become due and payable in the event of any deficiency at any time in the Lease Payment Account of the Debt Service Fund, or for the purpose of paying the interest on or principal of or redemption premiums, if any, on the 2019 Bonds in the event that no other money ( or amounts available to be drawn from a Qualified Reserve Fund Credit Instrument) of the Authority is lawfully available therefor, or for the retirement of all then Outstanding Bonds.

The Reserve Requirement may be satisfied by crediting to the Reserve Fund moneys or a Qualified Reserve Fund Credit Instrument or any combination thereof, which in the aggregate make funds available in the Reserve Fund in an amount equal to the Reserve Requirement. Upon the deposit with the Trustee of such Qualified Reserve Fund Credit Instrument to satisfy the Reserve Requirement, the Trustee shall transfer any excess amounts then on deposit in the Reserve Fund into a segregated subaccount of the Lease Payment Account of the Debt Service Fund, to be known as the "Excess Reserve Amount Sub account," to be established by the Trustee, which monies shall be applied at the written direction of the Authority either (i) to the payment within one year of the date of transfer of capital expenditures of the Authority permitted by law or (ii) to the redemption of Bonds on the earliest succeeding date on which such redemption is permitted hereby, and pending such application shall in accordance with written direction of the Authority ( on which the Trustee may conclusively rely and shall have no duty to determine whether such direction complies with the provisions of this Section 5.11, including with the yield requirements hereof) be held either not invested, or invested in property (as defined in section 148(b) of the Code constituting an Authorized Investment) to produce a yield that is not in excess of the yield on the 2019 Bonds; provided, however, that the Authority may by written direction to the Trustee cause an alternative use of such amounts if the Authority shall first have obtained a written opinion of Bond Counsel addressed and provided to the Trustee together with such written direction substantially to the effect that such alternative use will not adversely affect the exclusion pursuant to section 103 of the Code of interest on the 2019 Bonds from the gross income of the owners thereof for federal income tax purposes.

In any case where a Reserve Fund is funded with a combination of cash, investments and a Qualified Reserve Fund Credit Instrument, the Trustee shall deplete all cash balances and investments, at the direction of the City set forth in a City Certificate, before drawing on the Qualified Reserve Fund Credit Instrument. Any available moneys not needed to pay debt service on the 2019 Bonds provided by the Authority to fund the Reserve Fund after a withdrawal shall first be used to reinstate the Qualified Reserve Fund Credit Instrument pursuant to its terms and second, to replenish the cash in the Reserve Fund. If the Qualified Reserve Fund Credit Instrument is drawn on, the Authority shall make payment of interest on

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amounts advanced under the Qualified Reserve Fund Credit Instrument after making any payments pursuant to this subsection.

Certain Funds Established Under the Indenture

Base Rental Payment Reimbursement Fund. The Trustee shall use all amounts deposited in the Base Rental Payment Reimbursement Fund, as such amounts become available, to reimburse the City for the Reimbursable Portion of all Base Rental payments paid by the City from amounts not constituting Project Gross Revenues, which then remain unreimbursed, as set forth in a City Certificate.

Operating Reserve Fund. The money deposited in the Operating Reserve Fund, together with all investment income therefrom, shall be applied, as set forth in a City Certificate, to the payment of Project Operating Expenses to the extent a deficiency in amounts available to pay Project Operating Expenses exists. On the first Business Day of each month, the Trustee shall confirm that the balance in the Renewal and Replacement Fund does not exceed the maximum balance for such fund of $600,000 and shall transfer any amount in the Renewal and Replacement Fund in excess of $600,000 into the Operating Reserve Fund until the Operating Reserve Requirement is satisfied as provided in the Indenture and thereafter to the Revenue Fund.

Renewal and Replacement Fund. The amount on deposit in the Renewal and Replacement Fund will be maintained at the Renewal and Replacement Requirement at all times during the term of the 2019 Bonds pursuant to the Installment Purchase Agreement, except to the extent required for the purposes set forth therein. Amounts on deposit in the Renewal and Replacement Fund will be used for the following purposes in the following order of priority: (a) Payment of the costs of extensions, additions and capital improvements to, or the renewal and replacement of depreciable capital assets of, or the purchasing and installing of equipment for, the Hotel, as set forth in a City Certificate, or for paying any extraordinary maintenance and repair; and (b) Payment of Project Operating Expenses to the extent a deficiency in amounts available to pay Project Operating Expenses exists.

Lease Agreement

In consideration for the issuance of the 2019 Bonds by the Authority, the City will lease the Hotel and the underlying land (the "Leased Property") to the Authority pursuant to a Site and Facilities Lease dated as of December 1, 2019 (the "Site Lease"). The Authority, concurrently with the execution and delivery of the Site Lease, will lease the Leased Property back to the City pursuant to the Lease. Pursuant to the Lease, the City will make Base Rental payments sufficient in timing and amount to pay the principal of and interest on the 2019 Bonds.

The City is obligated under the Lease to make Base Rental payments for the right to use and occupy the Leased Property, consisting of the Hotel and the underlying land, and is obligated to budget and appropriate the full amount of the Base Rental payments for each year, but payment of such appropriation is offset by the amount of Project Net Revenues. "Project Net Revenues" consist of, with respect to any period, the amount of Project Gross Revenues received during such period less the amount of Project Operating Expenses becoming payable during such period. "Project Gross Revenues" consist of all revenues, income, receipts and money received by the City or by the Facilities Manager in connection with, or related to, the ownership and operation of the Hotel, and "Project Operating Expenses" are, for any specified period, the sum of expenses of the Hotel as shown on its "Statement of Revenues and Expenses" (or equivalent financial statement) as its operating expenses (or equivalent items

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of expense) including extraordinary and nonrecurring items but excluding interest expense and depreciation and amortization, all as determined in accordance with generally accepted accounting principles.

Pledge of Project Gross Revenues. Pursuant to the Lease, the City has irrevocably pledged all Project Gross Revenues to the payment of the Base Rental payments and Additional Rental payments as provided therein. This pledge, together with the pledge created by all other leases, loan agreements, installment sale agreements, bonds, notes or other obligations of the City payable from and secured by a pledge of and lien upon any of the Project Gross Revenues on a parity with the Base Rental payments and the Additional Rental payments, entered into or issued pursuant to and in accordance with the Lease ("Parity Obligations"), and subject to Permitted Encumbrances, will constitute a first and exclusive lien on Project Gross Revenues and other funds and accounts created under the Lease for the payment of the Base Rental payments and all other Parity Obligations in accordance with the terms thereof and the Indenture. To carry out and effectuate the pledge and lien of Project Gross Revenues contained in the Lease, the City will cause all Project Gross Revenues to be deposited on the day of their receipt in an account of the Facilities Manager designated as the "Operating Account." So long as no Event of Default has occurred and is continuing under the Lease or under Agreement No. 3323, dated November 29, 2017 (the "Hotel Management Agreement"), by and between the City and Hotel Adventures LLC, a California limited liability company ("HALLC "), the Operating Account is to be subject to the direction of the Facilities Manager on behalf of the City pursuant to the Hotel Management Agreement. Amounts held in the Operating Account will be used to pay Project Operating Expenses as they arise. Not less often than weekly, all amounts remaining in the Operating Account in excess of $100,000, after payment of Project Operating Expenses, will be transferred to the Trustee for deposit into the Revenue Fund established under the Indenture. In any case in which an Event of Default has occurred and is continuing under the Lease or under the Hotel Management Agreement, all amounts in the Operating Account will be transferred on the day of their receipt to the Trustee for deposit into the Revenue Fund.

Covenant to Budget and Appropriate. The City covenants in the Lease to take such action as may be necessary to include all Base Rental payments and Additional Rental payments in its annual budget and to make annual appropriations for all such Base Rental. The Lease provides that the several actions required by such covenants are deemed to be and will be construed to be ministerial duties imposed by law and that it is the duty of each and every public official of the City to take such action and do such things as are required by law in the performance of the official duty of such official to enable the City to carry out and perform the covenants in the Lease agreed to be carried out and performed by the City.

Except to the extent described below under "SOURCES OF PAYMENT FOR THE 2019 BONDS-City Obligation to Contribute Special Tax Revenues," the City is not required to make Base Rental payments from its General Fund unless Project Net Revenues are insufficient to pay principal of and interest on the 2019 Bonds as such payments become due and payable.

The Lease provides that Base Rental payments for any portion of the Leased Property will be abated during any period in which there is substantial interference with the City's use of such portions of the Leased Property because of damage, destruction or condemnation of such portions. The amount of such abatement will be an amount agreed upon by the City and the Authority such that the resulting Base Rental payments represent fair consideration for the use and occupancy of the portions of the Leased Property not taken, damaged or destroyed. Such abatement will continue for the period commencing with such taking, damage or destruction and ending with the substantial completion of the work of replacement, repair or reconstruction. In the event of any such damage or destruction, the Lease will continue in full force and effect and the City waives any right to terminate the Lease by virtue of such damage and destruction. Notwithstanding the foregoing, there will be no abatement of Base Rental payments under the Lease to the

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extent that the proceeds of rental interruption insurance or amounts in the Lease Payment Account of the Debt Service Fund are available to make Base Rental payments that would otherwise be abated under the Lease.

During any period of abatement of Base Rental, the Trustee may pay principal of and interest on the 2019 Bonds allocable to such portions of the Leased Property, if available, from proceeds of insurance or condemnation award. The City's reduced rental payments will constitute the total Base Rental. The reduced Base Rental may not be sufficient to pay principal and interest on the 2019 Bonds in the amounts and at the rates set forth therein. The failure to make such payment of principal of and interest on the 2019 Bonds would not constitute a default by the City under the Indenture, the Lease or otherwise.

The obligation of the City to pay Base Rental 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. Neither the 2019 Bonds nor the obligation of the City to pay Base Rental constitutes 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.

City Obligation to Contribute Special Tax Revenues

Under a Memorandum of Understanding and Intent (the "MOU"), dated October 19, 1999, by and between the City and HALLC, the City is obligated to budget and appropriate from its general fund, and to contribute to the Hotel, an amount equal to the "Special Tax Revenues," defined as the revenues resulting from: (i) the levy and collection of the Transient Occupancy Tax (the "Transient Occupancy Tax") upon the activities of the Hotel, as such tax is so defined and levied by the City pursuant to Ordinance No. 1094 of the City, passed and approved by the City Council on October 13, 1964 (as the same may be amended from time to time), and (ii) the levy and collection of the Hotel Land Tariff (the "Hotel Land Tariff"), as such tariff is defined and levied by the City pursuant to Ordinance No. 2251 of the City, passed and approved by the City Council on September 25, 2002 (as the same may be amended from time to time). The Special Tax Revenues are included as components of Hotel revenue in tables titled "Montebello Hotel Revenues and Expenses" and "Montebello Hotel Projected Revenues and Expenses" (see "THE PROJECT-Historical Revenues and Expenses of the Hotel"). Under the Lease, the City is obligated to budget and appropriate the full amount of the Base Rental payments for each year, but payment of such appropriation is offset by the amount of Project Net Revenues available for such Base Rental payments. For periods in which Project Net Revenues are alone sufficient to cover Base Rental payments, the City under the MOU will still remain obligated to contribute its general funds to the Hotel in an amount equal to the Special Tax Revenues.

Property Insurance

The Lease requires the City to maintain or cause to be maintained with respect to the Leased Property, comprehensive general public liability and property damage insurance and fire insurance with extended coverage. The City is not obligated to maintain insurance against earthquake related damage. The City is required to maintain rental interruption insurance covering loss of the use of any part of the Leased Property in an amount equal to the maximum aggregate amount of Base Rental scheduled to be payable in any twenty-four month period. In the event the Leased Property is damaged or destroyed, the City may apply the net proceeds of any insurance award ( except that received for the purposes of rental interruption) to replace, repair, restore, modify or improve (collectively, "repair") the Leased Property, or if repairing the Leased Property is not economically feasible, or in the best interest of the City, to prepay Bonds on a pro rata basis. If the Leased Property has been damaged or destroyed and the City directs the Trustee to apply

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insurance proceeds arising from such damage or destruction to the payment or redemption of Base Rental, then the Trustee will apply such proceeds to the redemption of Bonds. The amount of the Base Rental allocable to the portion of the Leased Property comprising the improvements and facilities will be adjusted or abated (but only after all available moneys have been depleted) during any period in which damage or destruction to the Leased Property or condemnation of the Leased Property substantially interferes with the City's use and possession thereof.

If there are not sufficient insurance proceeds to complete repair of the Leased Property, the Base Rental schedule will be proportionally reduced in accordance with the Lease. Such reduced Base Rental may not be sufficient to pay principal and interest on the 2019 Bonds in the amounts and at the rates set forth thereon. Such reduction would not constitute a default under either the Indenture or the Lease.

The Lease requires the City to obtain title insurance insuring the City's leasehold interest on the Leased Property in an amount equal to the outstanding principal component of the 2019 Bonds (see APPENDIX C-SUMMARY OF CERTAIN PROVISIONS OF THE LEGAL DOCUMENTS - THE LEASE AGREEMENT).

Reentering and Re-letting; No Foreclosure

If the City defaults in performance of its obligations under the Lease, the Trustee, as assignee of the Authority, may re-enter and re-let the Leased Property and may enforce the Lease and hold the City liable for all Base Rental on an annual basis while re-entering and re-letting the Leased Property. Such reentry and re-letting will not affect a surrender of the Lease. The City, in the event of default, waives all rights to any rentals received by the Trustee through re-letting of the Leased Property. The City agrees to pay all costs, loss or damage howsoever occurring.

There is no right to foreclosure on the Lease Property in the event of a default.

Encumbrances

The City and the Authority may not create any mortgage, pledge, lien, charge or encumbrance upon the Leased Property other than "Permitted Encumbrances."

"Permitted Encumbrances" mean, as of any particular time: (i) liens for general ad valorem taxes and assessments, if any, not then delinquent, or which the City may, pursuant to the Lease, permit to remain unpaid; (ii) the Lease and the Site Lease; (iii) the Assignment Agreement; (iv) any right or claim of any mechanic, laborer, materialman, supplier or vendor filed or perfected in the manner prescribed by law after the date of the Lease; (v) easements, rights of way, mineral rights, drilling rights and other rights, reservations, covenants, conditions or restrictions which exist of record as of the date of initial issuance of the 2019 Bonds and which an Authorized Representative of the City certifies in writing will not materially impair the beneficial use and occupancy of the Leased Property by the City; and (vi) easements, rights of way, mineral rights, drilling rights and other rights, reservations, covenants, conditions or restrictions established following the date of recordation of the Lease and to which the Authority and the City consent in writing.

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THE PROJECT

General

The Hotel is a 121-room hotel located at 801 Via San Clemente on approximately three acres of land in Montebello, California. The Hotel is situated adjacent to, and comprises a portion of the complex consisting of, the Montebello Country Club, The Quiet Cannon, and the Home2 Suites by Hilton Los Angeles Montebello, all of which are owned by the City. The Hotel opened in December of 2002 and has been in continuous operation thereafter.

The Hotel is a three-story low-profile building totaling approximately 133,000 square feet with public accessible space. The guest rooms consist of 12 deluxe king rooms, 59 regular king rooms and 50 double/double rooms. The public areas include a glass pavilion lobby, which includes an interior fireplace and a large screen television, and a lobby dining area and bar, all of which have views of the Montebello Golf Course. Hotel guests have access to approximately 20,000 square feet of meeting and event space at The Quiet Cannon. The Hotel has a fitness center, an outdoor swimming pool with spa and a business center. 500 spaces of on-site parking are provided in a complementary lot immediately adjacent to the Hotel site. The revenues generated by the Hotel are deposited into the Montebello Hilton Enterprise Fund (the "Hotel Fund"). The Hotel Fund had a net asset deficit of $6.6 million as of June 30, 2019. This amount includes $10.9 million in debt service payments but excludes the $11 million estimated value of the Hotel's buildings.

The Hotel is located on the 150+ acre Montebello Municipal Golf Course just south of the Pomona Freeway (" State Route 60 "). State Route 60 provides access throughout the San Gabriel Valley and into downtown Los Angeles to the west. State Route 60 connects to other major area freeways including Interstate 5 (Santa Ana Freeway), Interstate 710 (Long Beach Freeway), and Interstate 405 (San Diego Freeway). The Los Angeles International Airport is the primary source for air passengers visiting the area, and is located approximately 30 miles southwest of the Hotel.

Operation of the Hotel

The Hotel is being operated as a Hilton Garden Inn pursuant to a Franchise License Agreement, dated November 1, 2001 (the "License Agreement") between Hilton Inns, Inc. and Hotel Adventures LLC ("HALLC"). The License Agreement sets forth the requirements of HALLC and Hilton in connection with the operation of the Hotel to conform to Hilton Garden Inn's required standards. The Hotel is being managed pursuant to the Hotel Management Agreement.

Hotel Adventures LLC. HALLC is the operator and manager and Hilton franchisee for the Hotel. Hotel2Suites LLC, the operator of the Home2 Suites by Hilton Los Angeles Montebello, HALLC, the operator of the Hotel, and Quiet Cannon Montebello Inc., the operator of The Quiet Cannon Conference and Event Center, are entities with common ownership. Under the Hotel Management Agreement, HALLC has been designated and appointed the manager, as the City's agent, with the authority to manage, operate and maintain the Hotel facilities. HALLC's three (3) members have over 100 years combined experience in hospitality industry development, general contracting, restaurant, banquet, conference and hotel operations, management and ownership. Mr. Brad Perrin, Managing Member, oversees the development, administration and operation of the Hotel. He received a B.A. from California State University, Fullerton, and continuing education from the University of Pennsylvania, Wharton School of Finance.

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Management Fee. Under the Hotel Management Agreement, an annual management fee of $597,000 (adjusted annually based upon changes in the Annual CPI Index) is to be paid to HALLC (the "Management Fee") unless cash flow generated by the Hotel is not sufficient to pay the debt service on the 2019 Bonds and operating expenses relating to the Hotel. If the cash flow is not sufficient to pay such debt service costs and operating expenses, the Management Fee accrues, with interest. At June 30, 2018, approximately $713,971 was owed to HALLC for the accumulated Management Fee and related items. For additional information, see APPENDIX A-COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY OF MONTEBELLO FOR THE FISCAL YEAR ENDED JUNE 30, 2018, Note 7 and Note 13. Amounts of the accumulated Management Fee that remain unpaid at the end of the term of the Hotel Management Agreement, or December 17, 2032 whichever occurs first, will be the responsibility of the City.

Termination. The Hotel Management Agreement may be terminated with cause upon a positive vote of four members of the five-member Montebello City Council. If, for any reason, the number of members of the City Council changes, a positive vote of not less than four-fifths (4/5's) of the total membership will be required. Pursuant to the terms of the Hotel Management Agreement, there are certain events that will constitute events of default thereunder and will serve as the sole bases for termination of the Hotel Management Agreement for cause. These events include, but are not limited to, (a) failure by either party to pay or deposit sums owed by one party to the other within seven (7) days' notice by the other of such failure; provided, that failure to pay the Operations Phase Facilities Management Fee due to insufficient funds will not be considered an event of default; (b) failure of either HALLC or the City to perform, keep or fulfill any of the non-monetary covenants, undertakings, obligations or conditions of such party set forth in the Hotel Management Agreement and failure to cure such non-monetary default within ten (10) days of notice thereof; and ( c) violation by HALLC of any laws, ordinances, rules and regulations or orders of any public authority having jurisdiction over the Hotel facilities which are material to the City and failure by HALLC to cure or reach resolution the applicable violation within thirty (30) days following notice of any violation thereof from the City, or the applicable governmental agency. The Management Fee due to HALLC will become mandatorily payable upon a termination, with or without cause, of the Hotel Management Agreement. Upon the termination of the Hotel Management Agreement without cause by the City, the City would be obligated to pay HALLC liquidated damages in the amount of the present value of the management fee to be paid over the remaining term of the Hotel Management Agreement.

The Montebello Country Club

The Hotel is located adjacent to the Montebello Country Club, a public, 18-hole championship golf course situated on 120 acres that includes a full-service pro shop, a 32-stall, night lighted, double deck driving range and full service two story clubhouse consisting of approximately 50,000 square feet. The Montebello Country Club is not part of the Hotel. The City owns and oversees the operation and management of the Montebello Country Club. The food and beverage and pro shop concessions are contracted to outside operators, Quiet Cannon Montebello Inc. and Tommy Camacho, respectively. The Montebello Country Club is accessible from the 60 Freeway and located between the 605 and 710 Freeways to the east and west, respectively. The Montebello Country Club is 10 minutes from downtown Los Angeles. The Montebello Country Club public golf course was constructed in 1926 and designed by Max Howell Behr. Since its purchase of the golf course in 1941, the City has remained committed to a series of ongoing renovations, restorations and remodels in order to maintain the golf course in optimum playing condition. The Montebello Country Club facilities were renovated in 1999 at a cost of approximately four million dollars. Additional improvements to the Montebello Country Club clubhouse and Quiet Cannon (see below under the caption "-The Quiet Cannon") are ongoing.

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The Montebello Country Club does not comprise a part of the Hotel and no revenues therefrom are pledged to payment of the 2019 Bonds.

The Quiet Cannon

The Hotel is also located adjacent to The Quiet Cannon. Quiet Cannon Montebello Inc. has operated all food and beverage services for the Montebello Country Club and The Quiet Cannon since 197 4. Quiet Cannon Montebello Inc., Hotel2Suites LLC and HALLC, the operator and manager of the Hotel, are entities with common stockholders and members. Working with the City, Quiet Cannon Montebello Inc. has completed numerous remodels and renovations which have developed the original clubhouse into one of the largest banquet and conference facilities in Southern California.

The Quiet Cannon features four large view-oriented banquet rooms divisible into seven, plus indoor and outdoor prefunction space with a wedding gazebo garden and cafe available to assist in providing full service food and beverage support for the Hilton Garden Inn and the Home2 Suites by Hilton Los Angeles.

In October 2001, Quiet Cannon Montebello Inc. and the City completed a renovation that provides twin glass elevators, new banquet access, renovated and enhanced nightclub space and a new banquet room. This renovation provides seniors and handicapped guests easy access to all banquet rooms on the second floor.

The Quiet Cannon is not a part of the Hotel and no revenues therefrom are pledged to payment of the 2019 Bonds.

Home2 Suites by Hilton Los Angeles Montebello

Home2 Suites by Hilton Los Angeles Montebello is an eight-story, approximately 137,000 square feet, midscale extended-stay hotel containing 203 rooms, with a 32,500 square feet subterranean garage and other various on-site amenities including a hotel restaurant, indoor/outdoor glass-enclosable swimming pool, business center and meeting rooms. Guest rooms are furnished with kitchenettes with refrigerators, microwaves, and dishwashers. The Home2 Suites by Hilton Los Angeles opened in September of 2018.

The Home2 Suites by Hilton Los Angeles Montebello is not a part of the Hotel and no revenues therefrom are pledged to the payment of the 2019 Bonds.

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Historical Revenues and Expenses of the Hotel

The following table sets forth the historical actual revenues and expenses of the Hotel for five most recent fiscal years as shown. Audited financials are shown for fiscal year 2014-15 through fiscal year 2017-18 and unaudited actuals are shown for fiscal year 2018-19.

HILTON GARDEN INN MONTEBELLO HISTORICAL REVENUES AND EXPENSES

Fiscal Year Ending June 30, 2015 2016 2017 2018 2019(!)

Audited Audited Audited Audited Unaudited

REVENUES Project Gross Revenues $5,578,719 $5,849,636 $6,068,713 $6,400,383 $5,683,658 Transient Occupancy Tax 531,144 560,223 589,049 613,142 555,263 Hotel Land Use Tariff & Energy Tariff 160,333 169,907 177,010 183,962 220,615

Total Revenues 6,270,196 6,579,766 6,834,772 7,197,487 6,459,536

PROJECT OPERATING EXPENSES Labor and fringe benefits 1,500,302 1,607,168 1,642,398 1,623,286 1,645,425 Food and beverage 290,040 322,235 325,326 358,724 364,956 Repairs and maintenance 160,597 222,767 239,085 Utilities 171,143 171,984 150,847 158,115 161,387 Insurance claims and premiums 81,214 93,577 79,565 93,694 103,590 Contract services, marketing 435,337 418,564 560,829 767,302 543,097

Administrative (net ofOperating Mgmt Fee) 802,960 857,302 857,553 872,692 810,039

Other expenses 2,661 2,527 2,418

Subtotal 3,441,593 3,696,258 3,858,130 3,876,231 3,628,494 Hilton Franchise Fees 278,047 292,627 302,320 315,830 483,767

Total Project Operating Expenses 3,719,640 3,988,885 4,160,450 4,192,061 4,112,261

NET REVENUES 2,550,556 2,590,881 2,674,322 3,005,426 1,820,464

DEBT SERVICE Principal 485,000 135,000 515,000 535,000 550,000 Interest 383,109 601,644 586,069 559,819 532,694

Total Debt Service 868,109 736,644 1,101,069 1,094,819 1,082,694

DEBT SERVICE COVERAGE 2.93x 3.51x 2.42x 2.74x 2.17x FROM NET REVENUES

NET INCOME 1,682,447 1,854,237 1,573,253 1,910,607 1,264,581

Sources: City of Montebello and HALLC. (1) Fiscal year 2018-19 data is unaudited. Note: Revenues declined in the fiscal year 2018-19 due to Home2 Suites opening on the same campus in September 2018.

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Projected Revenues and Expenses of the Hotel

The following table sets forth projected revenues and expenses of the Hotel for the fiscal years

shown.

HILTON GARDEN INN MONTEBELLO PROJECTED REVENUES AND EXPENSES

Fiscal Year Ending June 30, 2020 2021 2022 2023 2024

REVENUES Project Gross Revenues $5,437,250 $5,333,670 $5,657,230 $5,770,374 $5,885,782 Transient Occupancy Tax 560,523 550,520 561,156 572,379 583,827 Hotel Land Use Tariff & Energy Tariff 224,157 220,208 224,462 228,951 233,531

Total Revenues 6,221,930 6,104,397 6,442,848 6,571,705 6,703,139

PROJECT OPERATING EXPENSES Labor and fringe benefits(2l 1,678,334 1,771,200 1,904,040 2,037,323 2,078,069 Food and beverage 319,299 313,268 330,637 337,249 343,994 Repairs and maintenance 326,842 320,668 338,447 345,216 352,120 Utilities 193,272 189,621 200,135 204,137 208,220 Insurance claims and premiums 69,988 68,666 72,473 73,923 75,401 Contract services, marketing 503,325 493,818 521,197 531,621 542,253

Administrative (net ofOperating Mgmt Fee) 649,540 637,270 672,603 686,055 699,776 Subtotal 3,740,600 3,794,511 4,039,532 4,215,524 4,299,833

Hilton Franchise Fees 455,900 478,255 504,771 514,867 525,164 Total Project Operating Expenses 4,196,500 4,272,766 4,544,303 4,730,391 4,824,997

NET REVENUES 2,025,431 1,831,631 1,898,545 1,841,314 1,878,142

DEBT SERVICE Total Debt Service 1,013,071 (!) 408,000 408,000 1,045,000 1,053,300

DEBT SERVICE COVERAGE 2.00x 4.48x 4.65x 1.76x 1.78x FROM NET REVENUES

NET INCOME 1,012,360 1,423,631 1,490,545 796,314 824,842

Sources: City of Montebello and HALLC. Note: Projected revenues decline in fiscal year 2019-20 and fiscal year 2020-21 are due to scheduled room renovations. (1) Fiscal year 2019-20 debt service payments include both payments of$829,471 on the 2004 Bonds and payments of$183,600

on the 2019 Bonds. (2) Projected annual increases to labor and fringe benefits are inclusive of anticipated State minimum wage increases.

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Hotel Occupancy Rates

The following tables set forth the actual occupancy rates and revenue per available room for each calendar year since the first full year of the operation of the Hotel in 2003 through 2019 and the projected occupancy rates and revenue per available room for calendar years 2020 through 2024.

HILTON GARDEN INN MONTEBELLO HISTORICAL OCCUPANCY RA TES

Room Room Average Daily Calendar Room Days Days Occupancy Daily Revenue

Year Revenues Sold Available Rate Rate Per Room 2003 $2,150,041 24,540 44,165 55.6% $ 87.61 $ 48.68 2004 2,818,684 31,163 44,286 70.4 90.45 63.65 2005 3,360,123 34,955 44,165 79.1 96.13 76.08 2006 3,706,219 33,974 44,165 76.9 109.09 83.92 2007 3,856,704 33,818 44,165 76.6 114.04 87.32 2008 3,886,731 33,752 44,286 76.2 115.16 87.76 2009 3,268,794 30,368 44,165 68.8 107.64 74.01 2010 3,386,806 31,034 44,165 70.3 109.13 76.69 2011 3,674,407 32,778 44,165 74.2 112.10 83.20 2012 4,060,012 34,575 44,286 78.1 117.43 91.68 2013 4,392,248 37,336 44,528 83.8 117.64 98.64 2014 5,223,241 40,852 44,165 92.5 128.10 118.49 2015 5,540,713 40,616 44,165 92.0 136.42 125.51 2016 5,974,170 41,146 44,286 93.3 145.19 134.90 2017 6,174,307 41,968 44,165 95.2 147.12 139.80 2018 6,023,594 40,112 44,165 91.0 150.17 136.39 2019 5,734,465 39,261 44,165 88.8 146.06 129.84

Source: HALLC.

HILTON GARDEN INN MONTEBELLO PROJECTED OCCUPANCY RA TES

Room Room Average Daily Calendar Room Days Days Occupancy Daily Revenue

Year Revenues Sold Available Rate Rate Per Room 2020(1) $5,357,250 36,677 44,286 82.8% $146.07 $120.97 2021 (l) 5,253,670 36,677 44,165 83.7 142.08 118.96 2022 5,577,230 36,677 44,165 85.3 148.03 126.28 2023 5,690,374 37,677 44,165 86.4 149.05 128.84 2024 5,805,782 38,677 44,286 87.3 150.11 131.10

Source: HALLC. (1) Calendar years 2020 and 2021 assume modest economic downturn with reduced occupancy rates in 2020 and reduced Daily

Revenue Per Room in both 2020 and 2021.

In the above tables, "Room Revenues" are revenues derived from guestroom rental. "Occupancy Rate" is the number ofrooms sold divided by the rooms available. "Daily Revenues Per Room" is Average Daily Rate divided by the Occupancy Rate.

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Competitors

The Hotel competes primarily within the San Gabriel Valley market area for commercial demand generated from businesses in the local area, leisure demand generated by pleasure travelers visiting family, friends, and nearby attractions within Los Angeles County, and group demand arising from corporate and social entities, as well as sports groups and social events.

The following table sets forth a list of nine hotels that can be considered the primary competition to the Hotel. The competitive hotels have substantially similar facilities, location, orientation, property rating, and/ or rate structures to the Hotel.

Source: HALLC.

HILTON GARDEN INN MONTEBELLO COMPETITORS

Hotel Name Home2 Suites by Hilton Los Angeles Montebello Best Western Markland Hotel Comfort Inn Monterey Park DoubleTree by Hilton Los Angeles - Rosemead Fairfield Inn & Suites Los Angles Rosemead Best Western Monterey Park Inn Crowne Plaza Los Angeles - Commerce Casino DoubleTree by Hilton Los Angeles - Commerce Quality Inn & Suites Montebello

Total

Room Count

203 87 50

200 70 55

184 201 149

1,199

Historical and Projected Hotel Improvements

Historical Improvements. Hilton and HALLC have made improvements to the Hotel since it opened. Since 2013, HALLC has also refreshed all 121 rooms with the installation ofrestroom tile, paint and all new carpets and pads. HALLC has enhanced and enlarged the Hotel's terrace area to provide additional golf course frontage, new sofa sectional lounges, mid and bar level seating, different terrace area elevations and fire tables.

From the Hotel's opening in December 2002 through the fiscal year ended June 30, 2014, approximately $3.2 million has been expended on improvements to the Hotel. The following table sets forth the improvements that have been made to the Hotel for the last five fiscal years.

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HILTON GARDEN INN MONTEBELLO HISTORICAL HOTEL IMPROVEMENTS

Fiscal Year Ending June 30,

2015 2016 2017 2018

Boardroom, Office, Lobby & Business Center $ 16,281 $ 55,389 Hallways 5,000 $ 16,482 $ 81,231 Patios/Pools 54,922 7,490 Guest Rooms 318,074 521,528 58,589 74,647 Building 193,161 53,672 86,064

Total $587,438 $544,500 $193,492 $216,100

Source: HALLC.

2019

$ 5,000

12,050 15,903 19,869

$52,822

The following table sets forth the planned improvements to the Hotel for the fiscal years shown to be funded from the Replacement and Renewal Fund.

HILTON GARDEN INN MONTEBELLO PLANNED HOTEL IMPROVEMENTS

Fiscal Year Ending June 30,

Boardroom, Office, Lobby & Business Center Hallways Patios/Pools Fitness Center Guest Rooms Building Total

Source: HALLC.

2020 2021

$ 150,000

1,270,000 $1,308,000

$1,420,000 $1,308,000

THE AUTHORITY

2022 2022

$ 18,000

$ 60,000 63,000

$ 60,000 $ 81,000

2023

$ 20,000

70,000

$ 90,000

The Authority is a joint exercise of powers entity organized and existing under and by virtue of the Joint Exercise of Powers Act, constituting Articles 1 through 4 ( commencing with Section 6500) of Chapter 5, Division 7, Title 1 of the California Government Code (the "Joint Powers Act"). The City and the Community Redevelopment Agency of the City of Montebello formed the Authority by the execution of a joint exercise of powers agreement on September 2, 1997. In July 2014, the Parking Authority of the City of Montebello replaced the Successor Agency to the Former Redevelopment Agency (as successor to the Community Redevelopment Agency of the City of Montebello) as a member of the Authority. Pursuant to the Joint Powers Act, the Authority is authorized to issue lease revenue bonds to provide funds to acquire or construct public capital improvements, such revenue bonds to be repaid from the lease payments for such improvements, such as the lease payments described herein. The members of the City Council of the City comprise the Authority's Board of Directors.

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THE CITY

General

The City is situated in eastern Los Angeles County, California. The City encompasses 8.2 square miles and is located 9 miles east of downtown Los Angeles. The City has access to three freeways: the San Gabriel River Freeway (State Highway 605) to the east, the Santa Ana Freeway (Interstate 5) to the south and the Pomona Freeway (State Highway 60) to the north. The City is a balanced community with light industry, residential areas, and commercial centers. It is bordered to the north by the cities of Monterey Park and Rosemead to the east by the City of Pico Rivera, and to the west by the City of Commerce. Other surrounding cities include the cities of Bell Gardens, Whittier, South El Monte and Los Angeles.

The City was incorporated as a general law city in 1920. The City operates under the CouncilManager member form of government. The five City Council members, including the Mayor, are elected to four-year terms on alternate slates every two years. The Mayor and the Mayor Pro Tern are selected by the City Council to serve two-year terms. The City Council appoints a City Manager. The population of the City was estimated to be 64,247 as of January 1, 2019.

See APPENDIX B-GENERAL INFORMATION REGARDING THE CITY OF MONTEBELLO AND LOS ANGELES COUNTY.

State Audit

In October of 2017, the City received a letter from the California State Auditor ( the "State Auditor") under the "High-Risk Local Government Agency Audit Program," authorized under section 8546.10 of the Government Code of the State. The Local High-Risk Agency Audit Program authorizes the State Auditor to use publicly available financial information in order to identify and audit local government agencies that are at high risk for potential waste, fraud, abuse, or mismanagement, or that have major challenges associated with their economy, efficiency, or effectiveness. Local agencies identified by the State Auditor as "high-risk" as a result of their audit must submit a corrective action plan and must then provide written updates every six months thereafter regarding its progress in implementing the corrective action plan. Once satisfactory corrective action has been taken the State Auditor will remove the "high-risk" designation. The State Auditor currently identifies the City as a "moderate risk."

The State Auditor released its audit report 2018-802 regarding the City (the" State Audit Report") on December 11, 2018. The full text of the State Audit Report may be found on the City's website at: https:/ I cityofmontebello.com/ department/finance under the heading "State Audit Report." The State Audit Report and other information presented on the City's website is not incorporated by reference as part of this Official Statement.

In releasing the State Audit Report, the State Auditor concluded that the City was a high-risk city because of its significant financial and organizational risks. The State Auditor found, for much of the prior decade, the City struggled to generate sufficient revenues to meet its expenses and as a result, suffered from a structural deficit. Further, the City relied on one-time revenues to balance its budget and its plans to increase revenues and decrease expenditures were not adequate to eliminate its structural deficit. Additionally, the City's enterprise activities, including a municipal golf course, water utility, and two hotels, posed a significant financial risk to the city's general fund. Further, the State Auditor found that the City did not competitively bid 10 of 16 agreements it reviewed and did not adequately justify the lack of

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https://cityofmontebello.com/department/finance

compet1t1ve bidding in most cases. To address these risk factors, the State Auditor developed recommendations for the city to implement, such as exploring alternate uses for its golf course and recommended that the City amend its municipal code to require competitive bidding for most procurements to ensure that Montebello obtains the best value from the services it received. On November 15, 2018, the City responded to the draft State Audit Report. The City's concerns and disagreements with the State Audit Report are discussed therein and should be read together with the State Audit Report. In summary, the City largely agreed with the conclusions reached in the State Audit report and acknowledged that while it has already taken steps towards improving its fiscal and operation efficiencies, there are many areas the City still needs to address. The City has since submitted a corrective action plan as well as quarterly progress updates on April 18 and July 10, 2019. The City's quarterly progress updates can be viewed on the City's website referenced above. The quarterly progress reports and other information presented on the City's website are not incorporated by reference as part of this Official Statement.

Any failure of the City to meet its financial obligations could have a material adverse impact in the value of the 2019 Bonds. See also "RISK FACTORS-Limitations on Remedies Available; Bankruptcy" herein.

CITY FINANCIAL INFORMATION

Financial Statements and Budgetary Process

The City's accounting policies conform to generally accepted accounting principles. The audited financial statements also conform to the principles and standards for public financial reporting established by the Governmental Accounting Standards Board.

Basis of Accounting and Financial Statement Presentation. The government-wide financial statements are reported using the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met.

Governmental fund financial statements are reported using the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures are recorded only when payment is due.

Audited Financial Statements. The City retained the firm of Vasquez & Company, LLP, Glendale, California (the "City's Auditor"), to examine the general purpose financial statements of the City as of and for the year ended June 30, 2018. The audited financial statements for fiscal year ended June 30, 2018, are included in APPENDIX A-COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY OF MONTEBELLO FOR THE FISCAL YEAR ENDED JUNE 30, 2018. The City has not requested, and the City's Auditor has not provided, any review or update of such financial statements in connection with their inclusion in this Official Statement.

Budget Process. The City Council adopts an annual budget with appropriations for all City funds prior to the beginning of the fiscal year, which begins on July 1 of each year. The City Council has the legal authority to amend the budget at any time during the fiscal year. The City maintains budgetary controls to ensure compliance with legal provisions embodied in the appropriated budget approved by the City Council.

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The level of budgetary control (that is, the level at which expenditures cannot legally exceed the appropriated amount) for the City's operating budget is at the fund level. For the operating budget, the City Manager has the authority to move appropriations between accounts (without dollar limitation) within a budget program and within the same fund. All other appropriation changes require the approval of the City Council.

All appropriations lapse at the end of the fiscal year unless specific carryovers are approved by the City Council.

The following table shows the City's audited General Fund balance sheet for fiscal years 2014-15 through 2017-18 and unaudited actuals for 2018-19.

CITY OF MONTEBELLO GENERALFUNDBALANCESHEET Fiscal Years 2014-15 through 2018-19

Fiscal Year endingJune 30, 2014-15 2015-16 2016-17 2017-18 2018-19 Audited Audited Audited Audited Unaudited

ASSETS Cash and investments $ 7,799,084 $ 3,324,339 $ 6,799,980 $ 12,191,403 $ 17,373,532 Restricted cash and investments 4,666,731 4,666,731 4,837,800 Interest receivable 17,887 31,940 56,420 132,932 212,495 Accounts receivable 1,089,097 1,104,568 1,142,552 1,389,708 2,392,715 Taxes receivable 1,932,653 4,312,322 2,644,616 2,501,514 2,617,771 Due from other funds 1,377,027 4,198,276 2,503,001 2,794,623 2,000,0l 7 Due from Successor Agency 2,847 3,517 34,241 29,243 Prepaid Expenses 52,620 109,099 171,468 174,398 141,044 Inventory 11,418 13,375 Investment in land held for resale 1,208,814 1,208,814 682,538

Total Assets 12,283,353 13,093,919 19,197,099 25,093,824 30,287,155

LIABILITIES Accounts payable and accrued liabilities 2,306,104 2,271,703 3,126,571 2,649,448 3,920,078 Deposits payable 5,000 5,000 5,000 5,000 Due to other funds 330,700 Due to Successor Agency 3,250 3,517 11,880 1,103 Unearned revenue 970,867 1,366,101 2,010,763 5,101,575 5,818,454

Total Liabilities 3,285,221 3,646,321 5,154,214 7,756,023 10,070,335

FUND BALANCES Non-spendable 64,038 122,474 1,380,282 1,383,212 823,583 Restricted 4,666,731 4,666,731 4,837,800 Committed Assigned Unassigned 8,934,094 9,325,124 7,995,872 11,287,858 14,555,437

Total Fund Balances 8,998,132 9,447,598 14,042,885 17,337,801 20,216,820

Total Liabilities and Fund Balances 12,283,353 13,093,919 19,197,099 25,093,824 30,287,155

Sources: City of Montebello 2015-18 Comprehensive Annual Financial Reports and City of Montebello Finance Department. Note: 2018-19 Unaudited actuals provided by the City of Montebello Finance Department.

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The following table shows the City's audited General Fund revenues, expenditures and changes in fund balances for fiscal years 2015-16 through 2017-18, unaudited actuals for 2018-19, and budgeted projections for fiscal year 2019-20.

CITY OF MONTEBELLO GENERAL FUND REVENUE, EXPENDITURES AND CHANGES IN FUND BALANCES

Fiscal Years 2015-16 through 2019-20

FY2015-16 FY2016-l 7 FY2017-18 FY2018-19 FY2019-20 Audited Audited Audited Unaudited<1) Budget<2)

REVENUES Sales taxes $ 13,992,347 $ 13,267,373 $ 13,ll8,981 $ 14,031,972 $ 13,146,732 Property taxes 4,927,230 5,094,185 5,208,975 5,676,4ll 5,967,797 Other taxes 503,173 553,462 585,960 614,486 658,201 Franchise taxes 1,405,229 1,493,956 2,141,450 2,224,088 2,315,184 Licenses and permits 4,733,752 4,374,761 4,452,210 6,220,480 5,137,999 Fines and forfeitures 1,912,729 2,251,384 2,185,022 2,165,922 2,023,693 Investment Income 42,685 29,419 74,742 162,487 179,506 Intergovernmental 5,730,251 5,950,400 6,157,030 6,526,570 6,784,372 Charges for services 6,6ll,348 6,382,058 6,438,100 6,657,595 6,914,613 Other revenues 2,993,814 959,391 1,153,423 728,696 223,200

Total Revenues 42,852,558 40,356,389 41,515,893 45,008,705 43,351,296

EXPENDITURES Current:

General government 5,415,578 4,869,177 4,976,497 5,501,362 5,422,959 Public safety 32,297,261 31,438,293 31,487,454 29,449,271 30,814,212 Public works 6,824,093 6,812,050 6,778,314 7,871,531 8,946,744 Parks and recreation 3,889,366 3,658,338 3,813,599 3,233,258 4,741,296 Housing and community development 2,212,276 2,058,623 2,006,274 2,029,591 1,784,894

Capital outlay 883,423 183,834 265,903 380,065 0 lnterfund charges (641,466) 130,090 (231,650) (355,84 7) (592,135) Debt service - Principal Debt service - Interest

Total Expenditures 50,880,531 49,150,405 49,096,391 48,109,232 51,ll7,970

EXCESS/(DEFICIENCY) OF REVENUES (8,027 ,973) (8,794,016) (7 ,580,498) (3,100,527) (7,766,674) OVER EXPENDITURES

OTHER FINANCING SOURCES/(USES) Other Revenues 4,666,731(3)

Transfers in (4) 8,550,134 9,978,439 12,257,329 6,758,437 5,888,806 Transfers out (5) (72,695) (1,255,867) (1,381,915) (778,891) (962,613)

Total Other Financing Sources 8,477,439 13,389,303 10,875,414 5,979,546 4,926,193

NET CHANGE IN FUND BALANCES 449,466 4,595,287 3,294,916 2,879,019 (2,840,481)

FUND BALANCES - BEGINNING OF YEAR 8,998,132 9,447,598 14,042,885 17,337,801 20,216,820

FUND BALANCES - END OF YEAR 9,447,598 14,042,885 17,337,801 20,216,820 17,376,338

Source: City of Montebello 2016-18 Comprehensive Annual Financial Reports and City of Montebello Finance Department. (1) Unaudited actuals provided by the City of Montebello Finance Department. (2) From the City's FY 2019-20 Budget, adopted June 26th, 2019. (3) Represents unspent bond proceeds from the City's Successor Agency. (4) Transfers in are mainly from the Pension Overrides Fund. When compared to prior year, the amount of transfer in from retirement fund for

the fiscal years FY18-20 is much less primarily due to an accounting change of the unfunded liability payment which was previously charged to each department budget, but is now charged directly to the Retirement Fund, hence reducing the amount of transfer needed.

(5) Transfers out are mainly to the Golf Enterprise Fund (all years) and Detention Fund (until FYI 7-18).

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City Financial Management Policies

The City Council has adopted a comprehensive set of financial management policies to provide for the prudent investment of City funds and management of debt. The City's practice is to incur debt only after deliberation over the effect of such debt on the City's General Fund and other resources of the City, and in those circumstances where the use of debt would be appropriate to the scale and economic life of the asset being financed and the accumulation or availability of reserves to fund the capital requirement.

Investment Policy. The investment of funds of the City ( except pension and retirement funds) is made in accordance with the City's Investment Policy, most recently approved in June 2018 (the "Investment Policy"), and section 53601 et seq. of the California Government Code. The Investment Policy is subject to revision at any time and is reviewed at least annually to ensure compliance with the stated objectives of safety, liquidity, yield, and current laws and financial trends. All amounts held under the Trust Agreement are invested at the direction of the City in Investment Securities, as defined in the Trust Agreement, and are subject to certain limitations contained therein.

Debt Management Policy. In accordance with section 8855(i) of the California Government Code the City adopted a debt management policy in September 25, 2019, to establish conditions for the use of debt; to ensure that debt capacity and affordability are adequately considered; to minimize the City's interest and issuance costs; to maintain the highest possible credit rating; to provide complete financial disclosure and reporting; and to maintain financial flexibility for the City.

Capital Improvement Program. The City's capital improvement program (the "CIP") is approved by City Council annually and throughout the year as needed. Capital assets (including infrastructure) are recorded at cost where historical records are available and at an estimated original cost where no historical records exist. Contributed capital assets are valued at their estimated fair market value at the date of contribution. Generally, capital asset purchases in excess of $5,000 are capitalized if they have an expected useful life of one year or more. The current CIP for fiscal year 2019-20 is $19,706,000, to be funded from available fund balances.

Current Investments

The City's investment portfolio (par value), as of June 30, 2019, included cash and investments equal to $84 million.

Principal Sources of General Fund Revenues

Sales and use taxes were the City's largest revenue source in fiscal year 2018-19 and represented approximately 31.2% of fiscal year 2018-19 General Fund revenues. Property taxes were the City's second largest General Fund revenue source in fiscal year 2018-19 and represented approximately 12.6% of General Fund revenues. For a discussion of potential State Budget impacts on General Fund revenues, see "-State Budgets." For a discussion of sales tax revenues and property taxes, see "-Sales and Use Taxes" and " -Property Taxes."

Vehicle license fees are assessed in the amount of 2% of a vehicle's depreciation market value for the privilege of operating a vehicle on California's public highways. A program to offset ( or reduce) a portion of the vehicle license fees ("VLF") paid by vehicle owners was established by Chapter 322, Statutes of 1998. Beginning January 1, 1999, a permanent offset of 25% of the VLF paid by vehicle owners became

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operative. Various pieces oflegislation increased the amount of the offset in subsequent years to the existing statutory level of 67.5% of 2% (resulting in the current effective rate of 0.65%).

The following table shows the City's audited General Fund tax revenues by source for the most recent four fiscal years and unaudited actuals for fiscal year 2018-19:

Source Property Taxes Sales Taxes

CITY OF MONTEBELLO GENERAL FUND TAX REVENUES BY SOURCE


Fiscal Year ending June 30,

2014-15 2015-16 2016-17 2017-18 Audited Audited Audited Audited

$6,284,614 $4,927,230 $5,094,187 $5,208,975 12,563,805 13,992,347 13,267,373 13,118,981

Transient Occupancy Taxes 357,896 365,290 401,852 414,198 Franchise Taxes 1,410,918 1,405,229 1,493,956 2,141,450 Other Local Taxes 132,100 137,883 151,611 171,762

Total $20,749,334 $20,827,976 $20,408,978 $21,055,366

Sources: City of Montebello Finance Department.

Sales and Use Taxes

2018-19 Unaudited $5,676,411 14,031,972

421,412 2,224,088

193,073

$22,546,956

A sales tax is imposed on the privilege of consuming personal property in California. California does not tax services. The tax rate is established by the State Legislature, and is presently 7.25%, statewide (of which 1% is paid to the City). In addition, many of California's cities, counties, Citys and communities have special taxing jurisdiction to impose a transaction (sales) or use tax. These so-called district taxes increase the tax rate in a particular area by adding the local option tax to the statewide tax. These district taxes can vary up to 1%, and more than one district tax may be in effect for a particular location.

Four seperate district taxes are levied on sales in the City by the Los Angeles County Metropolitan Transportation Authority, each having approved by the voters in Los Angeles County. The applicable sales taxes include Measure M taxes, Measure R taxes, Proposition C taxes and Proposition A taxes.

Source: City of Montebello.

CITY OF MONTEBELLO CURRENT SALES TAX RATES

Component State General Fund Los Angles County MeasureM MeasureR Proposition C Proposition A

Total

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Tax Rate 7.25% 0.25 0.50 0.50 0.50 0.50

9.50%

The State's actual administrative costs with respect to the portion of sales taxes allocable to the City are deducted before distribution and are determined on a quarterly basis.

Property Taxes

Under Proposition 13, an amendment to the California Constitution adopted in 1978, the county assessor's valuation of real property is established as shown on the fiscal year 1975-76 tax bill, or, thereafter, as the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred. Assessed value of property may be increased annually to reflect inflation at a rate not to exceed 2% per year, or reduced to reflect a reduction in the consumer price index or comparable data for the area under taxing jurisdiction or in the event of declining property value caused by substantial damage, destruction, market forces or other factors. As a result of these rules, real property that has been owned by the same taxpayer for many years can have an assessed value that is much lower than that of similar properties more recently sold, and may be lower than its own market value. Likewise, changes in ownership of property and reassessment of such property to market value commonly will lead to increases in aggregate assessed value even when the rate ofinflation or consumer price index would not permit the full 2% increase on any property that has not changed ownership.

Taxes are levied by the County for each fiscal year on taxable real and personal property which is situated in the County as of the preceding January 1. Real property which changes ownership or is newly constructed is revalued at the time the change in ownership occurs or the new construction is completed. The current year property tax rate will be applied to the reassessment, and the taxes will then be adjusted by a proration factor to reflect the portion of the remaining tax year for which taxes are due.

Local agencies and schools will share the growth of "base" sources from the tax rate area. Each year's growth allocation becomes part of each local agency's allocation in the following year. The availability of revenue from growth in the tax bases in such tax rate areas may be affected by the existence of redevelopment agencies (including their successor agencies) which, under certain circumstances, may be entitled to sources resulting from the increase in certain property values. State law exempts $7 ,000 of the assessed valuation of an owner-occupied principal residence. This exemption does not result in any loss of revenue to local agencies since an amount equivalent to the taxes that would have been payable on such exempt values is supplemented by the State.

For assessment and tax collection purposes, property is classified either as "secured" or "unsecured," and is listed accordingly on separate parts of the assessment roll. The "secured roll" is that part of the assessment roll containing State-assessed property and property (real or personal) for which there is a lien on real property sufficient, in the opinion of the county assessor, to secure payment of the taxes. All other property is "unsecured," and is assessed on the "unsecured roll." Secured property assessed by the State Board of Equalization is commonly identified for taxation purposes as "utility" property.

Property taxes on the secured roll are due in two installments, on November 1 and February 1 of each fiscal year, and if unpaid become delinquent on December 10 and April 10, respectively. A penalty of 10% attaches immediately to any delinquent payment. Property on the secured roll, with respect to which taxes are delinquent, becomes tax defaulted on or about June 30 of the fiscal year. Such property may thereafter be redeemed by payment of delinquent taxes and the delinquency penalty, plus costs and prepayment penalty of one and one-half percent per month to the time of prepayment. If taxes are unpaid for a period of five years or more, the property is subject to sale by the county treasurer.

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Property taxes on the unsecured roll are due as of the January 1 lien date and become delinquent, if unpaid, on August 31. A 10% penalty attaches to delinquent unsecured taxes. If unsecured taxes are unpaid at 5 p.m. on October 31, an additional penalty of one and one-half percent per month attaches to such taxes on the first day of each month until paid. A county has four ways of collecting delinquent unsecured personal property taxes: (1) bringing a civil action against the taxpayer; (2) filing a certificate in the office of the county clerk specifying certain facts in order to obtain a lien on certain property of the taxpayer; (3) filing a certificate of delinquency for record in the county clerk and county recorder's office in order to obtain a lien on certain property of the taxpayer; and (4) seizing and selling personal property, improvements, or possessory interests belonging or assessed to the delinquent taxpayer.

Assessed Valuation

The City uses the facilities of the County for tax assessment and collection. City taxes are assessed and collected at the same times and on the same tax rolls as County, school and special district taxes.

Under California law, two additional types of exemptions were authorized beginning in the tax year 1969-70. The first of these exempts 50% of the assessed valuation of business inventories from taxation. The second provides an exemption of $7,000 of the assessed valuation of an owner-occupied dwelling from which application has been made to the County Assessor. Under a constitutional amendment that is effective in fiscal year 2018-19, the California Legislature can raise this exemption. Revenue estimated to be lost to local taxing agencies due to such exemption is reimbursed from State sources if funds are appropriated. The reimbursement is based upon total taxes due upon these exempt values and therefore is not reduced by any amounts for estimated delinquencies.

Summarized below is the assessed valuation record of the City for the five most recent fiscal years.

Fiscal Year Local Secured 2015-16 $5,063,402,936 2016-17 5,282,681,403 2017-18 5,468,119,437 2018-19 5,794,732,247 2019-20 6,114,345,136

Source: California Municipal Statistics, Inc.

CITY OF MONTEBELLO ASSESSED VALUATIONS

Utility Unsecured $31,557,094 $210,915,229

20,057,286 223,110,011 20,953,141 221,018,561 20,402,706 238,293,460 21,715,493 257,035,933

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Total $5,305,875,259

5,525,848, 700 5,710,091,139 6,053,428,413 6,393,096,562

% Change

4.15% 3.33 6.01 5.61

Principal Taxpayers. The following table sets forth the principal secured property taxpayers in the City as of the current fiscal year.

CITY OF MONTEBELLO FISCAL YEAR 2019-20 LARGEST LOCAL SECURED PROPERTY TAXPAYERS

Fiscal Year 2019-20 %of

Property Owner Primary Land Use Assessed Valuation Total C1l

1. Montebello Town Center Shopping Center $191,929,050 3.14% 2. Sentinel Peak Resources CA LLC Oil & Gas 82,978,621 1.36 3. Brix or Montebello Plaza LP Shopping Center 77,049,290 1.26 4. Bimbo Bakeries USA Inc. Industrial 58,663,523 0.96 5. KK 3A Corporation Apartments 49,592,599 0.81 6. Somerset Apartments LLC Apartments 47,180,723 0.77 7. Comref So CA Industrial Industrial 45,333,273 0.74 8. Rreef America REIT II Corp. KKKK Industrial 40,016,877 0.65 9. Minson Investments Group LLC Industrial 38,295,000 0.63 10. KIR Montebello LP Shopping Center 35,810,843 0.59 11. Combined Properties LP, Lessor Shopping Center 33,406,366 0.55 12. Prologis California I LLC Industrial 33,339,391 0.55 13. Royal Paper Box Company of California Industrial 29,602,392 0.48 14. AMB Institutional Alliance Fund III LP Industrial 24,849,684 0.41 15. Phillip J. and Phyllis M. Pace, Trustees Industrial 24,836,102 0.41 16. Casa La Merced LP Apartments 24,782,328 0.41 17. Guardian Life Insurance Company of America Industrial 23,131,141 0.38 18. Park Victoria Apartments LLC Apartments 22,236,440 0.36 19. Stanley A. Sirott Apartments 21,651,944 0.35 20. Kaiser Foundation Health Plan Medical Offices 20,976,305 0.34

Total Top 20 $925,661,892 15.14%

Source: California Municipal Statistics, Inc. (1) Fiscal year 2019-20 Local Secured Assessed Valuation: $6,114,345,136.

Tax Levies and Delinquencies

Beginning in 1978-79, Article XIIIA and its implementing legislation shifted the function of property taxation primarily to the counties, except for levies to support prior-voted debt, and prescribed how levies on county-wide property values are to be shared with local taxing entities within each county.

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The following tables reflects the historical secured tax levy and year-end delinquencies for property tax levies for property in the City for the past five fiscal years.

CITY OF MONTEBELLO SECURED TAX CHARGE AND DELINQUENCY

Fiscal Years 2014-15 to 2018-19

Secured Amount Fiscal Tax Delinquent % Delinquent Year Charge C1l June 30 June 30

2014-15 $5,314,426.53 $75,473.56 1.42% 2015-16 5,437,457.99 75,925.48 1.40 2016-17 5,655,763.80 66,173.32 1.17 2017-18 5,872,622.32 71,885.24 1.22 2018-19 6,197,146.22 83,463.94 1.35

Source: California Municipal Statistics, Inc. (1) 1% General Fund apportionment. Excludes redevelopment agency impounds. Reflects countywide delinquency rate

No Teeter Plan

The County Board elected to discontinue the Alternative Method of Distribution of Tax Levies and Collections and of Tax Sales Proceeds (commonly referred to as the "Teeter Plan") on July 1, 2009. Under the terms of the Teeter Plan, the County had remitted to local agencies the amount of uncollected taxes in exchange for retaining any subsequent delinquent payments, penalties and interest that would have been due to the local agency. As the Teeter Plan has been discontinued, the City's property tax revenues now reflect both reduced property tax revenue from uncollected taxes and increased revenue from the subsequent receipt of delinquent taxes, interest and penalty payments.

Other Revenue Sources

In addition, the City receives the following General Fund revenues:

Licenses and Permits. The City charges certain permits, licenses and fees for the cost recovery of providing current planning, building inspection, recreation and other municipal services.

Fines~ Forfeitures and Penalties. These revenues include parking citations and other fines for municipal code violations.

Charges for Services. The City charges fees for plan checking, building inspection and a variety of other municipal services.

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The following table illustrates all non-tax General Fund revenue sources for the most recent four fiscal years and unaudited actuals for fiscal year 2018-19:

CITY OF MONTEBELLO OTHER GENERAL FUND REVENUE SOURCES


Fiscal Year ending June 30, 2014-15 2015-16 2016-17 2017-18 Audited Audited Audited Audited

Licenses and permits $ 4,640,365 $ 4,733,752 $ 4,374,761 $ 4,452,210 Fines and forfeitures 1,589,536 1,912,729 2,251,384 2,185,022 Investment income 31,302 42,685 29,419 74,742 Intergovernmental 5,616,198 5,730,251 5,950,400 6,157,030 Charges for services 6,054,033 6,611,348 6,382,058 6,438,100 Proceeds forom sale of property 1,968,213 Other revenue 1,469,321 1,025,601 959,391 1,153,423

TOT AL OTHER REVENUE SOURCES $19,400,755 $22,024,579 $19,947,413 $20,460,527

2018-19 Unaudited $6,220,480

2,165,922 162,487

6,526,570 6,657,595

728,696 $22,461,750

Sources: City of Montebello fiscal years 2014-15 through 2017-18 Comprehensive Annual Financial Reports and City of Montebello Finance Department.

OTHER CITY FINANCIAL INFORMATION

Labor Relations

Currently 214 permanent City employees are covered by negotiated agreements as detailed in the table below. The City also employs 78 additional employees unrepresented by a collective bargaining unit for a total of 292 employees in total, excluding the Transit Operations.

CITY OF MONTEBELLO NEGOTIATED EMPLOYEE AGREEMENTS

Bargaining Unit MFFA MCEA MSA MPMA MFMA MPOA UN-REP

Total

Contract Expiration Date

12/31/2021 12/31/2021 12/31/2021 12/31/2021 12/31/2021 12/31/2021 12/31/2021

Number of Employees

44 90

9 7 5

59 78

292

Source: City of Montebello Finance Department.

Risk Management

The City is partially self-insured for general liability and workers' compensation claims. The City pays up to $1 million per occurrence for general liability claims, and has excess insurance up to $10 million per occurrence. For workers' compensation, the City provides self-sinsurance up to a $1,000,000 retention

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level and has acquired excess insurance coverage of $5 million for each claim. The City also purchases commercial insurance for other risks ofloss, including property loss and vehicle physical damage.

See APPENDIX A-COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY OF MONTEBELLO FOR THE FISCAL YEAR ENDED JUNE 30, 2018, Note 11.

Employee Retirement Plans

Plan Description. All qualified permanent and probationary employees are eligible to participate in the Public Agency Cost Sharing Multiple-Employer Plan ("Plan") administered by the California Public Employees' Retirement System ("CalPERS"). The Plan consists of individual rate plans (benefit tiers) within a safety risk pool (police and fire) ("Safety") and a miscellaneous risk pool (all other) ("Miscellaneous"). Plan assets may be used to pay benefits for any employer rate plan of the Safety and Miscellaneous pools. Accordingly, rate plans within the Safety or Miscellaneous pools are not separate plans under GASB Statement No. 68. Individual employers may sponsor more than one rate plan in the Miscellaneous or Safety risk pools. The City sponsors seven rate plans (three Miscellaneous and four Safety). Benefit provisions under the Plan are established by State statute and City resolution. CalPERS issues publicly available reports that include a full description of the pension plan regarding benefit provisions, assumptions and membership information that can be found on the CalPERS website.

Benefits Provided. CalPERS provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to plan members and beneficiaries. A classic safety and miscellaneous CalPERS member becomes eligible for Service Retirement upon attainment of age 50 and 55, respectively, with at least 5 years of credited service. Public Employee Pension Reform Act (PEPRA) safety and miscellaneous members include all employees hired on or after January 1 2013. PEPRA members become eligible for full service retirement upon attainment of age 57 and 62, respectively, with at least 5 years of service. The service retirement benefit is a monthly allowance equal to the product of the benefit factor, years of service, and final compensation. The final compensation is the monthly average of the member's highest 12 full-time equivalent monthly pay. Retirement benefits for classic Safety and Miscellaneous employees are calculated as 3% and 2.7%, respectively, of the average final 12 months compensation. Retirement benefits for PEPRA safety and miscellaneous employees are calculated as 2. 7% and 2%, respectively, of the average final 36 months compensation.

Participant is eligible for non-industrial disability retirement if becomes disabled and has at least 5 years of credited service. There is no special age requirement. The standard non-industrial disability retirement benefit is a monthly allowance equal to 1.8% of final compensation, multiplied by service. Industrial disability benefits are not offered to miscellaneous employees.

An employee's beneficiary may receive the basic death benefit if the employee dies while actively employed. The employee must be actively employed with the City to be eligible for this benefit. An employee's survivor who is eligible for any other pre-retirement death benefit may choose to receive that death benefit instead of this basic death benefit. The basic death benefit is a lump sum in the amount of the employee's accumulated contributions, where interest is currently credited at 6.0% per year, plus a lump sum in the amount of one month's salary for each completed year of current service, up to a maximum of six months' salary. For purposes of this benefit, one month's salary is defined as the member's average monthly full-time rate of compensation during the 12 months preceding death.

Upon the death of a retiree, a one-time lump sum payment of $500 will be made to the retiree's designated survivor(s), or to the retiree's estate.

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Benefit terms provide for annual cost-of-living adjustments to each employee's retirement allowance. Beginning the second calendar year after the year of retirement, retirement and survivor allowances will be annually adjusted on a compound basis by 2%.

Employees Covered. At the June 30, 2018 (CalPERS actuarial valuation date), the following employees were covered by the benefit terms for each Plan.

CITY OF MONTEBELLO DEFINED BENEFIT PENSION PLAN

COVERED EMPLOYEES

Inactive employee or beneficiaries currently receiving benefits Inactive employees entitled to but not yet receiving benefits Active employees

Total

Source: City ofMontebello's 2018 Ca!PERS actuarial reports.

Safety Plan --

281 104 105

--

490

Misc Plan --

421 431 312

1,164

Contributions. Section 20814(c) of the California Public Employees' Retirement Law requires that the employer contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective on the July 1 following notice of a change in the rate. Funding contributions for both Plans are determined annually on an actuarial basis as of June 30 by CalPERS. The actuarially determined rate is the estimated amount necessary to finance the costs ofbenefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The City is required to contribute the difference between the actuarially determined rate and the contribution rate of employees.

According to the most recent CalPERS actuarial study, dated as of June 30, 2018, the Employer Normal Cost Rate will be 11.129% of payroll for Miscellaneous and 21.164% for Safety for fiscal year 2020-21. The contributions toward the unfunded liability will be $4,771,970 for Miscellaneous and $6,491,262 for Safety.

Net Pension Liability. The City's net pension liability for both Plans is measured as the total pension liability, less the plan's fiduciary net position. Net pension liability using the Actuarial Valuation Report as of June 30, 2018, is $56,113,583 for Miscellaneous and $92,748,818 for Safety, for a total of $148,862,401.

For the year ended June 30, 2018, the City recognized pension expense of $12,172,346 and $6,381,487 for the safety and miscellanoues plans, respecitvely. The City's contributions to the Plan recognized as a part of pension expense for the year ended June 30, 2018 were $6,096,263 and $4,395,716 for the safety and miscellaneous plans.

Deferred Ouiflows/lnflows of Resources Related to Pensions. At June 30, 2018, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

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CITY OF MONTEBELLO CALPERS DEFERRED OUTFLOWS/INFLOWS OF RESOURCES

Contributions subsequent to measurement date Changes in assumptions 11 between actual and expected experiences Net 11 between projected/actual earnings on plan investments

Total

Source: City of Montebello 2018 CAFR.

Deferred Outflows Deferred Inflows of Resources $10,491,982

14,743,283

4,515,476

$29,750,741

of Resources

$2,707,961

$2,707,961

For more information, including actuarial assumptions, a discussion of the discount rate used, and schedules of funding progress for the City's various pension plans, see APPENDIX ACOMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY OF MONTEBELLO FOR THE FISCAL YEAR ENDED JUNE 30, 2018-Notes to Basic Financial Statements-NOTE 9.

Tax Override. The City has a property tax assessment which is used specifically for pensions. In 1946, voters of the City approved a "tax override" to fund the City's participation in the State Employees' Retirement System ( the "1946 Initiative"). As reflected in Ordinance 402 adopted by the City Council on August 24, 1946 (the implementing Ordinance of the voter initiative), the voters approved a tax rate ofup to $0.35 per one hundred dollars of assessed property value. Ordinance 402 describes the "indebtedness" approved by the voters in 1946 as follows: "For obligations to the City to the State Employees' Retirement System for the retirement of City employees." In 1976, City voters approved "Proposition A," a measure which, in essence, extended the "indebtedness" approved in the 1946 Initiative to include death benefits and other "retirement features" for public safety members. In accordance with the provisions of the 1946 Initiative and Proposition A, City voters have approved a maximum tax rate of $0.495 per one hundred dollars ($100) assessed valuation to fund the City's contribution to the State Retirement System (now PERS), as well as death benefits and "retirement features" for public safety workers (Proposition A). Annually, the City Council approves a resolution to set property tax override rates on voter approved indebtedness for retirement programs (a "Tax Override Resolution") in accordance with the provisions of Article XIIIA of the California Constitution and Section 3, Chapter 112 of the Statues of 1985. The tax rate imposed on property within the City fluctuated in accordance with the rate set in each Tax Override Resolution until 1996 when the City Council adopted Ordinance No. 2148 (the" 1996 Ordinance") which codified a tax rate of $0.197875 per one hundred dollars ($100) assessed valuation (as further set forth in Montebello Municipal Code Section 3.28.020). The purpose of the 1996 Ordinance is described as funding "the City's contribution to PERS on behalf of its employees which was approved by the voters on July 9, 1946." The $0.197875 rate established in the 1996 Ordinance was consistent with the rate imposed for more than a decade prior to adoption of the 1996 Ordinance and is the rate currently imposed by the City.

Actions Taken by CalPERS. At its April 17, 2013, meeting, CalPERS' Board of Administration (the "Board of Administration") approved a recommendation to change the CalPERS amortization and smoothing policies. Prior to this change, CalPERS employed an amortization and smoothing policy that spread investment returns over a 15-year period with experience gains and losses paid for over a rolling 30-year period. As a result, CalPERS now employs an amortization and smoothing policy that will pay for all gains and losses over a 20-year period with a five-year ramp-up, and five-year ramp-down, period. The new amortization and smoothing policy was used for the first time in the June 30, 2013 actuarial valuations in setting employer contribution rates for fiscal year 2015-16.

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On February 18, 2014, the Board of Administration approved new demographic actuarial assumptions based on a 2013 study ofrecent experience. The largest impact, applying to all benefit groups, is a new 20-year mortality projection reflecting longer life expectancies and that longevity will continue to increase. Because retirement benefits will be paid out for more years, the cost of those benefits will increase as a result. The Board of Administration also assumed earlier retirements for Police 3%@50, Fire 3%@55, and Miscellaneous 2. 7%@55 and 3%@60, which will increase costs for those groups. As a result of these changes, rates increased beginning in fiscal year 2016-17 (based on the June 30, 2014 valuation) with full impact in fiscal year 2020-21.

On November 18, 2015, the Board of Administration adopted a funding risk mitigation policy intended to incrementally lower its discount rate - its assumed rate of investment return - in years of good investment returns, help pay down the pension fund's unfunded liability, and provide greater predictability and less volatility in contribution rates for employers. The policy establishes a mechanism to reduce the discount rate by a minimum of 0.05 percentage points to a maximum of 0.25 percentage points in years when investment returns outperform the existing discount rate, currently 7.5%, by at least four percentage points. CalPERS staff modeling anticipates the policy will result in a lowering of the discount rate to 6.5% in about 21 years, improve funding levels gradually over time and cut risk in the pension system by lowering the volatility of investment returns. More information about the funding risk mitigation policy can be accessed through CalPERS' web site at the following website address: https://www.calpers.ca.gov/page/newsroom/calpers-news/2015/adopts-funding-risk-mitigation-policy. The reference to this Internet website is provided for reference and convenience only. The information contained within the website may not be current~ has not been reviewed by the City or the Underwriter and is not incorporated in this Official Statement by reference.

On December 21, 2016, the Board of Administration voted to lower its discount rate from the current 7.5% to 7.0% over the next three years according to the following schedule.

Fiscal Year 2018-19 2019-20 2020-21

Discount Rate 7.375% 7.250 7.000

For public agencies like the City, the 7.0% discount rate took effect for the actuarial study as of July 1, 2018, which sets contributions for the 2020-21 Fiscal Year. Lowering the discount rate means employers that contract with CalPERS to administer their pension plans will see increases in their normal costs and unfunded actuarial liabilities. Active members hired after January 1, 2013, under the Public Employees' Pension Reform Act will also see their contribution rates rise. The three-year reduction of the discount rate will result in average employer rate increases of about 1 percent to 3 percent of normal cost as a percent of payroll for most Miscellaneous retirement plans, and a 2 percent to 5 percent increase for most Safety plans. Additionally, many CalPERS employers will see a 30 to 40 percent increase in their current unfunded accrued liability payments. These payments are made to amortize unfunded liabilities over 20 years to bring the pension fund to a fully funded status over the long-term.

CalPERS Amortization Period Reform. On February 13, 2018 the CalPERS Board voted to shorten the period over which actuarial gains and losses are amortized from 30 years to 20 years for new pension liabilities. The new 20-year amortization period begins with new gains or losses accrued starting with the

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https://www.calpers.ca.gov/page/newsroom/calpers-news/2015/adopts-funding-risk-mitigation-policy

June 30, 2019 actuarial valuations. The first payments on the new 20-year amortization schedule will take place in 2021.

A shorter amortization period will increase annual Unfunded Accrued Liability ("UAL") contributions for cities that participate in CalPERS so long as CalPERS remains underfunded. The shortened amortization period will also lead to reductions of periods of negative amortization of the UAL, interest cost savings, and faster recoveries of funded status after market downturns.

Cities that participate in CalPERS will also see additional volatility in their future UAL contributions due to market performance as gains or losses will be amortized faster under the new amortization period.

The City cannot currently estimate the impact the shorter amortization period will have on its required contributions for its Miscellaneous and Safety Plans.

Planned Pension Obligation Bonds. The City is in the process of issuing pension obligation bonds in early 2020 which is expected to prepay all or a portion ofits UAL reducing its annual payments to CalPERS. No assurance can be made, however, that such pension obligation bonds will be issued.

Other Post-Employment Benefits

Plan Description. The City provides postemployment healthcare benefits to eligible employees at retirement through a single-employer defined benefit other postemployment benefits plan administered by the City. Benefit provisions are established through agreements and memorandums of agreement between the City, its management employees, and undions representing the City's employees.

Employees Covered. As of the June 30, 2018, actuarial valuation, the plan consists of 381 active employees and 171 inactive employees or beneficiaries currently receiving benefits.

Funding Policy. Future contribution requirements of plan members, if any, and the City will be established and amended as needed by the City Council. The required contribution will be based on projected pay-as-you-go financing requirements, with additional amounts to prefund benefits as determined annually by the Council.

Annual OPEB Expense and Net OPEB Liability. For the year ended June 30, 2018, the City recognized OPEB expense of $1,505,956 The City currently finances these benefits on a pay-as-you-go basis. The following table shows the amount contributed to the plan, and changes in the City's net OPEB Liability calculated at a discount rate of 3 .40%:

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Service cost

CITY OF MONTEBELLO OPEB LIABILITY Fiscal Year 2017-18

Interest on net OPEB obligation Changes in assumptions Benefits payments

Increase in net OPEB obligation

$ 1,079,041 849,121

(2,111,032) (1,039,463) (1,222,333) 29,234,403 Net OPEB obligation, beginning of the year

Net OPEB obligation, end of the year $28,012,070


See APPENDIX A-COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY OF MONTEBELLO FOR THE FISCAL YEAR ENDED JUNE 30, 2018-Notes to Basic Financial Statements-Note 10.

Outstanding Debt

The City has the follow outstanding bonds secured in whole or in part by its general fund:

Issue Montebello Public Financing Authority Lease Revenue Bonds, 2004 Series A (Montebello Hotel Project) (1)

Montebello Public Financing Authority Lease Revenue Refunding Bonds, 2014 Series A

Montebello Public Financing Authority Lease Revenue Refunding Bonds, 2014 Series B

Montebello Public Financing Authority Taxable Lease Revenue Refunding Bonds, 2014 Series C

Montebello Public Financing Authority Lease Revenue Bonds, 2016 Series A (Home2Suites)

Outstanding Par Amount

$10,270,000

$1,810,000

$6,050,000

$2,895,000

$54,860,000

(1) To be refunded from the proceeds of the 2019 Bonds of this issue.

Final Maturity

12/1/2034

11/1/2028

11/1/2026

11/1/2024

6/1/2046

See APPENDIX A-COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY FOR THE YEAR ENDED JUNE 30, 2018-Notes to Basic Financial Statements-NOTE 8 for other obligations of the City not payable from its general fund.

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Overlapping Debt

Set forth below is a direct and overlapping debt report (the "Debt Report") prepared by California Municipal Statistics, Inc. and effective November 1, 2019. The Debt Report is included for general information purposes only. The City has not reviewed the Debt Report for completeness or accuracy and makes no representation in connection therewith.

The Debt Report generally includes long-term obligations sold in the public credit markets by public agencies whose boundaries overlap the boundaries of the City in whole or in part. Such long-term obligations generally are not payable from revenues of the City ( except as indicated) nor are they necessarily obligations secured by land within the City. In many cases, long-term obligations issued by a public agency are payable only from the General Fund or other revenues of such public agency.

The contents of the Debt Report are as follows: (1) the first column indicates the public agencies which have outstanding debt as of the date of the Debt Report and whose territory overlaps the City; (2) the second column shows the respective percentage of the assessed valuation of the overlapping public agencies identified in column 1 which is represented by property located in the City; and (3) the third column is an apportionment of the dollar amount of each public agency's outstanding debt (which amount is not shown in the table) to property in the City, as determined by multiplying the total outstanding debt of each agency by the percentage of the City's assessed valuation represented in column 2.

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DIRECT AND OVERLAPPING BONDED DEBT AS OF NOVEMBER 1, 2019

CITY OF MONTEBELLO

2019-20 Assessed Valuation: $6,393,096,562

OVERLAPPING TAX AND ASSESSMENT DEBT: The Metropolitan Water District of Southern California Los Angeles Community College District El Rancho Unified School District Los Angeles Unified School District Montebello Unified School District TOTAL GROSS OVERLAPPING TAX AND ASSESSMENT DEBT

Less: Los Angeles Unified School District General Obligation Bonds

% Applicable .207% .705 .003 .001

35.607

Amount accumulated in Interest and Sinking Fund and Set Aside for Repayment TOTAL NET OVERLAPPING TAX AND ASSESSMENT DEBT

DIRECT AND OVERLAPPING GENERAL FUND DEBT: Los Angeles County General Fund Obligations Los Angeles County Superintendent of Schools Certificates of Participation Los Angeles County Sanitation District No. 2 Authority Los Angeles County Sanitation District No. 15 Authority Los Angeles Unified School District Certificates of Participation Montebello Unified School District Certificates of Participation City of Montebello General Fund Obligations TOTAL GROSS DIRECT AND OVERLAPPING GENERAL FUND DEBT

Less: Los Angeles Unified School District Qualified Zone Academic Bonds City of Montebello Obligations supported from golf and hotel revenues TOTAL NET DIRECT AND OVERLAPPING GENERAL FUND DEBT

OVERLAPPING TAX INCREMENT DEBT (Successor Agency):

GROSS COMBINED TOTAL DEBT NET COMBINED TOTAL DEBT

Ratios to 2019-20 Assessed Valuation: Total Gross Overlapping Tax and Assessment Debt ............. 1.37% Total Net Overlapping Tax and Assessment Debt ................ 1.37% Total Gross Direct Debt ($76,706,939) ........................ 1.20% Total Net Direct Debt ($65,183,719) ........................... 1.02% Gross Combined Total Debt ................................................. 3.13% Net Combined Total Debt .................................................... 2.95%

.396%

.396 8.922

.725

.001 35.607

100.000

100.000%

Ratios to Redevelopment Successor Agency Incremental Valuation ($1,989,673,994): Total Overlapping Tax Increment Debt ................................ 1.18%

Source: California Municipal Statistics, Inc. (1) Excludes Bonds to be sold.

Debt 11/1/19 $ 99,464 27,036,045

1,847 96,830

60,487,252 87,721,438

(273) 87,721,165

9,389,295 20,522

503,910 41,915

1,715 2,348,282

76,706,939(1)

89,012,578 (74)

11,523,220 77,489,284

23,406,530

200, 140,546(2)

188,616,979

(2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and non-bonded capital lease obligations.

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STATE BUDGET INFORMATION

Information regarding the State Budget is regularly available at various State-maintained websites. The fiscal year 2019-20 State Budget further described below may be found at the website of the Department of Finance) www.dofca.gov) under the heading "California Budget.)) Additionally) an impartial analysis of the State)s Budgets is posted by the Office of the Legislative Analyst atwww.lao.ca.gov. The information referred to is prepared by the respective State agency maintaining each website and not by the City) and neither the City nor the Underwriter takes responsibility for the continued accuracy of the internet addresses or for the accuracy) completeness or timeliness of information posted there) and such information is not incorporated herein by these references.

2019-20 State Budget

On June 27, 2019, Governor Gavin Newsom signed the State budget for fiscal year 2019-20 (the "2019-20 Budget"). The 2019-20 Budget addresses rising costs while maintaining fiscal discipline amidst a slowing global economy. The 2019-20 Budget projects general fund revenues increasing by $5.8 billion (up 4.2% over 2018-19 levels) to a total of $143.8 billion, while expenditures are also projected to increase $5.1 billion (up 3.6% over 2018-19 levels) to a total of $147.8 billion. The State's rising revenues are almost entirely offset by a combination of the rising expenditures and continued contributions to the State's budget stabilization/rainy-day fund.

The largest areas of general fund expenditure increases over 2018-19 expenditures include health and human services, higher education, and legislative, judicial and executive programs. K-12 education expenditures, the single largest category of expenditures in the 2019-20 Budget, will increase by $827 million over the prior year to a total of $58.3 billion (up 1.2% over 2018-19 levels). Notable specific areas of expenditures from the 2019-20 Budget reflecting changes from prior years include:

Paying Down Retirement Liabilities. The 2019-20 Budget allocates $14.3 billion in 2019-20, and an additional $500 million over the forecast period, to build budgetary resiliency and pay down the State's unfunded liabilities. This includes $4.5 billion to eliminate debts and reverse deferrals, $5.5 billion to build reserves, and $4.3 billion to pay down unfunded retirement liabilities. The supplemental payment to the California Public Employees' Retirement System ("CalPERS") of $3 billion is scheduled to be made over the forecast period, with $2.5 billion being made this year and $500 million scheduled over the following three fiscal years.

Disaster Preparedness. The 2019-20 Budget includes critical investments needed to sustain and improve the State's emergency preparedness, response, and recovery capabilities. This includes $240.3 million to augment the California Department of Forestry and Fire Protection's ("CAL FIRE's") firefighting capabilities by adding 13 additional year-round engines, replacing Vietnam War-era helicopters, deploying new air tankers, and investing in technology and data analytics that support CAL FIRE 's initial fire suppression strategies. The 2019-20 Budget also provides a sizable investment in forest management to increase fire prevention and complete additional fuel reduction projects, including increased prescribed fire crews.

The 2019-20 Budget includes funding to backfill wildfire-related property tax losses and waives the local share of costs for debris removal. Funding for impacted schools is also backfilled. Additionally, the 2019-20 Budget establishes a stable funding structure to implement an enhanced Next Generation 9-1-1 system and includes funding to protect vulnerable populations and preserve

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http://www.dofca.gov

http://www.lao.ca.gov

public safety in response to power interruptions planned by utilities during the upcoming fire season.

K-12 Education. The 2019-20 Budget provides $1.9 billion in new Proposition 98 funding for the LCFF, reflecting a 3.26-percent COLA. Since the enactment of LCFF, the State has allocated over $23 billion in additional ongoing resources to local educational agencies through the formula. The 2019-20 Budget also includes a $3.15 billion non-Proposition 98 General Fund payment on their behalf to CalSTRS and the CalPERS Schools Pool. This payment is expected to save employers $6.1 billion over the next three decades, with an estimated reduction in the out-year contribution rate to CalSTRS of 0.3 percentage points, and to the CalPERS Schools Pool of 0.1 to 0.3 percentage points.

Affordability and Opportunity. The 2019-20 Budget more than doubles the Earned Income Tax Credit ("EITC") by investing $1 billion in a new expanded EITC. The expansion includes help for low-income families with young children by providing an additional $1,000 annually to address the costs of raising young children.

The 2019-20 Budget reflects continued work to improve affordability and access to health care, including addressing the rising cost of prescription drugs and increasing health insurance subsidies so more middle-class Californians can afford health coverage through Covered California. The 2019-20 Budget also moves closer to universal coverage by expanding full-scope Medi-Cal coverage eligibility to the aged, blind, and disabled population from 123 percent to 138 percent of the federal poverty level, and to young adults ages 19 through 25 regardless of immigration status.

The 2019-20 Budget takes initial steps to expand full-day full-year preschool to all incomeeligible four-year olds, makes major investments in childcare infrastructure and workforce training, and expands kindergarten facilities so more districts can offer full-day programs. The 2019-20 Budget also funds a master plan to develop a roadmap for providing universal preschool to all fouryear olds, as well as a long-term plan to improve access to and the quality of subsidized childcare.

The 2019-20 Budget expands the State's Paid Family Leave program so newborns can be cared for by a parent or close relative for the first six months of the child's life. The 2019-20 Budget expands paid family leave for each parent from six to eight weeks. This expansion adds an additional month of paid leave for two-parent families, allowing up to a combined four months ofleave after the birth or adoption of their child.

Higher Education. The 2019-20 Budget includes funding for two free years of community college tuition for first-time full-time students and provides significant increases for the California State University and the University of California to expand enrollment at the systems by nearly 15,000 students while preventing tuition increases this year. The 2019-20 Budget also increases the number of competitive Cal Grants by nearly 60 percent and provides a new Cal Grant Access Award for students with children to help meet basic family needs while increasing their likelihood of degree completion. The 2019-20 Budget includes total funding of$36.9 billion ($20.8 billion General Fund and local property tax and $16.1 billion other funds) for all higher education entities in 2019-20.

For additional information regarding the 2019-20 Budget, please see the Department of Finance website at ebudget.ca.gov. The District can take no responsibility for the continued accuracy of the above-

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referenced internet address as for the or for the accuracy, completeness, or timeliness ofinformation posted therein, and such information is not incorporated herein by reference.

Future State Budgets

The City receives a portion of its funding from the State. Changes in the revenues received by the State can affect the amount of funding, if any, to be received from the State by the City and other cities in the State.

The City cannot predict the extent of the budgetary problems the State will encounter in this fiscal year or in any future fiscal years, and, it is not clear what measures would be taken by the State to balance its budget, as required by law. In addition, the City cannot predict the final outcome of current and future State budget negotiations, the impact that such budgets will have on its finances and operations or what actions will be taken in the future by the State Legislature and Governor to deal with changing State revenues and expenditures. Current and future State budgets will be affected by national and State economic conditions and other factors, including the current economic downturn, over which the City has no control.

CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS

The constitutional and statutory provisions discussed in this section have the potential to affect the ability of the City to levy taxes and spend tax proceeds for operating and other purposes.

Article XIIIA of the California Constitution

Basic Property Tax Levy. On June 6, 1978, California voters approved Proposition 13 ("Proposition 13 "), which added Article XIIIA to the State Constitution(" Article XIIIA"). Article XIIIA limits the amount of any ad valorem tax on real property to 1% of the full cash value thereof, except that additional ad valorem taxes may be levied to pay debt service on (i) indebtedness approved by the voters prior to July 1, 1978, (ii) (as a result of an amendment to Article XIIIA approved by State voters on June 3, 1986) on bonded indebtedness for the acquisition or improvement of real property which has been approved on or after July 1, 1978 by two-thirds of the voters on such indebtedness, and (iii) (as a result of an amendment to Article XIIIA approved by State voters on November 7, 2000) bonded indebtedness incurred by a school district or community college district for the construction, reconstruction, rehabilitation or replacement of school facilities or the acquisition or lease of real property for school facilities, approved by 55% of the voters of the district, but only if certain accountability measures are included in the proposition. Article XIIIA defines full cash value to mean "the county assessor's valuation of real property as shown on the 1975-76 tax bill under full cash value, or thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership have occurred after the 1975 assessment". This full cash value may be increased at a rate not to exceed 2% per year to account for inflation.

Article XIIIA has subsequently been amended to permit reduction of the "full cash value" base in the event of declining property values caused by damage, destruction or other factors, to provide that there would be no increase in the "full cash value" base in the event of reconstruction of property damaged or destroyed in a disaster and in other minor or technical ways.

Legislation Implementing Article XII/A. Legislation has been enacted and amended a number of times since 1978 to implement Article XIIIA. Under current law, local agencies are no longer permitted to levy

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directly any property tax ( except to pay voter-approved indebtedness). The 1% property tax is automatically levied by the county and distributed according to a formula among taxing agencies. The formula apportions the tax roughly in proportion to the relative shares of taxes levied prior to 1979.

Increases of assessed valuation resulting from reappraisals of property due to new construction, change in ownership or from the annual adjustment not to exceed 2% are allocated among the various jurisdictions in the "taxing area" based upon their respective "situs." Any such allocation made to a local agency continues as part of its allocation in future years.

Inflationary Adjustment of Assessed Valuation. As described above, the assessed value of a property may be increased at a rate not to exceed 2% per year to account for inflation. On December 27, 2001, the Fresno County Superior Court, in County of Fresno v. Fresno County Assessment Appeals Board No. 3, held that where a home's taxable value did not increase for two years, due to a flat real estate market, the Fresno County assessor violated the 2% inflation adjustment provision of Article XIIIA, when the assessor tried to "recapture" the tax value of the property by increasing its assessed value by 4% in a single year. The assessors in most California counties, including the County, use a similar methodology in raising the taxable values of property beyond 2% in a single year. The State Board of Equalization has approved this methodology for increasing assessed values. On appeal, the Appellate Court held that the trial court erred in ruling that assessments are always limited to no more than 2% of the previous year's assessment. On May 10, 2004 a petition for review was filed with the California Supreme Court which petition was denied by the California Supreme Court. As a result of this litigation, the "recapture" provision described above may continue to be employed in determining the full cash value of property for property tax purposes.

Article XIIIB of the California Constitution

In addition to the limits Article XIIIA imposes on property taxes that may be collected by local governments, certain other revenues of the State and most local governments are subject to an annual "appropriations limit" imposed by Article XIIIB which effectively limits the amount of such revenues those entities are permitted to spend. Article XIIIB, approved by the voters in June 1979, was modified substantially by Proposition 111 in 1990. The appropriations limit of each government entity applies to "proceeds of taxes," which consist of tax revenues, State subventions and certain other funds, including proceeds from regulatory licenses, user charges or other fees to the extent that such proceeds exceed "the cost reasonably borne by such entity in providing the regulation, product or service." "Proceeds of taxes" excludes tax refunds and some benefit payments such as unemployment insurance. No limit is imposed on the appropriation offunds which are not "proceeds of taxes," such as reasonable user charges or fees, and certain other non-tax funds. Article XIIIB also does not limit appropriation of local revenues to pay debt service on bonds existing or authorized by January 1, 1979, or subsequently authorized by the voters, appropriations required to comply with mandates of courts or the federal government, appropriations for qualified capital outlay projects, and appropriation by the State of revenues derived from any increase in gasoline taxes and motor vehicle weight fees above January 1, 1990, levels. The appropriations limit may also be exceeded in case of emergency; however, the appropriations limit for the next three years following such emergency appropriation must be reduced to the extent by which it was exceeded, unless the emergency arises from civil disturbance or natural disaster declared by the Governor, and the expenditure is approved by two-thirds of the legislative body of the local government.

The State and each local government entity has its own appropriations limit. Each year, the limit is adjusted to allow for changes, if any, in the cost ofliving, the population of the jurisdiction, and any transfer to or from another government entity of financial responsibility for providing services. Proposition 111 requires that each agency's actual appropriations be tested against its limit every two years.

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If the aggregate "proceeds of taxes" for the preceding two-year period exceeds the aggregate limit, the excess must be returned to the agency's taxpayers through tax rate or fee reductions over the following two years.

The City has never exceeded its appropriations limit.

Articles XIIIC and XIIID of the California Constitution

General. On November 5, 1996, the voters of the State approved Proposition 218, known as the "Right to Vote on Taxes Act." Proposition 218 adds Articles XIIIC and XIIID to the California Constitution and contains a number of interrelated provisions affecting the ability of the City to levy and collect both existing and future taxes, assessments, fees and charges.

Taxes. Article XIIIC requires that all new local taxes be submitted to the electorate before they become effective. Taxes for general governmental purposes of the City(" general taxes") require a majority vote; taxes for specific purposes ("special taxes"), even if deposited in the City's General Fund, require a two-thirds vote.

Property-Related Fees and Charges. Article XIIID also adds several provisions making it generally more difficult for local agencies to levy and maintain property-related fees, charges, and assessments for municipal services and programs.

Reduction or Repeal of Taxes) Assessments) Fees and Charges. Article XIIIC also removes limitations on the initiative power in matters of reducing or repealing local taxes, assessments, fees or charges. No assurance can be given that the voters of the City will not, in the future, approve an initiative or initiatives which reduce or repeal local taxes, assessments, fees or charges currently comprising a substantial part of the City's General Fund. If such repeal or reduction occurs, the City's ability to pay debt service on the Certificates could be adversely affected.

Burden of Proof Article XIIIC provides that local government "bears the burden of proving by a preponderance of the evidence that a levy, charge, or other exaction is not a tax, that the amount is no more than necessary to cover the reasonable costs of the governmental activity, and that the manner in which those costs are allocated to a payor bear a fair or reasonable relationship to the payor's burdens on, or benefits received from, the governmental activity." Similarly, Article XIIID provides that in "any legal action contesting the validity of a fee or charge, the burden shall be on the agency to demonstrate compliance" with Article XIIID.

Judicial Interpretation of Proposition 218. The interpretation and application of Articles XIIIC and XIIID will ultimately be determined by the courts, and it is not possible at this time to predict with certainty the outcome of such determination.

Impact on City )s General Fund. The City does not believe that any material source of General Fund revenue is subject to challenge under Proposition 218 or Proposition 26.

The approval requirements of Articles XIIIC and XIIID reduce the flexibility of the City to raise revenues for the General Fund, and no assurance can be given that the City will be able to impose, extend or increase the taxes, fees, charges or taxes in the future that it may need to meet increased expenditure needs.

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Proposition IA; Proposition 22

Proposition 1A. Proposition lA, proposed by the Legislature in connection with the State's fiscal year 2004-05 Budget, approved by the voters in November 2004 and generally effective in fiscal year 2006-07, provided that the State may not reduce any local sales tax rate, limit existing local government authority to levy a sales tax rate or change the allocation of local sales tax revenues, subject to certain exceptions. Proposition lA generally prohibited the State from shifting to schools or community colleges any share of property tax revenues allocated to local governments for any fiscal year, as set forth under the laws in effect as of November 3, 2004. Any change in the allocation of property tax revenues among local governments within a county had to be approved by two-thirds of both houses of the Legislature.

Proposition 22. Proposition 22, entitled "The Local Taxpayer, Public Safety and Transportation Protection Act," was approved by the voters of the State in November 2010. Proposition 22 eliminates or reduces the State's authority to (i) temporarily shift property taxes from cities, counties and special districts to schools, (ii) use vehicle license fee revenues to reimburse local governments for State-mandated costs (the State will have to use other revenues to reimburse local governments), (iii) redirect property tax increment from redevelopment agencies to any other local government, (iv) use State fuel tax revenues to pay debt service on State transportation bonds, or (v) borrow or change the distribution of State fuel tax revenues.

Proposition 26

Proposition 26 ("Proposition 26 "), which was approved by California voters on November 2, 2010, revises the California Constitution to expand the definition of "taxes." Proposition 26 re-categorizes many State and local fees as taxes and specifies a requirement of two-thirds voter approval for taxes levied by local governments.

Proposition 26 requires the State obtain the approval of two-thirds of both houses of the State Legislature for any proposed change in State statutes, which would result in any taxpayer paying a higher tax. Proposition 26 eliminates the previous practice whereby a tax increase coupled with a tax reduction that resulted in an overall neutral fiscal effect was subject only to a majority vote in the State Legislature. Furthermore, pursuant to Proposition 26, any increase in a fee above the amount needed to provide the specific service or benefit is deemed to be a tax and the approval thereof will require such two-thirds vote of approval to be effective. In addition, for State imposed fees and charges, any fee or charge adopted after January 1, 2010 with a majority vote of approval of the State Legislature which would have required a twothirds vote of approval of the State Legislature if Proposition 26 were effective at the time of such adoption is repealed as of November 2011 absent the re-adoption by the requisite two-thirds vote.

Proposition 26 amends Article XIII C of the State Constitution to state that a "tax" means a levy, charge or exaction of any kind imposed by a local government, except (1) a charge imposed for a specific benefit conferred or privilege granted directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of conferring the benefit or granting the privilege; (2) a charge imposed for a specific government service or product provided directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of providing the service or product; ( 3) a charge imposed for the reasonable regulatory costs to a local government for issuing licenses and permits, performing investigations, inspections and audits, enforcing agricultural marketing orders, and the administrative enforcement and adjudication thereof; (4) a charge imposed for entrance to or use oflocal government property or the purchase rental or lease oflocal

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government property; (5) a fine, penalty, or other monetary charge imposed by the judicial branch of government or a local government as a result of a violation oflaw; (6) a charge imposed as a condition of property development; or (7) assessments and property related fees imposed in accordance with the provisions of Proposition 218.

Proposition 26 applies to any levy, charge or exaction imposed, increased, or extended by local government on or after November 3, 2010, unless exempted, as stated above. Accordingly, fees adopted prior to that date are not subject to the measure until they are increased or extended or if it is determined that an exemption applies. As of the date hereof, none of the City's fees or charges has been challenged in a court oflaw in connection with the requirements of Proposition 26.

If the local government specifies how the funds from a proposed local tax are to be used, the approval will be subject to a two-thirds voter requirement. If the local government does not specify how the funds from a proposed local tax are to be used, the approval will be subject to a fifty percent voter requirement. Proposed local government fees that are not subject to Proposition 26 generally are subject to the approval of a majority of the governing body. In general, proposed property charges will be subject to a majority vote of approval by the governing body although certain proposed property charges will also require approval by a majority of the affected property owners.

Possible Future Initiatives

Articles XIIIA, XIIIB, XIIIC and XIIID and Propositions 62, lA, 22 and 26 were each adopted as measures that qualified for the ballot pursuant to the State's initiative process. From time to time other initiative measures could be adopted, further affecting revenues of the City or the City's ability to expend revenues. The nature and impact of these measures cannot be anticipated by the City.

RISK FACTORS

Operational Risks

General. The 2019 Bonds constitute limited obligations of the Authority payable solely from Revenues, as described herein. The principal source of Revenues is anticipated to be Hotel room rentals and other revenues associated with the operation of the Hotel. The primary risks associated with the receipt of such revenues are the occupancy level of the Hotel and room rental rates. The primary risks associated with the cost of operations are labor costs, materials costs, insurance, and reserves for repair and replacement. Any factor that adversely affects the receipt of the aforementioned revenues and/ or the level of expenses in connection therewith creates a risk that debt service on the 2019 Bonds will not be paid when due.

Risks Associated with Hotel Operations. A number of factors, many of which are beyond the control of the Authority, the City and HALLC, could have an adverse impact on the revenues and expenses in connection with the Hotel, value of the Hotel and the ability to pay debt service on the 2019 Bonds, including adverse changes in the national economy and levels of tourism, competition from other hotels and convention centers, energy costs, governmental rules and policies (including changes in zoning and land use), potential environmental and other liabilities, and tax laws affecting real estate. The Hotel has, and is anticipated to continue to generate a portion of its business as a result of its proximity to the Montebello Country Club and The Quiet Cannon. The failure of the Montebello Country Club and/or The Quiet Cannon to maintain and increase its respective business as anticipated may have an adverse impact on the Project Net Revenues and the resulting ability to pay debt service on the 2019 Bonds. Such failure may be

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a result of a variety of factors, including, without limitation, damage or destruction, reduction in marketing efforts by The Quiet Cannon and/ or the Montebello Country Club, reduced maintenance, changes in the hospitality industry generally or other factors at The Quiet Cannon and/ or the Montebello Country Club. Because hotel rooms are rented for a relatively short period of time compared to other commercial properties, the negative impact of adverse economic conditions and competition is realized more quickly for hotels than for other commercial properties that are rented for longer periods of time.

Occupancy and Room Rate Risks. Revenue from the Hotel is largely generated from the rental of hotel rooms. The Authority's ability to pay debt service on the 2019 Bonds from Project Net Revenues largely depends on the occupancy rates and average daily rates at the Hotel and the ability of the City and HALLC to maintain occupancy volume at a level that does not adversely affect the Hotel's cash flow. Key factors affecting the amount of revenues generated from the rental of hotel rooms include the Hotel's brand name recognition, market support and reservation systems. Occupancy and average daily rates will also be affected by factors outside the control of the City and HALLC, such as general levels of tourism and seasonality. Such fluctuations may adversely affect the amount and timing of amounts available to pay debt service on the 2019 Bonds.

Marketing; Failure to Attract Guests. HALLC markets the Hotel pursuant to the Hotel Management Agreement. Although HALLC maintains convention, business and sales promotion services, advertising, publicity and public relations services, and central reservation services, there can be no assurances that HALLC's efforts will be successful in attracting sufficient numbers of guests to the Hotel or HALLC will provide adequate marketing throughout the term of the 2019 Bonds. Any failure to adequately or successfully market the Hotel may cause a reduction in Project Net Revenues received in connection therewith and may impact the City's ability to pay debt service on the 2019 Bonds.

Hotel Management Agreement~· Hotel Manager. Under the Hotel Management Agreement, HALLC has the sole and exclusive right to manage and operate the Hotel in conformance with Hilton Inns, Inc. standards. The ability of the Hotel to generate Project Net Revenues sufficient to pay debt service on the 2019 Bonds will depend in part on the successful ongoing management and operation of the Hotel by HALLC. HALLC has limited financial resources which could materially affect its ability to perform its obligations as Facilities Manager.

With respect to termination of the Hotel Management Agreement, see "THE PROJECTOperation of the Hotel-Hotel Management Agreement-Termination." Under certain circumstances, HALLC may terminate the Hotel Management Agreement for cause. Assuming HALLC 's approach to the management and operation of the Hotel is otherwise successful, early termination of the Hotel Management Agreement by HALLC, and the inability of the City to hire a replacement manager under a management agreement with substantially the same terms and conditions as the Hotel Management Agreement, could adversely affect the management and operation of the Hotel and the ability of the Hotel to generate Project Net Revenues sufficient to pay debt service on the 2019 Bonds.

License Agreement. Hilton Inns, Inc. has the ability to terminate the License Agreement under certain circumstances set forth therein. Early termination of the License Agreement by Hilton Inns, Inc. could adversely affect the operation and marketability of the Hotel and the ability of the Hotel to generate revenues sufficient to pay debt service on the 2019 Bonds.

Competitor Facilities. The Hotel faces competition from other existing hotel facilities in the Hotel's market area, and could face additional competition in the future as a result of the construction of new, or the upgrading of existing, facilities in this market area. Facilities such as the Hotel compete with each other

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on the basis of the quality and attractiveness of their facilities, published room rental rates, corporate discounts, accessibility, promotional efforts, and proximity to transportation and other facilities and amenities. No assurance can be given that the projected utilization of the Hotel will not be adversely affected by the availability of other hotel facilities in the Hotel's market area and elsewhere.

Labor Relations. The City and HALLC could experience increased labor costs and perhaps work stoppages, the result of which could adversely affect the Hotel's occupancy rate and therefore revenues and expenses in connection therewith. Further, there can be no assurance that HALLC will be able to attract and retain the required number of employees within the wage standards available to pay employees.

Bankruptcy of HALLC. No assurances can be made that HALLC will not file bankruptcy should the Hotel not perform as expected, or other events occur which affect the profitability of the ownership and/ or operation of the Hotel. Should HALLC file for bankruptcy, there could be adverse effects on the holders of the 2019 Bonds pursuant to the provisions of the United States Bankruptcy Code. These adverse effects could include, but might not be limited to, one or more of the following.

First, the automatic stay provisions of the Bankruptcy Code could prevent (unless approval of the bankruptcy court was obtained) any action to collect any amount owing by HALLC under any document to which it is a party (the "HALLC Documents"), or any action to enforce any obligation ofHALLC under the HALLC Documents. These restrictions might also prevent the Trustee from making payments to the holders of the 2019 Bonds from funds in the Trustee's possession during the pendency of the bankruptcy proceedings. The automatic stay will be removed upon the termination of the bankruptcy case, and the bankruptcy court has the discretion to remove it sooner.

Second, with the authorization of the bankruptcy court, HALLC might be able to repudiate one or more of the HALLC Documents. A repudiation of an agreement by HALLC would generally excuse HALLC from any further performance (including payment obligations) under such agreement.

Third, with the authorization of the bankruptcy court, HALLC may assign its rights and obligations under any of the HALLC Documents to another entity, despite any contractual prohibition to the contrary.

The occurrence of any of these, as well as the occurrence of other possible effects of a bankruptcy of HALLC, could result in delays or reductions in payments to the holder of the 2019 Bonds.

Limited Recourse on Default; No Acceleration of Base Rental

Failure by the City to make Base Rental or Additional Rental payments required to be made under the Lease, or failure to observe and perform any other terms, covenants or conditions contained in the Lease or in the Indenture for a period of 30 days after written notice of such failure and request that it be remedied has been given to the City by the Authority or the Trustee, constitute events of default under the Lease and permit the Trustee or the Authority to pursue any and all remedies available. In the event of a default, notwithstanding anything in the Lease or in the Indenture to the contrary, there is no right under any circumstances to accelerate the Base Rental or otherwise declare any Base Rental not then in default to be immediately due and payable.

The enforcement of any remedies provided in the Lease and the Indenture could prove both expensive and time consuming. If the City defaults on its obligation to make Base Rental with respect to the Leased Property, the Trustee, as assignee of the Authority, may retain the Lease and hold the City liable for all Base Rental thereunder on an annual basis and enforce any other terms or provisions of the Lease to be

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kept or performed by the City. Any suit for money damages would be subject to limitations on legal remedies against cities in California, including a limitation on enforcement of judgments against funds needed to serve the public welfare and interest. See "SOURCE OF PAYMENT FOR THE 2019 BONDS" and APPENDIX C-SUMMARY OF CERTAIN PROVISIONS OF THE LEGAL DOCUMENTS-THE LEASE AGREEMENT -Default.

Limitations on Remedies Available; Bankruptcy

The enforceability of the rights and remedies of the Owners and the obligations of the City may become subject to the following: the federal bankruptcy code and applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or affecting the enforcement of creditors' rights generally, now or hereafter in effect; usual equitable principles which may limit the specific enforcement under state law of certain remedies; the exercise by the United States of America of the powers delegated to it by the Federal Constitution; and the reasonable and necessary exercise, in certain exceptional situations, of the police power inherent in the sovereignty of the State of California and its governmental bodies in the interest of servicing a significant and legitimate public purpose.

Under Chapter 9 of the United States Bankruptcy Code (Title 11, United States Code) (the "Bankruptcy Code"), which governs bankruptcy proceedings of public entities such as the City, no involuntary bankruptcy petition may be filed against a public entity. However, upon satisfaction of certain prerequisite conditions, a voluntary bankruptcy petition may be filed by the City. The filing of a bankruptcy petition results in a stay against enforcement of remedies under agreements to which the bankrupt entity is a party. A bankruptcy filing by the City could thus limit remedies under the Lease. A bankruptcy debtor may choose to assume or reject executory contracts and leases, such as the Lease. In the event of rejection of a lease by debtor lessee, the leased property is returned to the lessor and the lessor has a claim for a limited amount of the resulting damages.

Under the Indenture, the Trustee holds a security interest in the Revenues, including Base Rental, for the benefit of the Owners of the 2019 Bonds, but such security interest arises only when the Base Rental are actually received by the Trustee following payment by the City. The Leased Property is not subject to a security interest, mortgage or any other lien in favor of the Trustee for the benefit of Owners. In the event of a bankruptcy filed by the City and the subsequent rejection of the Lease by the City, the Authority would recover possession of the Leased Property and the Trustee, as assignee of the Authority, would have a claim for damages against the City. The Trustee's claim would constitute a secured claim only to the extent of Revenues in the possession of the Trustee; the balance of such claim would be unsecured.

Bankruptcy proceedings would subject the Owners of the 2019 Bonds to judicial discretion and interpretation of their rights in bankruptcy or otherwise, and consequently entail risks of delay, limitation, or modification of their rights with respect to the 2019 Bonds. In a bankruptcy case, the amount recovered by Owners of the 2019 Bonds could be affected by whether the Lease is determined to be a "true lease" or a loan or other financing arrangement (a "financing lease"), and the Owners' recovery could be reduced in either case. If the Lease is determined by the bankruptcy court to constitute a "true lease" (rather than a financing lease), the City could choose not to perform under the Lease by rejecting it and the claim of the Owners could be substantially limited pursuant to Section 365 of the Bankruptcy Code to a fraction of the scheduled amount of Base Rental, and that reduced claim amount could be impaired as an unsecured claim under a plan of adjustment. If a bankruptcy court were to treat the Lease as a financing lease then, under a plan of adjustment, the priority, payment terms, collateral, payment dates, payment sources, covenants and other terms or provisions of the Lease and the 2019 Bonds may be altered. Such a plan could be confirmed even over the objections of the Trustee and the Owners, and without their consent. For example, the

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amount of the Base Rental from the City might be substantially reduced because of the power of the bankruptcy court under the Bankruptcy Code to adjust secured claims to the value of their collateral, which, as described above, could be limited to the Revenues held by the Trustee. In addition there can be a substantial disparity in treatment based on the nature of the Leased Property. Whether the Lease is characterized by the bankruptcy court as a true lease or a financing lease, either scenario could result in the Owners not receiving the full amount of the principal and interest due on the 2019 Bonds.

Natural Disasters

The occurrence of any natural disaster in or near the boundaries of the City, including, without limitation, fire, earthquake, landslide, high winds, drought or flood, could have an adverse material impact on the economy within the City and the generation of Project Gross Revenues.

Whitter Narrows Dam. The Army Corps of Engineers is beginning a $500-million repair project for the 62-year-old Whittier Narrows Dam (the "Dam"). The Dam, a 56-foot tall earth dam, is located along the Rio Hondo and the San Gabriel Rivers and collects runoff from the uncontrolled drainage areas upstream along with releases into the San Gabriel River from the Santa Fe Dam. The reservoir portion of the Dam, with a capacity of 67,060 acre-feet, is surrounded by the cities of South El Monte (to the north), Industry (to the east), Pico Rivera (to the south), and Montebello (to the south).

The Army Corps of Engineers has determined that the Dam no longer meets federal tolerable-risk guidelines and could fail in the event of a very large, very rare storm, similar to storms which occurred in California between December 1861 and January 1862. If such a storm were to occur, water could flow over the crest of the Dam or seepage could erode the sandy soil underneath it. These types of failures could have catastrophic effects on a number of Southern California communities including the City. In response to these potential dangers, the Army Corps of Engineers has classified the Dam's repairs as the highest priority of any of the 13 "high risk" dams in the country.

The construction of the repairs to the Dam are scheduled to start in 2021 and the repairs are expected to be completed in 2025. The Army Corps of Engineers began repair work on the Dam's gates and locks in 2018 and is expected to be complete those repairs by the end of 2019.

An extreme storm that results in a flood could significantly damage the Hotel and could result in a reduction of the Revenues. The City cannot predict when flood or extreme storm events will occur, when or whether the repairs described above will be completed, whether other mitigation measures will be implemented, or whether FEMA or other funds will be available to the City in the event of a failure of the Dam. Significant flooding in the City as a result of the failure of the Dam could have materially adverse consequences for the City's finances and operations, including the ability to make the payments due under the Lease.

Base Rental and Other Payments. The Base Rental and other payments due under the Lease (including a proportionate share of the costs of improvement, repair and maintenance of the Leased Property and taxes, other governmental charges and assessments levied against the Leased Property) are not secured by any pledge of taxes or other revenues of the City but are payable, to the extent Project Net Revenues are insufficient, from yearly appropriations of any funds lawfully available to the City. If the City's revenue sources are less than its total obligations, the City could choose to fund other services before paying Base Rental and other payments due under the Lease. The same result could occur if, because of State Constitutional limits on expenditures, the City is not permitted to appropriate and spend all of its available

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revenues. To the extent these types of events or other events adversely affecting the funds available to the City occur in any year, the funds available to pay Base Rental may be decreased.

The City has the capacity to enter into other obligations, including additional base rental payments under the Lease, which may constitute additional charges against its revenues. To the extent that additional obligations are incurred by the City, the funds available to the City to pay Base Rental may be decreased.

Abatement. The amount of Base Rental due under the Lease will be adjusted or abated during any period in which by reason of damage or destruction to the Leased Property or eminent domain proceedings there is substantial interference with the use and possession of the Leased Property. Notwithstanding the provisions of the Lease and the Indenture specifying the extent of abatement in the event of the City's failure to have use and possession of the Leased Property, such provisions may be superseded by operation oflaw, and, in such event, the resulting Base Rental may not be sufficient to pay all of that portion of the remaining principal and interest represented by the 2019 Bonds. The amount of such abatement will reduce the Base Rental applicable to the 2019 Bonds.

Earthquake Risk. Any natural disaster or other physical calamity, including earthquake, may have the effect of damaging the Hotel, resulting in reduced Project Gross Revenues, or abatement of all or a portion of the Base Rental. The seismic safety element of the City's General Plan lists ground shaking as the primary seismic risk to the City from a major earthquake along three faults located between 6 and 14 miles away from the City. A great earthquake along the San Andreas Fault, 33 miles from the City, would result in strong ground shaking. Risks of ground failure (such as liquefaction, landslides and rockfalls) are considered limited in the City. Ground displacement is not considered a significant risk because no active or potentially active faults are known to be present within the limits of the City of Montebello.

Insurance. The Lease obligates the City to obtain and keep in force various forms of insurance, to assure repair or replacement of the Leased Property in the event of damage or destruction to the Leased Property (see APPENDIX C-SUMMARY OF CERTAIN PROVISIONS OF THE LEGAL DOCUMENTS-THE LEASE AGREEMENT-Insurance). The City makes no representation as to the ability of any insurer to fulfill its obligations under any insurance policy provided for in the Lease. In addition, certain risks may not be covered by such property insurance.

If the Leased Property is partially or completely damaged or destroyed due to any uninsured or underinsured event, it is likely that Base Rental will be partially or completely abated. Apart from the proceeds of insurance, the City and the Authority will have no obligation to expend any funds to repair or replace such damaged or destroyed property. If any leased property so damaged or destroyed is not repaired or replaced within the period during which the proceeds of rental interruption insurance are available, any such abatement could prevent the City from timely paying Base Rental.

Cybersecurity Risks

The City relies on computers and technology to conduct its operations. The City and its departments face cyber threats from time to time including, but not limited to, hacking, viruses, malware and other forms of technology attacks. The City owns and operates its own enterprise class data network serving the municipal city government and its operations. The City has retained information technology professionals to support, maintain and protect these operations locally in a purpose-built and physically secure environment. This network and its operations are governed by and in compliance with all applicable governmental regulations as well as the City's own administrative regulations. Within the City's operations and guidance is an active cyber-security program designed to protect from, and to quickly identify and

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mitigate, a multitude of complex security threats. While no network is completely immune from all possible compromise, the City exercises its due diligence in protecting the data it possesses and the systems it operates. To date, there have been no significant cyber-attacks on the City's computers and technologies.

While the City is routinely maintaining its technology systems and continuously implementing new information security controls, no assurances can be given that the City's security and operational control measures will be successful in guarding against all cyber threats and attacks. The results of any attack on the City's computer and technology could negatively impact the City's operations, and the costs related to such attacks could be substantial.

Loss of Tax Exemption

As discussed under "TAX MATTERS," interest on the 2019 Bonds could become includable in federal gross income, possibly from the date of issuance of the 2019 Bonds, as a result of acts or omissions of the Authority subsequent to the issuance of the 2019 Bonds. Should interest become includable in federal gross income, the 2019 Bonds are not subject to redemption by reason thereof and will remain outstanding until maturity or earlier redemption.

No Liability of Authority to the Owners

Except as expressly provided in the Indenture, the Authority will not have any obligation or liability to the Owners of the 2019 Bonds with respect to the payment when due of the Base Rental by the City, or with respect to the performance by the City of other agreements and covenants required to be performed by it contained in the Lease or the Indenture, or with respect to the performance by the Trustee of any right or obligation required to be performed by it contained in the Indenture.

Limited Secondary Market

There can be no guarantee that there will be a secondary market for purchase or sale of the 2019 Bonds or, if a secondary market exists, that the 2019 Bonds can or could be sold for any particular price.

FINANCIAL STATEMENTS

The financial statements of the City for the fiscal year ended June 30, 2018, included in APPENDIX A-COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY OF MONTEBELLO FOR THE FISCAL YEAR ENDED JUNE 30, 2018, have been audited by Vasquez & Company, LLP, Glendale, California. Vasquez & Company, LLP was not requested to consent to the inclusion of its reports regarding the City in APPENDIX A-COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY OF MONTEBELLO FOR THE FISCAL YEAR ENDED JUNE 30, 2018, nor have they undertaken to update their reports or to take any action intended or likely to elicit information concerning the accuracy, completeness or fairness of the statements made in this Official Statement, and no opinion is expressed by Vasquez & Company, LLP with respect to any event subsequent to the date of their reports. The Authority represents that there has been no material adverse change in financial position of the City since June 30, 2018.

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NO LITIGATION

The Authority

The Authority will certify that, to the best of its knowledge, there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, governmental agency, public board or body, pending or threatened against the Authority seeking to restrain or enjoin the execution, delivery or sale of the 2019 Bonds, or in any way contesting or affecting any proceedings of the Authority taken concerning the Indenture, the sale thereof, the pledge or application of any moneys or security provided for the payment of the 2019 Bonds, the validity or enforceability of the Indenture, the Lease and the other documents executed by the Authority in connection with the 2019 Bonds or the completeness or accuracy of this Official Statement. Neither the creation, organization or existence of the Authority, nor the title of the present members of the Authority to their respective offices is being contested.

The City

The City will certify that, to the best of its knowledge, there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court governmental agency, public board or body, pending of which the City has received service of process or threatened against the City, seeking to restrain or enjoin the execution or delivery of the Lease, or in any way contesting or affecting the validity of the foregoing or any proceeding of the City taken with respect to any of the foregoing or that will materially affect the ability of the City to satisfy its obligations under the Lease.

TAX MATTERS

General

The delivery of the 2019 Bonds is subject to delivery of the opinion of Bond Counsel, to the effect that interest on the 2019 Bonds for federal income tax purposes under existing statutes, regulations, published rulings, and court decisions (1) will be excludable from the gross income, as defined in section 61 of the Internal Revenue Code of 1986, as amended to the date of initial delivery of the 2019 Bonds (the "Code"), of the owners thereof pursuant to section 103 of the Code, and (2) will not be included in computing the alternative minimum taxable income of the owners thereof. The delivery of the 2019 Bonds is also subject to the delivery of the opinion of Bond Counsel, based upon existing provisions of the laws of the State, that interest on the 2019 Bonds is exempt from personal income taxes of the State. A form of Bond Counsel's anticipated opinion is included as APPENDIX F-FORM OF OPINION OF BOND COUNSEL. The statutes, regulations, rulings, and court decisions on which such opinion will be based are subject to change.

In rendering the foregoing opm1ons, Bond Counsel will rely upon the representations and certifications of the Authority and the City made in a certificate of even date with the initial delivery of the 2019 Bonds (the "Tax Certificate") pertaining to the use, expenditure and investment of the proceeds of the 2019 Bonds and will assume continuing compliance with the provisions of the Indenture by the Authority subsequent to the issuance of the 2019 Bonds. The Indenture and the Tax Certificate contain covenants by the Authority and the City with respect to, among other matters, the use of the proceeds of the 2019 Bonds and the facilities and equipment financed or refinanced therewith by persons other than state or local governmental units, the manner in which the proceeds of the 2019 Bonds are to be invested, if required, the calculation and payment to the United States Treasury of any "arbitrage profits" and the reporting of certain information to the United States Treasury. Failure to comply with any of these

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covenants may cause interest on the 2019 Bonds to be includable in the gross income of the owners thereof from the date of the issuance of the 2019 Bonds.

Except as described above, Bond Counsel will express no other opinion with respect to any other federal, State or local tax consequences under present law, or proposed legislation, resulting from the receipt or accrual ofinterest on, or the acquisition or disposition of, the 2019 Bonds. Prospective purchasers of the 2019 Bonds should be aware that the ownership of tax-exempt obligations such as the 2019 Bonds may result in collateral federal tax consequences to, among others, financial institutions, life insurance companies, property and casualty insurance companies, S corporations with subchapter C earnings and profits, certain foreign corporations doing business in the United States, individual recipients of Social Security or Railroad Retirement benefits, individuals otherwise qualifying for the earned income tax credit, owners of an interest in a financial asset securitization investment trust ("FASIT"), and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry, or who have paid or incurred certain expenses allocable to, tax-exempt obligations. Prospective purchasers should consult their own tax advisors as to the applicability of these consequences to their particular circumstances.

Bond Counsel's opinions are not a guarantee of a result, but represent its legal judgment based upon its review of existing statutes, regulations, published rulings and court decisions and the representations and covenants of the Authority and the City described above. No ruling has been sought from the Internal Revenue Service ( the "Service") or the State with respect to the matters addressed in the opinions of Bond Counsel, and Bond Counsel's opinions are not binding on the Service or the State. The Service has an ongoing program of auditing the tax-exempt status of the interest on municipal obligations. If an audit of the 2019 Bonds is commenced, under current procedures, the Service is likely to treat the Authority as the "taxpayer," and the owners of the 2019 Bonds would have no right to participate in the audit process. In responding to or defending an audit of the tax-exempt status of the interest on the 2019 Bonds, the Authority may have different or conflicting interests from the owners of the 2019 Bonds. Public awareness of any future audit of the 2019 Bonds could adversely affect the value and liquidity of the 2019 Bonds during the pendency of the audit, regardless of its ultimate outcome.

Existing law may change to reduce or eliminate the benefit to owners of the 2019 Bonds of the exclusion of interest on the 2019 Bonds from gross income for federal income tax purposes. Any proposed legislation or administrative action, whether or not taken, could also affect the value and marketability of the 2019 Bonds. Prospective purchasers of the 2019 Bonds should consult with their own tax advisors with respect to any proposed or future changes in tax law.

Tax Accounting Treatment of Discount and Premium on Certain 2019 Bonds

The initial public offering of certain of the 2019 Bonds (the "Discount Bonds") may be less than the amount payable on such 2019 Bonds at maturity. An amount equal to the difference between the initial public offering price of a Discount Bond (assuming that a substantial amount of the 2019 Bonds of that maturity are sold to the public at such price) and the amount payable at maturity constitutes original issue discount to the initial purchaser of such Discount Bond. A portion of such original issue discount, allocable to the holding period of such Discount Bond by the initial purchaser, will, upon the disposition of such Discount Bond (including by reason ofits payment at maturity), be treated as interest excludable from gross income, rather than as taxable gain, for federal income tax purposes, on the same terms and conditions as those for other interest on the 2019 Bonds described above. Such interest is considered to be accrued actuarially in accordance with the constant interest method over the life of a Discount Bond taking into account the semiannual compounding of accrued interest at the yield to maturity on such Discount Bond,

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and generally will be allocated to an initial purchaser in a different amount from the amount of the payment denominated as interest actually received by the initial purchaser during the tax year.

However, such interest may be required to be taken into account in determining the amount of the branch profits tax applicable to certain foreign corporations doing business in the United States, even though there will not be a corresponding cash payment. In addition, the accrual of such interest may result in certain other collateral federal income tax consequences to, among others, financial institutions, life insurance companies, property and casualty insurance companies, "S" corporations with "subchapter C" earnings and profits, individual recipients of Social Security or Railroad Retirement benefits, individuals otherwise qualifying for the earned income tax credit owners of an interest in a F ASIT, and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry, or who have paid or incurred certain expenses allocable to, tax-exempt obligations. Moreover, in the event of the redemption, sale or other taxable disposition of a Discount Bond by the initial owner prior to maturity, the amount realized by such owner in excess of the basis of such Discount Bond in the hands of such owner ( adjusted upward by the portion of the original issue discount allocable to the period for which such Discount Bond was held) is includable in gross income.

Owners of Discount Bonds should consult with their own tax advisors with respect to the determination for federal income tax purposes of accrued original issue discount on Discount Bonds and with respect to the state and local tax consequences of owning and disposing of Discount Bonds. It is possible that, under applicable provisions governing determination of state and local income taxes, accrued interest on Discount Bonds may be deemed to be received in the year of accrual even though there will not be a corresponding cash payment.

The initial offering price of certain 2019 Bonds (the "Premium Bonds") may be greater than the amount payable on such bonds at maturity. An amount equal to the difference between the initial public offering price of a Premium Bond (assuming that a substantial amount of the 2019 Bonds of that maturity are sold to the public at such price) and the amount payable at maturity constitutes premium to the initial purchaser of such Premium Bonds. The basis for federal income tax purposes of a Premium Bond in the hands of such initial purchaser must be reduced each year by the amortizable bond premium, although no federal income tax deduction is allowed as a result of such reduction in basis for amortizable bond premium. Such reduction in basis will increase the amount of any gain (or decrease the amount of any loss) to be recognized for federal income tax purposes upon a sale or other taxable disposition of a Premium Bond. The amount of premium which is amortizable each year by an initial purchaser is determined by using such purchaser's yield to maturity. Purchasers of the Premium Bonds should consult with their own tax advisors with respect to the determination of amortizable bond premium with respect to the Premium Bonds for federal income purposes and with respect to the state and local tax consequences of owning and disposing of Premium Bonds.

LEGAL MATTERS

The validity of the 2019 Bonds and certain other legal matters are subject to the approving opinion of Norton Rose Fulbright US LLP, Los Angeles, California, Bond Counsel to the Authority. Complete copies of the proposed forms of opinions of Bond Counsel are attached hereto as APPENDIX F -FORM OF OPINION OF BOND COUNSEL. Bond Counsel undertakes no responsibility for the accuracy, completeness or fairness of this Official Statement. Certain legal matters will be passed upon for the City by the City Attorney, for the Authority by Authority Counsel and by Quint & Thimmig LLP, Larkspur, California, Disclosure Counsel to the Authority, and for the Underwriter by its counsel Nixon Peabody LLP, Los Angeles, California.

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RATING

S&P Global Ratings, a Standard & Poor's Financial Services LLC business(" S&P"), has assigned the underlying rating of" A" (negative outlook) to the 2019 Bonds. This rating reflects only the views of S&P and an explanation of the significance of such rating may be obtained from S&P. There is no assurance that such rating will continue for any given period of time or that such rating will not be revised downward or withdrawn entirely by S&P, ifin the judgment of the S&P, circumstances so warrant. Any such downward revision or withdrawal of such rating may have an adverse effect on the market price of the 2019 Bonds.

UNDERWRITING

The 2019 Bonds are being purchased by Cabrera Capital Markets, LLC, as underwriter (the "Underwriter"), at a purchase price of $11,528,175.05 (representing $10,200,000 aggregate principal amount of the 2019 Bonds, plus an original issue premium of$1,419,975.05, less Underwriter's discount of $91,800.00). The purchase contract relating to the 2019 Bonds provides that the Underwriter will purchase all of the 2019 Bonds if any are purchased, the obligation to make such purchase being subject to certain terms and conditions set forth in such purchase contract, the approval of certain legal matters by counsel and certain other conditions.

The 2019 Bonds may be offered and sold by the Underwriter to certain dealers and others at yields lower than the public offering yield indicated on the inside cover hereof, and such public offering yield may be changed, from time to time, by the Underwriter.

MUNICIPAL ADVISOR

Hilltop Securities Inc. has served as municipal advisor (the "Municipal Advisor") to the City and the Authority in connection with the issuance of the 2019 Bonds. The Municipal Advisor has not been engaged, nor has it undertaken, to audit, authenticate or otherwise verify the information set forth in this Official Statement with respect to accuracy and completeness of disclosure of such information. The Municipal Advisor makes no guaranty, warranty or other representation respecting accuracy and completeness of this Official Statement or any other matter related to this Official Statement.

CONTINUING DISCLOSURE

The Authority has determined that no financial or operating data concerning the Authority is material to any decision to purchase, hold or sell the 2019 Bonds and the Authority will not provide any such information.

The City will covenant for the benefit of the owners and beneficial owners of the 2019 Bonds to provide certain financial information and operating data relating to the City by not later than not later than not later than nine (9) months after the end of each fiscal year (the "Annual Report"), commencing with the fiscal year ending June 30, 2019 and to provide notices of the occurrence of certain enumerated events. The Annual Report will be filed by Hilltop Securities Inc., as dissemination agent (the "Dissemination Agent"), on behalf of the City, with the Municipal Standards Rulemaking Board (the "MSRB"). The specific nature of the information to be contained in the Annual Report and the notices of certain enumerated events is set forth in the Continuing Disclosure Agreement. See APPENDIX D-FORM OF CONTINUING DISCLOSURE AGREEMENT. These covenants are being made in order to assist the Underwriter of the 2019 Bonds in complying with Rule 15c2-12, as amended (the "Rule") of the U.S. Securities and Exchange Commission promulgated under the Securities Exchange Act of 1934, as amended.

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In the last five years, the City has in certain situations been late in meeting its continuing disclosure obligations under the Rule. A list oflate filings is as follows:

• The City was late in filing its FY2017-18 Audited Financial Statements and certain other operating data required under its disclosure obligation for its' Community Redevelopment Agency of the City of Montebello 2002 Housing Tax Allocation Parity Bonds. On December 2, 2019, the 2002 Bonds CUSIPs were added to the FY 2017-2018 filings posted on EMMA on March 30, 2019.

• The City was late to file totals of subordinate pledged tax revenues deposited into the redevelopment property tax trust fund (RPTTF) required under its disclosure obligation for its Successor Agency to the Community Redevelopment Agency of the City of Montebello, Subordinate Tax Allocation Refunding Bonds, Series 2015A (tax-exempt) and 2015B (taxable) for fiscal years ending 2015 through 2018. Additionally, the City was late to file the top ten taxpayers and the appeals by the top ten taxpayers in fiscal year ending 2014 for the Montebello Hills Project Area, South Montebello Industrial Project Area, and the Montebello Economic Revitalization Project Area. The City is currently in the process of drafting a catch-up filing which includes this missing information which will be posted on EMMA once received.

• The City was late to file notices of ratings upgrades that occurred in 2015 and 2016 relating to its Community Redevelopment Agency of the City of Montebello Housing Tax Allocation Parity Refunding Bonds, 2007 Series A, its Community Redevelopment Agency of the City of Montebello, Montebello Hills Redevelopment Project Tax Allocation Parity Bonds, 1999 Series A and its Community Redevelopment Agency of the City of Montebello, Montebello Hills Redevelopment Project Tax Allocation Parity Refunding Bonds, 2007 Series A and 2007 Series B. The ratings change notices were posted December 3, 2019.

All required remedial filings have been made or are in the process of being made. The City has engaged Hilltop Securities Inc. to act as its dissemination agent and to assist the City with satisfying its obligations under the Rule.

VERIFICATION OF MATHEMATICAL ACCURACY

The Verification Agent will deliver a report of the mathematical accuracy of certain computations, contained in schedules provided to them on behalf of the City, relating to the sufficiency of the anticipated amount of proceeds of the 2019 Bonds and other funds available to pay the redemption price of the 2004 Bonds. The report of the Verification Agent will include the statement that the scope of its engagement is limited to verifying mathematical accuracy, of the computations contained in such schedules provided to them, and that it has no obligation to update its report because of events occurring, or data or information coming to their attention, subsequent to the date of its report.

ADDITIONAL INFORMATION

The summaries and references contained herein with respect to the Indenture, the Lease, the 2019 Bonds, the statutes, agreements and other documents, do not purport to be comprehensive or definitive and are qualified by reference to each such document or statute and references to the 2019 Bonds are qualified in their entirety by reference to the forms thereof.

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The execution of this Official Statement by the undersigned Executive Director of the Authority has been duly authorized by the Authority.

MONTEBELLO PUBLIC FINANCING AUTHORITY

By/s/ Rene Bobadilla Executive Director

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93892219.4

APPENDIX A

COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY OF MONTEBELLO

FOR THE FISCAL YEAR ENDED JUNE 30, 2018

A-1


-.. I Comprehensive Annual Financial Report

Fiscal Vear Ended June 30, 2018

CITY OF MONTEBELLO CALIFORNIA

ww,N.cityofmontebe!!o.com

COMPREHENSIVE ANNUAL FINANCIAL REPORT

FOR THE FISCAL YEAR ENDED JUNE 30, 2018

PREPARED BY FINANCE DEPARTMENT

Comprehensive Annual Financial Report City of Montebello, California

Year ended June 30, 2018 with Report of Independent Auditors

INTRODUCTORY SECTION Letter of Transmittal Organizational Chart City Officials

FINANCIAL SECTION Report of Independent Auditors

Management's Discussion and Analysis

Basic Financial Statements Government-wide Financial Statements

Statement of Net Position Statement of Activities

Fund Financial Statements Governmental Funds:

City of Montebello Table of Contents

v vi

4

22 23

Balance Sheet 24 Reconciliation of the Balance Sheet of Governmental Funds

to the Statement of Net Position 25 Statement of Revenues, Expenditures, and Changes in Fund Balances 26 Reconciliation of the Statement of Revenues, Expenditures, and Changes

in Fund Balances of Governmental Funds to the Statement of Activities 27

Proprietary Funds Statement of Net Position 28 Statement of Revenues, Expenses, and Changes in Net Position 29 Statement of Cash Flows 30

Fiduciary Fund Statement of Fiduciary Net Position 31 Statement of Changes in Fiduciary Net Position 32

Notes to Financial Statements 33

REQUIRED SUPPLEMENTARY INFORMATION Schedule of Changes in the Net Pension Liability and Related Ratios - Miscellaneous

Plan 84 Schedule of Pension Plan Contributions - Miscellaneous Plan 85 Schedule of Changes in the Net Pension Liability and Related Ratios - Safety Plan 86 Schedule of Pension Plan Contributions - Safety Plan 87 Schedule of Changes in Net OPEB Liability and Related Ratios 88 Budgetary Comparison Schedule

General Fund 89 Retirement Special Revenue Fund 91 Housing Successor Special Revenue Fund 92 Public Financing Authority Debt Service Fund 93

Notes to Required Supplementary Information 94

SUPPLEMENTARY SCHEDULES Other Governmental Funds


Description of Other Governmental Funds 95 Combining Balance Sheet 96 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 97

Other Special Revenue Funds Description of Other Special Revenue Funds 98 Combining Balance Sheet 100 Combining Statement of Revenues, Expenditures and Changes in Fund Balances 104 Schedule of Revenues, Expenditures, and Changes in Fund Balance -

Budget and Actual Gas Tax Special Revenue Fund 108 Supplemental Law Enforcement Special Revenue Fund 109 Park Development Special Revenue Fund 110 Prop A Special Revenue Fund 111 Drug Enforcement Special Revenue Fund 112 Prop C Special Revenue Fund 113 Measure R Special Revenue Fund 114 Metro Station Special Revenue Fund 115 Air Quality Special Revenue Fund 116 Justice Assistance Grants Special Revenue Fund 117 Grants Special Revenue Fund 118 Community Development Block Grant Special Revenue Fund 119 HOME Special Revenue Fund 120 Road Maintenance & Rehabilitation Special Revenue Fund 121 State of Good Repairs Special Revenue Fund 122 Measure M Local Special Revenue Fund 123

Capital Projects Fund Description of Capital Projects Fund 124 Schedule of Revenues, Expenditures, and Changes in Fund Balance -

Budget and Actual Capital Improvements Capital Projects Fund 125

Other Enterprise Funds Description of Other Enterprise Funds 126 Combining Statement of Net Position 127 Combining Statement of Revenues, Expenses, and Changes in Net Position 128 Combining Statement of Cash Flows 129


Internal Service Funds Description of Internal Service Funds Combining Statement of Net Position Combining Statement of Revenues, Expenses, and Changes in Net Position Combining Statement of Cash Flows

STATISTICAL SECTION (UNAUDITED)

130 131 132 133

Description of Statistical Section Contents 134 Financial Trends

Net Position by Component- Last Ten Fiscal Years 135 Change in Net Position - Expenses and Program Revenues - Last Ten Fiscal Years 136 Change in Net Position - General Revenues - Last Ten Fiscal Years 137 Fund Balances of Governmental Funds - Last Ten Fiscal Years 138 Governmental Activities Tax Revenues by Source - Last Ten Fiscal Years 139

Revenue Capacity Assessed Value and Estimated Actual Value of Taxable Property- Last Ten Fiscal

Years 140 Direct and Overlapping Property Tax Rates - Last Ten Fiscal Years 141 Principal Property Taxpayers - Current Year and Nine Fiscal Years Ago 142 Property Tax Levies and Collections - Last Ten Fiscal Years 143

Debt Capacity Ratios of Outstanding Debt by Type - Last Ten Fiscal Years 144 Ratios of General Bonded Debt Outstanding - Last Ten Fiscal Years 145 Direct and Overlapping Debt 146 Legal Debt Margin Information - Last Ten Fiscal Years 147 Pledged Revenue Bond Coverage:

Golf Revenue Bonds - Last Ten Fiscal Years 148 Demographic and Economic Information

Demographic and Economic Statistics - Last Ten Fiscal Years 149 Principal Employers - Current Fiscal Year and Ten Fiscal Years Ago 150

Operating Information Full-Time and Part-Time City Employees by Function - Last Ten Fiscal Years 151 Operating Indicators by Function - Last Ten Calendar Years 152 Capital Asset Statistics by Function - Last Ten Fiscal Years 153

(This page intentionally left blank.)

INTRODUCTORY SECTION


CITY OF MONTEBELLO

March 11, 2019

Honorable Mayor, Members of the City Council, City of Montebello

The Comprehensive Annual Financial Report (CAFR) of the City of Montebello for the fiscal year ended June 30, 2018 is submitted as prepared by the City's Finance Department. The report is published to provide the public, the City Council, and the community, detailed information about the financial position and operating results of the City as measured by the financial activity of its various funds.

The CAFR is presented in three (3) sections: the Introductory Section, the Financial Section, and the Statistical Section. The Introductory Section contains a table of contents, this letter of transmittal, a list of elected officials, and an organization chart. The Financial Section contains our independent auditors', Vasquez & Company LLP, opinion letter, the general purpose financial statements, and the relevant supplemental financial statements and schedules for Fiscal Year 2017-18. The Statistical Section presents historical, financial, analytical, economic and demographic information, which may be useful for further analysis and comparisons.

Responsibility for both the accuracy of the financial report and the completeness and fairness of the presentation rests with the City. To the best of our knowledge, the information presented is accurate in all material aspects and includes all disclosures necessary to enable the reader to gain an understanding of the City's financial activities.

The City prepared the CAFR using the financial reporting requirements outlined in the Governmental Accounting Standards Board (GASB) Statement No. 34. This statement requires that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management's Discussion and Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. The City's MD&A can be found immediately following the report of the independent auditors in the financial section of the CAFR.

GENERAL INFORMATION AND ECONOMIC OUTLOOK

The City of Montebello was incorporated on October 16, 1920, and conducts its operations as a general law, Council/Manager City. The City is governed by a Council of five members elected at large and serves for staggered four year terms. The City Clerk and City Treasurer are also elected to four year terms. The City Mayor, Mayor Pro tern, City Manager and City Attorney are appointed by the Council.

Montebello is located nine miles east of the Los Angeles Civic Center and has access to three freeways -

the Santa Ana 5 Freeway to the south, the Pomona 60 Freeway to the north, and the San Gabriel River 605 Freeway to the east. The City has a population of approximately 63,917 living in an area of 8.2 square miles. The City is a balanced community with light industry, residential areas, and commercial centers.

The FY 2017-2018 assessed valuation of $5.7 billion represents an increase of 3.3 percent over last year. Increases during the past five years have averaged 3.0 percent. The Consumer Price Index for the Los Angeles-Riverside-Orange County area increased 4.0 percent over 2016-2017. Sales tax revenue of $13.1 million for FY 2017-18 reflects a decrease of 1.0 percent when compared to FY 2016-17. This is primarily due to the Board of Equalization's delayed sales tax payment of the fourth quarter of the fiscal year to the City.

Sales tax is a major revenue source for the General Fund of the City and is broad based with a major shopping mall anchored by major stores such as Forever 21 and JC Penney, and other shopping centers, as well as a large petroleum company, major paper products/distributors and two auto dealerships: Chevrolet of Montebello, and Ford of Montebello.

THE FINANCIAL REPORTING ENTITY

This report includes all funds of the City.

The City provides a full range of municipal services including police and fire protection, street maintenance, planning and development, parks and recreation services, and general administration. Montebello also operates several enterprise funds which include a municipal golf course, a transportation system, a detention facility, water services in certain areas of the City, and two hotels. Enterprise funds are financed from fees, user fees and subsidies from other governmental agencies, as applicable.

ACCOUNTING SYSTEM

The modified accrual basis of accounting is followed for governmental fund types and the accrual basis of accounting is followed for proprietary and fiduciary fund types.

In reviewing and developing the City's accounting system, consideration is given to the adequacy of internal accounting controls. Internal accounting controls are designed to provide reasonable but not absolute assurance regarding:

• The safeguarding of assets against losses from unauthorized use or disposition and the reliability of financial records for preparing financial statements and maintaining accountability for assets.

• The concept of reasonable assurance recognizes that the cost control procedures should not exceed the benefits likely to be derived and that the evaluation of costs and benefits require estimates and judgment by management.

• All internal control evaluations occur within the above framework.

ii

BUDGETARY CONTROL

In addition to internal accounting controls, the City also maintains budgetary controls. The objective of these budgetary controls is to ensure compliance with the City's budget policy approved by the City Council. Appropriations of the general fund, special revenue funds, debt service funds, and capital project funds are included in the annual approved budget.

Budgetary control is maintained at a functional level by division within the department through the use of object level accounting as actual expenditures are compared to the appropriations. As purchase orders are approved, appropriations are encumbered. Encumbrances and expenditures, which would cause an overrun of appropriations, require an approved budget transfer, which is reviewed and approved by the Director of Finance, pursuant to the City's administrative policy, the Annual Budget Resolution and the Municipal Code of the City. An annual capital plan is included in the City's published budget with each improvement monitored on a project-by project basis.

PENSION PLAN

The City of Montebello is covered under the Public Employees Retirement System (PERS), which is administered by the State. A portion of the City's share of contributions to the pension plans for employees are covered by a voter approved levy; the remainder is supported by the General Fund and enterprise funds.

DEBT ADMINISTRATION

At June 30, 2018, the City had general long-term debt amounting to $276.7 million, an increase of $33.5 million from prior year mainly due to: recognition of Other Postemployment Benefit Obligation (OPEB) related to GASB 75 implementation, increase in claims and net pension liability per actuarial reports. This is detailed in the Note 8 to the Financial Statements. The general long-term debt amount includes

$87.2 million of revenue bonds, $135.8 million of net pension liability, $28 million of net OPEB liability and $25.6 million for other long-term obligations and the noncurrent portion of accumulated vacation and sick leave. The City has no general obligation debt.

CASH AND INVESTMENT MANAGEMENT

The City has an investment policy and has an Investment Committee with members appointed by the City Council. The City Treasurer and the Director of Finance also participate in the Investment Committee. The Investment Committee oversees the City's Investment objectives in order of safety,

liquidity, and yield pursuant to the investment policy, in conjunction with the City Treasurer and Director of Finance.

The City invests its pooled funds and Successor Agency funds, except for bond funds debt service reserves and deferred employee compensation, which are maintained by appointed fiscal agents. The fiscal agents direct its bond fund and debt service fund investments. It is the City's policy to maintain a diversified investment portfolio.

iii

RISK MANAGEMENT

The City of Montebello has a Self-Insurance Fund for the payment of workers' compensation and liability

claims. The City annually contracts with an independent actuary to review the self-insurance program on an annual basis.

OTHER INFORMATION

The City requires that its financial statements be audited by a Certified Public Accountant selected by the City Council. This requirement has been satisfied, and the auditor's opinion is included in the financial section of this report.

In addition, the City is required to undergo an annual single audit in conformity with the provisions of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). This requirement has also been satisfied.

During the fiscal year ended June 30, 2018, the City implemented the Governmental Accounting Standards Board Statement No. 75 (GASB 75), Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. As a result of this implementation, the City's total long-term liabilities increased by approximately $17 million from FY 2016-17. This is further discussed under Note 1 of the financial statements.

Subsequent to the end of the fiscal year, the California State Auditor's office completed an audit of the City and concluded that Montebello is a high-risk city due to significant financial and organizational risks.

Those risks include the enterprise funds of the golf course, water utility, and two hotels; best practices on contracting and procurements; and unresolved staffing shortages. The City responded with an action plan to be completed by the end of the 2019 which will mitigate those risks.

Acknowledgments: The preparation of the City's comprehensive annual financial report could not have been accomplished without the dedicated services of the entire Finance Department staff. We also acknowledge the assistance and contribution of Vazquez & Company LLP, in completing the CAFR.

We thank the City Council, the Executive Management Team and staff for their interest and support of the financial operations of the City, in a responsible and progressive manner, for the best interest of the citizens of Montebello.

Respectfully submitted,

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Paul Talbot Acting City Manager

iv

City of Montebello - Organization Chart

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Directory of City Officials June 30, 2018

City Council

Vanessa Delgado - Mayor Jack Hadjinian- Mayor Pro Tern

Art Barajas - Councilmember Vivian Romero- Councilmember

William M. Molinari - Councilmember

Elected Officials

City Treasurer City Clerk

Ashod Mooradian Irma Barajas

Principal Administrative Officers

Acting City Manager

Assistant City Manager Police Chief Fire Chief Director of Transportation Finance Administrator

vi

Andrew G. Pasmant

Danilo Batson Brad Keller

Fernando Pelaez Tom Barrio

Craig Koehler

FINANCIAL SECTION


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REPORT OF INDEPENDENT AUDITORS

The Honorable Mayor and the Members of the City Council City of Montebello, California

Report on the Financial Statements

We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Montebello, California (the City), as of and for the year ended June 30, 2018, and the related notes to financial statements, which collectively comprise the City's basic financial statements, as listed in the table of contents.

Management's Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express op1n1ons on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

M~t'ti'la-

Opinions

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Montebello, California, as of June 30, 2018, and the respective changes in financial position, and cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Other Matters

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the management's discussion and analysis on pages 4 through 21 and Required Supplementary Information on pages 84 through 94 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Other Information

Our audit was conducted for the purpose of forming op1n1ons on the financial statements that collectively comprise the City of Montebello's basic financial statements. The introductory section, combining and individual nonmajor fund financial statements and statistical section, are presented for purposes of additional analysis and are not required parts of the basic financial statements.

The combining and individual nonmajor fund financial statements are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual nonmajor fund financial statements are fairly stated, in all material respects, in relation to the basic financial statements as a whole.

The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them.

2

Implementation of New Accounting Standards

As discussed in Note 1, the City has implemented Governmental Accounting Standards Board (GASB) Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other than Pensions (OPEB) effective for the fiscal year ended June 30, 2018. As a result of this implementation, the City's beginning net position was restated to retroactively report the City's net OPEB liability as of June 30, 2017. Our opinion is not modified with respect to this matter.

State Auditor Report

In December 2018, the State Auditor issued its report on the audit of the City of Montebello which was conducted as part of the State's high-risk local government agency program. The report concluded that the City is a high-risk city because of its financial and organizational risks. Our opinion is not modified with respect to this matter.

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated March 11, 2019, on our consideration of the City of Montebello's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City's internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City of Montebello's internal control over financial reporting and compliance.

Glendale, California March 11, 2019

LLf

3


City of Montebello Management's Discussion and Analysis

Year ended June 30, 2018

The following section represents Management's Discussion and Analysis (MD&A). It is intended to provide narrative overview and analysis on the City's financial performance for the fiscal year ended June 30, 2018. Readers are encouraged to consider the information presented here in conjunction with the accompanying letter of transmittal, and financial statements.

Overview of the Financial Statements

The City's basic financial statements consist of three components: 1) Government-wide Financial Statements, 2) Fund Financial Statements, and 3) Notes to the Basic Financial Statements. The Statistical section at the end of this report provides other supplementary information in addition to the basic financial statements. Government-wide Financial Statements are prepared using accrual accounting method to demonstrate the City's operational accountability, while the Fund Financial Statements are based on modified-accrual accounting method to demonstrate its budgetary accountability. Reconciliations of the Fund Financial Statements to the Government-wide Financial Statements are provided to explain to readers the differences created by this integrated approach.

Government-wide Financial Statements

The Government-wide Financial Statements provide a broad overview of the City's finances, in a manner similar to a private-sector business. The statements present information about the functions of the City that is principally supported by taxes and intergovernmental revenues (governmental activities). The governmental activities of the City include general government, public safety, public works, parks, recreation and culture, and housing and community development. Business-type activities of the City include water, golf course, transportation, hotel and detention operations. These statements include all assets of the City as well as all liabilities (including long-term debt). Additionally, certain eliminations have occurred as prescribed by the statement in regards to interfund activity, payables, and receivables.

The Statement of Net Position and the Statement of Activities report information about the City as a whole and about its activities. These statements include all assets and liabilities of the City using the accrual basis of accounting, which is similar to the accounting used by most private sector companies. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave).

The government-wide financial statements can be found immediately following this discussion and analysis.

Fund Financial Statements

The Fund Financial Statements include statements for three categories of activities - Governmental Funds, Proprietary Funds and Fiduciary Funds. The governmental activities are prepared using the current financial resources measurement focus and the modified accrual basis of accounting.

A Fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements.

4



Governmental Funds. Governmental funds are used to account for essentially the same functions reported as Governmental Activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government's near-term financing requirements.

Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the Government-wide Financial Statements. By doing so, readers may better understand the long-term impact of the government's near-term financing decisions. Both the governmental fund Balance Sheet and the governmental fund Statement of Revenues, Expenditures, and Changes in Fund Balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities.

The City maintains various individual governmental funds. Information is presented separately in the Governmental Funds Balance Sheet, and in the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances, for the General Fund, the Retirement Special Revenue Fund, the Public Financing Authority Debt Service Fund, and the Housing Successor Special Revenue Fund, all of which are considered to be major funds. Data from other governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these other governmental funds is provided in the form of combining statements elsewhere in this report. As a result of Assembly Bills 1X26 and 1484, Redevelopment Agency assets and liabilities are no longer a part of the governmental funds of the City and are now reported in the Fiduciary Fund section of the financial statements.

The City adopts an annual appropriated budget for its major funds. The basic financial statements include a budgetary comparison statement for the General Fund. The budgetary comparison statement has been provided to demonstrate compliance with this budget.

The basic governmental fund financial statements can be found immediately following the government-wide financial statements.

Proprietary Funds. Proprietary funds are generally used to account for services for which the City charges external customers, or other units of the City. Proprietary funds provide the same type of information as shown in the government-wide statements, only in more detail. The City maintains the following two types of proprietary funds.

Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City uses enterprise funds to account for the operations of water, golf course, transit system, Montebello Hilton, Home2suites Hotel and detention facility.

5



Internal service funds are used to report activities that provide internal services for the City. The City uses internal service funds to account for workers' compensation, equipment and vehicle maintenance and replacement. Because internal service funds predominantly benefit governmental rather than business-type functions, they have been included within governmental activities in the government-wide financial statements. The internal service funds are combined into a single, aggregated presentation in the proprietary fund financial statements. Individual fund data for the internal service funds is provided in the form of combining statements elsewhere in this report.

Fiduciary Funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the City's own programs. The basic fiduciary fund financial statements can be found immediately following the basic proprietary fund financial statements and include the assets and liabilities of the Successor Agency Fiduciary Fund.

Notes to financial statements

The notes to financial statements provide additional information that is essential to a full understanding of the data provided in the Government-wide and Fund Financial Statements. The notes to the basic financial statements can be found immediately following the Required Supplementary Information.

Other information

The combining statements referred to earlier in connection with other governmental funds and internal service funds are presented for all other Special Revenue Funds, all other Debt Service Funds, all other Capital Projects Funds, and all Internal Service Funds. These combining fund statements and schedules of revenues, expenditures and changes in fund balance - budget and actual for individual funds can be found immediately following the notes to financial statements.

Note: The numbers shown on the MD&A are either expressed in multiples of one thousand or million dollars while percentages are rounded to the nearest tenth or whole number. Hence. there may be slight differences between numbers on the MD&A and the numbers on the Basic Financial Statements.

Financial Highlights

At June 30, 2018, the City's total net position was approximately negative $6.6 million dollars which includes a decrease in net position of approximately $22.1 million over FY 2017 balance, mainly due to the ongoing effect of the recognition of net pension liability in accordance with GASB 68 and the implementation of GASB 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. Please refer to notes 9 and 10 respectively for additional information. The City's unrestricted net position, although at a negative $175.2 million, increased by $5.0 million dollars over FY 2017.

6



At the close of FY 2018, the City's governmental activities reported combined ending deficit in net position of $14.0 million, an increase of approximately $43.1 million (75%) over FY 2017, primarily due to the prior period adjustments related to an accounting change for two revenue bonds: Hotel2Suites and Hilton Hotel 2004 which were previously recorded under Governmental activities and are now reported under Business activities. Please see Note 16 for additional information.

Total revenues from all sources were $111.7 million while total expenses were $116.5 million. Of the total revenues, program revenues totaled $69.0 million while general revenues totaled $42.7 million, net of transfers.

The City's General Fund revenue and other financing sources exceeded expenditures by 3.3 million in the fiscal year 2018. The General Fund unassigned fund balance was $11.3 million at the end of the fiscal year, which was equivalent to approximately 3 months of the total General Fund expenditures for FY 2018.

During the fiscal year, the City's General Fund actual inflows (revenues and other financing sources) were greater than the final budget by $1.0 million, while actual outflows (expenditures and other financing uses) were $6.1 million less than the final budget, mostly due to deferred capital outlay and unfilled staffing vacancies in Public Safety. This resulted in a total positive budget and actual variance of $7 .1 million in the General Fund.

The City's Hilton Hotel Fund ended the fiscal year with $2 million in net income. Hotel2Suite's net position decreased by $2.3 million during fiscal year 2017-2018, mainly due to the prior period adjustments.

These Financial Highlights, as well as other points, are discussed in greater detail in the body of this discussion and analysis, and the Notes to the Financial Statements.

Government-wide Financial Analysis

The government-wide financial statements provide both long-term and short-term information about the City's overall financial position. This analysis addresses the financial statements of the City as a whole. The statement of net position includes all of the City's assets, deferred outflows of resources, liabilities and deferred inflows of resources. The City's net position is a useful measurement of its financial health. Net position can be tracked over time to assess whether the City's financial health is improving or deteriorating. However, readers will need to consider other nonfinancial factors, such as changes in the City's property tax base, the condition of the City's infrastructure, and the level of public safety services to assess the overall health of the City.

7

Assets: Current and other assets $ Capital assets

Total assets

Deferred outflows of resources

Liabilities: Long-term liabilities Other liabilities

Total liabilities

Deferred inflows of resources

Net Position: Net investment in capital assets Restricted Unrestricted

Total net position $



City of Montebello Statement of Net Position

June 30 (in thousands)

Governmental Activities Business-type Activities Total

2018 2017 2018 2017 2018 2017

60,882 $ 66,366 $ 34,085 $ 44,215 $ 94,967 $ 110,581 76,439 76,786 93, 188 66,457 169,627 143,243

137,321 143,152 127,273 110,672 264,594 253,824

21,917 24,542 9,013 9,953 30,930 34,495

160,605 207,795 116,116 35,437 276,720 243,232 9,926 6,763 11, 124 7,747 21,050 14,510

170,531 214,558 127,239 43,184 297,771 257,742

2,701 10,234 1,696 4,936 4,397 15,170

60, 132 58,373 50,936 62,240 111,068 120,613 30,871 37,978 26,656 37,064 57,527 75,042

(104,997) (153,449) (70,242) (26,799) (175,238) (180,248) (13,994) $ (57,098) $ 7,351 $ 72,505 $ (6,643) $ 15,407

As mentioned in the financial highlights, the City's total net position was negative $6.6 million as of June 30, 2018. The implementation of GASB No.75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions, effective July 1, 2017, along with the ongoing recognition of the net pension liability, which significantly increased over the last year due to CALPERS changing its discount rate, are the main contributing factors to the negative net position at June 30, 2018, as well as the $22 million (143.1%) decrease in the City's total net position compared to the fiscal year 2016-17. Included in the City's net position is $111.1 million net investment in capital assets (e.g. land, building, machinery and equipment, infrastructure, improvements other than buildings, and construction in progress); less any related debt used to acquire those assets that remain outstanding. Capital assets, net of accumulated depreciation, increased by $26.4 million, primarily due to construction of the new Home2Suites Hotel.

The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City's investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. Any remaining amount is restricted to spending agreements originated by law, contract, or other agreements with external parties. Capital assets are discussed in greater details under Capital Assets section of MD&A, and under Note 3 of the Financial Statements.

8



City of Montebello Summary of Changes in Net Position

(in thousands)


2018 2017 2018 2017 2018 2017 Revenues

Program revenues: Charges for services $ 13,075 $ 13,008 $ 17,191 $ 16,422 $ 30,267 $ 29,430 Operating grants and contributions 9,759 7,383 23,015 20,594 32,774 27,977 Capital grants and contributions 5,995 5,540 5,995 5,540

General revenues: Sales taxes 13,119 13,267 13,119 13,267 Property taxes 16,961 16,507 16,961 16,507 Other taxes 8,878 7,996 8,878 7,996 Proceeds from sale of property Other revenues 2,626 7,063 136 2,626 7,199 Investment earnings 666 173 449 1,115 173

Total revenues 65,084 65,397 46,650 42,692 111,734 108,089

Expenses General government 10,590 5,800 10,590 5,800 Public safety 39,720 38,180 39,720 38,180 Public works 9,825 6,892 9,825 6,892 Parks, culture, and recreation 3,948 3,589 3,948 3,589 Housing and community development 2,923 4,626 2,923 4,626 Transit 34,587 28,540 34,587 28,540 Golf course 3,169 2,745 3,169 2,745 Montebello Hilton 4,591 4,868 4,591 4,868 Water utility 2,251 2,296 2,251 2,296 Detention facility 446 435 446 435 Hotel2Suite 30 30 Interest on long-term debt 357 3,882 3,409 3,766 3,882 Unallocated infrastructure depreciation 705 705 705 705

Total expenses 68,068 63,674 48,484 38,884 116,552 102,558

Change in net position before transfers (2,984) 1,723 (1,834) 3,808 (4,818) 5,531

Transfers (1,634) (47,977) 1,634 47,977 Change in net position after transfers (4,618) (46,254) (200) 51,785 (4,818) 5,531

Net position - beginning of year, as restated (9,376) (10,844) 7,551 20,720 (1,825) 9,876 Net position - end of year $ (13,994) $ (57,098) $ 7,351 $ 72,505 $ (6,643) $ 15,407

See Note 16 Prior Period Adjustments affecting the restatement of Net Position.

The key elements impacting the City's net position for the fiscal year ended June 30, 2018 are as follows:

• Total revenues from the City's governmental and business-type activities were $111.7 million, an increase of approximately $3.6 million (3.4%) compared to the preceding fiscal year. Total citywide expenses before transfer increased by $14.0 million (13.6%) from $102.6 million in 2017 to $116.6 million in 2018.

9



• Revenues are classified into program and general revenues. Program revenues of approximately $69 million, which are used to offset program expenses under each functional activity, made up 61.8% of total citywide revenues for the current fiscal year. General revenues of approximately $42.7 million, which are used to offset the additional expenses net of program revenues, made up the remaining 38.2% of total revenues. The overall increase of 3.4% in total revenues for the City was mainly due to the increase in operating grants revenues in the amount of $2.4 million for Governmental activities and $2.4 million for Business-type activities (Transit).

• The Governmental Activities change in net position before transfers decreased by $4.7 million compared to FY 2016-17, Business-type activities changes in net position before transfers decreased by $5.6 million compared to prior year, primarily due to additional interests on Home2Suites and Hilton Hotel bonds that were transferred from governmental fund to business-type fund.

• The largest City-wide revenues came from 4 sources: charges for services (e.g. business license fees, building permits, hotel charges and bus fares) at $30.3 million (27.1%), operating grants and contributions (e.g. various grants from the Transportation Development Act (TOA), allocations of funds derived from Proposition A, C, Measure R, and the new Measure M as well as funds contributed from the Justice Department and US Treasury at $32.8 million (29.3%), property taxes at $17 million (15.2%), and sales taxes at $13.1 million (11.7%). Property taxes include the property taxes derived from the 1946 voter approved initiative to provide for the retirement benefit costs of City employees.

• Revenue from charges for services increased by $837 thousand (2.8%), Property tax increased by $454 thousand (2.8%) and sales taxes decreased by $148 thousand (1.1%). Sales tax revenue decreased due to delayed payments from the State, received in the subsequent year. Operating grants and contributions increased by $4.8 million (17.2%).

• The cost of serving citizenry for the year includes: $39.7 million for Public Safety, $34.6 million for Transit, $10.6 million for General Government, $9.8 million for Public Works, and $17.4 million for other services such as Recreation and Community Development, the Golf Course, Water Utility Fund, and two hotels.

• The total citywide expenses increased by $14 million, generally a result of increase in General government, Public Work and Transit expenses.

Governmental Activities

• As reflected in the Summary of Changes in Net Position schedule above, Governmental activities decreased the City's net position by $4.7 million. Key factors of this change in governmental activities include the following based on the government-wide statement of activities.

10

Revenues:



Total governmental activities revenues decreased by $313 thousand (0.5%). The main reason for this substantial decrease compared to prior year is that $7.1 million other revenue in 2017 included the $4.7 million bond proceeds.

Property tax revenues were the largest portion of total governmental activities revenues (26.1 %). This includes the 1946 voter-approved retirement portion of property tax revenue. Property tax revenues increased by $454 thousand (2.8%) from 2017, primarily due to the increase in annual assessed valuations.

Sales taxes were the second largest source of revenue for governmental activities (20.2%). Sales taxes decreased by $148 thousand (1.1%) compared to 2017 due to delayed payments from the State, received in the subsequent year.

Charges for services were the third largest revenue source (20.1 %) for governmental activities. Charges for services in governmental funds include: licenses and permits, fines and forfeitures, waste collection, etc. Compared to prior fiscal year, this program revenue increased by $67 thousand (0.5%) primarily a result of increase in development-related fees.

Operating grants and

contributions 15.0%

Charges for services 20.1%

FY2018

Sales taxes 20.2%

Investment revenues earnings 4.0%

1.0%

Governmental Activities Revenue by Source

Property taxes

26.1 % Operating

11

grants and contributions

11.3%


FY2017

Sales taxes 20.3%

Investment earnings

0.3%

Property taxes

25.2%

Other revenues

10.8%

Other taxes 12.2%

Expenses:



The cost of providing all governmental activities in 2018 was $68.1 million before applying program revenues of $22.8 million, an increase of approximately $4.4 million (7.0%) from 2017. The overall increase in expenses was mainly a result of increase in General governmental and Public Work expenses.

The remaining $45.3 million of governmental activities expenses is considered "public benefit" portion which was funded by general revenues primarily derived from taxes.

40

35

30

a 25 :§

~ 20

e 15

10

0

Governmental Activities Expenses by Function

Comparison Between Fiscal Years 2018 and 2017 (in$ Millions)

12

Business-type Activities



The City operates the following business-type activities: Transit System, Golf Course, Montebello Hilton Hotel, Home2suites Hotel, Water Utility, and Detention Facility. The City's Transit System is the largest business-type operation, followed by the Montebello Hilton Hotel and the Golf Course.

Business-type activities decreased the City's net position before transfers by $1.8 million. As mentioned above, two hotel bonds were transferred from the governmental fund to the business-type fund in the year of 2017 causing a substantial decrease in net position for business activities. Besides, the following key elements also impacted business-type activities for the current fiscal year. Activities under separate business operations are discussed in further detail under fund financial analysis.

Total revenues for business-type activities were $46.7 million, compared to $42.7 million in the previous fiscal year, constituting a 9.3% increase. The overall increase is primarily a result of the increase in Federal Transit -Formula grants provided to the Transit Fund.

Capital grants and

contributions 13.0%


contributions 49.8%

FY2018

Business Activities Revenue by Source



contributions 48.4%

FY2017

Capital grants and


Approximately 36.9% of revenue came from Charges for Services, which was generated from bus fares, special contracts, revenue from hotel fees and golf course green fee charges, while the remaining 63.1 % comes from State and Federal subsidies. Revenue generated from services was $769 thousand (4.7%) higher than fiscal year 2017, while the State and Federal subsidies increased by $2.9 million (11.0%) for fiscal year 2018.

13

35

30

25

§ 20

~ e 15

10

35

30

25

~ :§

20 ~ e

15

10

0



Business-type Activities Revenue by Function

Comparison Between Fiscal Years 2018 and 2017 (in $ Millions)

Business-type Activities Expenses by Function

Comparison Between Fiscal Years 2018 and 2017 (in $ Millio ns)

14

Hi: FY2018

~ FY 2017

iHY 2018

!OFY2017



The Transit System reported operating revenues of $4.7 million, $358 thousand (7.0%) lower than in 2017 due to lower ridership. Non-operating revenues and capital grants received in 2018 were $29 million compared to $26.1 million in 2017. Operating expenses in 2018 were $34.6 million; approximately $6 million higher than in 2017. Net position decreased by $ 840.2 thousand in 2018 compared to an increase in net position of $2.7 million in 2017.

The City's Golf Course generated $103.6 thousand more in revenues for the fiscal year ended June 30, 2018 compared to the prior year. Operating expenses increased by$ 579 thousand for the year primarily due to increase in pension expense. Overall, Golf Course net position, net of transfers increased by $ 109.4 thousand for the year primarily due to transfers in (subsidy) from the General Fund.

The Montebello Hilton reflected net income before net transfers for debt service and equipment reserve obligations of$ 2.0 million for fiscal year 2018, a 1% increase compared to last year. Operating revenues increased by $362.7 thousand, while operating expenses decreased by $194.3 thousand over the same period last year. The 5.3% increase in operating revenue is mainly due to higher occupancy rates.

Governmental Funds Financial Analysis (Reporting the City's most Significant Funds)

Governmental Funds. The focus of the City's governmental funds is to provide information on nearterm inflows, outflows, and balances of spendable resources. Such information may be useful in assessing the City's financing requirements, in particular, unassigned fund balance may serve as a useful measure of a government's net resources available for spending at the end of the fiscal year.

As of the end of the current fiscal year, the City's governmental funds reported total combined ending fund balances of $43.4 million, a decrease of $8.3 million (16.1%) as compared with the prior fiscal year. All governmental fund balances are either non-spendable, restricted, committed, assigned, or unassigned pursuant to GASB 54. Non-spendable indicates they are fund balances tied to inventories, prepaid expenses and property held for sale. The restricted fund balance category includes amounts that can be spent only for the specific purposes stipulated by constitution, external resource providers, or through enabling legislation. These restrictions of fund balance are to indicate that portions of fund balance are not available for new spending, because they have already been committed to: 1) finance Special Revenue Fund expenditures, 2) pay debt service, or 3) finance ongoing capital projects. Amounts in the committed fund balance are constrained for specific purposes that are internally imposed by the government through formal written action of the City Council. Amounts in the assigned fund balance classification are intended to be used by the government for specific purposes but do not meet the criteria to be classified as restricted or committed. The City has no committed and assigned fund balances. Unassigned fund balance is the residual classification for the government's general fund and includes all spendable amounts not contained in the other classifications.

15



City of Montebello

General Fund

As of June 30

(in thousands)

Change

2018 2017 Amount %

Operating revenues $ 41,516 $ 40,356 $ 1, 160 3%

Operating expenditures 49,096 49, 150 (54) 0%

Excess of revenues over (under) expenditures (7,580) (8,794) 1,214 -14%

Net operating transfers 10,875 8,722 2,153 25% Unspent bond proceeds from Successor Agency 4,667 (4,667) 100%

Surplus 3,295 4,595 (1,300) -28%

Beginning fund balance, as restated 14,043 9,448 4,595 49%

Ending fund balance $ 17,338 $ 14,043 $ 3,295 23%

General Fund is the City's main operating fund. It is used to account for revenues and expenditures necessary to perform basic government functions that are not accounted for through other special revenue and grant funds.

In fiscal year 2018, the General Fund ended the year with a surplus of $3.3 million compared to a surplus of $4.6 million in fiscal year 2017.

City of Montebello General Fund Variance fa..s of June 30 with Final (in thousands) Budget Variance

Budgeted Amounts 2018 Positive 2017 with Prior Original Final Actual (Negative) Actual Year

Revenues Sales taxes $ 13,526 $ 13,526 $ 13, 119 $ (407) $ 13,267 $ (148) Property taxes 5,079 5,079 5,209 130 5,094 115 Other taxes 506 506 586 80 554 32 Franchise taxes 1,420 1,420 2, 141 721 1,494 647 Licenses and permits 4,964 4,964 4,452 (512) 4,375 77 Fines and forfeitures 1,781 1,781 2,185 404 2,251 (66) Investment income 50 50 75 25 30 45 Intergovernmental 6,090 6,090 6,157 67 5,950 207 Charges for services 6,473 6,473 6,438 (35) 6,382 56 Other revenue 950 774 1, 153 379 959 194

Total revenues $ 40,840 $ 40,664 $ 41,516 $ 852 $ 40,356 $ 1, 160

The key factors affecting General Fund's fund balance for the fiscal year 2018 is as follows:

General Fund revenues increased by $1.2 million (2.9%) which is primarily due to the increase in franchise tax.

16



General Fund expenditures, excluding interfund charges, increased by $225.6 thousand (0.5%). This is mainly caused by increase in retirement cost. Of the total general fund expenses, Public Safety accounted for 64.2%, Public Works was 13.8% and General Government was 10.1%.

Retirement Fund is reserved for the payment of retirement expenses for the employees of the City. The Retirement Fund is financed by the retirement portion of the property tax revenue pursuant to a 1946 voter approved initiative to provide for the retirement benefit costs of City employees. The City's Retirement Fund increased its net position by $2.2 million in fiscal year 2018. This fund will continue to support a portion of the ongoing pension expenses.

Public Financing Authority Debt Service Fund is used to account for the accumulation of resources required for the payment of interest and principal on all revenue bonds issued by the Public Financing Authority. During the year ended June 30, 2018, the net position decreased by approximately $1.1 million.

Self Insurance Fund is the City's Internal Service Fund which is used to set aside funding to cover workers' compensation, liability claims, and potential future claims. The Self Insurance fund ended the year with deficit net position of $10.8 million compared to a deficit net position of$ 7.5 million in the prior fiscal year. The increase in deficit of $3.2 million is primarily result of an increase in claims.

Proprietary Funds

The City's proprietary funds account for the City's business-type activities.

8

7

6

5

4

3

2

0

Proprietary Funds (Operating Revenues)

Comparison Between Fiscal Years 2018 and 2017

17

ill FY 2018

FY 2017

Transit:



The Transit System incurred an operating loss of $29.9 million compared to $23.4 million in the prior fiscal year, an increase loss of approximately $6.4 million ( 27.3%). This is primarily due increased labor and benefit costs.

Operating revenues include bus fares and special contracts which totaled $4.7 million, which was $358.2 thousand lower than the prior year total of $5.1 million. Operating expenses for Transit amounted to $ 34.6 million in 2018, an increase of$ 6.0 million. Operating expenses included $4.8 million in depreciation expense reported as required by accounting standards.

This operating loss was offset by non-operating revenues and capital contributions of $29 million, which was $2.9 million higher than the prior fiscal year. Overall, net position in this fiscal year decreased by $840.2 thousand.

Golf:

The Municipal Golf Course incurred an operating loss of $1.0 million, which was $0.5 million more than prior year. Its operating revenues for the fiscal year 2018 were $2.2 million and operating expenses were $3.2 million. Operating revenues were higher by $0.1 million ( 5%) than in the prior year, while operating expenses increased by $0.6 million ( 22.3%). Operating expenses also include depreciation expense of $0.3 million.

Hilton:

The Montebello Hilton reflected operating revenues of $7.2 million, $0.4 million (5.3%) higher than the prior fiscal year. This is primarily due to increased occupancy during the fiscal year. Operating expenses decreased by $0.2 million (4.1%) due to lower administrative expenses.

Capital Asset and Debt Administration

Capital Assets

The City's capital assets for its governmental and business-type activities as of June 30, 2018 amounted to $169.6 million, net of accumulated depreciation. Capital assets include land, buildings, improvements, machinery and equipment, park facilities, roads, highways, and bridges. The City's capital assets net of accumulated depreciation increased by 18.4% over the prior year primarily due to the construction of the new Home2Suites.

18

Land $



City of Montebello Summary of Capital Assets, Net of Depreciation

As of June 30 (in thousands)

Governmental Activities Business-type Activities

2018 2017 2018 2017

2,054 $ 2,054 $ 6,307 $ 6,307

Total

2018 2017

$ 8,360 $ 8,361 Rights of way 14,392 14,392 14,392 14,392 Construction in progress 2,352 2,025 43,940 12,500 46,292 14,525 Buildings and improvements 37,965 37,066 22,272 24,039 60,237 61,105 Machinery and equipment 4,906 5,773 20,669 23,611 25,575 29,384 Infrastructure 14,771 15,476 14,771 15,476

$ 76,439 $ 76,786 $ 93,188 $ 66,457 $ 169,627 $ 143,243

The capital asset classes include:

Sewer system, including sewer pipes, pumping stations, manholes, and laterals;

Storm drain system, including storm drain pipes, flood control channels, and catch basins;

Streets, including pavement, curb and gutter, sidewalks, medians, greenways, block walls and traffic signals;

Buildings, including building remodels, building lighting systems, building equipment, and building roofs; and

Parks, including associated structures and infrastructure assets.

Major capital asset transactions during the current fiscal year included the following:

Building and Improvements are the biggest capital assets of the City, making up 35.5% of the total capital assets. Building and Improvements net of accumulated depreciation decreased approximately $0.9 million. Major projects included: Maple Avenue Street Improvements (Mines Ave to Washington Blvd.), Ellingbrook Avenue Street Improvements (Firvale to Easterly City Limits), Citywide Bus stop Improvement Project, and Home2suites.

Machinery, Equipment, and Automotive Equipment additions totaled approximately $613.3 thousand.

Additional information on the City's capital assets can be found in Note 3 to the basic financial statements section of this report.

19

Long-term Debt



At the end of fiscal year 2018, the City had total debt outstanding of $276.7 million. The outstanding debt includes $87.3 million of revenue bonds and $135.8 million of net pension liability. The remaining $53.6 million relates to the postemployment benefit obligation, notes payable, loans payable and compensated absences. Pension liability increased $16.1 million primarily due to CalPERS decreasing the anticipated rate of return on investments from 7.5% to 7.375%. The assumed rate is scheduled to decrease to 7.000% over the next two years. Total long-term claims payable as of June 30, 2018 was $16.6 million. Outstanding debt is summarized below.

City of Montebello Summary of Long-term Debt

As of June 30 (in thousands}


2018 2017 2018 2017 2018 2017

Revenue bonds, net $ 11,333 $ 86,123 $ 75,919 $ 3,395 $ 87,252 $ 89,518 Claims payable 16,649 13,473 16,649 13,473 Notes payable 4,043 4,387 484 686 4,527 5,073 Capital lease obligation 902 972 414 457 1,317 1,429 Compensated absences 2,021 1,992 1,109 1,058 3,130 3,050 Net pension liability 100,703 89,885 35,132 29,841 135,834 119,726 Other postemployment

benefit obligation 24,955 10,963 3,058 28,012 10,963 Sub total 160,605 207,795 116,116 35,437 276,720 243,232

Less current portion 7,677 9,405 2,043 1,462 9,719 10,867 Noncurrent portion $ 152,928 $ 198,390 $ 114,073 $ 33,975 $ 267,001 $ 232,365

Economic Factors and Next Year's Budgets and Rates

The City's financial position and its ability to pay for essential services and capital projects rely heavily on the economic conditions, legislative actions on both Federal and State level, and laws governing local finances:

Credit rating: As of the date of this CAFR, the City S&P underlying credit rating is "A".

Employment trends: The City's 12-month average unemployment rate continued to fall from 4.5% to 4.4% during the fiscal year 2018, a 0.1 % decrease from prior year. This decrease is likely to continue, but at a slower pace, as noted in the Legislative Analyst's Office (LAO) Economic assumptions which predict that the overall State unemployment rate will continue to fall through 2019.

20



Economic growth: According to a near term projection by the Legislative Analyst's Office (LAO) based on consensus of economists about the likely trend of the U.S. economy through 2019, which was published in the recent State 2019-20 California's Fiscal Outlook, California's economy will LAO projects that personal income in California will grow by 5.7% in 2019 and then decrease to 4.2% in 2020.

Costco closed its Montebello facility in 2018. However, according to a sales tax sharing agreement, the City will continue to receive a portion of the sales tax revenues.

Real Estate Market: According to California Budget 2018-19 published in November 2017, California assessed values are expected to increase by 5.9% all through 2019. This trend is consistent with the trend the City is seeing. Taxable assessed values for properties within the City have increased steadily since 2011-12. According to the preliminary property tax report prepared by HDL Companies for the fiscal year 2017-18, the total assessed valuation for the City is estimated to increase by 3.7 percent from FY 2016-17. These increases will continue to boost the City's property tax revenues over the next several years.

Requests for Information

This financial report is designed to provide a general overview of the City's finances for all those with an interest in the government's finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Finance Department, 1600 W. Beverly Blvd., Montebello, CA 90640.

21


ASSETS Cash and investments $ 37,557,208 $ Restricted cash and investments 4,666,731 Receivables:

Interest 132,392 Accounts 2,369,500 Property tax 2,825,025 Notes 817,599

Property held for resale 3,249,644 Inventory 4,547 Prepaid items and deposits 224,503 Advances to Successor Agency Trust Fund 6,150,883 Internal balances 2,883,846 Capital assets, not being depreciated 18,797,012 Capital assets, being depreciated 57,641,810

Total assets 137,320,700

DEFERRED OUTFLOWS OF RESOURCES Deferred outflows of resources related to pensions 20,897,753 Deferred outflows of resources related to OPEB 781,041 Unamortized loss on defeasance of debt 238,419

21,917,213

LIABILITIES Accounts payable and accrued liabilities 3,684,799 Interest payable 78,954 Deposits payable 5,000 Unearned revenue 6,157,690 Noncurrent liabilities:

Due within one year 7,676,654 Due in more than one year 152,927,984

Total liabilities 170,531,081

DEFERRED INFLOWS OF RESOURCES Deferred inflows of resources related to pensions 1, 196,313 Deferred inflows of resources related to OPEB 1,504,490

2,700,803

NET POSITION (DEFICIT) Net investment in capital assets 60, 131,857 Restricted for:

Community development 24,580,702 Public safety 1,134,719 Capital projects 4,788,937

Debt service 366,492 Unrestricted deficit (104,996,678)

Total net deficit $ (13,993,971) $

See notes to financial statements. 22


June 30, 2018

Business-type Activities Total

1,794,038 $ 39,351,246 26,656,264 31,322,995

132,392 7,271,470 9,640,970

2,825,025 817,599

3,249,644 1,219,751 1,224,298

27,636 252,139 6,150,883

(2,883,846) 50,246,297 69,043,309 42,941,674 100,583,484

127,273,284 264,593,984

8,852,988 29,750,741 95,696 876,737 64,370 302,789

9,013,054 30,930,267

9,597,565 13,282,364 288,695 367,649

38, 130 43,130 1, 199,432 7,357,122

2,042,733 9,719,387 114,072,891 267,000,875 127,239,446 297,770,527

1,511,648 2,707,961 184,336 1,688,826

1,695,984 4,396,787

50,936,245 111,068, 102

24,580,702 1,134,719

25,254,809 30,043,746

1,401,455 1,767,947 (70,241,601) (175,238,279)

7,350,908 $ (6,643,063)

Functions/Programs Expenses Governmental activities

General government $ 10,590,425 Public safety 39,719,749 Public works 9,824,917 Parks, recreation, and culture 3,948,193 Housing and community development 2,923,175 Unallocated infrastructure depreciation 704,807 Interest on long-term debt 356,579

Total governmental activities 68,067,845

Business-type activities Transit system 34,587,386 Golf course 3,169,377 Montebello Hilton 4,590,912 Water utility 2,251,495 Detention facility 445,590 Hotel2Suite 30,205 Interest on long-term debt 3,409,286

Total business-type activities 48,484,251

Total primary government $ 116,552,096

General revenues Taxes

Property taxes, levied for general purposes Sales tax Franchise taxes Motor vehicle license fees Other taxes

Other revenues Investment earnings

Transfers Transfers - net

Total general revenues

Change in net position

Net position (deficit), beginning of year, as restated

Net position (deficit), end of year

$

$

Program Revenues Operating Capital

Charges for Grants and Grants and Services Contributions Contributions

3,921,684 $ 3,040,654 $ 3,227,705 104,368 4,421,025 3,588,814

486,274 1,018,644 3,025,232

13,075,332 9,759,068

4,728,570 23,014,664 5,994,885 2,194,976 7,197,488 2,992,821

77,560

17,191,415 23,014,664 5,994,885

30,266,747 $ 32,773,732 $ 5,994,885


$

$

City of Montebello Statement of Activities


Net (Expense) Revenue and Changes in Net Position

Governmental Business-type Activities Activities Total

(3,628,087) $ $ (3,628,087) (36,387,676) (36,387,676)

(1,815,078) (1,815,078) (3,461,919) (3,461,919) 1, 120,701 1, 120,701 (704,807) (704,807) (356,579) (356,579)

(45,233,444) (45,233,444)

(849,267) (849,267) (974,401) (974,401)

2,606,576 2,606,576 741,326 741,326

(368,030) (368,030) (30,205) (30,205)

(3,409,286) (3,409,286) (2,283,287) (2,283,287)

(45,233,444) (2,283,287) (47,516,731)

16,961,038 16,961,038 13,118,981 13,118,981

2, 141,450 2,141,450 6,150,537 6,150,537

585,960 585,960 2,626,065 2,626,065

665,702 448,876 1,114,578

(1,634,476) 1,634,476 40,615,257 2,083,352 42,698,609

(4,618,187) (199,935) (4,818,122)

(9,375,784) 7,550,843 (1,824,941)

(13,993,971) $ 7,350,908 $ (6,643,063)

ASSETS Cash and investments $ Restricted cash and investments Receivables

Interest Accounts Taxes Notes

Due from other funds Due from Successor Agency Trust Fund Prepaid expenses Investment in land held for resale

Total assets $

LIABILITIES AND FUND BALANCES

LIABILITIES Accounts payable and accrued liabilities $ Deposits payable Due to other funds Unearned revenue

Total liabilities

FUND BALANCES Nonspendable

Prepaid expenses Advances to Successor Agency Trust Fund Investment in land held for resale

Restricted for Debt service Special revenue funds Capital projects

Unassigned Total fund balances

Total liabilities and fund balances $

Special Debt Service Revenue Fund Fund

Retirement Public Financing General Fund Authority

12, 191,403 $ 8,485,441 $ 4,666,731

132,392 1,389,708 2,501,514 323,511

2,794,623 376,060 34,241

174,398 1,208,814

25,093,824 $ 8,808,952 $ 376,060

2,649,448 $ 3,920 $ 5,000

9,568 5, 101,575 7,756,023 3,920 9,568

174,398

1,208,814

366,492 8,805,032

4,666,731 11,287,858 17,337,801 8,805,032 366,492

25,093,824 $ 8,808,952 $ 376,060


City of Montebello Governmental Funds

Balance Sheet June 30, 2018

Special Revenue Fund

Housing other Successor Governmental

Fund Funds Total

$ 821,874 $ 8,364,218 $ 29,862,936 4,666,731

132,392 978,544 2,368,252

2,825,025 817,599 817,599

3, 170,683 6, 116,642 6, 150,883

137 43,503 218,038 2,040,830 3,249,644

$ 8,979,483 $ 10,203,864 $ 53,462, 183

$ 1,715 $ 972,806 $ 3,627,889 5,000

9,611 267,658 286,837 1,056,115 6, 157,690

11,326 2,296,579 10,077,416

174,398 6, 116,642 6, 116,642 2,040,830 3,249,644

366,492 810,685 7,942,232 17,557,949

122,206 4,788,937 (157,153) 11,130,705

8,968,157 7,907,285 43,384,767

$ 8,979,483 $ 10,203,864 $ 53,462, 183

City of Montebello Reconciliation of the Balance Sheet of Governmental Funds

to the Statement of Net Position June 30, 2018

Amounts reported for governmental activities in the statement of net position are different because:

Total governmental fund balances

Capital assets used in governmental activities are not current financial resources

and, therefore, are not reported in the governmental fund balance sheet.

Long-term liabilities and related items are not due and payable in the current period and, therefore, are not reported in the governmental funds. Balances at June 30, 2018 are:

Revenue bonds Bond issuance premium Bond issuance discount Deferred amount on refunding Notes payable Capital lease obligation Compensated absences Net OPEB liability Net pension liability Deferred outflows of resources - OPES-related Deferred outflows of resources - pension-related Deferred inflows of resources - OPES-related Deferred inflows of resources - pension-related

Internal service funds are used by management to charge the costs of various City activities to individual governmental and business-type funds. The assets and liabilities of the internal service funds are included in governmental activities in the statement of net position, but are not included in the governmental funds balance sheet.

Interest on long-term debt is not accrued in governmental funds, but rather is recognized as an expenditure when due.

Net position of governmental activities


$ (10,409,600) (926,497)

3,391 238,419

(4,042,886) (902,071)

(2,017,395) (24,954,548)

(100,670,815) 781,041

20,889,730 (1,504,490) (1, 194,943)

$ 43,384,767

76,321,444

(124,710,664)

(8,910,564)

(78,954)

$ (13,993,971)


Statement of Revenues, Expenditures, and Changes in Fund Balances

Revenues Sales taxes $ Property taxes Other taxes Franchise taxes Licenses and permits Fines and forfeitures Investment income Intergovernmental Charges for services Other revenue

Total revenues

Expenditures Current:

General government Public safety Public works Parks and recreation Housing and community development Sub-total

Capital outlay Debt service:

Principal retirement Interest and fiscal charges Sub-total

lnterfund charges

Total expenditures

Excess (deficiency) of revenues over expenditures

Other financing sources (uses) Transfers in Transfers out

Net other financing sources (uses)

Change in fund balances

Fund balances, beginning of year as restated Fund balances, end of year $

Special Debt Service Revenue Fund Fund

Retirement Public Financing General Fund Authority

13,118,981 $ $ 5,208,975 11,752,063

585,960 2, 141,450 4,452,210 2,185,022

74,742 75,298 6, 157,030 6,438, 100 1, 153,423 1,466,882

41,515,893 11,827,361 1,466,882

4,976,497 717,607 4,569 31,487,454

6,778,314 3,813,599 2,006,274

49,062, 138 717,607 4,569

265,903

977,340 489,542

1,466,882

(231,650)

49,096,391 717,607 1,471,451

(7,580,498) 11, 109,754 (4,569)

12,257,329 (1,381,915) (8,920,673) (1,096,387) 10,875,414 (8,920,673) (1,096,387)

3,294,916 2,189,081 (1, 100,956)

14,042,885 6,615,951 1,467,448 17,337,801 $ 8,805,032 $ 366,492

See notes to financial statements.

26


Special Revenue Fund

Housing Other Successor Governmental

Fund Funds Total

$ $ $ 13,118,981 16,961,038

585,960 2, 141,450 4,452,210 2, 185,022

515,662 665,702 9,752,575 15,909,605

6,438, 100 5,760 2,626,065 5,760 10,268,237 65,084,133

1,092,771 6,791,444 857,626 32,345,080 813,997 7,592,311

3,813,599 20,059 978,870 3,005,203 20,059 3,743,264 53,547,637

4,483,413 4,749,316

348,000 1,325,340 184,796 674,338 532,796 1,999,678

(231,650)

20,059 8,759,473 60,064,981

(14,299) 1,508,764 5,019, 152

12,257,329 (2,500,000) (13,898,975) (2,500,000) (1,641,646)

(14,299) (991,236) 3,377,506

8,982,456 8,898,521 40,007,261 $ 8,968,157 $ 7,907,285 $ 43,384,767


Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities


Amounts reported for governmental activities in the statement of activities are different because:

Change in fund balance - governmental funds

Governmental funds report capital outlay as expenditures. In the statement of activities the cost of those assets is allocated over their estimated useful lives as depreciation expense.

Depreciation expense Capital outlay

The issuance of long-term debt provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net position.

Principal payments on bonds, notes and capital lease obligation

Some expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in the governmental funds.

Net change in compensated absences Net change in accrued interest Net change in deferred amount on refunding Net change in bond discount Net change in bond premium

$

Changes in net OPEB and pension liability and other pension related items do not represent revenues or expenditures that consume current financial resources

Net change in net pension liability Net change in deferred outflows of resources related to pensions Net change in deferred inflows of resources related to pensions Net change in net OPEB liability Net change in deferred outflows of resources related to OPEB Net change in deferred inflows of resources related to OPEB

Internal service funds are used by management to charge the costs of self-insurance and capital replacements to individual funds. Net income (loss) of the internal service funds is reported with governmental activities.

Change in net position of governmental activities


27

(3,207, 123) 2,859,979

1,391,549

(29,061) 133,879 (52,690)

(484) 240,834

(10,845,696) 5,002,957

681,538 162,899 781,041

(1,504,490)

$ 3,377,506

(347,144)

1,391,549

292,478

(5,721,751)

(3,610,825)

$ (4,618,187)

ASSETS Current assets

Cash and investments Cash and investments with fiscal agent Accounts receivable

Inventory Prepaid expense and other current assets

Total current assets Noncurrent assets

Capital assets Land Buildings and improvements

Machinery and equipment Construction in progress Accumulated depreciation

Total noncurrent assets Total assets

DEFERRED OUTFLOWS OF RESOURCES Deferred outflows of resources related to pensions

Deferred outflows of resources related to OPEB Unamortized loss on defeasance of debt

Total deferred outflows of resources

LIABILITIES Current liabilities

Accounts payable and accrued liabilities

Due to other funds

Deposits payable Unearned revenue Interest payable

Current portion of long-term liabilities: Claims payable Compensated absences

Capital lease obligation Notes payable Bonds payable

Total current liabilities

Noncurrent liabilities

Claims payable Compensated absences Net pension liability Net OPEB liability

Capital lease obligation Notes payable Bonds payable

Total noncurrent liabilities Total liabilities

DEFERRED INFLOWS OF RESOURCES Deferred inflows of resources related to pensions Deferred inflows of resources related to OPEB

NET POSITION (DEFICIT) Net investment in capital assets Restricted for

Capital projects Debt service

Unrestricted

Total net position {deficit) $

Business-type Activities - Enterprise Funds

Transit System Golf Montebello Fund Course Hilton Hotel2Suites

613,455 1,925 469,447 1,401,455 25,254,809

6,795,901 97,280 210,722 1,000

1,143,361 75,043 1,347 16,922 380 8,428

8,569,639 174,628 2,091,399 25,255,809

3,901,596 2,370,000 29,455,713 10,733,363 3,632,269

62,509,929 2,474,333 5,456,764 689,643 37,544,760

(55,889,797) (8,959,444) (1, 156,089) 45,434,205 6,618,252 3,165,823 37,544,760

54,003,844 6,792,880 5,257,222 62,800,569

8,241,790 605,957

90,896 4,800 64,370

8,332,686 675,127

1,497,564 196,293 940,786 6,522,924

2,366,871 11,775

400 6,055 1,199,432

20,285 48,227 220,183

826,999 67,562

163,746 45,077 98,264

276,820 550,000 3,687,741 3,071,572 1,545,068 6,754,882

173,469 39,251 32,706,309 2,404,651

2,904,161 153,362

158,224 47,448 298,826

2,853,929 11,517,757 60,720,348 35,942,163 5,797,467 11,517,757 60,720,348

39,629,904 8,869,039 13,062,825 67,475,230

1,407,287 103,466 175,090 9,246

1,582,377 112,712

45,434,205 2,997,888 2,079,221

25,254,809 1,401,455

(24,309,956) (4,511,632) (9,207,058) (32,008,691)

21, 124,249 $ (1,513,744) $ (7,805,603) $ (4,674,661) $


28


Proprietary Funds June 30, 2018

Governmental

Activities Internal

Service Others Total Funds

709,211 1,794,038 7,694,272 26,656,264

166,567 7,271,470 1,248

1,219,751 4,547 1,906 27,636 6,465

877,684 36,969,159 7,706,532

35,000 6,306,596 108,369 184,316 44,005,661 428,794

2,204,819 67,189,081 643,651 248,532 43,939,699

(2,247,736) (68,253,066) (1,063,436) 424,931 93, 187,971 117,378

1,302,615 130,157,130 7,823,910

5,241 8,852,988 8,023

95,696 64,370

5,241 9,013,054 8,023

439,998 9,597,565 56,910

505,200 2,883,846

31,675 38,130 1,199,432

288,695

7,471, 188 1,279 895,840 3,777

208,823 12,986 111,250

826,820 991,138 16,050,401 7,531,875

9,177,417 212,720

20,798 35,131,758 31,835 3,057,523

205,672 74,358 373,184

75,092,034 95,156 114,072,891 9,209,252

1,086,294 130, 123,292 16,741,127

895 1,511,648 1,370 184,336

895 1,695,984 1,370

424,931 50,936,245 117,378

25,254,809 1,401,455

(204,264) (70,241,601) (9,027,942)

220,667 $ 7,350,908 (8,910,564)

Operating revenues Charges for services Other

Total operating revenues

Operating expenses Labor and fringe benefits Materials and supplies Food and beverage Repairs and maintenance Utilities Insurance claims and premiums Contract services Franchise fee Depreciation expense Administrative expense Other expenses

Total operating expenses

Operating income (loss)

Nonoperating revenues (expenses) Operating subsidies:

Proposition "A" discretionary Proposition "C" discretionary Measure M Measure R State transit assistance

Subtotal - operating subsidies Interest income Interest expense

Total nonoperating revenues (expenses)

Income (loss) before capital grants

Federal and State capital grants

Income (loss) before transfers

Transfers in Transfers out

Net transfers in (out)


Net position, beginning of year, as restated

Net position (deficit), end of year

City of Montebello Statement of Revenues, Expenses, and Changes in Net Position

Business-type Activities - Enterprise Funds Transit System Golf Montebello

Fund Course Hilton Hotel2Suites

4,303,782 2,194,976 7,074,628 424,788 122,860

4,728,570 2,194,976 7, 197,488

21,163,911 1,326,336 1,623,286 2,639,680 70,314

358,724 37,649

398,969 604,384 158,115 1,800,000 52,041 93,694 2,285,794 411,945 767,302 30,205

315,830 4,822,311 305,799 81,542 1,447,641 321,874 1,190,001

29,080 39,035 2,418 34,587,386 3,169,377 4,590,912 30,205

(29,858,816) (974,401) 2,606,576 (30,205)

5,234,533 3,650,263 3,064,202 3,217,342 7,848,324

23,014,664 9,061 433,552

(130,082) (622,090) (2,655,547) 23,023,725 (130,082) (622,090) (2,221,995)

(6,835,091) (1,104,483) 1,984,486 (2,252,200)

5,994,885

(840,206) (1,104,483) 1,984,486 (2,252,200)

1,213,859

1,213,859

(840,206) 109,376 1,984,486 (2,252,200)

21,964,455 (1,623, 120) (9,790,089) (2,422,461)

21, 124,249 $ (1,513,744) $ (7,805,603) $ (4,674,661) $


29

Proprietary Funds Year ended June 30, 2018

Governmental Activities Internal Service

Others Total Funds

3,070,381 16,643,767 6,811,983 547,648 19,116

3,070,381 17,191,415 6,831,099

14,998 24, 128,531 (6,829) 1,960 2,711,954 276,994

358,724 37,649 91,182

125,792 1,287,260 1,945,735 9,387,433

2,361,155 5,856,401 683,857 315,830

3,532 5,213, 184 189,648 3, 149, 164 16,457

70,533 2,697,085 45,074,965 10,449,094

373,296 (27,883,550) (3,617,995)

5,234,533 3,650,263 3,064,202 3,217,342 7,848,324

23,014,664 6,263 448,876

(1,567) (3,409,286) 4,696 20,054,254

377,992 (7,829,296) (3,617,995)

5,994,885

377,992 (1,834,411) (3,617,995)

420,617 1,634,476 7,170

420,617 1,634,476 7,170

798,609 (199,935) (3,610,825)

(577,942) 7,550,843 (5,299,739)

220,667 $ 7,350,908 $ (8,910,564)

City of Montebello Statement of Cash Flows

Proprietary Funds Year ended June 30, 2018


Business-type Activities - Enterprise Funds Internal Transit System Golf Montebello Seivice

Fund Course Hilton Hotel2Suites Others Total Funds

Cash flows from operating activities Receipts from customers 4,303,782 $ 2,164,729 $ 6,977,595 $ 1,000 3,028,912 $ 16,476,018 $ 7,118,610 Other receipts 424,788 122,860 547,648 Payments to suppliers (8,486,614) (1,408,471) (4,309,749) 4,584,709 (2,514, 142) (12,134,267) (7,279,738) Payments to employees (18,232,361) (1,250,644) (1,623,286) (9,984) (21,116,275) (20,960)

Net cash provided by (used in)

operating activities (21,990,405) (494,386) 1,167,420 4,585,709 504,786 (16,226,876) (182,088)

Cash flows from non-capital financing activities Operating subsidies received from Federal and State 18, 128,052 18, 128,052 Cash received from other funds 1,213,859 11,775 420,617 1,646,251 7,170

Net cash provided by (used in) non-capital financing activities 18, 128,052 1,213,859 11,775 420,617 19,774,303 7,170

Cash flows from capital and related financing activities Interest received 9,061 433,552 6,263 448,876 Interest paid (126,431) (605,355) (2,435,364) (1,567) (3, 168,717) Principal payments (592,865) 714,068 10,227,782 10,348,985 Acquisition of capital assets (5,526,456) (26,241,349) (220,947) (31,988,752) Federal and State capital grants 5,994,885 5,994,885

Net cash provided by (used in) capital and related financing activities 477,490 (719,296) 108,713 (18,015,379) (216,251) (18,364,723)

Change in cash and cash equivalents (3,384,863) 177 1,276,133 (13,417,895) 709, 152 (14,817,296) (174,918)

Cash and cash equivalents - beginning 3,998,318 1,748 594,769 38,672,704 59 43,267,598 7,869, 190 Cash and cash equivalents - ending 613,455 1,925 1,870,902 25,254,809 709,211 28,450,302 7,694,272

Reconciliation of operating income (loss) to net cash provided by (used in) operating activities:

Operating income (loss) (29,858,816) $ (974,401) $ 2,606,576 (30,205) $ 373,296 (27,883,550) $ (3,617,995) Depreciation and amortization 4,822,311 305,799 81,542 3,532 5,213, 184 Changes in assets and liabilities

(Increase) decrease in acounts receivable (30,247) (97,033) 1,000 (41,469) (167,749) 287,511 (Increase) decrease in inventories (186,501) 1,284 (1,051) (186,268) (Increase) decrease in prepaid expenses 21,125 992 46,383 (1,906) 66,594 (Increase) decrease in deferred outflows of resources 839,461 100,542 (394) 939,609 8,839 Increase (decrease) in accounts payable and accrued liabiities 279,926 126,495 (1,454,405) 4,610, 129 78,975 3,641,120 724 Increase (decrease) in due to other funds 4,785 4,785 Increase (decrease) in deposits payable (14,592) (14,592) Increase (decrease) in compensated absences 47,476 3,550 (169) 50,857 Increase (decrease) in claims payable 3,175,461 Increase (decrease) in net pension liability 5,055,009 229,053 6,970 5,291,032 (28,086) Increase (decrease) in net OPEB liability (18,959) (1,052) (20,011) Increase (decrease) in notes payable 87,344 87,344 Increase (decrease) in deferred inflows of resources (2,991,437) (256,401) (1,393) (3,249,231) (8,542)

Net cash provided by (used in) operating activities $ (21,990,405) $ (494,386) $ 1,167,420 4,585,709 504,786 $ (16,226,876) $ (182,088)


30

ASSETS Cash and investments Cash and investments with fiscal agent Receivables:

Interest Accounts Notes, net

Prepaid expenses Land held for resale Capital assets, net of accumulated depreciation

Total assets

DEFERRED OUTFLOWS OF RESOURCES Unamortized loss on defeasance of debt

LIABILITIES Accounts payable and accrued liabilities Deposits payable Unearned revenues Interest payable Advances from City of Montebello, net Noncurrent liabilities

Due within one year Due in more than one year

Total liabilities

NET POSITION (DEFICIT) Unrestricted fiduciary net position

$

Total net position (deficit) $

City of Montebello Statement of Fiduciary Net Position

Fiduciary Funds June 30, 2018

Successor Agency

9,360,769 2,692,486

19,545 8,200

3,853,716 84,445

5,983,486 11,956,489 33,959, 136

238,419

20, 151

20, 145 471, 156

6, 150,883

4,444,638 40,306,878 51,413,851

$

(17,216,296) (17,216,296) $

Agency Fund

2,479,969

2,479,969

2,479,969

2,479,969

=====


City of Montebello Statement of Changes in Fiduciary Net Position

Fiduciary Funds Year ended June 30, 2018

Revenues Property tax Investment income Other revenue


Housing and community development Debt service:

Interest and fiscal charges

Total revenues

Total expenditures


Net position (deficit), beginning of year, as restated Net position (deficit), end of year


32

$

Successor Agency

Private-purpose Trust Fund

7,087,612 84,566

624,674

7,796,852

363,671

2,030,309 2,393,980

5,402,872

(22,619, 168) $ (17,216,296)

============

NOTE 1

City of Montebello Notes to Financial Statements


SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Financial Reporting Entity The City of Montebello (the City) was incorporated on October 16, 1920 and conducts its operations as a general law, Council/Manager City.

The City's accounting policies conform to accounting principles generally accepted in the United States of America, as applicable to governments.

As required by accounting principles generally accepted in the United States of America, these financial statements present the City of Montebello and its component units, entities for which the City is considered to be financially accountable. The City is considered to be financially accountable for an organization if the City appoints a voting majority of that organization's governing body and the City is able to impose its will on that organization, or there is a potential for that organization to provide specific financial benefits to or impose specific financial burdens on the City. The City is also considered to be financially accountable for an organization if that organization is fiscally dependent (i.e., it is unable to adopt its budget, levy taxes, set rates or charges, or issue bonded debt without approval from the City) and there is a financial burden or benefit component to the relationship. In certain cases, other organizations are included as component units if the nature and significance of their operational and financial relationship with the City are such that their exclusion would cause the City's financial statements to be misleading or incomplete.

Based upon the above criteria, the component units of the City, as of June 30, 2018, are the Montebello Public Improvement Corporation (MPIC), Montebello Public Financing Authority (Authority), and Water System Improvement Corporation (WSIC). A brief description of each component unit follows:

Montebello Public Improvement Corporation The Montebello Public Improvement Corporation was formed in June 1990 as a nonprofit corporation. MPIC was formed for the purpose of acquisition and construction of various projects to be leased to the City under a lease agreement. The MPIC is not active.

Montebello Public Financing Authority The Montebello Public Financing Authority was established pursuant to a Joint Exercise of Powers Agreement, dated September 2, 1997, entered into by the City and the former Redevelopment Agency for the purpose, among others, of issuing bonds to be used to provide financial assistance to its members. The activities of the Authority are reported in the Debt Service and Capital Projects Funds. In August 2014, the Montebello Parking Authority replaced the Successor Agency as one of the principals in the Montebello Public Financing Authority.

Water System Improvement Corporation The Water System Improvement Corporation was formed in July 1972. The WSIC was formed for the purpose of rendering assistance to the City by leasing to the City any asset acquired or improvement to the City's Water System facilities. The WSIC is not active.

33

NOTE 1



SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Separate financial statements are not prepared for the Montebello Public Financing Authority, Montebello Public Improvement Corporation, and the Water System Improvement Corporation.

Montebello Redevelopment Agency Prior to its dissolution on February 1, 2012, the former Montebello Redevelopment Agency's (Agency) financial activity was reported as a component unit of the City. The primary purpose of the Agency was to eliminate blighted areas by encouraging development of residential, commercial, industrial, recreational, and public facilities.

Pursuant to the provisions of AB 1x26, the Montebello Redevelopment Agency was dissolved and the Successor Agency to the Dissolved Montebello Redevelopment Agency (Successor Agency) was created. Accordingly, all of the assets, liabilities and obligations of the former redevelopment agency were transferred to the Successor Agency and the Housing Successor Special Revenue Fund (Housing Fund) of the City on February 1, 2012.

The City of Montebello currently serves as the Successor Agency to the former redevelopment agency that is responsible for revenue collection, maintaining the bond reserves, disposing of excess property and fulfilling the obligations of the dissolved Agency. The City Council serves as the Successor Agency's governing board.

Financial information for the Successor Agency is presented as a Private-purpose Trust fund. See also Note 16.

Government-wide and Fund Financial Statements The government-wide financial statements (i.e., the Statement of Net Position and the Statement of Activities) report information about the reporting government as a whole, except for its fiduciary activities. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. Likewise, the primary government (including its blended component units) is reported separately from discretely presented component units for which the primary government is financially accountable. The City has no discretely presented component units. As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are payments-in-lieu of taxes where the amounts are reasonably equivalent in value to the interfund services provided and other charges between the government's enterprise activities and various functions of the government. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned.

34

NOTE 1




The Statement of Activities demonstrates the degree to which the direct expenses of a given function or segment is offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include: 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported as general revenues.

The underlying accounting system of the City is organized and operated on the basis of separate funds, each of which is considered to be a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenues, and expenditures or expenses, as appropriate. Governmental resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled.

Separate financial statements for the City's governmental, proprietary, and fiduciary funds are presented after the government-wide financial statements. These statements display information about major funds individually and other funds in the aggregate for governmental and enterprise funds. Fiduciary statements, even though excluded from the government-wide financial statements, include financial information that primarily represents assets held by the City in a custodial capacity for other individuals or organizations.

Measurement Focus, Basis of Accounting, and Financial Statement Presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund financial statements. Under the economic resources measurement focus, all assets and deferred outflows of resources and liabilities and deferred inflows of resources (whether current or noncurrent) are included in the statement of net position. Operating statements present increases (revenues) and decreases (expenses) in total net position. Under the accrual basis of accounting, revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations.

35

NOTE 1




Nonexchange transactions, in which the City gives (or receives) value without directly receiving (or giving) equal value in exchange include property taxes, grants, entitlements, and donations. Revenues from grants, entitlements, and donations are recognized in the fiscal year in which all the eligibility requirements have been satisfied. Operating expenses for proprietary funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses.

When both restricted and unrestricted resources are available for use, it is the City's policy to use restricted resources first, then unrestricted resources as they are needed.

Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under the current financial resources measurement focus, only current assets and current liabilities are generally included on their balance sheets. The reported fund balance (net current assets) is considered to be a measure of "available spendable resources." Governmental fund operating statements present increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in net current assets. Accordingly, they are said to present a summary of sources and uses of "available spendable resources" during a period. Noncurrent portions of long-term receivables due to governmental funds are reported on their balance sheets in spite of their spending measurement focus. However, special reporting treatments are used to indicate that they should not be considered "available spendable resources" since they do not represent net current assets. Recognition of governmental fund type revenue represented by noncurrent receivables is deferred until they become current receivables. Noncurrent portions of other long-term receivables are offset by fund balance nonspendable accounts.

Under the modified accrual basis of accounting, revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the City considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, except for principal and interest on general long-term liabilities, claims and judgments, and compensated absences, which are recognized as expenditures to the extent they have matured. General capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term liabilities are reported as other financing sources.

Property taxes, franchise taxes, licenses, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period with the exception of interest not expected to be received within 60 days. Only the portion of special assessments receivable due within the current fiscal period is considered to be susceptible to accrual as revenue of the current period. All other revenue items are considered to be measurable and available only when cash is received by the City.

36

NOTE 1




In accordance with GASB Statement No. 62, Codification of Accounting and Financial Reporting Guidance contained in pre-November 1989 FASB and A/CPA Pronouncements, all government-wide and business-type activities of the City follow Financial Accounting Standards Board (FASB) Statements and Interpretations issued on or before November 30, 1989, Accounting Principles Board Opinions, and Accounting Research Bulletins, unless those pronouncements conflict with GASB pronouncements.

Fund Classifications The funds designated as major funds are determined by a mathematical calculation consistent with GASB Statement No. 34, Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments. The City reports the following major governmental funds:

The General Fund is the primary operating fund of the City. It is used to account for all revenues and expenditures that are not required to be accounted for in another fund.

The Retirement Special Revenue Fund is used to account for the accumulation of resources required for the funding of the City employees' retirement fund.

The Public Financing Authority Debt Service Fund is used to account for the accumulation of resources required for payment of interest and principal on all Public Financing Authority revenue bonds.

The Housing Successor Special Revenue Fund is used to account for the housing assets and activities of the former Low and Moderate Income Housing Fund of the dissolved redevelopment agency.

The City reports the following major enterprise funds:

The Transit System Fund is used to account for all revenues and expenses related to the operations of the City's transit service.

The Golf Course Fund is used to account for all revenues and expenses related to the operations of the Montebello Municipal Golf Course.

The Montebello Hilton Fund is used to account for revenues and expenses related to the operations of the Montebello Hilton. Capital assets and related debt are not reported in the fund as any shortfall related to debt service payments are guaranteed from tax revenues of the Successor Agency, subsequently reimbursed either from operations of the Hilton or from the General Fund.

The Hotel2Suites Fund is used to account for costs related to the construction and equipping of the Montebello Home2Suites Project.

37

NOTE 1




The City's fund structure also includes the following fund types:

Governmental Funds

The Special Revenue Funds are used to account for proceeds of specific revenue sources that are legally restricted or otherwise designated for specific purposes.

The Capital Projects Funds are used to account for proceeds received and issuance of bonds for capital improvements.

Proprietary Funds

The Enterprise Funds are used to account for operations that provide services to the general public that are financed primarily by user charges or where the periodic measurement of net increase is deemed appropriate. Combined and presented as Other Enterprise Funds are the Water Utility and Detention Facility funds.

The Internal Service Funds are used to account for the financing of special activities that provide services within the City. These activities include vehicle, equipment, and insurance services.

Fiduciary Fund

The Successor Agency Private-purpose Trust Fund is a fiduciary fund type used by the City to report trust arrangements under which principal and income benefit other governments. This fund reports the assets, liabilities and activities of the Successor Agency to the Dissolved Montebello Redevelopment Agency. Unlike the limited reporting typically utilized for an Agency Fund, Private-purpose Trust Fund reports a Statement of Fiduciary Net Position and a Statement of Changes in Fiduciary Net Position.

The Agency Fund is used to account for the resources (deposits) held by the City in a fiduciary capacity for individuals, governmental entities, and others.

38

NOTE 1




Net Position In the government-wide financial statements, net positions are categorized as follows:

• Net Investment in Capital Assets consists of capital assets, net of accumulated depreciation, and reduced by outstanding debt attributed to the acquisition of these assets.

• Restricted Net Positions consist of assets, net of any related liabilities, which have had restrictions imposed on them by external creditors, grantors, contributors, or laws or regulations of other governments or law through constitutional provisions or enabling legislation. When both restricted and unrestricted resources are available for use, it is the City's policy to use restricted resources first and then unrestricted resources, as they are needed.

• Unrestricted Net Positions consist of net positions that do not meet the definition of Net Investment in Capital Assets or Restricted Net Positions.

Fund Balances GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, classifies governmental fund balances as follows:

• Nonspendable - Amounts that cannot be spent either because it is not in spendable form or because of legal or contractual constraints.

• Restricted - Amounts that are constrained for specific purposes, which are externally imposed by providers, such as creditors, or amounts constrained due to constitutional provisions or enabling legislation.

• Committed - Amounts that are constrained for specific purposes that are internally imposed by the government through formal action of the City Council and does not lapse at year-end.

• Assigned - Amounts that are intended to be used for specific purposes and that are neither considered restricted or committed. Fund balance may be assigned by City Council or by an official or body to which the City Council delegates the authority.

• Unassigned - All amounts not included in other classifications.

The City considers restricted amounts to be spent first when both restricted and unrestricted fund balance is available unless there are legal contracts that prohibit doing this. Additionally, the City would first use committed, then assigned, and lastly, unassigned amounts of unrestricted fund balance when expenditures are made as necessary.

39

NOTE 1




Cash and Cash Equivalents For purposes of the Statement of Cash Flows, the City considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. In addition, cash invested in the City's cash management pool is considered to be a cash equivalent.

Investments Investments are reported at fair value, except for the investment contracts with fiscal agents and the investment in Redevelopment Agency bonds that are reported at cost because they are not transferable and they have terms that are not affected by changes in market interest rates.

Land Held for Resale Land held for resale is carried at the lower of cost or estimated realizable value.

Inventory In governmental funds, inventories are valued at cost on a first-in, first-out basis. The City follows the consumption method for inventory control. Inventory items are reported as expenditures when consumed.

In proprietary funds, inventories are valued at cost on a first-in, first-out basis.

Capital Assets Capital assets (including infrastructure) are recorded at cost where historical records are available and at an estimated original cost where no historical records exist. Contributed capital assets are valued at their estimated fair market value at the date of contribution. Generally, capital asset purchases in excess of $5,000 are capitalized if they have an expected useful life of one year or more.

Capital assets include additions to public domain (infrastructure), certain improvements including pavement, curb and gutter, sidewalks, traffic control devices, streetlights, sewers, bridges, and right-of-way corridors within the City. The City has valued and recorded all infrastructure asset data as of June 30, 2018.

Capital assets used in operations are depreciated over their estimated useful lives using the straight-line method in the government-wide financial statements and in the fund financial statements of the proprietary funds. Depreciation is charged as an expense against operations and accumulated depreciation is reported on the respective balance sheet. The lives used for depreciation purposes of each capital asset class are:

Buildings Machinery Equipment lnfrastru ctu re

40

10 to 50 years 5 to 30 years 5 to 10 years

20 to 50 years

NOTE 1




Deferred Outflows and Inflows of Resources Pursuant to GASB Statement Nos. 63 and 65, the City recognizes deferred outflows and inflows of resources. A deferred outflow of resources is defined as a consumption of net position by the government that is applicable to a future reporting period. A deferred inflow of resources is defined as an acquisition of net position by the government that is applicable to a future reporting period. Refer to Note 12 for the deferred outflows and deferred inflows of resources the City has recognized as of June 30, 2018.

Compensated Absences It is the City's policy to permit employees to accumulate limited amounts of earned but unused vacation and sick leave benefits, which will be paid to employees upon separation from City service. In governmental fund types, the cost of vacation and sick leave benefits are recognized when payments are made to employees. Proprietary fund types accrue vacation and sick leave benefits in the period they are earned. The total compensated absences liability of $2,021, 172 reported in the governmental activities includes $2,017,395 to be paid by governmental funds and $3,777 accrued in the internal service funds. The total compensated absences reported in the business-type activities amounted to $1, 108,560.

Property Taxes The assessment, levy, and collection of property taxes are the responsibility of the County of Los Angeles. The City records property taxes as revenue when received from the County, except at year-end, when property taxes received within 60 days are accrued as revenue.

Property taxes are assessed and collected each fiscal year according to the following property tax calendar:

Lien date Levy date Due date

Collection date

January 1 July 1 November 1 - 1st installment March 1 - 2nd installment December 10 - 1st installment April 10 - 2nd installment

41

NOTE 1




Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenditures during the reporting period. Specifically, the City has made certain estimates and assumptions relating to the collectability of its receivables (including accounts receivable and notes receivable), the valuation of property held for resale, and the ultimate outcome of claims and judgments. Actual results could differ from those estimates and assumptions.

Pensions For purposes of measuring the net pension liability and deferred outflows/inflows of resources related to pensions and pension expense, information about the fiduciary net position of the City's California Public Employees' Retirement System (CalPERS) plan (Plan) and additions to/deductions from the Plan's fiduciary net position have been determined on the same basis as they are reported by CalPERS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value.

Implementation of New Accounting Pronouncements During the fiscal year ended June 30, 2018, the City adopted the following new Statements of the Governmental Accounting Standards Board (GASB):

• GASB statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. This Statement replaces the requirements of Statements No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions. The scope of this Statement addresses accounting and financial reporting for OPEB that is provided to the employees of state and local governmental employers. This Statement establishes standards for recognizing and measuring liabilities, deferred outflows of resources, deferred inflows of resources, and expense/expenditures. For defined benefit OPEB, this Statement identifies the methods and assumptions that are required to be used to project benefit payments, discount projected benefit payments to their actuarial present value, and attribute that present value to periods of employee service. Note disclosure and required supplementary information requirements about defined benefit OPEB are also addressed in this Statement. Refer also to Note 10.

42

NOTE2 CASH AND INVESTMENTS



Cash and investments at June 30, 2017 consisted of the following:

Government-wide Fiduciary Fund Statement of Statement of Net Position Net Position Total

Unrestricted assets: Cash and investments $ 39,351,246 $ 11,840,738 $ 51,191,984

Restricted assets: Cash and investments from Successor Agency

unspent bond proceeds 4,666,731 4,666,731 Cash and investments with fiscal agents 26,656,264 2,692,486 29,348,750

Total cash and investments $ 70,674,241 $ 14,533,224 $ 85,207,465

Cash and investments at June 30, 2018 consisted of the following:

Cash on hand Deposits with financial institutions Investments

$ 7,146 12,309,552 72,890,767

Total cash and investments$ 85,207,465 ==============

Investments Authorized by the California Government Code and the City's Investment Policy The table below identifies the investment types that are authorized for the City by the California Government Code (or the City's investment policy, where more restrictive). The table also identifies certain provisions of the California Government Code (or the City's investment policy, where more restrictive) that address interest rate risk, credit risk, and concentration of credit risk. This table does not address investments of debt proceeds held by bond trustee that are governed by the provisions of debt agreements of the City, rather than the general provisions of the California Government Code or the City's investment policy.

Maximum Maximum Percentage Maturity of Portfolio *

United States Treasury Obligations 5 years 80% United States Government Sponsored

Enterprises Securities 365 days 50% Banker's Acceptances 180 days 40% Commercial Paper 270 days 25% Negotiable Certificates of Deposit 5 years 30% Repurchase Agreements 1 day 40% Money Market Mutual Funds (1) 25%** Certificates of Deposit (2) None County Pooled Investment Funds (1) 10% Local Agency Investment Fund (LAIF) (1) lesser of 60%

or $20,000,000 State and Local Obligations NIA 30%

(1) Not applicable I on demand (2) Subject to agreement entered into with depository * Excluding amounts held by bond trustees that are not subject to California Government

Code restrictions. ** 5% of the City's surplus funds

NIA Not applicable

43

NOTE2 CASH AND INVESTMENTS (CONTINUED)

Investments Authorized by Debt Agreements



Investments of debt proceeds held by bond trustee are governed by provisions of the debt agreements, rather than the general provisions of the California Government Code or the City's investment policy. The table below identifies the investment types that are authorized for investments held by bond trustee. The table also identifies certain provisions of these debt agreements that address interest rate risk, credit risk, and concentrations of credit risk.

Maximum Maximum Maximum Percentage Investment Maturity Allowed in One Issuer

United States Treasury Obligations None None None United States Government Sponsored

Enterprises Securities None None None Banker's Acceptances 30 days None None Commercial Paper 270 days None None Money Market Mutual Funds NIA None None Investment Contracts 30 years None None

Disclosures Relating to Interest Rate Risk Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. The City does not have a formal policy to manage interest rate risk. However, one of the ways that the City manages its exposure to interest rate risk is by purchasing a combination of shorter-term and longer-term investments and by timing cash flows from maturities so that a portion of the portfolio is maturing or coming close to maturity over time as necessary to provide the cash flow and liquidity needed for operations. Information about the sensitivity of the fair values of the City's investments (including investments held by bond trustee) to market interest rate fluctuations is provided by the following table that shows the distribution of the City's investments by maturity:

Remaining Maturity in

months 12 Months

Investment Type or Less Totals Local Agency Investment Fund (LAIF) $ 38,404,043 $ 38,404,043 Certificates of deposits 1,013,939 1,013,939 Restricted cash and investments:

Money market mutual funds 33,472,785 33,472,785 Total $ 72,890,767 $ 72,890,767

44


Disclosures Relating to Credit Risk



Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented below is the minimum rating required by (where applicable) the California Government Code, the City's investment policy, or debt agreements, and the actual rating, as reported by Standard & Poor's, as of year end for each investment type:

Minimum Total as of Legal

Investment Type June 30, 2016 Rating AAA Unrated Local Agency Investment Fund (LAIF) $ 38,404,043 NIA $ $ 38,404,043 Certificates of Deposits 1,013,939 NIA 1,013,939 Restricted cash and investments:

Money market mutual funds 33,472,785 A 33,472,785 Total $ 72,890,767 $ 33,472,785 $ 39,417,982

Custodial Credit Risk Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty (e.g., broker-dealer) to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The California Government Code and the City's investment policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits or investments, other than the following provision for deposits: The California Government Code requires that a financial institution secure deposits made by state or local governmental units by pledging securities in an undivided collateral pool held by a depository regulated under state law (unless so waived by the governmental unit). The market value of the pledged securities in the collateral pool must equal at least 110% of the total amount deposited by the public agencies. California law also allows financial institutions to secure City deposits by pledging first trust deed mortgage notes having a value of 150% of the secured public deposits. At June 30, 2018, the City deposits (bank balances) were insured by the Federal Depository Insurance Corporation up to $250,000 and the remaining balance of the deposits was collateralized as required by California Law.

Investment in State Investment Pool The City is a voluntary participant in the LAIF that is regulated by California Government Code Section 16429 under the oversight of the Treasurer of the State of California. The fair value of the City's investment in this pool is reported in the accompanying financial statements at amounts based on the City's pro-rata share of the fair value provided by LAIF for the entire LAIF portfolio (in relation to the amortized cost of that portfolio). The balance available for withdrawal is based on the accounting records maintained by LAIF, which are recorded on an amortized cost basis. As of June 30, 2018, the City had a contractual withdrawal value of $38,404,043.

45


Fair Value Measurement



GASB 72, Fair Value Measurement and Application, establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The City categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset.

• Level 1 inputs are quoted prices for identical assets or liabilities in active markets that government can access at the measurement date.

• Level 2 inputs are other than quoted prices included in Level 1 that are observable for an asset or liability, either directly or indirectly.

• Level 3 inputs are unobservable inputs for an asset or liability.

The City has the following recurring fair value measurements as of June 30, 2018:

Investments by fair value level Certificates of time deposits Held By Bond Trustee:

Money market mutual funds Total

Uncategorized: Local Agency Investment Fund

Total investments measured at fair value

46

$

$

Fair Value 1,013,939 $

33,472,785 34,486,724 $

38,404,043 72,890,767

Fair Value Measurement

Using Significant

Other Observable

Inputs (Level 2)

1,013,939

33,472,785 34,486,724

NOTE3 CAPITAL ASSETS



A summary of changes in the governmental activities capital assets for the year ended June 30, 2018 is as follows:

Balance at Reclassifications I Balance at June 30, 2017 Additions Deletions June 30, 2018

Governmental activities Capital assets, not being depreciated

Land $ 2,053,644 $ $ $ 2,053,644 Right of way 14,391,776 14,391,776 Construction in progress 2,025,060 1,616,478 (1,289,946) 2,351,592

Total capital assets, not being depreciated 18,470,480 1,616,478 (1,289,946) 18,797,012

Capital assets, being depreciated Buildings and improvements 59,038,567 1,091,479 1,289,946 61,419,992 Machinery and equipment 48,431,718 152,023 (102,045) 48,481,696 Infrastructure 48,409,657 48,409,657

Total capital assets, being depreciated 155,879,942 1,243,502 1,187,901 158,311,345

Less accumulated depreciation for: Buildings and improvements (21,972, 179) (1,483,077) (23,455,256) Machinery and equipment (42,658,572) (1,019,240) 102,045 (43,575,767) Infrastructure (32,933,705) (704,807) (33,638,512)

Total accumulated depreciation (97 ,564,456) (3,207,124) 102,045 (100,669,535)

Total capital assets, being depreciated, net 58,315,486 (1,963,622) 1,289,946 57,641,810

Governmental activities capital assets, net $ 76,785,966 $ (347,144) $ $ 76,438,822

A summary of changes in the business-type activities capital assets for the year ended June 30, 2018 is as follows:

Balance at Reclassifications/ Balance at June 30, 2017 Additions Deletions June 30, 2018

Business-type activities Capital assets, not being depreciated

Land $ 6,306,596 $ $ $ 6,306,596 Construction in progress 12,499,613 31,440,088 43,939,701

Total capital assets, not being depreciated 18,806,209 31,440,088 50,246,297

Capital assets, being depreciated Buildings and improvements 43,962,629 43,032 44,005,661 Machinery and equipment 66,727,780 461,300 67,189,080

Total capital assets, being depreciated 110,690,409 504,332 111,194,741

Less accumulated depreciation for: Buildings and improvements (19,923,734) (1,809,466) (21,733,200) Machinery and equipment (43,116,149) (3,403,718) (46,519,867)

Total accumulated depreciation (63,039,883) (5,213,184) (68,253,067)

Total capital assets, being depreciated, net 47,650,526 (4,708,852) 42,941,674

Business-type activities capital assets, net $ 66,456,735 $ 26,731,236 $ $ 93,187,971

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NOTE3

NOTE4

CAPITAL ASSETS (CONTINUED)

Depreciation Expense



Depreciation expense was charged to City functions/programs as follows:

Amount General government $ 591,653 Public safety 1,061, 161 Public works 584,577 Parks, recreation, and culture 251,436 Housing and community development 13,490 Allocated depreciation 2,502,317 Unallocated infrastructure depreciation 704,807

Total depreciation expense - governmental activities $ 3,207, 124 ======

Depreciation expense was charged to the business-type activities as follows:

Amount Transit $ 4,822,312 Golf course 305,799 Montebello Hilton 81,541 Other business units 3,532

Total depreciation expense -business-type activities $ 5,213, 184 ==============

NOTES RECEIVABLE

Notes receivable at June 30, 2018 include the following:

Low and Moderate Income Housing loans Community Development Block Grant loans

HOME Program loan

Less: Allowance for doubtful accounts

Notes receivable, net of allowance

48

Amount $ 5,905,908

672,599 145,000

6,723,507

5,905,908

$ 817,599

NOTE4 NOTES RECEIVABLE (CONTINUED)

Low and Moderate Housing Loans

Montebello Downtown Plaza Project



On December 26, 2001, the Agency entered into an Owner Participation Agreement (Agreement) with the Montebello Downtown Plaza LLC (Participant) for the acquisition, development, and operation of affordable senior citizen rental units and retail commercial buildings. The Agreement, which was amended and restated on October 26, 2005, provides that the now dissolved Redevelopment Agency loan a total amount of $6,250,000 from the Low- and Moderate-Income Housing Fund for the acquisition of property and construction of affordable senior housing units only. The Participant was to provide financing for costs in excess of $6,250,000. The unpaid balance of the loan outstanding at June 30, 2018 was $5,276,308. The loan is to be forgiven over a period of 99 years.

Whittier Project In March 2000, the now dissolved Redevelopment Agency entered into an Owner Participation Agreement with Garfield Financial Corporation (Owner), whereby the Agency was to loan the Owner money for the construction of an affordable housing project. In accordance with the agreement, the amounts disbursed accrue interest at the rate of 7% compounded annually. In fiscal year 2005, the terms of the note were changed to forgive the loan over a period of 99 years. The balance of the note receivable at June 30, 2018 was $629,600.

Above loans were provided with 100% allowance for doubtful accounts.

Community Development Block Grant Loans At June 30, 2018, loans made to individual homeowners under the Community Development Block Grant program amounted to $672,599. These loans are payable when the borrowers sell the property.

HOME Program Loan On July 23, 2014, the City entered into a HOME program loan agreement with the Montebello Housing Development Corporation (Developer), whereby the City provided financial assistance of $145,000 in the form of a forgivable loan in exchange for developing single-family homes for sale to low and moderate income individuals and families. This financial assistance shall be forgiven over a period of 20 years provided the Developer causes all housing units to adhere to affordability requirements.

49

NOTES



INTERFUND RECEIVABLES, PAYABLES, AND TRANSFERS

The composition of interfund balances as of June 30, 2018 is as follows:

Due To/From Other Funds:

Receivable Fund Payable Fund Amount General fund Golf Course enterprise fund $ 1,990,811

Hotel2Suites 11,775 Public Financing Authority 9,568 Housing Sucessor Fund 9,611 Other enterprise funds 505,200 Other governmental funds 267,658

Debt Service fund Golf Course enterprise fund 376,060 $ 3, 170,683

The receivable of the General Fund and Debt Service Fund from the Golf Course Enterprise Fund was mainly to fund operating deficits incurred by the Golf Course Enterprise Fund in prior years.

The other interfund payable balances represent routine and temporary cash flow assistance until amounts receivable from the other funds are collected to pay the amounts owed.

lnterfund Transfers

The compositions of the City's interfund transfer balances are as follows:

Transfers In

Internal Golf Course Other General Service Enterprise Enterprise

Fund Fund Fund Funds Total Transfers out (A) General fund i $ $ 963,320 $ 418,595 $ 1,381,915 (B) Retirement special

revenue fund 8,660,942 7, 170 250,539 2,022 8,920,673 (C) Other governmental funds 2,500,000 2,500,000 (D) Debt service fund 1,096,387 1,096,387

Total governmental activities$ 12,257,329 $ 7,170 $ 1,213,859 $ 420,617 $ 13,898,975

(A) Transfers from the General Fund of $963,320 to the Golf Course Enterprise Fund and $418,595 to the Other Enterprise Funds were to cover the corresponding fund's cash deficits.

(B) Transfers from the Retirement Fund of $8,660,942 to the General Fund and $250,539 to the Golf Course Enterprise Fund were to pay the annual retirement contributions.

50

NOTES

NOTE6

NOTE 7



INTERFUND RECEIVABLES, PAYABLES, AND TRANSFERS (CONTINUED)

(C) Transfer from the Other Governmental Funds of $2,500,000 to the General Fund was to reimburse street maintenance expenses paid by the General Fund.

(D) Transfer from the Debt Service Fund of $1,096,387 to the General Fund was to pay for the debt service obligation.

ADVANCES TO SUCCESSOR AGENCY TRUST FUND

At June 30, 2018, the Successor Agency has a net liability to the City of $6, 150,883, which is reported in the Statement of Net Position as Advances to Successor Agency Trust Fund. This amount includes $6, 116,642 advanced from the Housing Fund pertaining to advances made by the former Low and Moderate Income Housing Fund to the former redevelopment agency. These advances were used to finance the project expenses of one of the project areas of the former redevelopment agency.

HOTEL MANAGEMENT AGREEMENT

Pursuant to a Hotel Management Agreement dated November 29, 2001, the Montebello Hilton Hotel (Hotel) is charged by Hotel Adventures LLC (HALLC) an annual management fee which includes an operational amount and a projected franchise fee assessed by Hilton Hotels. The actual franchise fee amount is paid directly to Hilton Hotels from the City's Montebello Hilton (Enterprise) Fund. The obligation of the City to pay the management fee is subordinated to the payment of operating expenses and debt service on the Bonds issued to finance Hotel construction. Unpaid fees, consisting of the management fee and any franchise fee differential between projected franchise fees and actual franchise fees paid to Hilton Hotels, accrue interest at a prime lending rate established by Citibank, N.A.

51

NOTE 7

NOTE 8



HOTEL MANAGEMENT AGREEMENT (CONTINUED)

On November 29, 2017, the City extended the hotel management agreement with HALLC for additional 15 years until December 17, 2032. Under this new agreement, HALLC shall receive an annual management fee of $597,000, as adjusted upward or downward based upon changes in the Annual CPI Index. Unpaid management fees shall accrue interest at simple annual interest rate equal to that earned in the Local Agency Investment Fund (LAIF).

During fiscal year 2018, the Hotel recorded expense for management fees (including the franchise fee differential) and interest on management fees of $317,310, and $2,592, respectively. Accrued unpaid expenses for management fees at June 30, 2018 amounted to $713,971.

LONG-TERM LIABILITIES

The following is a summary of long-term liability transactions for the year ended June 30, 2018:

Governmental Activities Amount

Balance Balance Due Within July 1, 2017 Additions Reductions June 30, 2018 One Year (Restated)

Bonds payable Revenue bonds $ 11,386,940 $ $ (977,340) $ 10,409,600 $ 1,053,180

Add (Less): bond premium 1,029,441 (102,944) 926,497 151,657 bond discount (3,875) 484 (3,391) Total bonds payable 12,412,506 (1,079,800) 11,332,706 1,204,837

Claims payable 13,473,144 7,319,505 (4, 144,044) 16,648,605 5,742,548 Notes payable 4,387,106 9,725 (353,945) 4,042,886 366,000 Capital lease obligation 972,060 (69,989) 902,071 359,492 Compensated absences 1,992,111 385,372 (356,311) 2,021,172 3,777 Net pension liability 89,885,040 17,396,824 (6,579,214) 100, 702,650

Net OPEB liability 25, 117,447 (162,899) 24,954,548

Total governmental activities $ 148,239,414 $ 25, 111,426 $ (12,746,202) $ 160,604,638 $ 7,676,654

52

NOTE 8



LONG-TERM LIABILITIES (CONTINUED)

Business-tlf.e.e Activities

Amount Balances Balance Due Within

July 1, 2017 Additions Reductions June 30, 2018 One Year (Restated)

Golf Course Enterprise Fund Revenue bonds $ 3,313,060 $ $ (257,660) $ 3,055,400 $ 276,820 Add (Less): bond premium 83,340 (6,945) 76,395

bond discount (1,196) 150 (1,046) Total Golf bonds payable 3,395,204 (264,455) 3,130,749 276,820

Montebello Hilton Hotel Fund Revenue bonds 11,925,000 (535,000) 11,390,000 550,000 Add (Less): bond premium 720,117 (42,360) 677,757

12,645,117 (577,360) 12,067,757 550,000 Hotel2Suites Fund

Revenue bonds 54,860,000 54,860,000 Add (Less): bond premium 6,205,074 (344,726) 5,860,348

61,065,074 (344,726) 60,720,348 Subtotal - Bonds 77,105,395 (1,186,541) 75,918,854 826,820

Notes payable 686,116 108,812 (310,494) 484,434 111,250 Capital lease obligation 457,321 (42,826) 414,495 208,823 Compensated absences 1,057,703 136,234 (85,377) 1,108,560 895,840 Net pension liability 29,840,726 7,964,027 (2,672,995) 35,131,758 Net OPEB liability 3,057,523 3,057,523

Total business-type activities $ 109,147,261 $ 11,266,596 $ (4,298,233) $ 116,115,624 $ 2,042,733


A. 20148 Lease Revenue Refunding Bonds (20148 LRRBs) On September 10, 2014, the City issued the 2014 Lease Revenue Refunding Bonds (LRRBs), Series B, of $10,040,000 which defeased the $12,595,000 of principal due on the 2000 COPs. The City received a premium on the bond issue in the amount of $1,338,273 and incurred a loss of $294,258 in the bond defeasance. The bond premium and loss on defeasance are amortized over the life of the refunded bonds. The Bonds are payable from lease payments to be made by the City to the Montebello Public Finance Authority (MPFA) as rental for certain public facilities consisting of the City Hall and Police Department pursuant to the Lease Agreement. The City is required under the Lease Agreement to make payments in each fiscal year to pay the annual principal and interest due on the Bonds. Annual installments of $1,018,375 to $1,031,564 are due November 1, 2014 through November 1, 2026. Interest rates on the 2014 Series B LRRBs range from 0.30% to 5.0%. The outstanding balance at June 30, 2018 was $7,430,000.

53

NOTE 8 LONG-TERM LIABILITIES (CONTINUED)



The annual requirements to amortize the 2014 Series B LRRBs are as follows:

Year Ending June 30,

2019 $ 2020 2021 2022 2023

2024-2027 Totals $

Principal 675,000 705,000 745,000 780,000 820,000

3,705,000 7,430,000 =============

Interest $ 354,625

320,125 283,875 245,750 205,750 381,625

$ 1,791,750

2014C Lease Revenue Refunding Bonds (2014C LRRBs)

Total $ 1,029,625

1,025, 125 1,028,875 1,025,750 1,025,750 4,086,625

$ 9,221,750

On September 10, 2014, the City issued 2014 Lease Revenue Refunding Bonds Series C of $5,395,000 which defeased the principal due on the 2001 COPs. The Bonds are payable from lease payments to be made by the City to the Montebello Public Finance Authority (MPFA) as rental for certain public facilities consisting of the City Hall and Police Department pursuant to the Lease Agreement. The City is required under the Lease Agreement to make payments in each fiscal year to pay the annual principal and interest due on the Bonds. Interest rates on the 2014 Series C LRRBs range from 0.40% to 4.07%. Annual installments of $440,623 to $647,922 are due November 1, 2014 through November 1, 2024.

The City's share (76.4%) from the 2014C LRRBs is $4, 121,780 and the Golf Course Enterprise Fund's share (23.6%) is $1,273,220. The outstanding balance at June 30, 2018 was $2,979,600. The annual requirements to amortize the 2014 Series C LRRBs are as follows:


2019 $ 2020 2021 2022 2023

2023-2025 Totals $

Principal 378, 180 389,640 404,920 420,200 439,300 947,360

2,979,600 =============

54

Interest Total $ 97,524 $ 475,704

87,099 476,739 74,907 479,827 60,986 481, 186 45,584 484,884 38,562 985,922

$ 404,662 $ 3,384,262


B. Notes Payable



United States Department of Housing and Urban Development (1) In November 2005, the City borrowed $6,500,000 from the United

States Department of Housing and Urban Development (HUD) to provide for funds to pay for street improvements. Interest and principal are due as follows:


2019 $ 2020 2021 2022 2023

2023-2026 Totals $

Principal 366,000 385,000 405,000 425,000 445,000

1,124,000 3, 150,000 =============

Interest Total $ 165,729 $ 531,729

145,392 530,392 123,743 528,743 100,749 525,749 76,409 521,409 72,716 1,196,716

$ 684,738 $ 3,834,738

(2) During the fiscal year ended June 30, 2011, the City was notified by HUD that the City had not provided sufficient documentation with respect to $2, 189, 106 in grant expenditures and directed the City to repay the amount. In September 2011, the City paid $1,300,000 to HUD. As at June 30, 2018, the remaining amount of $892,886 remained unpaid. The City collected $1,300,000 of these funds from a third party contractor involved with the grant-funded project. In August 2016, HUD accepted the City's proposal for the repayment agreement of the unpaid balance upon disposition of the property. As of March 11, 2019, the sale of the property is still in process.

C. Claims Payable

Refer to Note 11 for more information on these liabilities.

D. Compensated Absences

The noncurrent portion of the accumulated compensated absences liabilities, liquidated primarily by the General Fund of $2,017,395, has no repayment schedule at June 30, 2018.

E. Net Pension Liability and Net OPEB Liability

Refer to Notes 9 and 10 for more information on these obligations.

55


Business-type Activities

A. Hilton Hotel Revenue Bonds



On November 19, 2001, the Montebello Public Financing Authority (established pursuant to a joint exercise of powers agreement between the City of Montebello and the former Community Redevelopment Agency of the City of Montebello) issued $15,830,000 of Revenue Bonds, Series A to: (a) finance the acquisition, construction, and equipping of a hotel facility (Project) located adjacent to the Montebello Country Club, a municipal golf course owned and operated by the City and the Quiet Cannon Restaurant and Conference Facility; (b) fund a reserve fund; (c) fund capitalized interest on the bonds through April 1, 2003; (d) fund an operating reserve; and (e) pay certain costs of issuance of the bonds. Concurrently with the issuance of the bonds, the Authority and City entered into an installment purchase agreement in which the Authority sold the Project to the City in consideration for the installment purchase payments to be made by the City in amounts sufficient to pay the debt service payments on the bonds.

Pursuant to the installment purchase agreement, the City pledged all revenues received related to the ownership and operation of the hotel facility to make the installment purchase payments to the Authority for payment of the debt service. In addition, the City and the Agency have entered into a separate agreement dated November 1, 2000 in connection with the development and operation of the hotel facility. Pursuant to this agreement, the Agency has agreed to pay, solely from tax revenues from the Montebello Hills Redevelopment Project Area, any shortfall on the City's lease payments required to pay the debt service on the bonds. The hotel facility began operations in December 2002.

In September 2004, the City issued $17,060,000 in Variable Rate Lease Revenue Refunding Bonds to advance refund $15,490,000 of outstanding Series 2001A Revenue Bonds as described above. The reacquisition price exceeded the net carrying amount by $604, 199 which is now being presented as deferred outflows of resources and amortized over the remaining life of the refunded debt. As a result, the 2001A Revenue Bonds are considered to be defeased, and the liability for those bonds has been removed from the long-term liabilities.

Similar to the provision of the defeased Series 2001A Revenue Bonds, the 2004 Revenue Refunding Bonds, Series A are limited obligations of the Authority, payable solely from the lease payments to be received from the City pursuant to the Amended and Restated Lease Agreement, dated September 1, 2004. The City has pledged all revenues received related to the ownership and operation of the project to make the lease payments due to the Authority to make debt service payments on the bonds.

56




On March 26, 2015, the City remarketed and converted the Variable Rate Lease Revenue Refunding Bonds to Fixed Rate Lease Revenue Refunding Bonds. As a result of the remarketing and conversion, the City received a bond premium of $847,197 and reduced the outstanding debt to $12,575,000. These fixed rate bonds have interest rates ranging from 3.625% to 5% payable on June 1 and December 1 of each year until 2033. The outstanding balance at June 30, 2018 was $11,390,000. The annual requirements to amortize the bonds are as follows:


2019 $ 2020 2021 2022 2023

2024-2028 2029-2033 2034-2033

Totals $

Principal 550,000 570,000 585,000 610,000 630,000

3,465,000 4,080,000

900,000 11,390,000

============

Interest $ 532,694

504,694 475,819 445,944 414,944

1,574,094 702,209

22,500 $ 4,672,898

B. 2014A Lease Revenue Refunding Bonds (2014A LRRBs)

Total $ 1,082,694

1,074,694 1,060,819 1,055,944 1,044,944 5,039,094 4,782,209

922,500 $ 16,062,898

On September 10, 2014, the City issued 2014 Lease Revenue Refunding Bonds Series A of $2,755,000 which defeased the outstanding principal due on the 1999 COPs. The City received a premium on the bond issue in the amount of $104,175 and incurred a loss of $87,777 in the bond defeasance. The bond premium and loss on defeasance are amortized over the life of the refunded bonds. The Bonds are payable from lease payments to be made by the City to the Montebello Public Finance Authority (MPFA) as rental for certain public facilities consisting of the City Hall and Police Department pursuant to the Lease Agreement. The City is required under the Lease Agreement to make payments in each fiscal year to pay the annual principal and interest due on the Bonds. Annual Installments of $227,363 to $234,538 are due from November 1, 2014 through November 1, 2028. Interest rates on the 2014 Series A LRRBs range from 0.30% to 3.5%.

57




The outstanding balance at June 30, 2018 was $2, 135,000. The annual requirements to amortize the 2014 LRRBs are as follows:


2019 $ 2020 2021 2022 2023

2024-2028 2029-2030

Totals $

Principal 160,000 165,000 175,000 180,000 190,000

1,035,000 230,000

2, 135,000 =============

Interest $ 72,338

65,838 59,038 51,938 44,538

126,656 4,025

$ 424,371

C. 2014C Lease Revenue Refunding Bonds (2014C LRRBs)

Total $ 232,338

230,838 234,038 231,938 234,538

1,161,656 234,025

$ 2,559,371

In September 2014, the City issued 2014 Lease Revenue Refunding Bonds Series C of $5,395,000 which defeased the principal due on the 2001 COPs. The Bonds are payable from lease payments to be made by the City to the Montebello Public Finance Authority (MPFA) as rental for certain public facilities consisting of the City Hall and Police Department pursuant to the Lease Agreement. The City is required under the Lease Agreement to make payments in each fiscal year to pay the annual principal and interest due on the Bonds. Interest rates on the 2014 Series C LRRBs range from 0.40% to 4.07%. Annual installments of $440,623 to $647,922 are due November 1, 2014 through November 1, 2024.

The Golf Course Enterprise Fund's share of this debt is $1,273,220. The outstanding balance at June 30, 2018 was $920,400. The annual requirements to amortize the 2014 LRRBs Series Care as follows:


2019 $ 2020 2021 2022 2023

2024-2025 Totals $

Principal 116,820 120,360 125,080 129,800 135,700 292,640 920,400

=========

58

Interest Total $ 30,125 $ 146,945

26,905 147,265 23, 139 148,219 18,839 148,639 14,080 149,780 11,912 304,552

$ 125,000 $ 1,045,400


D. 2016A Lease Revenue Bonds (2016A LRBs)



On October 18, 2016, the Authority issued 2016 Series A Lease Revenue Bonds in the amount of $54,860,000. The bonds bear interest rate of 5% and will mature in 2046. The bonds were issued to (1) finance the acquisition, construction and equipping of the Home2Suites by Hilton Hotel Project, (2) fund a reserve fund for the bonds, (3) fund interest accruing on the bonds through November 1, 2019, and (4) pay costs of issuance of the bonds. The bonds are payable from the lease payments to be made by the City to the Authority as rental for the Home2Suites property pursuant to the Lease Agreement. The City is required under the Lease Agreement to make payments in each fiscal year to pay the annual principal and interest due on the bonds. Annual installments of $2,642,200 to $3,652,000 are due June 1, 2018 through June 1, 2046. The outstanding balance at June 30, 2018 was $54,860,000. The annual requirements to amortize the 2016 Series A LRBs are as follows:


2019 $ 2020 2021 2022 2023

2024-2028 2029-2033 2034-2038 2039-2043 2044-2046

Totals $

Principal

1,005,000 1,060,000 1,110,000 1, 165,000 6,765,000 8,630,000

11,025,000 14,040,000 10,060,000 54,860,000 =============

59

Interest Total $ 2,642,200 $ 2,642,200

2,642,200 3,647,200 2,591,950 3,651,950 2,538,950 3,648,950 2,438,450 3,603,450

11,482,500 18,247,500 9,614,250 18,244,250 7,228,500 18,253,500 4,201,200 18,241,200

888,400 10,948,400 $ 46,268,600 $ 101,128,600


Notes Payable



The City entered into two loan agreements with Quiet Cannon Montebello, Inc. (Quiet Cannon). Quiet Cannon leases a facility on the City's golf course property. The loans were obtained by Quiet Cannon on behalf of the City from a financial institution payable in monthly installments ranging from $5,969 to $6,658 at prime interest rate (currently 3.25%) until year 2021. The installment payments are deducted by Quiet Cannon from its lease payments to the City. The loan proceeds were used to finance the renovation of the facility and signage.

During the year ended June 30, 2014, the City entered into a Maintenance Loan Agreement with Quiet Cannon for $700,000. Under the agreement, Quiet Cannon borrowed the amount from a financial institution payable over a period of 5 years at prime lending rate. The loan repayment shall be offset by Quiet Cannon from its rental obligation to the City.

In July 2013, the City entered into a zero percent On-Bill Financing Agreement with the Southern California Edison Company for the installation of certain energy efficient equipment at the Golf Course premises for a total amount of $327,213 payable over a period of 116 months.

At June 30, 2018, the total outstanding loans payable amounted to $397,090.

60

NOTE9 DEFINED BENEFIT PENSION PLAN

Plan Description



All qualified permanent and probationary employees are eligible to participate in the City's Safety Plan (police and fire) and Miscellaneous Plan (all others), agent multiple-employer defined benefit pension plans administered by the California Public Employees' Retirement System (CalPERS), which acts as a common investment and administrative agent for its participating member employers. Benefit provisions under the Plans are established by State statute and City resolution. CalPERS issues publicly available reports that include a full description of the pension plans regarding benefit provisions, assumptions and membership information that can be found on the CalPERS website.

Benefits Provided

CalPERS provides service retirement and disability benefits, annual cost of living adjustments and death benefits to plan members, who must be public employees and beneficiaries. Benefits are based on years of credited service, equal to one year of full time employment. Members with five years of total service are eligible to retire at age 50 with statutorily reduced benefits. All members are eligible for non-duty disability benefits after 10 years of service. The death benefit is one of the following: the Basic Death Benefit, the 1957 Survivor Benefit, or the Optional Settlement 2W Death Benefit. The cost of living adjustments for each plan are applied as specified by the Public Employees' Retirement Law.

The Plans' provisions and benefits in effect at June 30, 2018, are summarized as follows:

Hire date Benefit formula Benefit vesting schedule Benefit payments Retirement age Monthly benefits, as a % of eligible compensation Required employee contribution rates Required employer contribution rates

61

Prior to 1-Jan-13

Safety

3.0%@50 5 years service monthly for life

50 - 55 2.0% to 3.0%

9% 51.800%

On or after 1-Jan-13

2.7%@57 5 years service monthly for life

50 - 57 2.0% to 2.7%

11.25% 51.800%

NOTE9



DEFINED BENEFIT PENSION PLAN (CONTINUED)

Miscellaneous Prior to On or after

Hire date 1-Jan-13 1-Jan-13 Benefit formula 2.7%@55 2%@62

Benefit vesting schedule 5 years service 5 years service

Benefit payments monthly for life monthly for life Retirement age 50 - 55 52 -67

Monthly benefits, as a % of eligible compensation 2.0% to 2.7% 1.0% to 2.5%

Required employee contribution rates 8% 6.25% Required employer contribution rates 26.899% 26.899%

Employees Covered At June 30, 2018, the following employees were covered by the benefit terms for each Plan:

Inactive employees or beneficiaries currently receiving benefits Inactive employees entitled to but not yet receiving benefits Active employees Total

Contributions

Safety Miscellaneous 268 387

84 397 116 331 -----468 1, 115

=====

Section 20814(c) of the California Public Employees' Retirement Law requires that the employer contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective on the July 1 following notice of a change in the rate. Funding contributions for both Plans are determined annually on an actuarial basis as of June 30 by CalPERS. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The City is required to contribute the difference between the actuarially determined rate and the contribution rate of employees.

Net Pension Liability The City's net pension liability for each Plan is measured as the total pension liability, less the pension plan's fiduciary net position. The net pension liability of the Plan is measured as of June 30, 2017, using an annual actuarial valuation as of June 30, 2016 rolled forward to June 30, 2017 using standard update procedures. A summary of principal assumptions and methods used to determine the net pension liability is shown below.

62

NOTE9




Actuarial Assumptions The total pension liabilities were determined using the following actuarial assumptions:

Safety Miscellaneous

Valuation Date June 30, 2016 June 30, 2016 Measurement Date June 30, 2017 June 30, 2017 Actuarial Cost Method Entry-Age Normal Entry-Age Normal

Cost Method Cost Method Actuarial Assumptions:

Discount Rate 7.15% 7.15% Inflation 2.75% 2.75% Projected Salary Increase ( 1) ( 1) Investment Rate of Return 7.50% (2) 7.50% (2) Mortality (3) (3)

( 1) Varies by entry age and service (2) Net of pension plan investment and administrative expenses, including inflation (3) Derived using CalPERS' Membership Data for all funds

The underlying mortality assumptions and all other actuarial assumptions used in the June 30, 2016 valuation were based on the results of a January 2015 actuarial experience study for the period 1997 to 2011. Further details of the Experience Study can be found on the CalPERS website.

Discount Rate The discount rate used to measure the total pension liability was 7.15% for each Plan. To determine whether the municipal bond rate should be used in the calculation of a discount rate for each plan, CalPERS stress tested plans that would most likely result in a discount rate that would be different from the actuarially assumed discount rate. Based on the testing, none of the tested plans run out of assets. Therefore, the current 7.15 percent discount rate is adequate and the use of the municipal bond rate calculation is not necessary. The long term expected discount rate of 7.15 percent used for the June 30, 2017 measurement date is without reduction of pension plan administrative expenses and will be applied to all plans in the Public Employees Retirement Fund (PERF). The stress test results are presented in a detailed report that can be obtained from the CalPERS website.

63

NOTE9




The long-term expected rate of return on pension plan investments was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class.

In determining the long-term expected rate of return, CalPERS took into account both short-term and long-term market return expectations as well as the expected pension fund cash flows. Using historical returns of all the funds' asset classes, expected compound returns were calculated over the short-term (first 10 years) and the long-term (11-60 years) using a building-block approach. Using the expected nominal returns for both short-term and long-term, the present value of benefits was calculated for each fund. The expected rate of return was set by calculating the single equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated using both short-term and long-term returns. The expected rate of return was then set equivalent to the single equivalent rate calculated above and rounded down to the nearest one quarter of one percent.

The following table reflects the long-term expected real rate of return by asset class. The rate of return was calculated using the capital market assumptions applied to determine the discount rate and asset allocation. These rates of return are net of administrative expenses.

New Strategic Real Return

Asset Class Allocation Years 1 - 1 O(a)

Global Equity 47.00% Global Fixed Income 19.00% Inflation Sensitive 6.00% Private Equity 12.00% Real Estate 11.00% Infrastructure and Forestland 3.00% Liquidity 2.00%

Total 100%

(a) An expected inflation of 2.5% used for this period.

(b) An expected inflation of 3.0% used for this period.

64

4.90% 0.80% 0.60% 6.60% 2.80% 3.90% -0.40%

Real Return Years 11 +(b)

5.38% 2.27% 1.39% 6.63% 5.21% 5.36% -0.90%

NOTE9




Changes in the Net Pension Liability

The following table shows the changes in net pension liability over the measurement period:


Balance, June 30, 2016 $ 73,632,584 $ 46,093, 183 Changes recognized for the following:

Service cost 3,513,114 2,932,068 Interest on the total pension liability 16,587,154 12,673,319 Differences between expected and

actual experiences (484,213) (2,393,873) Changes of assumptions 13,789,932 10,512,651 Net plan to resource movement 1,197 Contributions from the employer (5,358,752) (3,893,457) Contributions from the employee (949,049) (1,186,191) Net investment income (16,289,173) (13,752,535) Administrative expense 220,253 186, 195 Net changes during 2016-2017 11,029,266 5,079,374

Balance, June 30, 2017 $ 84,661,850 $ 51,172,557

Sensitivity of the Net Pension Liability to Changes in the Discount Rate The following presents the net pension liability of the City, calculated using the current discount rate as well as what the City's net pension liability would be if it were calculated using a discount rate that is one percentage point lower or one percentage point higher than the current rate:


1% Decrease 6.15% 6.15% Net Pension Liability $ 117,952,272 $ 76,420,922

Current Discount Rate 7.15% 7.15% Net Pension Liability $ 84,661,850 $ 51,172,557

1% Increase 8.15% 8.15% Net Pension Liability $ 57,431,386 $ 30,368,259

Pension Plan Fiduciary Net Position Detailed information about the Plan's fiduciary net position is available in the separately issued CalPERS financial reports.

65

NOTE9




Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions For the year ended June 30, 2018, the City recognized pension expenses of $12, 172,346 and $6,381,487 for the safety and miscellaneous plans, respectively. At June 30, 2018, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Safet:t Miscellaneous Total Deferred Deferred Deferred Deferred Deferred Deferred

Outflows of Inflows of Outflows of Inflows of Outflows of Inflows of Resources Resources Resources Resources Resources Resources

Pension contributions subsequent to measurement date 6,096,263 $ 4,395,719 $ 10,491,982

Changes of assumptions 8,273,959 6,469,324 14,743,283 Differences between expected and

actual experiences 506, 110 2,201,851 2,707,961.00 Net differences between projected and

actual earnings on plan investments 2,485,347 2,030, 129 4,515,476

Total 16,855,569 $ 506,110 $ 12,895, 172 $ 2,201,851 29,750,741 2,707,961

Pension contributions made subsequent to measurement date amounting to $6,096,263 and $4,395,719 for Safety and Miscellaneous plans, respectively, were reported as deferred outflows of resources and will be recognized as a reduction of the net pension liability in the year ending June 30, 2019.

Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized as a reduction of pension expense as follows:

Year Ending June 30

2019 2020 2021 2022 2023

Thereafter

66

$

Amount

7,517,155 9,371,030 1,811,068

(2, 148,455)

NOTE9

NOTE 10




Payable to the Pension Plan

At June 30, 2018, the City did not have outstanding amount of contributions to the pension plan required for the year ended June 30, 2018.

Allocation to Proprietary Funds

The City allocated net pension liability and related costs to the Transit Fund, Golf Course Fund, Water Fund and internal service funds based upon the enterprise and internal service funds' proportionate share of the total pension contribution during the fiscal year ended June 30, 2018.

OTHER POSTEMPLOYMENT BENEFITS

a. Plan Description

The City provides postemployment healthcare benefits to eligible employees at retirement through a single-employer defined benefit other postemployment benefits (OPEB) plan administered by the City. Benefit provisions are established through agreements and memorandums of agreement between the City, its management employees, and unions representing the City's employees.

Benefits Provided

The City provides the minimum required employer contributions under the CalPERS Health Plan for eligible retirees and surviving spouses in receipt of a pension benefit from PERS. An employee is eligible for this employer contribution provided they are vested in their PERS pension benefit and commence payment for their pension benefit when retiring from the City. The surviving spouse of an eligible retiree who elected spouse coverage under CalPERS is eligible for the employer contribution upon the death of the retiree.

Additional Benefits:

Miscellaneous Employees The current retiree health benefit is a monthly allowance that is payable to the eligible retiree and will be reduced by any amounts paid by the City towards health insurance for the retiree. The monthly allowance is available only to the retired employee and does not continue to a surviving spouse. The retiree is not required to continue medical insurance through the City to receive the monthly allowance. The monthly allowance is currently $25 for each year of service with the City up to 25 years ($625 maximum). The monthly allowance is payable up to Medicare eligibility age (currently age 65).

67

NOTE 10



OTHER POSTEMPLOYMENT BENEFITS (CONTINUED)

Eligibility from the monthly allowance requires retirement from the City on or after age 50 with at least 15 years of active City service at retirement. Disability retirement requires 10 years of active City service and has no age requirement. Montebello MidManagement Association (MMMA) and Montebello Supervisors Association (MSA) employees are not eligible for this allowance unless they made a one-time election for this benefit in lieu of a City contribution to a 401 (a) plan.

Safety (Fire and Police) Employees The current retiree health benefit is a monthly allowance that is payable to the eligible retiree and will be reduced by any amounts paid by the City towards health insurance for the retiree. The monthly allowance is available only to the retired employee and does not continue to a surviving spouse. The retiree is not required to continue medical insurance through the City to receive the monthly allowance. The monthly allowance is currently $25 for each year of service with the City up to 25 years ($625 maximum). The monthly allowance is payable during the retiree's lifetime for members of Montebello Police Officers Association (MPOA), Montebello Police Management Association (MPMA) and Montebello Fire Fighters Association (MFFA) and to Medicare eligibility age for all unrepresented Safety employees.

Eligibility from the monthly allowance requires retirement from the City on or after age 50 with at least 15 years of active City service at retirement. Disability retirement requires only 10 years of active City service and has no age requirement. Prior to August 2008, MFFA employees received a contribution to a 401 (a) (h) plan in lieu of retiree health benefits.

The City also pays 1 % of payroll into a Health Reimbursement Account for MPOA, MPMA and, commencing in 2008 for MFFA employees.

Employees Covered by Benefit Terms

Category Active employees Inactive employees or beneficiaries currently receiving benefit

Inactive employees entitled to but not yet receiving benefit payment

Contributions

Count

381 171

The plan is not funded. The City finances these benefits on a pay-as-you-go basis.

b. Net OPEB Liability

The City's net OPEB liability was measured as of June 30, 2017, and the OPEB liability used to calculate the net OPEB liability was determined by an actuarial valuation as of July 1, 2016.

68

NOTE 10




Actuarial Assumptions

The total OPEB liability for the July 1, 2016 valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement, unless otherwise specified:

Inflation Salary increases

Investment rate of return Healthcare cost trend rates

2.75% Aggregate salary increases of 3%. Individual salary increases based on CalPERS 3.40% 7% in the first year, trending down to 5% over 5 years

Mortality rates were based on CalPERS tables

Discount Rate

The discount rate used to measure the total OPEB liability was 3.4% per annum. The discount rate is the average, rounded to 5 basis points, of the range of 3-20 year municipal bond rate indices: S & P Municipal Bond 20 Year High Grade Rate Index, Bond Buyer 20-Bond GO Index, Fidelity GO AA 20 Year Bond Index.

Change in the Net OPEB Liability

Balance at June 30, 2016 Changes for the year:

Service cost Interest on the total OPEB liability

Difference between actual and expected experience Changes in assumptions

Contribution - employer Net investment income Benefit payments

Administrative expense Net Changes Balance at June 30, 2017

69

Increases (Decreases) Total OPEB Plan Fiduciary Net OPEB

Liability Net Position Liability

$ 29,234,403 $ $ 29,234,403

1,079,041 1,079,041 849,121 849,121

(2,111,032) (2,111,032)

(1,039,463) (1,039,463)

(1,222,333) (1,222,333) $ 28,012,070 $ $ 28,012,070 =====

NOTE 10




Sensitivity of the Net OPEB liability to changes in the discount rate

The net OPEB liability of the City, as well as what the City's net OPEB liability would be if it were calculated using a discount rate that is one percentage lower (2.4%) or one percentage point higher (4.4%) follows:

1%Decrease 2.40%

Discount Rate 3.40%

1%1ncrease 4.40%

Net OPEB liability $ 32,043,592 $ 28,012,070 $ 24,731,789

Sensitivity of the Net OPEB liability to changes in the healthcare cost trend rates

The net OPEB liability of the City, as well as what the City's net OPEB liability would be if it were calculated using healthcare cost trend rates that is one percentage lower or one percentage point higher follows:

1%Decrease Healthcare Cost Trend Rate 1%1ncrease 5.50% HM0/6.00% PPO 6.50% HM0/7.00% PPO 7.50% HM0/8.00% PPO

decreasing to decreasing to decreasing to 4.00% HM0/4.00% PPO 5.00% HM0/5.00% PPO 6.00% HM0/6.00% PPO

Net OPEB liability $ 26,015,269 $ 28,012,070 $ 30,623,022

c. OPEB Expense and Deferred Inflows and Outflows of Resources Related to OPEB

For the year ended June 30, 2018, the City recognized OPEB expense of $1,505,956 At June 30, 2018, the City reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources:

Deferred Deferred Outflows of Inflows of Resources Resources

Contributions subsequent to measurement date $ 876,737 $ Differences between actual and expected experience

Change of assumptions 1,688,826 Net differences between projected and actual earnings on $

OPEB plan investments

$ 876,737 $ 1,688,826

$876,737 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net OPEB liability in the year ending June 30, 2019.

70

NOTE 10

NOTE 11

NOTE 12




Other amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized in OPEB expense as follows:

Year Ended June 30

2018 $ (422,206) 2019 (422,206) 2020 (422,206) 2021 (422,208) 2022 $

SELF INSURANCE

The City is partially self-insured for general liability and workers' compensation claims. The City pays up to $1 million per occurrence for general liability claims, and has excess insurance up to $10 million per occurrence. For workers' compensation, the City provides self-insurance up to a $1,000,000 retention level and has acquired excess insurance coverage of $5 million for each claim. The City also purchases commercial insurance for other risks of loss, including property loss and vehicle physical damage. There have been no significant changes in insurance coverage as compared to last year. At June 30, 2017, the present value of the estimated liability for claims payable, discounted at a 2% rate, is $16,648,605, based on an actuarial study. The liability includes an estimate for incurred, but not reported, losses and is based on past experience, modified for current trends and information.

Insurance claims payable: Claims payable at July 1, 2017 $ Claims incurred during the fiscal year Payments on claims during the fiscal year Claims payable at June 30, 2018 $

DEFERRED OUTFLOWS AND INFLOWS OF RESOURCES

Amount

13,473,144 7,319,505

(4, 144,044) 16,648,605

Pursuant to GASB Statement No. 63, "Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position" and GASB Statement No. 65, "Items Previously Reported as Assets and Liabilities," the City recognized deferred outflows and inflows of resources in the City's financial statements aside from the pension and OPES-related deferred outflows and inflows of resources stated in Notes 9 and 10, respectively. The deferred outflow of resources, amounting to $302,789 at June 30, 2018, pertains to the unamortized loss on defeasance of debt. Previous financial reporting standards required this amount to be presented as part of the City's long-term debt. This deferred outflow of resources is recognized as a component of interest expense in a systematic and rational manner over the remaining life of the old debt or the life of the new debt, whichever is shorter.

71

NOTE 13



STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY

Expenditures in Excess of Appropriations

Expenditures for the year ended June 30, 2018, exceeded appropriations in the following funds:

Fund Name Major governmental funds

General Fund City attorney Police administration Field Services - Police Trees Building and maintenance

Housing Fund Housing and community development

Nonmajor governmental funds Special Revenue Funds

Gas Tax Public v1,mks

Drug Enforcement Public safety Capital outlay

Grants General government

State of Good Repairs Public v1,mks

72

$

Excess Over Appropriations Expenditures Appropriations

450,000 $ 671,853

11,538,430 529,122 467,495

683,385 38,045

2,000

110,831

505,634 $ 827,340

11,598,753 543, 137 508,187

20,059

31, 104

812,050 121,242

7,098

137,276

(55,634) (155,487)

(60,323) (14,015) (40,692)

(20,059)

(31,104)

(128,665) (83, 197)

(5,098)

(26,445)

NOTE 13

NOTE 14

NOTE 15



STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY (CONTINUED)

Deficit Fund Balance

The following funds have deficit fund balances or net position at June 30, 2018. Management expects to eliminate the deficits with subsequent revenue in the funds or transfers from the General Fund.

Nonmajor governmental funds: Special Revenue Funds

HOME $ Internal service funds:

Self-Insurance Equipment

Proprietary funds:

ENCUMBRANCES

Golf course Montebello Hilton Hotel2Suites Detention facility

Accumulated Deficit

(157,153)

(10,770,910) (6,443)

(1,513,744) (7,485,701) (4,674,661)

(74,170)

At June 30, 2018, there were outstanding encumbrances, which represent commitments on open purchase orders or contracts, of $632,544 in the governmental funds. There were commitments on open purchase orders amounting to $3,416,441 in the enterprise funds.

CONTINGENCIES

The City is involved in several pending lawsuits of a nature common to many similar jurisdictions. City management estimates that potential claims against the City, not covered by insurance, will not have a material adverse effect on the financial statements of the City.

73

NOTE 16



PRIOR PERIOD ADJUSTMENTS

The beginning net position of the governmental and business-type activities and the Montebello Hilton, Hotel2Suites, Transit, and Golf Course enterprise funds and the Public Financing Authority Debt Service Fund were restated to transfer the debt of the Montebello Hilton and Hotel2suites Funds from governmental to business-type activities and to report the retroactive effect of implementing GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other than Pensions (OPEB).

Governmental Montebello Activities Hilton Hotel2Suites Transit GoW Course

Beginning Net Position, as previoulsy reported (57,098,561) $ 1,563,600 48, 100,662 $ 24,887,575 $ (1,468,755) Adjustment to transfer the debt of Hilton Hotel to

Montebello Hilton Fund (including bond premium) 12,645, 117 (12,645,117) Adjustment to transfer related debt reserve Fund to

Montebello Hilton (1,291,428) 1,291,428 Adjustment to transfer the debt of Hotel2Suites to

Hotel2Suite Fund (including bond premium) 60,927,184 (60,927, 184) Adjustment to transfer related debt reserve Fund and

unspent bond proceeds to Hotel2Suites ( 10,404,061) 10,404,061 Adjustment to record the retroactive effect of GASB 75

implementation (14, 154,035) (2,923, 120) (154,365) Beginning Net Position, as restated (9,375,784) $ (9, 790,089) $ (2,422,461) $ 24,887,575 $ ( 1,468, 755)

The beginning fund balance of the Public Financing Authority Fund (City's debt service fund) was restated to report the transfer of related debt reserve fund and unspent bond proceeds to Montebello Hilton and Hotel2Suite funds:

Beginning fund balance, as previously reported

Adjustment to transfer debt reserve fund and unspent bond proceeds to Montebello Hilton and Hotel2Suites Beginning fund balance, as restated

74

$

$

Public Financing Authori~ 13,162,936

11,695,488 1,467,448

NOTE17



SUCCESSOR AGENCY TRUST FOR ASSETS OF THE DISSOLVED MONTEBELLO REDEVELOPMENT AGENCY

The accompanying financial statements also include the Private-purpose Trust Fund for the Successor Agency to the City's former Redevelopment Agency (Successor Agency). The City, as the Successor Agency, serves in a fiduciary capacity, as custodian for the assets and to wind down the affairs of the former Redevelopment Agency. Its assets are held in trust for the benefit of the taxing entities within the former Redevelopment Agency's boundaries and as such, are not available for the use of the City.

Disclosures related to the certain assets and long-term liabilities of the Successor Agency are as follows:

Disclosure of Successor Agency Receivables

Notes Receivable

Notes receivable at June 30, 2018 include the following:

Quiet Cannon $ Casa La Merced Business assistance program Home improvement loans

Quiet Cannon Montebello, Inc.

Total $

Amount 2,182,178

666,308 567,836 437,394

3,853,716 ======

The Agency leases a facility to Quiet Cannon Montebello, Inc. (Quiet Cannon). The Agency agreed to provide financing for the renovation and improvement of the leased facility and in return Quiet Cannon agreed to make additional rental payments. As of June 30, 2018, $2, 182, 178 remains outstanding on the note receivable.

Casa La Merced Casa La Merced entered into an agreement on September 24, 1985 with the Agency. The agreement with Casa La Merced was for the development of a parcel of land. Casa La Merced agreed to a note payable to the Agency for $666,308 that matures February 1, 2027. The note has a simple interest rate of 9.25% and the Agency has accrued interest receivable of $666,308 on the note receivable as at June 30, 2018. The interest receivable is covered by a 100% provision for bad debts.

75

NOTE 17



SUCCESSOR AGENCY TRUST FOR ASSETS OF THE DISSOLVED MONTEBELLO REDEVELOPMENT AGENCY (CONTINUED)

Business Assistance Program Business improvement loans were made in the prior years between the Agency and local merchants. The loans are secured by the real estate property and personal guaranty of the borrowers. As of June 30, 2018, $567,836 remained outstanding on the business improvement loans.

Home Improvement Loans During the prior fiscal years, the Agency made home improvement loans to low- and moderate-income households. These loans accrue interest of 4% and are payable in ten years or when the borrower sells their property, whichever comes first. The total outstanding balance as of June 30, 2018 was $437,394.

Disclosure of Successor Agency Debts

Details of the Successor Agency's long-term debt as of June 30, 2018 follow:

Bonds payable

Balance July 1, 2017 (Restated)

Additions Reductions Balance

June 30, 2018

Amount Due Within One Year

Tax allocation bonds $ 42,935,554 $ 640,672 $ (4,070,000) $ 39,506,226 $ 4,245,000 (239,333) 2,393,329 Add (Less): bond premium

bond discount 2,632,662

(2,289) 763 (1,526) Total bonds payable 45,565,927 640,672 (4,308,570) 41,898,029

Notes payable 3,043,408 (189,921) 2,853,487

(4,498,491) Total $ 48,609,335 $ 640,672 $ -~~=a:=!: $ 44,751,516

A. Tax Allocation Bonds

Nonhousing Tax Allocation Bonds:

$2,918,888 Montebello Hills Tax Allocation Parity Bonds, Series B comprised of Capital Appreciation Serial Bonds accreting semiannually through March 1, 2024; interest at 4.80% to 5.60% $

$2,905,000 2007 Montebello Hills Tax Allocation Parity Refunding Bonds, Series A due in annual installments of $95,000 to $440,000 through March 1, 2019; interest at 3.35% to 4.00%

$3,660,000 2007 Montebello Hills Tax Allocation Parity Refunding Bonds, Series B (Taxable) due in annual installments of $80,000 to $360,000 through March 1, 2024; interest at 5.85%

76

4,245,000

199,638

$ 4,444,638

Amount

9,191,121

440,000

1,860,000

NOTE17




$6,065,000 2007 South Montebello Tax Allocation Parity Bonds, Series A (Taxable) due in annual installments of $160,000 to $675,000 through September 1, 2022; interest at 5.80% 3,010,000

$23,775,000 2015 Subordinated Tax Allocation Refunding Bonds, Series A (Tax-exempt) due in annual installments of $1,220,60,000 to $3,045,000 through September 1, 2027; interest rate ranging from 2% to 5% 20,690,000

$1,405,000 2015 Subordinated Tax Allocation Refunding Bonds, Series B (Taxable) due in annual installments of $335,000 to $375,000 through September 1, 2019; interest rate ranging from 1.25% to 2.50% 725,000

Total Nonhousing Tax Allocation Bonds $ 35,916, 121

1999 Montebello Hills Tax Allocation Parity Bonds. Series B:

The Bonds are secured by incremental property taxes allocated to and received by the Agency. Interest on the Bonds is payable semiannually. The Bonds are subject to redemption at the Agency's option on any interest payment date beginning March 1, 2008 with no redemption premium after March 1, 2010.

2007 Montebello Hills Tax Allocation Parity Refunding Bonds. Series A:

The Bonds are secured by incremental property taxes allocated to and received by the Agency. Interest on the Bonds is payable semiannually. The Bonds are subject to redemption at the Agency's option on any interest payment date beginning March 1, 2018 with no redemption premium.

2007 Montebello Hills Tax Allocation Parity Refunding Bonds. Series B (Taxable):

The Bonds are secured by incremental property taxes allocated to and received by the Agency. Interest on the Bonds is payable semiannually. The Bonds are subject to redemption at the Agency's option on any interest payment date beginning March 1, 2008. The Series B Bonds maturing on March 1, 2024 are Term Bonds subject to redemption by owner on March 1 of each year in ranges of $70,000 (March 1, 2008) to $360,000 (March 1, 2024) from sinking account payments made by the Agency at a redemption price equal to the principal amount plus accrued interest to the redemption date without premium.

77

NOTE17




2007 South Montebello Tax Allocation Parity Refunding Bonds. Series A (Taxable):

The Bonds are secured by incremental property taxes allocated to and received by the Agency. Interest on the Bonds is payable semiannually. The Bonds are subject to redemption at the Agency's option on any interest payment date beginning September 1, 2009.

The Series A Bonds maturing on September 1, 2022 are Term Bonds and shall be subject to redemption, in part pro rata by owner, on September 1 in each year in ranges of $145,000 (September 1, 2009) to $675,000 (September 1, 2022), from sinking account payments made by the Agency without a redemption premium.

2015 Subordinated Tax Allocation Refunding Bonds. Series A (Tax-exempt) and Series B (Taxable):

In August 2015, the Successor Agency issued Subordinate Tax Allocation Refunding Bonds, Series 2015 A (Tax Exempt) & Series B (Taxable), totaling $25, 180,000 to refund the following old bonds: 1997 Montebello Hills, 1998A Montebello Hills, 1999A Montebello Hills, 2009A Montebello Hills, 1999A South Montebello, 19998 South Montebello, 19988 Montebello Hills, and 2002 Housing (non-accretion bonds only) with total outstanding principal as of June 30, 2015 of $28,355,000. The Series A bonds, with interest rate ranging from 2% to 5%, are due in annual installments of $1,220,000 to $3,045,000 through September 1, 2027. The Series B bonds, with interest rates ranging from 1.25% to 2.50%, are due in annual installments of $335,000 to $375,000 through September 1, 2019.

Housing Tax Allocation Bonds:

$5,550,000 1997 Montebello Housing Taxable Tax Allocation Bonds, Series B due in annual installments of $270,000 to $405,000 through September 1, 2019; interest at5.90%to7.16% $

$8,860,000 2007 Montebello Housing Tax Allocation Parity Refunding Bonds, Series A due in annual installments of $650,000 to $685,000 through September 1, 2019; interest

Amount

715,000

at 3.38% to 4.00% 1,345,000

2002 Montebello Housing Tax Allocation Capital Accretion Bonds, interest at 5.65% maturing on September 1, 2021. 1,530,105

Total Housing Tax Allocation Bonds $ 3,590, 105

78

NOTE17




1997 Taxable Housing Tax Allocation Bonds. Series B:

The Bonds are secured by incremental property taxes allocated to and received by the Agency. Interest on the Bonds is payable semiannually. The Bonds are subject to mandatory redemption, without premium, on any interest payment date beginning September 1, 2007.

2007 Housing Tax Allocation Parity Refunding Bonds. Series A:

The Bonds are secured by incremental property taxes allocated to and received by the Agency. Interest on the Bonds is payable semiannually. The Bonds are subject to redemption at the Agency's option on or after September 1, 2018 at a redemption price equal to the principal amount.

2002 Montebello Housing Tax Allocation Bonds

The Bonds are secured by incremental property taxes allocated to and received by the Agency. This is the capital accretion bonds portion of the 2002 Tax Allocation Bonds maturing on September 1, 2021 with interest of 5.65%.

The annual requirements to amortize the existing tax allocation bonds outstanding as of June 30, 2018 are as follows:

Year Ending June 30, Principal Interest Total

2019 $ 4,245,000 $ 1,336,083 $ 5,581,083 2020 4,980,000 1, 109,933 6,089,933 2021 3,380,000 898,474 4,278,474 2022 3,865,000 710,323 4,575,323 2023 4,055,000 504,700 4,559,700

2024-2028 18,981,226 771,924 19,753,150 $ 39,506,226 $ 5,331,438 $ 44,837,664

79

NOTE17




Notes Payable

Redevelopment Agency Note The former redevelopment agency entered into an agreement dated February 11, 2009 to purchase the property owned by Ostrom Chevrolet for $12,000,000. The Agency paid $5,000,000 in cash; $2,734,834 was from proceeds of a note owed by Ostrom Chevrolet to the Agency; and $4,265, 166 was financed by a note payable to the seller. The note payable has an interest rate of 5%. For the first 10 years, interest only payments are due each calendar quarter. Following the 10th anniversary of the note date, the Agency is to make four quarterly payments in an amount sufficient to amortize and repay all accrued interest and principal by the date the last payment is due on the first day of the full calendar quarter following the 20th anniversary date of the note. The Agency made early principal payments in the current year as well as the prior fiscal years with total annual payment of $337,780 inclusive of interest. At June 30, 2018, the principal amount outstanding is $2,853,487.

Annual debt service payments on this note are as follows:

Year Ending June 30, Principal Interest Total

2019 $ 199,638 $ 138,141 $ 337,779 2020 209,852 127,927 337,779 2021 220,588 117,191 337,779 2022 231,874 105,905 337,779 2023 243,737 94,042 337,779

2024-2028 1,418,995 338,962 1,757,957 2029-2030 328,803 8,973 337,776

$ 2,853,487 $ 931, 141 $ 3,784,628

Advances from City of Montebello

At June 30, 2018, the Successor Agency has a net liability to the City of $6, 150,883, which is reported in the Statement of Fiduciary Net Position as Advances from the City of Montebello. This amount was due to the Housing Fund pertaining to advances made by the former Low-and-Moderate Income Housing Fund to the former redevelopment agency. These advances were for payment of the Supplemental Educational Revenue Augmentation Fund (SERAF) and to finance the project expenses of one of the project areas of the former redevelopment agency.

80

NOTE17

NOTE 18




Commitment

Pursuant to the agreement dated November 1, 2000 with the City in connection with the development and operation of the hotel facility, the former redevelopment agency agreed to pay, solely from tax revenues from the Project Areas, any shortfall of amounts in the Lease Payment Account of the Debt Service Fund to pay the City's lease payments which are the source of repayment of the 2004 Revenue Refunding Bonds, Series A (see Note 8). This commitment was previously recognized by the California Department of Finance as an enforceable obligation of the Successor Agency.

SUBSEQUENT EVENTS

The City has evaluated events subsequent to June 30, 2018 to assess the need for potential recognition or disclosure in the financial statements. Such events were evaluated through March 11, 2019, the date the financial statements were available to be issued. Based upon this evaluation, other than the following, it was determined that no subsequent events occurred that require recognition or additional disclosure in the financial statements.

The City's second hotel project, Home2Suites, has started its operation effective September 19, 2018.

In December 2018, the State Auditor issued its report on the audit of the City of Montebello which was conducted as part of the State's high-risk local government agency program. The report concluded that the City is a high-risk city because of financial and organizational risks which resulted in structural deficit. Management of the City will develop a corrective action plan to ensure that all the findings and issues raised by the State in the audit report will be addressed.

81

NOTE 19



GOVERNMENTAL ACCOUNTING STANDARDS BOARD (GASB) STATEMENTS ISSUED, NOT YET EFFECTIVE

The Governmental Accounting Standards Board (GASB) has issued several pronouncements prior to June 30, 2018, that have effective dates that may impact future financial presentations. Management has not yet determined any impact the implementation of the following statements may have on the financial statements of the City.

GASB Statement No. 83 - Certain Asset Retirement Obligations. This Statement will enhance comparability of financial statements among governments by establishing uniform criteria for governments to recognize and measure certain asset retirement obligations (AROs), including obligations that may not have been previously reported. This Statement also will enhance the decision-usefulness of the information provided to financial statement users by requiring disclosures related to those AROs. The provisions of this Statement are effective for financial statements for periods beginning after June 15, 2018.

GASB Statement No. 84 - Fiduciary Activities. The requirements of this Statement will enhance consistency and comparability by (1) establishing specific criteria for identifying activities that should be reported as fiduciary activities and (2) clarifying whether and how business-type activities should report their fiduciary activities. Greater consistency and comparability enhances the value provided by the information reported in financial statements for assessing government accountability and stewardship. The provisions of this Statement are effective for financial statements for periods beginning after December 15, 2018.

GASB Statement No. 85 - Omnibus 2017. The requirements of this Statement will enhance consistency in the application of accounting and financial reporting requirements. Consistent reporting will improve the usefulness of information for users of state and local government financial statements. The provisions of this Statement are effective for financial statements for periods beginning after June 15, 2018.

GASB Statement No. 86 - Certain Debt Extinguishment Issues. The requirements of this Statement will increase consistency in accounting and financial reporting for debt extinguishments by establishing uniform guidance for derecognizing debt that is defeased in substance, regardless of how cash and other monetary assets placed in an irrevocable trust for the purpose of extinguishing that debt were acquired. The requirements of this Statement also will enhance consistency in financial reporting of prepaid insurance related to debt that has been extinguished. In addition, this Statement will enhance the decision-usefulness of information in notes to financial statements regarding debt that has been defeased in substance. The provisions of this Statement are effective for financial statements for periods beginning after June 15, 2017.

82

NOTE 19



GOVERNMENTAL ACCOUNTING STANDARDS BOARD (GASB) STATEMENTS ISSUED, NOT YET EFFECTIVE (CONTINUED)

GASB Statement No. 87 - Leases. This Statement will increase the usefulness of governments' financial statements by requiring reporting of certain lease liabilities that currently are not reported. It will enhance comparability of financial statements among governments by requiring lessees and lessors to report leases under a single model. This Statement also will enhance the decision-usefulness of the information provided to financial statement users by requiring notes to financial statements related to the timing, significance, and purpose of a government's leasing arrangements. The provisions of this Statement are effective for financial statements for periods beginning after December 15, 2019.

GASB Statement No. 88 - Certain Disclosures Related to Debt, including Direct Borrowings and Direct Placements. The requirements of this Statement are effective for reporting periods beginning after June 15, 2018.

GASB Statement No. 89 - Accounting for Interest Cost Incurred before the End of a Construction Period. The requirements of this Statement are effective for reporting periods beginning after December 15, 2019.

GASB Statement No. 90 -Majority Equity Interests-an amendment of GASB Statements No. 14 and No. 61. The requirements of this Statement are effective for reporting periods beginning after December 15, 2018.

83

REQUIRED SUPPLEMENTARY INFORMATION

City of Montebello California Public Retirement System

Schedule of Changes in the Net Pension Liability and Related Ratios Miscellaneous Plan

June 30, 2018 Last Ten Years*

Measurement Period 2013-2014 2014-2015 2015-2016 2016-2017

Total Pension Liability Service Cost $ 2,802, 157 $ 2,918,611 $ 2,703,362 $ 2,932,068 Interest on total pension liability 11,639,094 12,022,505 12,395,700 12,673,319 Differences between expected and actual experience (2,072,412) (2,550,443) (2,393,873) Changes in assumptions (2,949,227) 10,512,651 Benefit payments, including refunds of employee contributions (7,364,542) (7,653,087) (7,156,315) (9,080,226) Net change in total pension liability 7,076,709 2,266,390 5,392,304 14,643,939 Total pension liability · beginning 157,469, 110 164,545,819 166,812,209 172,204,513 Total pension liability · ending (a) $ 164,545,819 $ 166,812,209 $ 172,204,513 $ 186,848,452

Plan Fiduciary Net Position Contributions · employer $ 3, 168,029 $ 3,123,518 $ 3,474,912 $ 3,893,457 Contributions · employee 1,468,002 1,260,428 1,208,725 1,186,191 Net investment income 19,352,467 2,844,663 665,613 13,752,535 Benefit payments (7,364,542) (7,653,087) (7,156,315) (9,080,226) Net plan to plan resource movement (1,197) Administrative expense (144,043) (78,007) (186,195) Net change in plan fiduciary net position 16,623,956 (568,521) (1,885,072) 9,564,565

Plan fiduciary net position · beginning 111,940,967 128,564,923 127,996,402 126,111,330 Plan fiduciary net position · ending (b) $ 128,564,923 $ 127,996,402 $ 126,111,330 $ 135,675,895

Net pension liability · ending (a)-(b) $ 35,980,896 $ 38,815,807 $ 46,093,183 $ 51,172,557

Plan fiduciary net position as a percentage of the total pension liability 78.13% 76.73% 73.23% 72.61%

Covered · employee payroll $ 15,828, 716 $ 16,304, 182 $ 16,324,646 $ 16,116,462

Net pension liability as percentage of covered-employee payroll 227.31% 238.07% 282.35% 317.52%

Notes to Schedule of Changes in Net Pension Liability and Related Ratios:

Benefit changes: The figures above do not include any liability impact that may have resulted from plan changes which occurred after June 30, 2016 valuation date. This applies for voluntary benefit changes as well as any offers of Two Years Additional Service Credit (a.k.a. Golden Handshakes).

Changes of assumptions: In 2017, the accounting discount rate reduced from 7.65 percent to 7.15 percent. In 2016, there were no changes. In 2015, amounts reported reflect an adjustment of the discount rate from 7.5% (net of administrative expense) to 7.65% (without a reduction for pension plan administrative expense). In 2014, amounts reported were based on the 7.5% discount rate.

* Fiscal year 2015 was the first year of implementation, therefore only four years are shown.

84


Schedule of Pension Plan Contributions Miscellaneous Plan


2017-2018

Actuarially determined contributions $ 4,395,719 $

2016-2017

3,893,457 $ (3,893,457)

2015-2016

3,474,912 $ (3,474,912)

2014-2015

3,123,518 (3, 123,518) Contributions in relation to the actuarially determined contributions (4,395,719)

Contribution deficiency I (excess) $ ____ -_ $ - $ - $ -----Covered-Employee Payroll $ 16, 116,462 $ 16, 116,462 $ 16,324,646 $ 16,304, 182

Contributions as a percentage of Covered-Employee Payroll 27.27% 24.16% 21.29%

Notes to Schedule: Valuation date 6/30/2016 6/30/2015 6/30/2014

The actuarial methods and assumptions used to set the actuarially determined contributions for Fiscal Year 2017-18. were from the June 30, 2016 public agency valuations.

Actuarial Cost Method Amortization method I Period Asset valuation method Inflation Salary increases Payroll Growth Investment rate of return

Retirement age

Mortality

Entry age normal Level percent of payroll 15 year Smoothed Market 2.75%

Varies by Entry age and Service 3.00%

7.50%, net of pension plan investment expense and administrative expenses including inflation.

The probabilities of retirement are based on the 2014 CalPERS Experience Study for the period from 1997 to 2011.

The probabilities of mortality are based on the 2014 Cal PERS Experience Study for the period from 1997 to 2011. Pre-retirement and Post-retirement mortality rates include 20 years of projected mortality improvement using Scale BB published by the Society of Actuaries.


85

19.16%

6/30/2013


Schedule of Changes in the Net Pension Liability and Related Ratios Safety Plan


Measurement Period 2013-2014 2014-2015 2015-2016 2016-2017

Total Pension Liability Service Cost $ 3,199,355 $ 3,228,635 $ 3,178,292 $ 3,513, 114 Interest on total pension liability 15,059,257 15,555, 154 16,109,903 16,587,154 Differences between expected and actual experience (1,653,000) (831,534) (484,213) Changes in assumptions (3,773,844) 13,789,932 Benefit payments, including refunds of employee contributions (10,199,284) (10,403,035) (10,947,880) ( 11, 772,390) Net change in total pension liability 8,059,328 2,953,910 7,508,781 21,633,597 Total pension liability· beginning 204,290,062 212,349,390 215,303,300 222,812,081 Total pension liability· ending (a) $ 212,349,390 $ 215,303,300 $ 222,812,081 $ 244,445,678

Plan Fiduciary Net Position Contributions - employer $ 6,437,996 $ 4,710,747 $ 5, 153,218 $ 5,358,752 Contributions - employee 1,627,017 1,207,244 1, 193, 160 949,049 Net investment income 22,955,341 3,345,009 737,269 16,289, 173

Benefit payments (10,199,284) (10,403,035) (10,947,880) ( 11, 772,390) Administrative expense (172,263) (93,329) (220,253) Net change in plan fiduciary net position 20,821,070 (1,312,298) (3,957,562) 10,604,331

Plan fiduciary net position · beginning 133,628,287 154,449,357 153,137,059 149, 179,497 Plan fiduciary net position · ending (b) $ 154,449,357 $ 153,137,059 $ 149, 179,497 $ 159, 783,828

Net pension liability· ending (a)-(b) $ 57,900,033 $ 62, 166,241 $ 73,632,584 $ 84,661,850

Plan fiduciary net position as a percentage of the total pension liability 72.73% 71.13% 66.95% 65.37%

Covered - employee payroll $ 11,224,230 $ 11,922,582 $ 11, 768,402 $ 11,568,474

Net pension liability as percentage of covered-employee payroll 515.85% 521.42% 625.68% 731.83%

Notes to Schedule of Changes in Net Pension Liability and Related Ratios:

Benefit changes: The figures above do not include any liability impact that may have resulted from plan changes which occurred after June 30, 2016 valuation date. This applies for voluntary benefit changes as well as any offers of Two Years Additional Service Credit (a.k.a. Golden Handshakes).

Changes of assumptions: In 2017, the accounting discount rate reduced from 7.65 percent to 7.15 percent. In 2016, there were no changes. In 2015, amounts reported reflect an adjustment of the discount rate from 7.5% (net of administrative expense) to 7.65% (without a reduction for pension plan administrative expense). In 2014, amounts reported were based on the 7.5% discount rate.


86


Schedule of Pension Plan Contributions Safety Plan


2017-2018 2016-2017 2015-2016

Actuarially determined contributions $ 6,096,263 $ 5,358,752 $ 5, 153,218 $

2014-2015

4,710,747 (4,710,747) Contributions in relation to the actuarially determined contributions (6,096,263) (5,358, 752) (5, 153,218)

Contribution deficiency I (excess) $ - $ - $ - $ ~~~~= =~~~== ~~~~=

Covered-Employee Payroll $ 11,568,474 $ 11,568,474 $ 11,768,402 $ 11,922,582

Contributions as a percentage of Covered-Employee Payroll 52.70% 46.32% 43.79%

Notes to Schedule: Valuation date 6/30/2016 6/30/2015 6/30/2014

The actuarial methods and assumptions used to set the actuarially determined contributions for Fiscal Year 2017-18 were from the June 30, 2016 public agency valuations.

Actuarial Cost Method Amortization method I Period Asset valuation method Inflation Salary increases Payroll Growth Investment rate of return

Retirement age

Mortality

Entry age normal Level percent of payroll 15 year Smoothed Market 2.75%

Varies by Entry age and Service 3.00%

7.50%, net of pension plan investment expense and administrative expenses including inflation.

The probabilities of retirement are based on the 2014 Cal PERS Experience Study for the period from 1997 to 2011.

The probabilities of mortality are based on the 2014 CalPERS Experience Study for the period from 1997 to 2011. Pre-retirement and Post-retirement mortality rates include 5 years of projected mortality improvement using Scale BB published by the Society of Actuaries.


87

39.51%

6/30/2013

City of Montebello Schedules of Changes in Net OPEB Liability and Related Ratios


Total Pension Liability Service cost Interest on total OPEB liability

Last Ten Years*

Differences between expected and actual experience Changes in assumptions Benefit payments, including refunds of employee contributions Net change in total OPEB liability Total OPEB liability - beginning of year Total OPEB liability - end of year (a)

Plan Fiduciary Net Position Net investment income Contributions - employer Benefit payments, including refunds of employee contributions Administrative expenses Net change in plan fiduciary net position Plan fiduciary net position - beginning of year Plan fiduciary net position - end of year (b)

Net OPEB liability - end of year (a)-(b)

Plan fiduciary net position as a percentage of the total pension liability

Covered - employee payroll

Net OPEB liability as percentage of covered-employee payroll

* Fiscal year 2018 was the first year of implementation, therefore only one year is shown.

88

Fiscal Year Ended June 30, 2017 *

$

$

$

$

$

$

1,079,041 849,121

(2, 111,032) (1,039,463) (1,222,333) 29,234,403 28,012,070

1,039,463 (1,039,463)

28,012,070

0.00%

19,234,000

145.64%

Revenues Sales taxes Property taxes Other taxes Franchise taxes Licenses and permits Fines and forfeitures Investment income Intergovernmental Charges for services Other revenue

Expenditures Current: General government

City Council City Clerk City Treasurer City Attorney City Administration Employee relations Community promotions Finance General services

Total revenues

Governmental building maintenance Total general government

Public safety Police administration Field services - police Support services - police Investigative services Fire administration Fire suppression Fire prevention Fire communications

Total public safety

$

City of Montebello Budgetary Comparison Schedule

General Fund Year ended June 30, 2018

Variance with Final Budget

Budgeted Amounts Positive Original Final Actual (Negative)

13,526,000 $ 13,526,000 $ 13,118,981 $ (407,019) 5,078,930 5,078,930 5,208,975 130,045

506,315 506,315 585,960 79,645 1,420,000 1,420,000 2,141,450 721,450 4,964,336 4,964,336 4,452,210 (512, 126) 1,780,890 1,780,890 2,185,022 404,132

50,000 50,000 74,742 24,742 6,090,354 6,090,354 6,157,030 66,676 6,472,709 6,472,709 6,438,100 (34,609)

950,000 950,000 1, 153,423 203,423 40,839,534 40,839,534 41,515,893 676,359

186,878 184,711 165,867 18,844 23,253 258,102 251,687 6,415 23,518 26,836 23,370 3,466

450,000 450,000 505,634 (55,634) 728,157 741,967 735,202 6,765 299,763 313,741 255,526 58,215

20,450 14,581 13,727 854 2,357,569 2,465,549 2,417, 180 48,369

236,336 235,943 204,579 31,364 656,581 674,023 403,725 270,298

4,982,505 5,365,453 4,976,497 388,956

509,731 671,853 644,295 27,558 11,540,364 11,538,430 11,598,753 (60,323) 3,215,062 3,268,077 2,985,753 282,324 4,964,416 4,841,574 3,802,787 1,038,787 1,041,273 979,942 754,678 225,264

12,687,906 12,577,639 11, 170,508 1,407, 131 380,189 377,005 350,065 26,940 122,145 281,536 180,615 100,921

34,461,086 34,536,056 31,487,454 3,048,602

89


General Fund (Continued) Year ended June 30, 2018



Public works Administration $ 503,343 $ 487,585 $ 437,896 $ 49,689 Streets 7,030,959 7,092,075 6,340,418 751,657 Building 11,190.00 14,065.00 14,065

Total public works 7,545,492 7,593,725 6,778,314 815,411

Parks and recreation Parks and recreation administration 373,889 367,131 358,812 8,319 Recreation services 1,859,682 1,850,405 1,583, 145 267,260 Parks maintenance 1,309,849 1,325,869 1,262,025 63,844 Trees 502,166 529,122 543,137 (14,015) AB939 108,500 108,500 66,480 42,020

Total parks and recreation 4,154,086 4,181,027 3,813,599 367,428

Housing and community development Community development 351,070 178,912 163,483 15,429 Planning 312,162 298,318 247,190 51, 128 Engineering 773,356 801,481 772,169 29,312 Building and maintenance 248,986 467,495 508,187 (40,692) Code enforcement 409,529 382,222 315,245 66,977

Total housing and community development 2,095,103 2,128,428 2,006,274 122,154

Capital outlay 2,038,152 2,413,884 265,903 2,147,981

lnterfund charges (1,700,000) (1,524,388) (231,650) (1,292,738)

Total expenditures 53,576,424 54,694,185 49,096,391 5,597,794

Deficiency of revenues over expenditures (12,736,890) (13,854,651) (7,580,498) 6,274,153

Other financing sources (uses) Transfers in 11,890,116 11,890,116 12,257,329 367,213 Transfers out (1,876,673) (1,876,673) (1,381,915) 494,758

Net, other financing sources (uses) 10,013,443 10,013,443 10,875,414 861,971

Change in fund balance (2,723,447) (3,841,208) 3,294,916 7,136,124

Fund balance - beginning of year 14,042,885 14,042,885 14,042,885 Fund balance - end of year $ 11,319,438 $ 10,201,677 $ 17,337,801 $ 7,136,124

90


Retirement Special Revenue Fund Year ended June 30, 2018



Revenues Investment income $ 7,048 $ 7,048 $ 75,298 $ 68,250

Property taxes 11,282,929 11,282,929 11,752,063 469,134

Total revenues 11,289,977 11,289,977 11,827,361 537,384

Expenditures Current

General government 834,600 834,600 717,607 116,993

Total expenditures 834,600 834,600 717,607 116,993

Excess of revenues over expenditures 10,455,377 10,455,377 11,109,754 654,377

Other financing uses Transfers out (9,646,602) (9,646,602) (8,920,673) 725,929

Total other financing uses (9,646,602) (9,646,602) (8,920,673) 725,929

Change in fund balance 808,775 808,775 2,189,081 1,380,306

Fund balance - beginning of year 6,615,951 6,615,951 6,615,951

Fund balance - end of year $ 7,424,726 $ 7,424,726 $ 8,805,032 $ 1,380,306

91

Revenues Other revenue

Total revenues

Expenditures Housing and community development

Total expenditures

Change in fund balance

Fund balance - beginning of year Fund balance - end of year


Housing Successor Special Revenue Fund Year ended June 30, 2018

Budgeted Amounts Original Final Actual


Positive (Negative)

$ _____ $ _____ $ 5, 760 $ ____ 5__c,_76_0_

5,760 5,760

20,059 (20,059) 20,059 (20,059)

(14,299) (14,299)

8,982,456 8,982,456 8,982,456 $ 8,982,456 $ 8,982,456 $ 8,968, 157 $ (14,299) =====

92


Public Financing Authority Debt Service Fund Year ended June 30, 2018



Revenues Other revenues $ $ $ 1,466,882 $ 1,466,882

Total revenues 1,466,882 1,466,882


General government 10,000 10,000 4,569 5,431 Sub-total 10,000 10,000 4,569 5,431

Debt Service Principal retirement 1,512,340 1,512,340 977,340 535,000 Interest and fiscal charges 3,691,562 3,691,562 489,542 3,202,020 Sub-total 5,203,902 5,203,902 1,466,882 3,737,020

Total expenditures 5,213,902 5,213,902 1,4 71,451 3,742,451

Excess (deficiency) of revenues over expenditures (5,213,902) (5,213,902) (4,569) 5,209,333

Other financing sources Transfers in 376,673 376,673 (376,673) Transfers out (1,096,387) (1,096,387)

Total other financing sources 376,673 376,673 (1,096,387) (1,473,060)

Change in fund balance (4,837,229) (4,837,229) (1, 100,956) 3,736,273

Fund balance - beginning of year, as restated 1,467,448 1,467,448 1,467,448

Fund balance - end of year $ (3,369, 781) $ (3,369,781) $ 366,492 $ 3,736,273

93

NOTE 1 BUDGETARY DATA

City of Montebello Notes to Required Supplementary Information


The City adheres to the following general procedures in establishing the budgetary data reflected in the combined financial statements:

1) The annual budget adopted by the City Council provides for the general operation of the City. It includes proposed expenditures and estimated revenues for all governmental fund types.

2) The City Manager is authorized to transfer certain appropriations between activities within any department in accordance with the budget resolution.

3) The budget is formally integrated into the accounting system.

4) Budgets for the General and Special Revenue Funds are adopted on a basis consistent with accounting principles generally accepted in the United States of America. The modified accrual basis of accounting is employed in the preparation of the budget.

5) At fiscal year-end, operating budget appropriations lapse. Incomplete capital improvements are rolled over to the new fiscal year. Projects that are not started during the budget year are re-evaluated in the following year.

94

SUPPLEMENTARY SCHEDULES

[THIS PAGE INTENTIONALLY LEFT BLANK]

City of Montebello Other Governmental Funds

Special Revenue Funds are used to account for the proceeds of specific revenue sources that are restricted by law or administrative action for a specified purpose.

Debt Service Funds are used to account for the accumulation of resources for, and the payment of, longterm liabilities, interest, and related fiscal agent costs.

Capital Projects Fund is used to account for financial resources segregated for the acquisition of capital facilities financed by the Public Financing Authority debt.

95

City of Montebello Combining Balance Sheet

Other Governmental Funds Year ended June 30, 2018

Capital Projects Total

Special Funds Other Revenue Capital Governmental

Funds Improvements Funds

ASSETS Cash and investments $ 8,242,012 $ 122,206 $ 8,364,218 Receivables:

Accounts receivable 978,544 978,544 Notes 817,599 817,599

Prepaid expenses 43,503 43,503 Total assets $ 10,081,658 $ 122,206 $ 10,203,864

LIABILITIES AND FUND BALANCES Liabilities

Accounts payable and accrued liabilities $ 972,806 $ $ 972,806 Due to other funds 267,658 267,658 Unearned revenue 1,056, 115 1,056, 115

Total liabilities 2,296,579 2,296,579

Fund balances Restricted for

Special revenue funds projects 7,942,232 7,942,232 Capital projects 122,206 122,206

Unassigned (157,153) (157,153) Total fund balances 7,785,079 122,206 7,907,285

Total liabilities and fund balances $ 10,081,658 $ 122,206 $ 10,203,864

96

City of Montebello Combining Statement of Revenues, Expenditures, and Changes in Fund Balances

Other Governmental Funds Year ended June 30, 2018

Capital Projects Total

Special Funds Other Revenue Capital Governmental

Funds Improvements Funds Revenues

Investment income $ 513,148 $ 2,514 $ 515,662 Intergovernmental 9,752,575 9,752,575

Total revenues 10,265,723 2,514 10,268,237


General government 1,092,771 1,092,771 Public safety 857,626 857,626 Public works 813,997 813,997 Housing and community development 978,870 978,870

Capital outlay 4,272,359 211,054 4,483,413 Debt service

Principal payments 348,000 348,000 Interest and fiscal charges 184,796 184,796

Total expenditures 8,548,419 211,054 8,759,473

Excess of revenues over (under) expenditures 1,717,304 (208,540) 1,508,764

Other financing sources (uses) Transfers out (2,500,000) (2,500,000)

Net other financing sources (uses) (2,500,000) (2,500,000)

Change in fund balance (782,696) (208,540) (991,236)

Fund balance - beginning of year 8,567,775 330,746 8,898,521 Fund balance - end of year $ 7,785,079 $ 122,206 $ 7,907,285

97

City of Montebello Other Special Revenue Funds

Gas Tax Fund - To account for the City's share of state and county gas tax allocations. The tax allocations are expended on street maintenance and street construction.

Supplemental Law Enforcement Fund - To account for certain grant funds received. These funds are used for the enhancement of law enforcement programs.

Park Development Fund - To account for new construction license fees received. These fees are used for the maintenance and improvement of the City's parks.

Prop A Fund - To account for the receipt of the half-cent sales tax allocated by Los Angeles County Metropolitan Transportation Authority (LACMTA). These funds are used for public transit related expenditures.

Drug Enforcement Fund - To account for the revenues resulting from the seizure of assets in conjunction with criminal cases (primarily drug related). These funds are used for the enhancement of law enforcement programs.

Prop C Fund - To account for the receipt of the half-cent sales tax allocated by LACMTA. These funds are used to reduce traffic congestion, improve air quality, improve conditions of streets/freeways utilized by public transit, and reduce foreign fuel dependence.

Measure R Fund - This fund is used to account for revenues and expenditures related to a half-cent sales tax under Measure R approved by Los Angeles County voters in November 2008. A portion of Measure R funds is allocated to cities, and these funds must be used for streets and roads, traffic control measures, bikeways and pedestrian improvements, public transit services and capital improvements, transportation marketing, and congestion management program.

Metro Station Fund - Funds for this rail station are generated from Prop C Local Return, Prop C Discretionary, and Transportation Capital Improvement grants. The station serves as a component of the regional Metrolink commuter rail network. Shared by the Cities of Montebello and Commerce, the station is located in the 600 South Vail Avenue, Montebello, California.

Air Quality Fund - To account for monies received through the South Coast Air Quality Management District used for the purpose of improving air quality within the community.

Justice Assistance Grants - To account for revenues received from the Justice Assistance Grant Program to fund the City's law enforcement programs.

Grants Fund - To account for other various grants for neighborhood and commercial improvement purposes.

CDBG Fund - To account for funds received from the Community Development Block Grant for housing and community development purposes.

HOME Fund - To account for grant funds received for housing activities of the City.

Road Maintenance and Rehabilitation Fund - To account for revenue and eligible expenditures related to the California SB1 Road Repair and Accountability Act of 2017, which created the Road Maintenance and Rehabilitation Program to address deferred maintenance on the State and local roads. Funding is apportioned by formula pursuant to Streets and Highways Code section 2032(h) for basic road maintenance, rehabilitation, and critical safety projects on the local streets and roads system.

98

City of Montebello Other Special Revenue Funds

State of Good Repairs Fund - To account for revenue and eligible expenditures related to the to the California SB1 Road Repair and Accountability Act of 2017, which created the State of Good Repairs (SGR) Program to provide funding to eligible transit maintenance, rehabilitation, and capital projects to improve public transportation infrastructure and services. Funding is apportioned by formula from the State Transit Assistant Program.

Measure M Local Fund - To account for revenue and eligible expenditures related to Los Angeles County's Ballot Measure M which was passed by voters to improve traffic flow and safety by funding needed repairs and maintenance with a 1/2 cent local sales tax effective January 2017.

Major Fund

Retirement Fund - To account for financial resources received to pay for the contribution to the employees' retirement fund.

Housing Successor Fund - To account for funds received to increase or improve housing for low and moderate income households.

99

Supplemental Gas Law Park Tax Enforcement Development

ASSETS Cash and investments $ 212,148 $ 416,965 $ 34,213 Receivables

Accounts receivable Notes

Prepaid expenses 4,690 Total assets $ 212,148 $ 421,655 $ 34,213


Accounts payable and accrued liabilities $ 2,000 $ 9,193 $ Due to other funds

Unearned revenue Total liabilities 2,000 9,193

Fund balances (deficits) Restricted for:

Special revenue funds projects 210,148 412,462 34,213 Unassigned

Total fund balances (deficits) 210,148 412,462 34,213

Total liabilities and fund balances (deficits) $ 212,148 $ 421,655 $ 34,213

100

Drug Prop A Enforcement Prop C

$ 676,746 $ 458,888 $ 3,152,531 $

232,712

22,000 $ 676,746 $ 713,600 $ 3,152,531 $

$ $ 45,062 $ 400,164 $

45,062 400,164

676,746 668,538 2,752,367

676,746 668,538 2,752,367

$ 676,746 $ 713,600 $ 3,152,531 $

101

Measure R

1,342,451

1,342,451


Other Special Revenue Funds June 30, 2018

Metro Air Station Quality

$ 20,940 $ 582,626

21,043

$ 20,940 $ 603,669

222,193 $ 20,940 $ 1,627

222,193 20,940 1,627

1,120,258 602,042

1,120,258 602,042

1,342,451 $ 20,940 $ 603,669

Justice Assistance

Grants Grants CDBG

ASSETS Cash and investments $ 53,719 $ 605,479 $ 9,503 Receivables Accounts receivable 281,802 132,518

Notes 672,599 Prepaid expenses

Total assets $ 53,719 $ 887,281 $ 814,620


Accounts payable and accrued liabilities $ $ 15,024 $ 29,418

Due to other funds

Unearned revenue 238,516 672,599 Total liabilities 253,540 702,017

Fund balances (deficits) Restricted for:

Special revenue funds projects 53,719 633,741 112,603 Unassigned

Total fund balances (deficits) 53,719 633,741 112,603

Total liabilities and fund balances (deficits) $ 53,719 $ 887,281 $ 814,620

102

$

$

$

$

HOME

$

29,410 145,000

174,410 $

4,300 $ 182,263

145,000 331,563

(157,153) (157,153)

174,410 $

Road Maintenance

& Rehabilitation

42,104 $

55,581

97,685 $

80,936 $

80,936

16,749

16,749

97,685 $

State of Good

Repairs

$

225,478

16,813 242,291 $

140,084 $

85,395

225,479

16,812

16,812

242,291 $

103

Measure M Local

633,699 $

633,699 $

1,865 $

1,865

631,834

631,834


Other Special Revenue Funds June 30, 2018

Total Other

Special Revenue

Funds

8,242,012

978,544 817,599

43,503 10,081,658

972,806

267,658

1,056,115 2,296,579

7,942,232 (157,153)

7,785,079

633,699 $ 10,081,658 ======

Supplemental Gas Law Park Tax Enforcement Development

Revenues Investment income $ 11,896 $ 5,985 $ 523 Intergovernmental 1,340,450 100,000

Total revenues 1,352,346 105,985 523


General government Public safety 45,576 Public works 31,104 Housing and community development

Capital outlay 18,856 9,853 Debt service:

Principal Interest

Total expenditures 31,104 64,432 9,853

Excess (deficiency) of revenues over expenditures 1,321,242 41,553 (9,330)

Other financing sources (uses) Transfers out (2,500,000)

Net other financing sources (uses) (2,500,000)

Change in fund balances (1,178,758) 41,553 (9,330)

Fund balances (deficits) - beginning of year 1,388,906 370,909 43,543

Fund balances (deficits) - end of year $ 210,148 $ 412,462 $ 34,213

104

$

$

City of Montebello Combining Statement of Revenues, Expenditures and Changes in Fund Balances

Other Special Revenue Funds Year ended June 30, 2018

Drug Metro Air Prop A Enforcement Prop C Measure R Station Quality

14,424 $ 11, 189 $ 43, 112 $ 21,757 $ $ 8,276 1, 192,390 4,368 987,458 740,793 81,943 1,206,814 15,557 1,030,570 762,550 90,219

1,000,000 68,468 17,205 812,050

146,537 221,324 32,659

121,242 527,898 741,333

1,000,000 933,292 742,903 979,862 32,659

206,814 (917,735) 287,667 (217,312) 57,560

206,814 (917,735) 287,667 (217,312) 57,560

469,932 1,586,273 2,464,700 1,337,570 544,482

676,746 $ 668,538 $ 2,752,367 $ 1,120,258 $=====$ 602,042

105

Justice Assistance

Grants Grants CDBG

Revenues Investment income $ 792 $ 3,703 $ 386,750 Intergovernmental 3,055,788 896,384

Total revenues 792 3,059,491 1,283, 134


General government 7,098 Public safety Public works Housing and community development 544,396 242,288

Capital Outlay 2,501,186 280,601 Debt service:

Principal 348,000 Interest 184,796

Total expenditures 3,052,680 1,055,685

Excess (deficiency) of revenues over expenditures 792 6,811 227,449

Other financing sources (uses) Transfers out

Net other financing sources (uses)

Change in fund balances 792 6,811 227,449

Fund balances (deficits) - beginning of year 52,927 626,930 (114,846)

Fund balances (deficits) - end of year $ 53,719 $ 633,741 $ 112,603

106

$

$

HOME

161,560 161,560

115,162

115,162

46,398

46,398

City of Montebello Combining Statement of Revenues, Expenditures and Changes in Fund Balances

Other Special Revenue Funds (Continued) Year ended June 30, 2018

Total Other

Road State of Special Maintenance Good Measure M Revenue

& Rehabilitation Repairs Local Funds

$ 205 $ $ 4,536 $ 513,148 294,635 225,478 671,328 9,752,575 294,840 225,478 675,864 10,265,723

1,092,771 857,626

235,701 137,276 42,055 813,997 42,390 1,975 978,870

71,390 4,272,359

348,000 184,796

278,091 208,666 44,030 8,548,419

16,749 16,812 631,834 1,717,304

(2,500,000) (2,500,000)

16,749 16,812 631,834 (782,696)

(203,551) 8,567,775

(157,153) $ 16,749 $ 16,812 $ 631,834 $ 7,785,079

107

City of Montebello Schedule of Revenues, Expenditures and Changes in Fund Balance -

Budget and Actual Gas Tax Special Revenue Fund




Revenues Investment income $ 2,000 $ 2,000 $ 11,896 $ 9,896 Intergovernmental 1,785,932 1,417,300 1,340,450 (76,850)

Total revenues 1,787,932 1,419,300 1,352,346 (66,954)

Expenditures Public Works 31,104 (31,104)

Total expenditures 31,104 (31,104)

Excess of revenues over expenditures 1,787,932 1,419,300 1,321,242 (98,058)

Other financing uses Transfers out (2,500,000) (2,500,000) (2,500,000)

Total other financing uses (2,500,000) (2,500,000) (2,500,000)

Change in fund balance (712,068) (1,080,700) (1,178,758) (98,058)

Fund balance - beginning of year 1,388,906 1,388,906 1,388,906 Fund balance - end of year $ 676,838 $ 308,206 $ 210,148 $ (98,058)

108

Revenues Investment income Intergovernmental

Expenditures Current Public safety

Capital Outlay



Budget and Actual Supplemental Law Enforcement Special Revenue Fund




$ 1,700 $ 1,700 $ 5,985 $ 4,285 120,000 120,000 100,000 (20,000)

Total revenues 121,700 121,700 105,985 (15,715)

50,000 45,576 4,424 120,000 70,000 18,856 51,144

Total expenditures 120,000 120,000 64,432 55,568

1,700 1,700 41,553 39,853

Fund balance - beginning of year 370,909 370,909 370,909 Fund balance - end of year $ 372,609 $ 372,609 $ 412,462 $ 39,853

109

Revenues Investment income

Expenditures Capital outlay



Budget and Actual Park Development Special Revenue Fund




$ $ $ 523 $ 523

Total revenues 523 523

29,213 9,853 19,360 Total expenditures 29,213 9,853 19,360

(29,213) (9,330) 19,883


110


Budget and Actual Prop A Special Revenue Fund




Revenues Investment income $ 5,000 $ 5,000 $ 14,424 $ 9,424 Intergovernmental 1, 188,900 1, 188,900 1, 192,390 3,490

Total revenues 1, 193,900 1, 193,900 1,206,814 12,914

Expenditures

Current General government 1,000,000 1,000,000 1,000,000

Total expenditures 1,000,000 1,000,000 1,000,000

Excess of revenues over expenditures 193,900 193,900 206,814 12,914

Other financing sources (uses) Transfers out (284,900) (284,900) 284,900

Total other financing uses (284,900) (284,900) 284,900

Change in fund balance (91,000) (91,000) 206,814 297,814


111


Intergovernmental

Expenditures

Current

Public safety Capital outlay


Budget and Actual Drug Enforcement Special Revenue Fund




$ 3,000 $ 3,000 $ 11, 189 $ 8,189 960,000 960,000 4,368 (955,632)

Total revenues 963,000 963,000 15,557 (947,443)

683,385 683,385 812,050 (128,665) 38,045 121,242 (83, 197)

Total expenditures 683,385 721,430 933,292 (211,862)

Excess (deficiency) of revenues over expenditures 279,615 241,570 (917,735) (1, 159,305)

Change In fund balance 279,615 241,570 (917,735) (1, 159,305)

Fund balance - beginning of year 1,586,273 1,586,273 1,586,273 Fund balance - end of year $ 1,865,888 $ 1,827,843 $ 668,538 $ (1, 159,305)

112


Intergovernmental


General government Public works

Capital outlay


Budget and Actual Prop C Special Revenue Fund




$ 4,000 $ 4,000 $ 43, 112 $ 39,112

986,161 986, 161 987,458 1,297

Total revenues 990,161 990,161 1,030,570 40,409

98,000 101,390 68,468 32,922 25,000 154,209 146,537 7,672

2,230,505 2,101,781 527,898 1,573,883 Total expenditures 2,353,505 2,357,380 742,903 1,614,477

Excess {deficiency) of revenues over expenditures (1,363,344) (1,367,219) 287,667 1,654,886

Change in fund balance (1,363,344) (1,367,219) 287,667 1,654,886

Fund balance • beginning of year 2,464,700 2,464,700 2,464,700 Fund balance · end of year $ 1,101,356 $ 1,097,481 $ 2,752,367 $ 1,654,886

113


Budget and Actual Measure R Special Revenue Fund




Revenues Investment income $ 2,000 $ 2,000 $ 21,757 $ 19,757 lntergovern men ta I 739,636 739,636 740,793 1,157

Total revenues 741,636 741,636 762,550 20,914


General government 50,000 52,664 17,205 35,459 Public works 242,520 221,324 21,196

Capital outlay 1,834,981 1,641,198 741,333 899,865 Total expenditures 1,884,981 1,936,382 979,862 956,520

Excess (deficiency) of revenues over expenditures (1,143,345) (1,194,746) (217,312) 977,434

Change in fund balance (1,143,345) (1,194,746) (217,312) 977,434

Fund balance - beginning of year 1,337,570 1,337,570 1,337,570 Fund balance - end of year $ 194,225 $ 142,824 $ 1,120,258 $ 977,434

114


Budget and Actual Metro Station Special Revenue Fund





Housing and community development $ 284,900 $ $ $ Total expenditures 284,900

Excess (deficiency) of revenues over expenditures (284,900)

Other financing sources Transfers in 284,900 284,900 (284,900)

Total other financing sources 284,900 284,900 (284,900)

Change in fund balance 284,900 (284,900)

Fund balance - beginning of year Fund balance - end of year $ $ 284,900 $ $ (284,900)

115


Intergovernmental



Budget and Actual Air Quality Special Revenue Fund




$ 1,000 $ 1,000 $ 8,276 $ 7,276

82,000 82,000 81,943 (57)

Total revenues 83,000 83,000 90,219 7,219

Housing and community development 35,500 35,500 32,659 2,841 Total expenditures 35,500 35,500 32,659 2,841

Change in fund balance 47,500 47,500 57,560 10,060


116


Expenditures Current Public safety



Budget and Actual Justice Assistance Grants Special Revenue Fund




$ $ $ 792 $ 792

Total revenues 792 792

14,000 14,000 14,000 Total expenditures 14,000 14,000 14,000

(14,000) (14,000) 792 14,792


117


Budget and Actual Grants Special Revenue Fund




Revenues Investment income $ $ $ 3,703 $ 3,703

Intergovernmental 5,890,315 3,055,788 (2,834,527)

Total revenues 5,890,315 3,059,491 (2,830,824)

Expenditures

Current General government 2,000 7,098 (5,098)

Housing and community development 835, 148 544,396 290,752

Capital outlay 5,053,167 2,501,186 2,551,981

Total expenditures 5,890,315 3,052,680 2,837,635

Excess (deficiency) of revenues over expenditures 6,811 6,811

Change in fund balance 6,811 6,811

Fund balance - beginning of year 626,930 626,930 626,930

Fund balance - end of year $ 626,930 $ 626,930 $ 633,741 $ 6,811

118


Intergovernmental



Budget and Actual Community Development Block Grant Special Revenue Fund




$ $ $ 386,750 386,750 600,081 600,081 896,384 $ 296,303

Total revenues 600,081 600,081 1,283, 134 683,053

Housing and community development 256,951 305,205 242,288 62,917 Capital outlay 134,865 281,161 280,601 560 Debt service

Principal 348,000 348,000 348,000 Interest 184,796 184,796 184,796

Total expenditures 924,612 1,119,162 1,055,685 63,477


Fund balance (deficit) - beginning of year (114,846) (114,846) (114,846) Fund balance (deficit) - end of year $ (439,377) $ (633,927) $ 112,603 $ 746,530

119

Revenues Intergovernmental



Budget and Actual HOME Special Revenue Fund




$ $ $ 161,560 $ 161,560

Total revenues 161,560 161,560

Housing and community development 499,584 499,584 115, 162 384,422 Total expenditures 499,584 499,584 115, 162 384,422


Fund balance (deficit) - beginning of year (203,551) (203,551) (203,551) Fund balance (deficit) - end of year $ (703, 135) $ (703, 135) $ (157,153) $ 545,982

120


Intergovernmental


Public works


Budget and Actual Road Maintenance & Rehabilitation Special Revenue Fund




$ $ $ 205 $ 205 368,632 294,635 (73,997)

Total revenues 368,632 294,840 (73,792)

326,512 235,701 90,811 Housing and community development 42,390 42,390

Total expenditures 368,902 278,091 90,811

Change in fund balance (270) 16,749 17,019

Fund balance (deficit) - beginning of year Fund balance (deficit) - end of year $ $ (270) $ 16,749 $ 17,019

121

Revenues Intergovernmental


Public works

Capital outlay



Budget and Actual State of Good Repairs Special Revenue Fund




$ $ 182,221 $ 225,478 $ 43,257

Total revenues 182,221 225,478 43,257

110,831 137,276 (26,445)

71,390 71,390 Total expenditures 182,221 208,666 (26,445)

16,812 16,812

Fund balance (deficit) - beginning of year Fund balance (deficit) - end of year $ $ $ 16,812 $ 16,812

122


Intergovernmental

Expenditures

Current

Public works


Budget and Actual Measure M Local Special Revenue Fund



Budgeted Amounts Positive

Original Final Actual (Negative)

$ $ $ 4,536 $ 4,536 477,795 671,328 193,533

Total revenues 477,795 675,864 198,069

58,623 42,055 16,568 Housing and community development 2,514 1,975 539

Capital Outlay 416,658 416,658 Total expenditures 477,795 44,030 433,765

Change in fund balance 631,834 631,834

Fund balance {deficit) - beginning of year Fund balance {deficit) - end of year $ $ $ 631,834 $ 631,834

123

City of Montebello Description of Capital Projects Fund

June 30, 2018

Capital Improvements Fund - To account for financial resources segregated for the acquisition of major general City capital outlay other than those financed by special assessment and proprietary funds.

124


Expenditures Capital outlay

City of Montebello Schedule of Revenues, Expenses and Changes in Fund Balances -

Budget and Actual Capital Improvements Capital Projects Fund




$ 100 $ 100 $ 2,514 $ 2,414

Total revenues 100 100 2,514 2,414

311,531 311,531 211,054 100,477 Total expenditures 311,531 311,531 211,054 100,477

Change in fund balance (311,431) (311,431) (208,540) 102,891


125

City of Montebello Description of Other Enterprise Funds

Water Utility Fund - To account for the revenues and expenses of the Water Fund. All activities necessary to provide such service are accounted for in this fund including, but not limited to, administration, operations, maintenance, financing, and billing and collection.

Detention Facility Fund - To account for revenues and expenses related to the operations of the Montebello Police Department jail.

126


Cash and investments $ Accounts receivable Prepaid expenses and other current assets

Total current assets

Noncurrent assets Capital assets

Land Construction in progress Buildings and improvements Machinery and equipment Accumulated depreciation

Total noncurrent assets Total assets

DEFERRED OUTFLOWS OF RESOURCES Deferred outflows of resources related to pensions

LIABILITIES Current liabilities

Accounts payable and accrued liabilities Due to other funds Deposits payable Notes payable Compensated absences

Total current liabilities

Noncurrent liabilities Notes payable Net pension liability

Total non-current liabilities Total liabilities

DEFERRED INFLOWS OF RESOURCES Deferred inflows of resources related to pensions

NET POSITION (DEFICIT) Net investment in capital assets Unrestricted

Total net position (deficit) $

127

City of Montebello Combining Statement of Net Position

Other Enterprise Funds June 30, 2018

Water Utility

709,211 $ 166,567

1,906 877,684

35,000 248,532 184,316

2, 185,927 (2,228,844)

424,931 1,302,615

5,241

365,828 505,200

31,675 12,986

1,279 916,968

74,358 20,798 95, 156

1,012, 124

895

424,931

Detention Facility

18,892 (18,892)

74,170

74, 170

74, 170

(130,094) (74, 170)

$

Total Other

Enterprise Funds

709,211 166,567

1,906 877,684

35,000 248,532 184,316

2,204,819 (2,247,736)

424,931 1,302,615

5,241

439,998 505,200

31,675 12,986

1,279 991, 138

74,358 20,798 95, 156

1,086,294

895

424,931 (204,264)

294,837 $ (7 4, 170) $ 220,667 ======

City of Montebello Combining Statement of Revenues, Expenses, and Changes in Fund Net Position

Other Enterprise Funds Year ended June 30, 2018

Total Other

Water Detention Enterprise Utility Facility Funds

Operating revenues Charges for services $ 3,045,581 $ 24,800 $ 3,070,381

Operating expenses Labor and fringe benefits 14,998 14,998

Materials and supplies 1,960 1,960 Utilities 125,792 125,792 Contract services 1,920,693 440,462 2,361, 155 Depreciation expense 3,532 3,532 Administration expense 186,480 3,168 189,648

Total operating expenses 2,251,495 445,590 2,697,085

Operating income (loss) 794,086 (420,790) 373,296

Nonoperating revenues Interest income 6,263 6,263 Interest expense (1,567) (1,567)

Income (loss) before transfers 798,782 (420,790) 377,992 Other financing sources

Transfers in 2,022 418,595 420,617

Change in net position 800,804 (2, 195) 798,609

Net position (deficit), beginning of year (505,967) (71,975) (577,942)

Net position (deficit), end of year $ 294,837 $ (74,170) $ 220,667

128

Cash flows from operating activities Receipts from customers Payments to suppliers Payments to employees

Net cash provided by (used) in operating activities

Cash flows from non-capital financing activities Cash received from other funds

Net cash provided by non-capital financing activities

Cash flows from capital and related financing activities Interest received Interest paid Acquisition of capital assets

Net cash used in capital and related financing activities

Change in cash and investments

Cash and investments - beginning of year Cash and investments - end of year


$

$

Operating income (loss) $ Adjustments to reconcile operating loss to net cash used by

operating activities Depreciation and amortization

(Increase) decrease in accounts receivable (Increase) decrease in prepaid expense (Increase) decrease in deferred outflows of resources Increase (decrease) in accounts payable and accrued liabilities

including compensated absences Increase (decrease) in notes payable Increase (decrease) in net pension liability Increase (decrease) in deferred inflows of resources

Net cash provided by (used in) operating activities $

129

City of Montebello Combining Statement of Cash Flows

Other Enterprise Funds Year ended June 30, 2018

Total Other

Water Detention Enterprise Utility Facility Funds

3,004,112 $ 24,800 $ 3,028,912 (2,070,704) (443,438) (2,514, 142)

(9,984) (9,984)

923,424 (418,638) 504,786

2,022 418,595 420,617 2,022 418,595 420,617

6,263 6,263 (1,567) (1,567)

(220,947) (220,947)

(216,251) (216,251)

709, 195 (43) 709, 152

16 43 59 709,211 $ $ 709,211

=====

794,086 $ (420,790) $ 373,296

3,532 3,532 (41,469) (41,469)

(1,906) (1,906) (394) (394)

76,654 2,152 78,806 87,344 87,344 6,970 6,970

(1,393) (1,393) 923,424 $ (418,638) $ 504,786

=====

City of Montebello Description of Internal Service Funds

Corporate Shop Fund - To account for the resources and costs of automotive equipment used by City departments.

Self-Insurance Fund - To account for the resources for and payment of the City's self-insurance claims.

Equipment Fund - To account for the repair and replacement of the City's machinery and equipment.

130

City of Montebello Combining Statement of Net Position

All Internal Service Funds June 30, 2018

Corporate Shop Self-Insurance Equipment Total


Cash and investments $ 1,780,477 $ 5,913,795 $ $ 7,694,272 Accounts receivable 1,248 1,248 Inventory 4,547 4,547 Prepaid expenses and other current assets 6,465 6,465

Total current assets 1,785,024 5,921,508 7,706,532

Noncurrent assets Capital assets

Land 108,369 108,369 Buildings and improvements 428,794 428,794 Machinery and equipment 643,651 643,651 Accumulated depreciation (1,063,436) (1,063,436)

Total noncurrent assets 117,378 117,378 Total assets 1,902,402 5,921,508 7,823,910

DEFERRED OUTFLOWS OF RESOURCES Deferred outflows of resources related to pensions 8,023 8,023

LIABILITIES Liabilities Current liabilities

Accounts payable and accrued liabilities 10,431 40,036 6,443 56,910 Claims payable - current portion 7,471,188 7,471,188 Compensated absences 3,777 3,777

Total current liabilities 10,431 7,515,001 6,443 7,531,875

Noncurrent liabilities Claims payable 9,177,417 9,177,417 Net pension liability 31,835 31,835

Total noncurrent liabilities 31,835 9,177,417 9,209,252 Total liabilities 42,266 16,692,418 6,443 16,741,127

DEFERRED INFLOWS OF RESOURCES Deferred inflows of resources related to pensions 1,370 1,370

NET POSITION (DEFICIT) Net investment in capital assets 117,378 117,378 Unrestricted 1,749,411 (10,770,910) (6,443) (9,027,942)

Total net position (deficit) $ 1,866,789 $ (10,770,910) $ (6,443) $ (8,910,564)

131

City of Montebello Combining Statement of Revenues, Expenses, and Changes in Net Position

All Internal Service Funds Year ended June 30, 2018


Operating revenues Charges for services $ $ 6,811,983 $ $ 6,811,983 Other 19, 116 19, 116

Total operating revenues 6,831,099 6,831,099

Operating expenses Labor and fringe benefits (6,829) (6,829) Materials and supplies 275,902 1,092 276,994 Repairs and maintenance 91,182 91, 182 Insurance claims and premiums 9,387,433 9,387,433 Contractual services 8,896 674,961 683,857 Administrative expense 1,727 14,730 16,457

Total operating expenses 370,878 10,078,216 10,449,094

Operating income (loss) before transfers (370,878) (3,247, 117) (3,617,995)

Other financing sources Transfers in 7,170 7,170

Net other financing sources 7,170 7,170

Change in net position (363,708) (3,247,117) (3,610,825)

Net position (deficit), beginning of year 2,230,497 (7,523,793) (6,443) (5,299, 739)

Net position (deficit), end of year $ 1,866,789 $ (10,770,910) $ (6,443) $ (8,910,564)

132

City of Montebello Combining Statement of Cash Flows

All Internal Service Funds Year ended June 30, 2018


Cash flows from operating activities Receipts from customers $ $ 7,118,610 $ $ 7, 118,610 Payments to suppliers (381,866) (6,897,872) (7,279, 738) Payments to employees (20,960) (20,960)

Net cash provided by (used in) operating activities (402,826) 220,738 (182,088)

Cash flows from non-capital financing activities Cash transfers in 7, 170 7, 170

Net cash provided by non-capital financing activities 7, 170 7, 170

Change in cash and investments (395,656) 220,738 (174,918)

Cash and investments - beginning 2, 176, 133 5,693,057 7,869, 190 Cash and investments - ending $ 1, 780,477 $ 5,913,795 $ $ 7,694,272


Operating income (loss) $ (370,878) $ (3,247,117) $ $ (3,617,995) Adjustments to reconcile operating income (loss) to net

cash provided (used) by operating activities Changes in operating assets and liabilities:

(Increase) decrease in accounts receivable 287,511 287,511 (Increase) decrease in deferred outflows of resources 8,839 8,839 Increase (decrease) in accounts payable and accrued liabilities including compensated absences (4, 159) 4,883 724

Increase (decrease) in claims payable 3, 175,461 3, 175,461 Increase (decrease) in net pension liability (28,086) (28,086) Increase (decrease) in deferred inflows of resources (8,542) (8,542)

Net cash provided by (used in) operating activities $ (402,826) $ 220,738 $ $ (182,088)

133

STATISTICAL SECTION (UNAUDITED)

City of Montebello Description of Statistical Section Contents

This part of the City of Montebello's comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information say about the City's overall financial health.

Contents:

Financial Trends these schedules contain trend information to help the reader understand how the City's financial performance and well-being have changed overtime.

Revenue Capacity these schedules contain information to help the reader assess the City's most significant local revenue source, the property tax.

Debt Capacity these schedules present information to help the reader assess the affordability of the City's current levels of outstanding debt and the City's ability to issue additional debt in the future.

Demoaraohic and Economic Information these schedules offer demographic and economic indicators to help the reader understand the environment within which the City's financial activities take place.

Operating Information these schedules contain service and infrastructure data to help the reader understand how the information in the City's financial report relates to the services the City provides and the activities it performs.

134

135-139

140-143

144-148

149-150

151-153

City of Montebello Net Position by Component

Last Ten Fiscal Years

Fiscal Year 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18

Government Activities Invested in capital assets, net of related debt 28,992,463 51,377,564 50, 154,445 53,911,210 54,636,719 55,212,827 56,943, 195 58,082,755 $ 58,372,453 $ 60,131,857 Restricted 63,061, 184 24,305, 187 28,522,292 27,662,376 20,219,054 29,141,471 22,556,230 27,459,377 37,978,261 30,870,850 Unrestricted (68,290, 188) (46,153,068) (42,582,327) (15,674,582) (4,370,518) (13,656,834) (93,615,680) (96,385,527) (152,645,842) (104,996,678)

Total governmental activities net assets 23,763,459 29,529,683 36,094,410 65,899,004 70,485,255 70,697,464 (14, 116,255) (10,843,395) (56,295, 128) (13,993,971)

Business-Type Activities Invested in capital assets, net of related debt 37,693,683 50,781,549 50,305,058 55,556,802 55,753,529 53,562,215 51,644,871 49,943,300 62,240,064 50,936,245 Restricted 302,086 302, 120 1,017,411 496,628 153,929 37,063,750 26,656,264 Unrestricted (1,469,666) (3,518,995) (5,887 ,082) (11,263,176) (8,619,600) (8,758,663) (29,367,364) (29,377 ,639) (26,856,332) (70,241,601)

36,224,017 47,262,554 44,417,976 44,595,712 47,436,049 45,820,963 22,774, 135 20,719,590 72,447,482 7,350,908 Primary Government

Invested in capital assets, net of related debt 66,686, 146 102, 159, 113 100,459,503 109,468,012 110,390,248 108, 775,042 108,588,066 108,026,055 120,612,517 111,068, 102 Restricted 63,061, 184 24,305, 187 28,522,292 27,964,462 20,521,174 30, 158,882 23,052,858 27,613,306 75,042,011 57,527, 114 Unrestricted (69,759,854) (49,672,063) (48,469,409) (26,937,758) (12,990,118) (22,415,497) (122,983,044) (125,763,166) (179,502,174) (175,238,279)

59,987,476 76,792,237 80,512,386 $ 110,494,716 $ 117,921,304 $ 116,518,427 8,657,880 9,876,195 $ 16, 152,354 $ (6,643,063)

Source: City Financial Statements

135

City of Montebello Change in Net Position - Expenses and Program Revenues


Fiscal Year 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18

Expenses: Governmental Activities

General government 10,840,411 5,181,691 6,003,579 6,625,106 3,397,386 3,868,688 8,214,000 9,376,874 5,800,255 10,590,425 Public safety 33,131,797 34,440,947 30, 196,363 29,927,417 31,736,790 33,376,844 33,233,838 34,991,222 38,180,200 39,719,749 Public works 5,098,404 5,383,610 5,916,177 5,871,891 6,222,809 7,063,899 7, 145,909 7,314,357 6,892,489 9,824,917 Parks, recreation, and culture 4,994,538 6, 194,042 4,955,587 5,092,219 5,183,532 4,943,297 4,433,420 4,244,463 3,589,256 3,948, 193 Housing and community development 12,760,934 12,479,919 11,811,986 4,587,403 2,042,906 4,045,684 3,662, 170 4,149,321 4,625,548 2,923, 175 Unallocated infrastructure depreciation 659,156 698,249 704,807 704,807 704,807 704,807 704,807 464,900 704,807 704,807 Interest on long-term debt 5,837,489 5,072,065 5, 143, 129 3,329,205 1,954,908 1,254,337 1,908,319 1,238,015 3,882,293 356,579

Total governmental activities and expenses 73,322,729 69,450,523 64,731,628 56,138,048 51,243,138 55,257,556 59,302,463 61,779, 152 63,674,848 68,067,845

Business-Type Activities Transit system 25,773,717 24,752,340 23,653,069 27,864,749 28,190,745 30,850,208 29,557,024 28,530,818 28,540,085 34,587,386 Golf course 3,404,206 3,064,788 3,028,680 2,595,321 3,015,645 2,965,428 3,095, 101 2,914,099 2,745,203 3,169,377 Montebello Hilton 3,521,600 3,509,164 3,483,481 3,443,794 3,558,013 4,302,388 4,600,977 4,742, 125 4,866,766 4,590,912 Other programs 1,895,974 2,125,401 2, 133,751 2,143,480 2,515,604 2,806,018 2,945,512 3,138,928 2,731,099 2,727,290 Interest on long-term debt 3,409,286

Total business-type activities and expenses 34,595,497 33,451,693 32,298,981 36,047,344 37,280,007 40,924,042 40, 198,614 39,325,970 38,883, 153 48,484,251

Total primary government expenses 107,918,226 102,902,216 97,030,609 92,185,392 88,523,145 96,181,598 99,501,077 101,105,122 102,558,001 116,552,096

Program revenues: Governmental Activities

Charges for services General government 3,293,527 3,854,697 4, 171,044 2,787,309 3,071,973 4,074,735 3,720,526 3,548,576 3,709,505 3,921,684 Public safety 2,383,579 2,741,147 2,570,877 1,863,933 2,103,502 2,767,256 2,644,432 3,167,766 3,311,979 3,227,705 Public works 5,651,310 5,059,588 4,911,495 4,812,850 5,377,463 5,427,918 5,391,630 5,565,885 5,515,371 4,421,025 Parks, recreation, and culture 735,910 501,801 602,711 631,832 665,468 533,575 527,346 414,018 471,348 486,274 Housing and community development 1,018,644

Operating grants and contributions 7,256,003 9,829,694 8,283, 188 7, 155,005 8,519,753 8,292,687 9,522,821 10, 109,717 7,382,419 9,759,068 Total governmental activities program revenues 19,320,329 21,986,927 20,539,315 17,250,929 19,738,159 21,096,171 21,806,755 22,805,962 20,390,622 22,834,400

Business-Type Activities Charges for services

Transit system 6,391,094 6,156,991 6,340,026 6,277,092 6,078,505 5,985,798 5,838,678 5,680,227 5,086,810 4,728,570 Golf course 2,806,983 2,537,564 2,633,844 2,321,582 2,389, 101 2,385,213 2,312,095 2,294,518 2,091,410 2,194,976 Montebello Hilton 3,994,972 3,846,393 4,027,805 4, 124,516 4,316,746 5,522,384 6,270,196 6,579,766 6,834,772 7, 197,488 Other programs 1,457,989 1,585,638 1,515,315 1,444,863 1,325,834 2,121,732 2,505,234 2,295,158 2,409,339 3,070,381

Operating grants and contributions 17,243,596 15,487,526 16,398,554 16,868,344 18,834,317 19,726,264 20,914,063 19,314,666 20,593,875 23,014,664 Capital grants and contributions 9,578,566 16,253,784 3,226,572 5,024,417 7,777,911 2,764,857 1,780,967 1,726,259 5,540,308 5,994,885

Total business-type activities program revenues 41,473,200 45,867,896 34, 142, 116 36,060,814 40,722,414 38,506,248 39,621,233 37,890,594 42,556,514 46,200,964

Primary government program revenues 60,793,529 67,854,823 54,681,431 53,311,743 60,460,573 59,602,419 61,427,988 60,696,556 62,947, 136 69,035,364

Net (Expense) Revenue: Governmental activities (54,002,400) (47,463,596) (44,192,313) (38,887, 119) (31,504,979) (34, 161,385) (37,495,708) (38,973, 190) (43,284,226) (45,233,444) Business-type activities 6,877,703 12,416,203 1,843, 135 13,470 3,442,407 (2,417,794) (577,381) (1,435,376) 3,673,361 (2,283,287)

Total primary government net (expense) revenue (47, 124,697) (35,047,393) (42,349,178) (38,873,649) (28,062,572) (36,579, 179) (38,073,089) (40,408,566) (39,610,865) (47,516,731)


136

2008-09 2009-10 2010-11 2011-12 General Revenues and Other Changes in Net Assets:

Governmental Activities: Property taxes, levied for general purposes $ 26,981, 166 $ 26,991,825 $ 26,319,201 $ 20,245,594 Franchise taxes 1,088,537 1,254,753 1,311,388 1,221,311 Sales tax 10,509,273 8,048,518 10,446,061 10,847,400 Transient occupancy tax 234,980 243,276 255,705 297,679 Unrestricted intergovernmental revenue 5,288,610 5,252,095 5,291,513 5,156,500 Other revenues 3,264,050 1,873,556 2,078,045 2,415,809 Investment earnings 2,671,569 341,815 260,297 72,750 Transfers 771,708 1,377,666 5, 143,761 (164,266)

Total governmental activities 50,809,893 45,383,504 51,105,971 40,092,777

Business-Type Activities: Other revenues Investment earnings 73,597 10,990 Transfers (771,708) (1,377,666) (4,020,809) 164,266

Total business-type activities (698,111) (1,377,666) (4,009,819) 164,266

Total primary government $ 50, 111,782 $ 44,005,838 $ 4 7,096, 152 $ 40,257,043

Change in Net Position: Governmental Activities: $ (3, 192,507) $ (2,080,092) $ 6,913,658 1,205,658 Business-Type Activities: 6, 179,592 11,038,537 (2,166,684) 177,736

Total primary government 2,987,085 $ 8,958,445 $ 4,746,974 1,383,394


137

City of Montebello Change in Net Position - General Revenues


Fiscal Year 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18

$ 15,449,858 $ 14,683,907 $13,759,217 $ 15,988,925 16,507,389 16,961,038 1,158,219 1,303,603 1,410,918 1,405,229 1,493,956 2,141,450

11,363,067 11,725,818 12,563,805 13,992,347 13,267,373 13,118,981 364,425 355,404 357,896 365,290 401,852 414,198

5,205,958 5,394,777 5,613,991 5,235,832 5,948,161 6,322,299 2,239,898 2,154,383 3,029,784 4,538,998 7,214,594 2,626,065

54,393 49,705 54,391 86,920 172,515 665,702 602,070 (792,325) (4,948,058) 632,509 (47,976,779) (1,634,476)

36,437,888 34,875,272 31,841,944 42,246,050 (2,970,940) 40,615,257

10,383 6,433 13,340 135,411 448,876 (602,070) 792,325 4,948,058 (632,509) 47,976,779 1,634,476

(602,070) 802,708 4,954,491 (619,169) 48, 112, 190 2,083,352

$ 35,835,818 $ 35,677,980 $ 36, 796,435 $ 41,626,881 45, 141,250 42,698,609

4,932,909 212,209 $ (5,653,764) $ 3,272,860 (46,255, 166) (4,618, 187) 2,840,337 (1,615,086) 4,377,110 (2,054,545) 51,785,551 (199,935)

7,773,246 $ (1,402,877) $ ( 1,276,654) $ 1,218,315 5,530,385 (4,818,122)

2008-09 2009-10 2010-11 2011-12 General Fund

Reserved Unreserved

Total general fund

All Other Governmental Funds: Reserved Unreserved, designated reported in:

Special revenue funds Capital projects funds

Unreserved, undesignated reported in: Special revenue funds Capital projects funds

Total all other governmental funds

General Fund Nonspendable $ 83,346 $ 107,756 $ 83,346 $ 107,756 Restricted Committed Assigned 497,558 497,558 Unassigned 4,394,672 7,047,301 4,394,672 7,047,301

Total general fund $ 4,975,576 $ 7,155,057 $ 4,975,576 $ 7, 155,057

All Other Governmental Funds: Nonspendable $15, 170,693 $ 2,313,452 $ 15, 170,693 $ 2,313,452 Restricted

Debt service 19,520,813 5,918,851 19,520,813 5,918,851 Special revenue funds 7,219,900 20,478,029 7,219,900 20,478,029 Capital projects funds 24,991,784 1,464,215 24,991,784 1,464,215

Committed Assigned Unassigned (14,421,751) (159,133) (14,421,751) (159,133)

Total all other governmental funds $ 52 ,481 ,439 $30,015,414 $ 52,481,439 $ 30,015,414


138

Fiscal Year 2012-13 2013-14

$ 187,730 $ 142,394

7,879,020 8,387,981 $ 8,066,750 $ 8,530,375

$ 2,288,508 $ 2,057,207

6,116,124 7,960,932 22,034,631 18,000,779

1,445,551 1,090,991

(80,230) $ 31,804,584 $ 29, 109,909

City of Montebello Fund Balances of Governmental Funds


2014-15 2015-16 2016-17 2017-18

$ 64,038 $ 122,474 $ 1,380,282 $ 1,383,212 4,666,731 4,666,731

8,934,094 9,325,124 7,995,872 11,287,858 $ 8,998,132 $ 9,447,598 $ 14,042,885 $ 17,337,801

$10,719,195 $ 10,258,543 $ 8,533,222 $ 8, 157,472

3,070,688 3,865,331 13,162,936 366,492 7,814,447 12,882,023 15,951,357 17,557,949 1,093,640 453,480 330,746 122,206

(111,631) (682,268) (318,397) (157,153) $ 22,586,339 $26,777,109 $ 37,659,864 $ 26,046,966

City of Montebello Governmental Activities Tax Revenues by Source


Transient Fiscal Property Sales and Occupancy Franchise Other Total Year Tax Use Tax Tax Tax Taxes Taxes

2008-09 $ 26,895,881 $ 10,391,851 $ 234,980 $ 1,088,537 $ 939,751 $ 39,551,000

2009-10 26,991,825 8,417,053 243,276 1,254,753 961,373 37,868,280

2010-11 27, 106,442 10,413, 127 255,705 1,311,388 1,087,329 40,173,991

2011-12 23,636,827 10,847,400 297,679 1,221,311 1,765,267 37,768,484

2012-13 20,655,816 11,363,067 271,153 1, 158,219 93,272.00 33,541,527

2013-14 20,078,684 11,725,818 355,404 1,303,603 118,241 33,581,750

2014-15 19,373,208 12,563,805 357,896 1,410,918 132, 100 33,837,927

2015-16 21,224,757 13,992,347 365,290 1,405,229 137,883 37,125,506

2016-17 16,507,389 13,267,373 401,852 1,493,956 151,611 31,822, 180

2017-2018 16,961,038 13, 118,981 414,198 2, 141,450 171,762 32,807,430


139

City of Montebello Assessed Value and Estimated Actual Value of Taxable Property

Last Ten Fiscal Years (rates are per $1,000 of assessed value)

City Redevelopment Agency

Taxable Taxable Fiscal Less: Assessed Less: Assessed

Year Secured Unsecured Exemptions Value Secured Unsecured Exemptions Value

2008-09 $ 3, 126,247 $ 93,224 $ 90,524 $ 3,128,947 $ 1,490,281 $128,875 $ 32,670 $ 1,586,486

2009-10 3,075,831 94,754 97,719 3,072,866 1,531,767 131,990 34,413 1,629,344

2010-11 3,009,280 93,206 100,372 3,002, 114 1,565,508 139,738 39,759 1,659,537

2011-12 3,081,874 95,765 99,789 3,077,850 1,578,855 139,820 41,746 1,676,929

2012-13 3,166,417 87,265 104,467 3,149,215 1,591, 142 135,785 42,457 1,684,470

2013-14 4,938,771 220,911 146,649 5,013,033 1,671,422 133,318 40,811 1,763,929

2014-15 3,420,628 99,344 110,362 3,409,610 1,701,294 129,735 41,886 1,789, 143

2015-16 3,543,765 82,016 113,073 3,512,708 1,708, 111 129,094 44,039 1,793, 167

2016-17 3,693,850 82,228 99,747 3,676,331 1,734,850 141,080 26,411 1,849,518

2017-18 3,845,241 76,621 103,168 3,818,695 1,789,082 144,402 42,088 1,891,396

Source: Los Angeles County Assessor and Auditor

140

2008-09 2009-10 2010-11 2011-12

City Direct Rate:

City basic rate 1.00000 1.00000 1.00000 1.00000

Retirement 0.19788 0.19788 0.19788 0.19788

Total City Direct Rate 1.19788 1.19788 1.19788 1.19788

Overlapping Rates:

L.A. County General 0.00000 0.00000 0.00000 0.00000

Montebello USD 0.08063 0.09673 0.09792 0.10001

L.A. County Flood Control 0.00000 0.00000 0.00000 0.00000

Metropolitan Water District 0.00430 0.00430 0.00370 0.00370

Community College 0.02212 0.02311 0.04031 0.03530

Totals 1.30493 1.32202 1.33981 1.33689

Source: Muniservices, LLC

141

City of Montebello Direct and Overlapping Property Tax Rates


Fiscal Year 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18

1.00000 1.00000 1.00000 1.00000 1.00000 1.00000

0.19788 0.19788 0.19788 0.19788 0.19788 0.19788

1.19788 1.19788 1.19788 1.19788 1.19788 1.19788

0.00000 0.00000 0.00000 0.00000 0.00000 0.00000

0.09630 0.09457 0.08750 0.08715 0.14705 0.13514

0.00000 0.00000 0.00000 0.00000 0.00000 0.00000

0.00350 0.00350 0.00350 0.00350 0.00350 0.00350

0.03756 0.04454 0.04017 0.03575 0.03596 0.04599

1.33524 1.34049 1.32905 1.32428 1.38439 1.38251

Taxable Assessed

Taxpayer Value

Montebell Town Center Investor, LLC $ 206,933, 152

Brixmor Montebello Plaza LP 74,057,392

Freeport-McMoran Oil and Gas LLC 54,778,925

Bimbo Bakeries, USA Inc 54,014,533

K K 3A Corporation 47,645,293

Somerset Apartments LLC 45,348,661

Comref So CA Industrial Sub G LLC 43,572,929

RREEF America Reil II Corporation 38,462,976

Kir Montebello LP 34,420,287

Prologis California I LLC 32,044,786

$ 631,278,934


City of Montebello Principal Property Tax Payers

Current Fiscal Year and Nine Fiscal Years Ago

2017-18 2008-09 Percentage Percentage ofTotal City ofTotal City

Taxable Taxable Taxable Assessed Assessed Assessed

Rank Value Value Rank Value

3.65% $ 171,119,866 3.77%

2 1.31% 0.00%

3 0.97% 0.00%

4 0.95% 82,858,630 1.83%

5 0.84% 0.00%

6 0.80% 0.00%

7 0.77% 0.00%

8 0.68% 33,984,666 0.75%

9 0.61% 30,412,771 0.67%

10 0.57% 44,469, 101 0.98%

11.14% $ 362,845,034 8.00%

142

Collected Within the Fiscal Total Tax Fiscal Year of the Levy Year Levy Amount % of Levy

2008-09 $ 9,799,000 $ 9,143,220 93.31%

2009-10 10,416,000 8,995,261 86.36%

2010-11 10,095,367 8,683,277 86.01%

2011-12 7,869,020 10,379,033 131.90%

2012-13 6,975,325 11,293,837 161.91%

2013-14 7,279,631 7,275,179 99.94%

2014-15 7,504,080 7,092,120 94.51%

2015-16 7,616,230 10,352,514 135.93%

2016-17 7,923,442 10,685,828 134.86%

2017-18 8,159,530 11,032,559 135.21%

Note (1) Negative number not included

City of Montebello Property Tax Levies and Collections


Collections in Total Collections to Date Subsequent Years Amount % of Levy

$ 560,692 $ 9,703,912 99.03%

474,808 9,470,069 90.92%

613,510 9,296,787 92.09%

10,379,033 131.90%

11,293,837 161.91%

338,473 7,613,652 104.59%

330,553 7,422,673 98.92%

385,447 10,737,961 140.99%

579,837 11,265,665 142.18%

659,322 11,691,881 143.29%

Source: Los Angeles County Auditor - AF91 Report and City Remittance Advice Summary

143

Governmental Activities Fiscal Certificates of Tax Year Participation Allocation Bonds Revenue

2008-09 $ 21,671,100 $ 74,057,213 $ 16,170,000

2009-10 25,450,000 71,779,239 15,895,000

2010-11 19,213,600 64,603,222 15,575,000

2011-12 18,351,480 15,210,000

2012-13 17,447,900 14,800,000

2013-14 16,502,860 14,370,000

2014-15 25,728,200

2015-16 24,738,440

2016-17 78, 171,940

2017-18 10,409,600


144

City of Montebello Ratios of Outstanding Debt by Type


Total Primary Total Debt Other Government Per Capita

$ 15,534, 163 $ 127,432,4 76 1,941

15,273,662 123,415,981 1,886

17,190,970 116,582,792 1,772

33,561,480 510

32,247,900 513

30,872,860 486

25,728,200 405

24,738,440 387

78,171,940 1,223

10,409,600 162

Fiscal Certificates of Year Participation

2008-09 $ 21,671

2009-10 25,450

2010-11 19,213

2011-12 18,351

2012-13 17,448

2013-14 16,503

2014-15

2015-16

2016-17

2017-18

City of Montebello Ratios of General Bonded Debt Outstanding

Last Ten Fiscal Years (in thousands except for Per Capita)

Outstanding General Bonded Debt Tax Allocation Percent of Per

Bonds Revenue Total Assessed Value(1) Capita

$ 74,057 $ 16,170 $ 111,898 2.39% 1,704

71,779 15,895 113,124 2.30% 1,653

64,603 15,575 99,391 2.15% 1,511

15,210 33,561 0.74% 510

14,800 32,248 0.65% 513

14,370 30,873 0.62% 486

25,728 25,728 0.50% 405

24,738 24,738 0.47% 387

78,172 78,172 1.41% 1,223

10,410 10,410 0.00% 162

(1) Assessed value has been used because the actual value of taxable property is not readily available in the State of California

Source: City Finance Department

145

2017-18 Assessed Valuation: $5,710,091, 139

OVERLAPPING TAX AND ASSESSMENT DEBT: Los Angeles County Flood Control District Los Angeles Community College District El Rancho Unified School District Los Angeles Unified School District Montebello Unified School District Los Angeles County Regional Park and Open Space Assessment District

TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT

DIRECT AND OVERLAPPING GENERAL FUND OBLIGATION DEBT: Los Angeles County General Fund Obligation Los Angeles County Superintendent of Schools Certificates of Participation Los Angeles County Sanitation District No. 2 Authority Los Angeles County Sanitation District No. 15 Authority Los Angeles Unified School District Certificates of Participation Montebello Unified School District Certificates of Participation City of Montebello General Fund Obligation City of Montebello Equipment Lease Obligations

TOTAL GROSS DIRECT AND OVERLAPPING GENERAL FUND DEBT: Less: Los Angeles Country General Fund Obligations supported

by landfill revenues Los Angeles Unified School District Qualified Zone

Academic Bonds supported by building fund 51 City of Montebello Obligations supported from surplu

increment and golf and hotel revenues

TOTAL NET DIRECT AND OVERLAPPING GENERAL FUND DEBT:

OVERLAPPING TAX INCREMENT DEBT (Successor Agency):

TOTAL GROSS DIRECT DEBT TOTAL NET DIRECT DEBT TOTAL GROSS OVERLAPPING DEBT TOTAL NET OVERLAPPING DEBT

GROSS COMBINED TOT AL DEBT NET COMBINED TOTAL DEBT

Total Outstanding Debt 6/30/18

$ 60,600,000 4,165,830,000

68,713,551 10,604, 150,000

196,211,890 26,575,000

$ 1,921,992,404 6,500,306

11,504, 168 11,775,920

195,975,000 7,830,000

79,715,000 296,934

$ 32,351,530

City of Montebello Direct and Overlapping Debt

June 30, 2018

City's Share of

Percentage Overlapping Applicable (1) Debt 6/30/18

0.208% $ 126,048 0.719% 29,952,318 0.003% 2,061 0.001% 106,042 35.68% 69,998,592 0.401% 106,566

$ 100,291,626

0.401% $ 7,707,190 0.401% 26,066 8.883% 1,021,915 0.750% 88,319 0.001% 1,960

35.675% 2,793,353 100.000% 79,715,000 100.000% 296,934

91,650,737

74

12,310,400

$ 79,340,263

100% $ 32,351,530

$ 80,011,934 $ 67,701,534 $ 144,281,960 $ 144,281,886

$ 224,293,894 $ 211,983,420

1) The percentage of overlappng debt applicable to the city is estimated using taxable assessed property value. Applicable percentages were estimated by determining the portion of the overlapping district's assessed value that is within the boundaries of the city divided by the district's total taxable assessed value. 2) Excludes accreted value 3) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage and non-bonded capital lease obligation.

Ratios to 2017-18 Assessed Valuation: Total Overlapping Tax and Assessed Debt Total Gross Direct Debt (80,011,934,000)

Total Net Direct Debt (67,701,534) Gross Combined Total Debt Net Combined Total Debt

1.76% 1.40% 1.19% 3.93% 3.71%

Ratios to Redevelopment Incremental Valuation ($1,756,743,508): Total Overlapping Tax Increment Debt 1.84%

Source: California Municipal Statistics

146

2008-09 2009-10 Assessed valuation 18,861,572,384 18,808,841,532

Conversion Percentage 25.00% 25.00%

Adjusted assessed valuation 4,715,393,096 4,702,210,383

Debt limit percentage 15.00% 15.00%

Total net debt applicable to limi 707,308,964 705,331,557

Legal debt margin 707,308,964 705,331,557

2013-14 2014-15 Assessed valuation 19,864,600,740 20,609,967,972

Conversion Percentage 25.00% 25.00%

Adjusted assessed valuation 4,966,150,185 5, 152,491,993

Debt limit percentage 15.00% 15.00%

Total net debt applicable to limi 744,922,528 772,873,799

Legal debt margin 744,922,528 772,873,799

City of Montebello Legal Debt Margin Information


Fiscal Year 2010-11 2011-12 2012-13

19,358,675,984 19,019,112,168 19,404,069,772

25.00% 25.00% 25.00%

4,839,668,996 4,754,778,042 4,851,017,443

15.00% 15.00% 15.00%

725,950,349 713,216,706 727,652,616

725,950,349 713,216,706 727,652,616

Fiscal Year 2015-16 2016-17 2017-18

21,223,501,036 22, 103,394,800 22,840,364,556

25.00% 25.00% 25.00%

5,305,875,259 5,525,848,700 5,710,091,139

15.00% 15.00% 15.00%

795,881,289 828,877,305 856,513,671

795,881,289 828,877,305 856,513,671

The Government Code of the State of California provides for a legal debt limit of 15% of gross assessed. However, this provision was enacted when assessed valuation was based upon 25% of market value.

Effective with the 1981-82 fiscal year, each parcel is now assessed at 100% of market value (as of the most recent change in ownership fort parcel). The computations shown above reflect a conversion of assessed valuation data for each fiscal year that was in effect at the time that legal debt margin was enacted by the State of California for local governmenets located with in the state.

Source: Los Angeles County Assessor and Auditor Combined

147

Fiscal Gross Less Operating Net Available Year Revenue Expenses Revenue

2008-09 2,823,898 (3,163,896) (339,998)

2009-10 2,538,595 (2,842,743) (304, 148)

2010-11 2,633,844 (2,826,967) (193,123)

2011-12 2,321,581 (2,567,019) (245,438)

2012-13 2,389, 101 (2,826,082) (436,981)

2013-14 2,385,213 (2,748,196) (362,983)

2014-15 2,312,095 (2,992,640) (680,545)

2015-16 2,294,518 (2, 753,607) (459,089)

2016-17 2,091,410 (2,535,564) (444,154)

2017-18 2,194,976 (3, 169,377) (974,401)


Golf Revenue Bonds

Principal

163,440

171,980

180,520

192,880

201,420

209,960

256,420

225,240

233,500

257,660

148

City of Montebello Pledged-Revenue Bond Coverage


Debt Service Interest Total Coverage

240,310 403,750 -84.21%

218,711 390,691 -77.85%

201,173 381,693 -50.60%

193,653 386,533 -63.50%

200,594 402,014 -108.70%

175,667 385,627 -94.13%

67,650 324,070 -210.00%

134,526 359,766 -127.61%

116,281 349,781 -126.98%

110,341 368,001 -264.78%

Calendar Personal Income Year Population (in millions)

2008-09 65, 187 1,209

2009-10 65,424 1, 185

2010-11 65,781 1,262

2011-12 62,857 1,272

2012-13 63, 184 1,328

2013-14 63,527 1,288

2014-15 63,555 1,321

2015-16 63,921 1,329

2016-17 63,917 1,428

2017-18 64,327 1,529


149

City of Montebello Demographic and Economic Statistics


Capita Personal Unemployment Income Rate

18,546 8.40%

18, 110 12.90%

19,187 14.10%

20,230 13.70%

21,013 12.20%

20,269 11.00%

20,783 6.71%

20,784 4.87%

22,344 4.50%

23,766 4.40%

2017-18 Percent of Total

Employer Employees Employment* Montebello Unified Sehl Dist* 1,374 4.6735%

Beverly Hospital 930 3.1633%

City of Montebello 487 1.6565%

Costco 358 1.2177%

Bimbo Bakery 326 1.1088%

Macy's 320 1.0884%

Wilbur Curtis CO 301 1.0238%

Old Dominion Freight Line 200 0.6803%

Rio Hondo Convalescent Hosp 186 0.6327%

Jc Penney 179 0.6088%

Total Top Ten 4,661 15.8537%

Total Employment * 29,400


150

City of Montebello Principal Employers

Current Fiscal Year and Ten Fiscal Years Ago

2007-08 Percent of Total

Employer Employees Employment * Oroweat Food Company 795 0.0174%

Minson Corporation 633 0.0138%

Royal Paper Box Company 170 0.0037%

Montebello Unified Sehl Dist 3,577 0.0782%

City of Montebello 604 0.0132%

Montebello Town Center 1,897 0.0415%

Kaiser 4,496 0.0983%

Beverly Hospital 995 0.0218%

Litho Monarch 2,865 0.0626%

Costco 200 0.0044%

16,232 0.3549%

Function 2008-09 General Government 53

Public Safety 197

Public Works 15

Parks and Recreation 115

Economic Development 6

Transit 215

Totals 601

Function 2013-14 General Government 33

Public Safety 177

Public Works 38

Parks and Recreation 99

Economic Development 15

Transit 253

Totals 615


City of Montebello Full-Time and Part-Time City Employees by Function


Fiscal Year 2009-10 2010-11 2011-12 2012-13

42 43 47 37

182 182 167 203

12 12 14 17

123 123 115 133

7 7 18

217 217 212 200

583 584 555 608

Fiscal Year 2014-15 2015-16 2016-17 2017-18

34 54 53 53

180 181 176 176

39 30 17 22

96 84 71 73

13 16 12 12

254 249 238 241

616 614 567 577

151

City of Montebello Operating Indicators by Function

Last Ten Calendar Years

Calendar Year

Function 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Police: As of June

Arrests 2,598 2,702 2,621 2,093 2,093 1,896 1,642 2,005 2,037 1,648

Traffic violations 4,900 6,862 2,467 2,968 2,773 2,682 2,505 1,418 2,191 2,096

Parking violations 20,018 19,413 22,661 20,448 20,448 18,950 16,446 16,767 17,507 17,346

Fire:

Number of calls answered 4,165 5,037 4,891 4,977 4,800 5,100 5,686 6,051 6,494 6,661

Inspections conducted 1,616 1,320 1,160 728 625 988 1,248 1,094 809 1,271

Public Works:

Street resurfacing (miles) 4 14.16 15.15 1.60 0.51 2.28 1.42 5.96 0.47 3.20

Sidewalk repairs (sq ft) N/A 31,930 32,281 25,997 11,100 35,435 29,632 7,942 3,600 15,042

Potholes repaired N/A N/A 5,352 3,010 3,325 3,876 3,774 4,009 7,163 7,317

Storm drains cleaned N/A N/A 1,702 0 0 N/A N/A N/A N/A N/A

Parks and Recreation:

Number of recreation classes 167 68 190 210 137 153 160 192 214 268

Number of facility rentals 44 2,660 854 689 708 2,156 3,180 3,438 3,428 3,589


152

City of Montebello Capital Asset Statistics by Function


Fiscal Year Function 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18

Police: Police Stations

Fire: Fire Stations 3 3 3 3 3 3 3 3 3 3

Public Works: Street (miles) 125 125 125 125 125 125 125 125 125 5 Street Lights 3,682 3,682 3,682 3,682 3,682 3,682 3,682 3,682 3,683 4,718 Traffic Signals 80 81 81 81 81 81 81 79 79 79

Parks and Recreation: Parks 7 7 7 7 7 7 7 7 7 7 Community Centers 4 4 3 3 3


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APPENDIXB

GENERAL INFORMATION REGARDING THE CITY OF MONTEBELLO AND LOS ANGELES COUNTY

The following information concerning Los Angeles Count;y and the Cit;y of Montebello is included only for the purpose of supplying general information regarding the Count;y and the Cit;y. The 2019 Bonds are not a debt of the Count;y) the State or arry of its political subdivisions) and none of the Count;y) the State nor arry of their political subdivisions) except for the Cit;y and the Authority) are liable therefor.

Although reasonable efforts have been made to include up-to-date information in this Appendix BJ some of the information is not current due to delays in reporting of information by various sources. It should not be assumed that the trends indicated by the following data would continue beyond the specific periods reflected herein.

General Description and Background

The City of Montebello (the "City") is situated in eastern Los Angeles County, California. The City encompasses 8.2 square miles and is located 9 miles east of downtown Los Angeles. The City has access to three freeways: the San Gabriel River Freeway (State Highway 605) to the east, the Santa Ana Freeway (Interstate 5) to the south and the Pomona Freeway (State Highway 60) to the north. The City is a balanced community with light industry, residential areas, and commercial centers. It is bordered to the north by the cities of Monterey Park and Rosemead, to the east by the City of Pico Rivera, and to the west by the City of Commerce. Other surrounding cities include the cities of Bell Gardens, Whittier, South El Monte and Los Angeles.

The City was incorporated as a general law city in 1920. The City operates under the Council-Manager member form of government. The five City Council members, including the Mayor, are elected to four-year terms on alternate slates every two years. The Mayor and the Mayor Pro Tern are selected by the City Council to serve twoyear terms. The City Council appoints a City Manager. The population of the City was estimated to be 64,247 as of January 1, 2019.

Los Angeles County (the "County") is located in the Southern region of the State of California. It boarders 70 miles of coast on the Pacific Ocean and encompasses mountain ranges, valleys, forests, islands, lakes, rivers and desert. It is one of California's original 27 counties and was established on February 18, 1850. It is one of the nation's largest counties with 4,084 square miles and has the largest population of any county in the nation - nearly 10 million residents who account more than one quarter of California's population. As a subdivision of the state, the County is charged with providing numerous services that affect the lives of all residents, including law enforcement, tax collection, public health protection, public social services, elections and flood control.

The County is home to 88 incorporated cities and many unincorporated areas. In between the large desert portions of the County- which make up around 40% ofits land area - and the heavily urbanized central and southern portions, sit the San Gabriel Mountains, containing the Angeles National Forest. Los Angeles is a charter county governed by a five-member elected Board of Supervisors. Each member serves alternating four-year terms, and is elected by residents from their respective supervisorial districts to serve four-year terms. The other elected officials of the County are the Assessor, District Attorney and Sheriff.

The County is the third-largest metropolitan economy in the world, with a Nominal GDP of over $700 billion-larger than the GDPs of Belgium, Norway, and Taiwan. The County serves as the central trade district for the western United States and the gateway to the Asian economies. The County is one of the most ethnically diverse counties in the U.S. The county seat, the City of Los Angeles, is also California's most populous city and the nation's second largest city with about 4 million people.

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Population

The following table contains the population of the City, the County and the State of California for the last five years.

CITY OF MONTEBELLO, LOS ANGELES COUNTY AND STATE OF CALIFORNIA

POPULATION (as of January 1)

City of Los Angeles State of Year Montebello County California 2015 64,315 10,155,753 38,952,462 2016 64,289 10,185,851 39,214,803 2017 64,301 10,226,920 39,504,609 2018 64,316 10,254,658 39,740,508 2019 64,247 10,253,716 39,927,315

Source: California Department of Finance, E-4 Population Estimate for Cities, Counties, and the State, 2010-2019, with 2018 Census Benchmark.

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Employment

The following tables summarize historical employment and unemployment for the County, the State of California and the United States:

LOS ANGELES COUNTY, CALIFORNIA, AND UNITED STATES CIVILIAN LABOR FORCE, EMPLOYMENT, AND UNEMPLOYMENT

(Annual Averages)

Unemployment Year 2014

2015

2016

2017

Area Los Angeles County California United States

Los Angeles County California United States




Labor Force

5,025,900 18,811,400

155,922,000

5,011,700 18,981,800

157,130,000

5,043,300 19,102,700

159,187,000

5,123,900 19,312,000

160,320,000

5,136,300 19,398,200

162,075,000

Employment

4,610,800 17,397,100

146,305 ,000

4,674,800 17,798,600

148,834,000

4,778,800 18,065,000

151,436,000

4,883,600 18,393,100

153,337,000

4,896,500 18,582,800

155,761,000

Unemployment

415,100 1,414,300 9,617,000

336,900 1,183,200

146,411,000

264,500 1,037,700

148,976,000

240,300 918,900

6,982,000

239,800 815,400

6,314,000

Rate C1l

8.3% 7.5 6.2

6.7 6.2 5.3

5.2 5.4 4.9

4.7 4.8 4.4

4.7 4.2 3.9

Source: California Employment Development Department, Monthly Labor Force Data for Counties, Annual Average 2010-2017, and US Department of Labor. (1) The unemployment rate is computed from unrounded data, therefore, it may differ from rates computed from rounded figures available in

this table. (2) Latest available full-year data.

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Major Employers in the City

The table below sets forth the principal employers in the City in 2018.

CITY OF MONTEBELLO 2018 PRINCIPAL EMPLOYERS

#of Employer Employees

Montebello Unified School District 1,374 Beverly Hospital 930 City of Montebello 487 Costco 358 Bimbo Bakery 326 Macy's 320 Wilbur Curtis Co 301 Old Dominion Freight Line 200 Rio Hondo Convalescent Hospital 186 JC Penny 179

Total Top 10 4,661


Major Industries in the County

% of Total

4.67% 3.16 1.65 1.21 1.10 1.08 1.02

.68

.63

.60

15.85

The table below sets forth the principal industries in Los Angeles County in 2018.

Source:

LOS ANGELES COUNTY 2018 PRINCIPAL INDUSTRIES

#of Industry Employees

Trade, Transportation and Utilities 828,400 Educational & Health Services 804,800 Professional & Business Services 629,100 Government 594,400 Leisure & Hospitality 552,200 Manufacturing 350,400 Financial Activities 222,200 Information 211,900 Other Services 155,300 Construction 144,300

Ten Largest Industries 4,493,000 All Other Industries 399,900

Total 4,892,900

Los Angeles County 2018 CAFR.

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% of Total

16.93% 16.45 12.86 12.15 11.29

7.16 4.54 4.33 3.17 2.95

91.83 8.17

100.00%

Construction Activity

The following table reflects the five-year history of building permit valuation for the City and the County:

CITY OF MONTEBELLO BUILDING PERMITS AND VALUATION

(Dollars in Thousands)

2014 2015 2016 2017 2018(1)

Permit Valuation: New Single-family $ 7,517 $ 9,068 $ 1,439 $ 35 $ 251 New Multi-family 2,800 5,044 5,956 Res. Alterations/ Additions 3,411 3,061 4,539 3,738 4,952

Total Residential 10,928 14,930 5,979 9,682 11,159 Total Nonresidential 12,991 21,347 5,696 9,350 9,558

Total All Building 23,920 36,277 11,676 19,033 20,718

New Dwelling Units: Single Family 43 54 6 Multiple Family 29

Total 43 83 6

LOS ANGELES COUNTY BUILDING PERMITS AND VALUATION

(Dollars in Thousands)

2014 2015 2016

Permit Valuation: New Single-family $ 1,744,290 $ 1,897,829 $ 2,162,018 New Multi-family 2,290,197 2,843,749 2,774,294 Res. Alterations/ Additions 1,474,930 1,641,457 1,639,294

Total Residential 5,509,417 6,383,036 6,575,607 Total Nonresidential 6,657,571 5,645,372 5,287,623

Total All Building $12,166,989 $12,028,408 $11,863,230

New Dwelling Units: Single Family 4,358 4,487 4,780 Multiple Family 14,349 18,405 15,589

Total 18,707 22,892 20,369

Source: Construction Industry Research Board: "Building Permit Summary." (1) Latest available full year data. Note: Totals may not add due to independent rounding.

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1 3 35 72

---

36 75

2017

$ 2,352,614 3,257,833 1,757,904

7,368,352 6,037,502

$13,405,855

5,456 17,023

22,479

2018(1)

$ 2,277,101 3,222,530 1,941,369

7,441,001 6,694,097

14,135,098

6,070 17,152

23,222

Median Household Income

The following table summarizes the total effective buying income and the median household effective buying income for the City, the County, the State of California and the nation for the past five years.

Source: Nielsen, Inc.

CITY OF MONTEBELLO, LOS ANGELES COUNTY STATE OF CALIFORNIA AND UNITED STATES

MEDIAN HOUSEHOLD EFFECTIVE BUYING INCOME

Year 2015

2016

2017

2018

2019

Area City of Montebello Los Angeles County California United States

City of Montebello Los Angeles County California United States




Total Effective Buying Income (OOO's Omitted)

$ 1,073,575 231,719,110 981,231,666

7,757,960,399

1,080,410 243,502,324

1,036,142,723 8,132,748,136

1,140,609 261,119,300

1,113,648,181 8,640, 770,229

1,171,921 271,483,825

1,183,264,399 9,017,967,563

1,213,448 281,835,290

1,243,564,816 9,487,165,436

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Median Household Effective Buying

Income $ 42,427

48,950 53,589 46,738

43,070 50,236 55,681 48,043

44,962 54,720 59,646 50,735

46,113 56,831 62,637 52,841

48,508 60,174 65,870 55,303

APPENDIXC

SUMMARY OF CERTAIN PROVISIONS OF THE PRINCIPAL LEGAL DOCUMENTS

The following is a summary of certain provisions of the Indenture and the Lease. This summary is not to be considered a full statement of the terms of such documents and accordingly is qualified by reference thereto and is subject to the full text thereof Capitalized terms not otherwise defined in this summary or in this Official Statement have the respective meanings set forth in the Indenture.

DEFINITIONS

Certain Definitions

Unless the context otherwise requires, the terms defined below shall have the meanings defined below, the following definitions to be equally applicable to both the singular and plural forms of any of the terms defined in the Indenture.

"Additional Rental" means the amounts specified as such in the Lease, as such amounts may be adjusted from time to time in accordance with the terms thereof.

"Administrative Expenditures" means any expenditures of the Authority or the Trustee for insurance, fees and expenses of auditing, fees and expenses of the Trustee payable under the Indenture or the Lease and not otherwise paid or provided for by the City, and all other expenditures reasonably and necessarily incurred by the Authority or the Trustee by reason of the financing of the costs of the Project, including (without limitation) legal, financing and administrative expenses and expenses incurred by the Authority or the Trustee to compel full and punctual performance of the provisions of the Lease in accordance with the terms thereof.

"Annual Debt Service" means, for any Bond Year, the principal and interest payable on the Outstanding Bonds in such Bond Year.

"Assignment Agreement" means that certain Assignment Agreement dated as of December 1, 2019 by and between the Authority and the Trustee.

"Authority" means the Montebello Public Financing Authority, established pursuant to the laws of the State of California, organized and created pursuant to the terms and conditions of the Joint Powers Agreement.

State:

"Authorized Denominations" shall mean $5,000 or any integral multiple of $5,000.

"Authorized Investments" means any of the following, to the extent permitted by the laws of the

(1) Direct obligations of the United States of America (including obligations issued or held in book-entry form on the books of the Department of the Treasury, and CATS and TIGRS) or obligations the principal of and interest on which are unconditionally guaranteed by the United States of America.

(2) Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following federal agencies and provided such obligations are backed by the full faith and credit of the United States of America (stripped securities are only permitted if they have been stripped by the agency itself):

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1. U.S. Export-Import Bank (Eximbank) Direct obligations or fully guaranteed certificates of beneficial ownership

2. Farmers Home Administration (FmHA) Certificates of beneficial ownership

3. Federal Financing Bank

4. Federal Housing Administration Debentures (FHA)

5. General Services Administration Participation certificates

6. Government National Mortgage Association (GNMA or "Ginnie Mae") GNMA - guaranteed mortgage-backed bonds GNMA - guaranteed pass-through obligations

7. U.S. Maritime Administration Guaranteed Title XI financing

8. U.S. Department of Housing and Urban Development (HUD) Project Notes Local Authority Bonds New Communities Debentures - U.S. government guaranteed debentures U.S. Public Housing Notes and Bonds - U.S. government guaranteed public housing notes and bonds

(3) Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following non-full faith and credit U.S. government agencies (stripped securities are only permitted if they have been stripped by the agency itself):

1. Federal Home Loan Bank System Senior debt obligations

2. Federal Home Loan Mortgage Corporation (FHLMC or "Freddie Mac") Participation Certificates Senior debt obligations

3. Federal National Mortgage Association (FNMA or "Fannie Mae") Mortgage-backed securities and senior debt obligations

4. Student Loan Marketing Association (SLMA or" Sallie Mae") Senior debt obligations

5. Resolution Funding Corp. (REFCORP) obligations

6. Farm Credit System Consolidated systemwide bonds and notes

(4) Money market funds registered under the Federal Investment Company Act of 1940, whose shares are registered under the Federal Securities Act of 1933, and having a rating by S&P of AAAm-

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G; AAA-m; or AA-m and if rated by Moody's rated Aaa, Aal or Aa2, including funds for which the Trustee or an affiliate receives and retains a fee for services provided to the fund, whether as a custodian, transfer agent, investment advisor or otherwise.

(5) Certificates of deposit secured at all times by collateral described in (A) and/or (B) above. Such certificates must be issued by commercial banks, savings and loan associations or mutual savings banks including the Trustee, its parent holding company and their affiliates. The collateral must be held by a third party and the bondholders must have a perfected first security interest in the collateral.

( 6) Certificates of deposit, savings accounts, deposit accounts or money market deposits which are fully insured by FDIC, including BIF and SAIF, which may be from or with the Trustee, its parent holding company and their affiliates.

(7) Investment Agreements, including GIC's, Forward Purchase Agreements and Reserve Fund Put Agreements, with providers rated, or guaranteed by guarantors rated, at the time of investment, in the top three categories (without regard to modifiers) by any two or more Rating Agencies.

(8) Commercial paper rated, at the time of purchase, "Prime -1" by Moody's and "A-1" or better by S&P.

(9) Bonds or notes issued by any state or municipality which are rated by Moody's and S&P in one of the two highest rating categories (without regard to modifiers) assigned by such agencies.

(10) Repurchase Agreements which satisfy the following criteria:

Repurchase Agreements provide for the transfer of securities from a dealer bank, financial entity or securities firm (seller/borrower) to the City (buyer/lender) or the Trustee or a third party custodial agent, and the transfer of cash from the City to the dealer bank, financial entity or securities firm with an agreement that the dealer bank, financial entity or securities firm will repay the cash plus a yield to the City in exchange for the securities at a specified date.

1. Repos must be between the municipal entity and a dealer bank or securities firm or other financial entity

a. Primary dealers on the Federal Reserve reporting dealer list which are rated at the time of investment in the top three rating categories (without regard to modifiers) by two or more Rating Agencies, or

b. Banks rated at the time of investment in the top three rating categories (without regard to modifiers) by two or more Rating Agencies, or

c. Financial Entities rated at the time of investment in the top three rating categories (without regard to modifiers) by two or more Rating Agencies.

2. The written repo contract must include the following:

a. Securities which are acceptable for transfer are those securities listed in (A), (B) and (C) above.

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b. The term of the repo may be up to 30 days, or greater than 30 days if subject to put or redemption at par to pay project/ construction costs and/ or debt service on the Bonds.

c. The collateral must be delivered to the municipal entity, trustee or third party acting as agent for the trustee before/simultaneous with payment (perfection by possession of certificated securities).

d. Valuation of Collateral

(1) The securities must be valued weekly, marked-to-market at current market price plus accrued interest

(a) The value of collateral must be equal to at least 104% of the amount of cash transferred by the municipal entity to the dealer bank or security firm or financial entity under the repo plus accrued interest. If the value of securities held as collateral slips below 104% of the value of the cash transferred by municipality, then additional cash and/or acceptable securities must be transferred. If, however, the securities used as collateral are any of those listed in (C) above, then the value of collateral must equal 105%.

(11) U.S. dollar denominated deposit accounts, federal funds and banker's acceptances with domestic commercial banks (including the Trustee and its affiliates) which have a rating on their short-term certificates of deposit on the date of purchase of "P-1" by Moody's and "A-1+" by S&P and maturing no more than 360 days after the date of purchase, provided that ratings on holding companies are not considered as the rating of the bank.

(12) Local Agency Investment Fund of the State of California ("LAIF"), created pursuant to Section 16429.1 of the California Government Code.

"Authorized Officer of the City" means the Mayor, City Manager, Treasurer, or Clerk of the City, or any other person designated as an Authorized Officer of the City by a Certificate of the City signed by its Mayor or City Manager and filed with the Authority and the Trustee.

"Authorized Representative" means the Chairman, Vice Chairman, Executive Director, Treasurer, or Secretary of the Authority, or any other person designated as an Authorized Representative by a Certificate of the Authority signed by its Chairman or Executive Director and filed with the Authority and the Trustee.

"Base Rental" means the amounts specified as such in the Lease, as such amounts may be adjusted from time to time in accordance with the terms thereof.

"Bond Counsel" means an attorney or firm of attorneys of recognized national standing in the field of municipal finance selected by the Authority.

"Bond Payment Date" means each June 1 and December 1 commencing June 1, 2020.

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"Bond Year" means each twelve-month period extending from December 2 in one calendar year to December 1 of the succeeding calendar year, both dates inclusive, except that the first Bond Year for the Bonds shall extend from the Closing Date to December 2, 2020.

"Bonds" means the Montebello Public Financing Authority Lease Revenue Refunding Bonds, 2019 Series A (Hilton Garden Inn Project) authorized by and any time Outstanding pursuant to the Indenture.

"Business Day" means any day other than: (i) a Saturday or Sunday or legal holiday in the State of California, (ii) a day on which the Trustee is authorized to close, (iii) any day on which banking institutions located in the cities where the principal corporate trust office of the Trustee is located are authorized or obligated by law or executive order to remain closed; and (iv) a day on which the New York Stock Exchange is closed.

"Certificate," "Statement," "Request," "Requisition" or "Order" means, respectively, a written certificate, statement, request, requisition or order in its name by, with respect to the City, the City Manager, or by any other officer of the City duly authorized by the City Manager for that purpose, and, with respect to the Authority, an Authorized Representative. Any such instrument and supporting opinions or representation, and the two or more so combined shall be read and construed as a single instrument. If and to the extent required by the Indenture, each such instrument shall be the statement provided for in the Indenture.

"City" means the City of Montebello, California.

"Closing Date" means, for each Series of Bonds, the date on which the Bonds of such Series are delivered by the Authority to the original purchaser thereof.

"Code" means the Internal Revenue Code of 1986, as amended and any regulations promulgated from time to time thereunder.

"Continuing Disclosure Agreement" means any continuing disclosure agreement or continuing disclosure certificate by the City relating to the Bonds, as originally executed and as it may be amended from time to time in accordance with the terms thereof.

"Costs oflssuance" means all items of expense directly or indirectly payable by or reimbursable to the Authority or the City, relating to the authorization, issuance, sale and delivery of the Bonds, including, but not limited to, printing expenses, title insurance policy premiums with respect to the Leased Property, rating agency fees, any premium or other fees with respect to insurance provided in connection with the issuance of the Bonds, including but not limited to, municipal bond insurance, rental interruption insurance and other types of insurance as may be required by the Lease, filing and recording fees, any and all costs associated with condemnation proceedings with respect to the Leased Property, initial fees and charges and the first annual administrative fee of the Trustee, fees and costs associated with obtaining any Credit Facility obtained in connection with the issuance of the Bonds, fees, charges and disbursements of attorneys, financial advisors, accounting firms, consultants and other professionals, fees and charges for preparation, execution and safekeeping of the Bonds, and any other costs, charges or fees in connection with the original issuance of the Bonds.

"Costs of Issuance Funds" means the funds so designated and established pursuant to the Indenture.

"Debt Service Fund" means the fund so designated and established pursuant to of the Indenture.

"DTC" means The Depository Trust Company, New York, New York, and its successors and assigns.

"Event of Default" means any of the events specified in the Indenture.

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"Facilities Management Fee" means the fees payable to the Facilities Manager pursuant to the Hotel Management Agreement.

"Facilities Manager" means Hotel Adventures LLC, its successors and assigns.

"Financial Newspaper or Journal" means The Wall Street Journal or The Bond Buyer or any other newspaper or journal containing financial news, printed in the English language, customarily published on each Business Day and circulated in California, and selected by the Trustee.

"Fiscal Year" means the year beginning on July 1 of each year and ending on the next succeeding June 30, or any other twelve-month period selected and designated as the official fiscal year period of the Authority.

"Franchise Fee" means all amounts required to be paid by the Facilities Manager to Hilton Inns, Inc. pursuant to a Franchise License Agreement, dated as of November 1, 2001, by and between the Facilities Manager and Hilton Inns, Inc., pertaining to the Project.

"Hotel Management Agreement" means Agreement No. 3323, dated November 29, 2017 by and between the City and the Facilities Manager, or any similar agreement between the City and any Facilities Manager.

"Indenture" means the Indenture, dated as of December 1, 2019, by and between the Authority and the Trustee.

"Information Services" means the Electronic Municipal Market Access System (referred to as "EMMA"), a facility of the Municipal Securities Rulemaking Board, at http.//emma.msrb.org; provided, however, in accordance with then current guidelines of the Securities and Exchange Commission, Information Services shall mean such other organizations providing information with respect to called Bonds as the City may designate in writing to the Trustee.

"Interest Component Subaccount" means the subaccount so designated and established pursuant to the Indenture.

"Joint Powers Agreement" means that certain Joint Exercise of Powers Agreement, dated as of September 2, 1997, as amended by and between the City and the Parking Authority of the City of Montebello creating the Authority for the purposes, among other things, of assisting in the financing of Public Capital Improvements, as such term is defined in Section 6585(g) of the California Government Code, together with any amendments thereof and supplements thereto.

"Law" means Article 4 ( commencing with Section 6584) of Chapter 5 of Division 7 of Title 1 of the California Government Code.

"Lease" means that certain Lease Agreement dated as of December 1, 2019 by and between the Authority, as lessor, and the City, as lessee.

"Lease Payment Account" means the account by that name in the Debt Service Fund established in accordance with the Indenture.

"Leased Property" means the Project and the underlying land at 801 Via San Clemente, Montebello, California, as described in the Lease.

"Maximum Annual Debt Service" means, as of the date of calculation, the largest amount obtained by totaling, for the current or any future Bond Year, the sum of (a) the amount of interest payable on the Bonds to be Outstanding in such Bond Year, assuming that principal thereof is paid as scheduled and that any

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http://emma.msrb.org

mandatory sinking fund payments are made as scheduled, and (b) the amount of principal payable on the Bonds to be Outstanding in such Bond Year, including any principal required to be prepaid by operation of mandatory sinking fund payments.

"Moody's" means Moody's Investors Service or any successor corporation thereto.

"Net Proceeds" means any insurance proceeds or condemnation award paid with respect to the Leased Property remaining after payment therefrom of all expenses incurred in the collection thereof.

"Nominee" means the nominee of the Depository, which may be the Depository, or any nominee substituted by the Depository pursuant to the Indenture.

"Operating Account" means the account by that name established pursuant to the Lease.

"Operating Reserve Fund" means the fund by that name established pursuant to the Indenture.

"Operating Reserve Requirement" means an amount equal to $100,000.00, to be held in the Operating Reserve Fund.

"Outstanding," when used as of any particular time with reference to the Bonds, means (subject to the provisions of the Indenture) all Bonds theretofore issued by the Authority except:

(1) Bonds theretofore canceled by the Trustee or surrendered to the Trustee for cancellation;

(2) Bonds for the payment or redemption of which moneys or securities in the necessary amount (as provided in the Indenture) shall have been theretofore deposited in trust (whether upon or prior to the maturity or the redemption date of such Bonds), provided that, if such Bonds are to be redeemed prior to the maturity thereof, notice of such redemption shall have been given as provided in the Indenture;

(3) Untendered Bonds; and

(4) Bonds in lieu of, or in substitution for, other Bonds which shall have been authorized, executed, issued and delivered by the Authority pursuant to the Indenture.

"Owner" means the Person or Persons whose name appears on the registration books maintained by the Trustee as the registered owner of a Bond or Bonds.

"Parity Obligations" means any leases, loan agreements, installment sale agreements, bonds, notes or other obligations of the City payable from and secured by a pledge of and lien upon any of the Revenues on a parity with the Base Rental payments, entered into or issued pursuant to and in accordance with the Lease.

"Participant" means those broker-dealers, banks and other financial institutions from time to time for which the Depository holds Bonds as a securities depository.

"Person" means an individual, corporation, firm, association, partnership, trust, or other legal entity or group of entities, including a governmental entity or any agency or political subdivision thereof.

"Prepayment" means any payment made by the City pursuant to the Lease as a prepayment of Base Rental payments.

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"Principal Component Subaccount" means the subaccount so designated and established pursuant to the Indenture.

"Principal Office" means the principal corporate trust office of the Trustee in Los Angeles, California, or the principal corporate trust office of any successor Trustee.

"Project Gross Revenues" means all revenues, income, receipts and money received by the City or by the Facilities Manager in connection with, or related to, the ownership and operation of the Project, including, but not limited to, (i) gross proceeds received from room charges and all other services including, but not limited to, telephone, fax, telecommunications, internet access, in-room movies or other televised programming charges, valet, and laundry services; (ii) gross proceeds received from the sale of merchandise of any type whatsoever (excluding food and beverage proceeds); and (iii) all investment earnings from investment of any such revenues, income, receipts and money related to the City's ownership of the Project.

"Project Net Revenues" means, with respect to any period, the amount of Project Gross Revenues received during such period less the amount of Project Operating Expenses becoming payable during such period.

"Project Operating Expenses" means, for any specified period, the sum of expenses of the Project as shown on its "Statement of Revenues and Expenses" ( or equivalent financial statement) as its operating expenses (or equivalent items of expense) including extraordinary and nonrecurring items but excluding interest expense and depreciation and amortization, all as determined in accordance with generally accepted accounting principles.

"Qualified Reserve Fund Credit Instrument" means an irrevocable standby or direct-pay letter of credit or surety bond issued by a commercial bank, national banking association or insurance company and deposited with the Trustee pursuant to the Indenture; provided, that all of the following requirements are satisfied: (i) at the time of issuance of such letter of credit or surety bond, the long-term credit rating of such commercial bank, national banking association or insurance company is "A" or "A2" by S&P or Moody's, respectively, or higher, and, if rated by A.M. Best & Company, a minimum rating of "A"; (ii) such letter of credit or surety bond has a term which ends no earlier than the last Interest Payment Date; (iii) such letter of credit or surety bond has a stated amount at least equal to the portion of the Reserve Requirement with respect to which funds are proposed to be released pursuant to the Indenture; and (iv) the Trustee is authorized pursuant to the terms of such letter of credit or surety bond to draw thereunder amounts necessary to carry out the purposes specified in the Indenture, including the replenishment of the Interest Component Subaccount or the Principal Component Subaccount.

"Rating Category" means one of the general rating categories of S&P or Moody's, as the case may be, without regard to any refinement or graduation of such rating category by numerical modifier or otherwise.

"Record Date" means, the close of business on the fifteenth day of the month immediately preceding each Bond Payment Date.

"Redemption Fund" means the fund so designated and established pursuant to the Indenture.

"Reimbursable Portion" when used in reference to any Base Rental payment, means the portion of such Base Rental payment that was paid from the general fund of the City.

"Renewal and Replacement Fund" means the fund created pursuant to the Indenture.

"Renewal and Replacement Requirement" means an amount equal to four percent ( 4%) of Project Gross Revenues for the prior Fiscal Year; the City shall deliver to the Trustee a certificate setting forth the amount equal to four percent ( 4%) by each August 1.

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"Reserve Fund" means the fund so designated and established pursuant to the Indenture.

"Reserve Requirement" means, as of each calculation date, an amount equal to the least of (i) Maximum Annual Debt Service on all Outstanding Bonds, (ii) 10% of the initial principal amount of the Bonds (or, if the Bonds are sold with more than 2% net original issue discount or more than 2% net original issue premium, 10% of the issue price of the Bonds), or (iii) 125% of the average Annual Debt Service as of the date of issuance of the Bonds.

"Revenues" means (i) all payments to the Trustee (as assignee of the Authority) pursuant to the Lease; (ii) all amounts held in the funds and accounts created under the Indenture, together with earnings thereon; and (iii) all other receipts of the Trustee (as assignee of the Authority) attributable to the ownership, leasing or operation of the Project.

"Securities Depositories" means The Depository Trust Company, 55 Water Street, New York, New York 10041, Fax: (212) 855-7320 or 855-1000, and, in accordance with then current guidelines of the Securities and Exchange Commission, such other addresses and/ or such other securities depositories as the Authority may designate in a Certificate of the Authority delivered to the Trustee.

"Serial Bonds" means the Bonds falling due by their terms in specified years, for which no mandatory sinking account payments are provided.

"Site and Facilities Lease" means that certain Site and Facilities Lease dated as of December 1, 2019 by and between the City, as lessor, and the Authority, as lessee.

"Supplemental Indenture" means any indenture duly authorized and entered into between the Authority and the Trustee, supplementing, modifying or amending the Indenture; but only if and to the extent that such supplemental indenture is specifically authorized under the Indenture.

"S&P" means S&P Global Ratings, a business unit of Standard & Poor's Financial Services LLC, its successors and assigns or, if such entity shall be dissolved or liquidated or shall no longer perform the functions of a statistical rating organization, any other nationally recognized securities rating agency designated by the City, with notice to the Trustee.

"State" means the State of California.

"Tax Certificate" means the Tax Exemption Certificate delivered by the Authority and the City at the time of issuance and delivery of the Bonds, as the same may be amended or supplemented in accordance with its terms.

"Term Bonds" means the Bonds payable at or before their specified maturity date or dates from mandatory sinking account payments established for that purpose and calculated to retire such Bonds on or before their specified maturity date or dates.

"Trustee" means The Bank of New York Mellon Trust Company, N.A. or any successor trustee appointed pursuant to the provisions of the Indenture.

THE INDENTURE

Establishment of Funds; Pledge and Assignment.

Costs of Issuance Fund. The Trustee shall establish and maintain a fund designated as the "Costs of Issuance Fund." Moneys in the Costs of Issuance Fund shall be used and withdrawn by the Trustee from time to time to pay the Costs of Issuance relating to the Bonds upon submission to the Trustee of a Request of the Authority

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containing payment instructions stating (i) the Person to whom payment is to be made, (ii) the amount to be paid, (iii) the purpose for which the obligation was incurred and (iv) that such payment is a proper charge against said fund. Each Request of the Authority shall be sufficient evidence to the Trustee of the facts stated therein and the Trustee shall have no duty to confirm the accuracy of such facts. On the date that is 180 days following the Closing Date, or upon receipt of a Certificate of the Authority stating that amounts in such fund are no longer required for the payment of such Costs of Issuance, any amounts then remaining in such account shall be withdrawn therefrom by the Trustee and transferred to the Revenue Fund. Upon such transfer, the Costs oflssuance Fund shall be closed.

Redemption Fund. Pursuant to the Indenture, the Trustee shall establish a special fund designated as the "Redemption Fund" in which the Trustee shall establish a special account designated as the "Lease Prepayment Account." The Trustee shall keep such fund separate and apart from all other funds and moneys held by it and shall administer such fund and accounts as provided in the Indenture. Moneys from Prepayments to be used for redemption of the Bonds shall be deposited into the Lease Prepayment Account of the Redemption Fund and shall be used to redeem Bonds.

Additional Funds. In addition to the funds referenced above, the Trustee shall further establish, maintain and hold in trust the following funds and accounts: Revenue Fund, Escrow Fund, Insurance and Condemnation Award Fund, Renewal and Replacement Fund, Base Rental Payment Reimbursement Fund, Debt Service Fund (in which there is further established a Lease Payment Account; in the Lease Payment Account there is established a Principal Component Subaccount and an Interest Component Subaccount), Redemption Fund (in which there is further established pursuant to the Indenture a Lease Prepayment Account), Reserve Fund and Operating Reserve Fund.

Pledge and Assignment; Equal Security. The Bonds are secured by a pledge of and lien on all of the Revenues ( except as otherwise provided in the Indenture) and upon all of the moneys in the funds and accounts established under the Indenture. Except for the Revenues and such moneys, no funds or properties of the Authority shall be pledged to, or otherwise liable for, the payment of principal of, premium (if any) or interest on the Bonds. The Authority and the City, as their interests may appear, by the Indenture grant to the Trustee, for the benefit of the Owners, a lien on and a security interest in the Lease and the Revenues, including all moneys in the funds held by the Trustee under the Indenture ( excepting only the moneys set aside by the Trustee to satisfy the requirements of the Indenture, including, without limitation, the Debt Service Fund, and all such moneys shall be held by the Trustee in trust and applied to the respective purposes specified in the Indenture and in the Lease; provided, however, that no security interest is granted to the Trustee for the purpose of paying its fees or expenses in money drawn by the Trustee to the extent such moneys are applied to the payment of the amounts due to the Owners. The Trustee shall be entitled to and shall collect and receive all of the Revenues, and any Revenues collected or received by the Authority shall be deemed to be held, and to have been collected or received, by the Authority as the agent of the Trustee and shall forthwith be paid by the Authority to the Trustee. The Trustee also shall be entitled to and subject to the provisions of the Indenture, shall take all steps, actions and proceedings reasonably necessary in its judgment to enforce, either jointly with the Authority or separately, all of the rights of the Authority that have been assigned to the Trustee and all of the obligations of the City under the Lease. In consideration of the acceptance of the Bonds by those who shall own them from time to time, the Indenture shall be deemed to be and shall constitute a contract between the Authority and the Owners from time to time of the Bonds and the covenants and agreements in the Indenture set forth to be performed on behalf of the Authority shall be for the equal and proportionate security and protection of all Owners of the Bonds without preference, priority or distinction as to security or otherwise of any of the Bonds over any of the others by reason of the number or date thereof, of the time of sale, execution and delivery thereof, or otherwise for any cause whatsoever, except as expressly provided therein or in the Indenture.

Deposits to the Revenue Fund. All Revenues shall be deposited when received into the Revenue Fund, and other payments made by or on behalf of the City under the Lease, shall be paid directly to the Trustee and shall, except as otherwise expressly provided in the Indenture, be deposited in the Revenue Fund. Except as otherwise provided in the Indenture, moneys in the Revenue Fund shall be paid by the Trustee as follows and in the following order of priority:

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FIRST: to the Trustee on each December 1, the reasonable Administrative Expenditures of the Trustee, upon receipt of an invoice or other request for payment submitted by the Trustee and approved by an Authorized Officer of the City;

SECOND: if Project Gross Revenues and other amounts on deposit in the Operating Account are to be deposited directly to the Revenue Fund pursuant to the Lease, to the payment of Project Operating Expenses and the Franchise Fee, as they come due, pursuant to a requisition of the City stating that the party to whom the amount is payable, the invoice or other billing advice to which it pertains, the amount, and stating that the amount so requisitioned and that the obligations in the stated amounts have been incurred by the Project and are presently due and payable or are properly reimbursable to the Project and each item thereof is a necessary Project Operating Expense and is a proper charge against the Revenue Fund and has not been paid from amounts previously disbursed from the Revenue Fund; provided, that if no requisition of the City is received by the Trustee by the second Business Day prior to the first Business Day of each month, Revenues shall be applied as set forth below;

THIRD: not later than the first Business Day of each month, commencing April 2020: (A) to the Interest Component Subaccount of the Lease Payment Account, one-fourth (1/ 4) of the total amount required to make the amount on deposit in such Subaccount equal to the amount of accrued and unpaid interest on the Bonds due and payable on the next Bond Payment Date (provided that for the months of April 2020 and May 2020, the deposit shall be one-half (1/2) of the amount required to make the amount on deposit in such Subaccount equal to the amount of accrued and unpaid interest on the Bonds due and payable on the next Bond Payment Date) and (B) not later than two (2) Business Days prior to the first Business Day of each month, to the Principal Component Subaccount of the Lease Payment Account, one-eighth (1/8) of the amount required to make the amount on deposit in such Subaccount equal to the amount of principal coming due on the Bonds on the next December 1;

FOURTH: to the Reserve Fund such amount as may be necessary to maintain a balance therein equal to the Reserve Requirement;

FIFTH: to the Authority, on the first Business Day of each month, the reasonable Administrative Expenditures of the Authority, upon receipt of an invoice or other request for payment submitted by the Authority and approved by an Authorized Officer of the City in the case of any Administrative Expenditures; provided, that if no invoice or request is received by the Trustee by the second Business Day prior to the first Business Day of each month, Revenues shall be applied by the Trustee as set forth below;

SIXTH: on the first Business Day of each month, to the Base Rental Payment Reimbursement Fund, reimbursement for the Reimbursable Portion of Base Rental payments pursuant to the Indenture, as set forth in a City Certificate delivered to the Trustee by November 15; provided, that if the Trustee has not received a City Certificate by the second Business Day prior to the first Business Day of the month, no reimbursement shall be made and Revenues shall be applied by the Trustee as set forth below;

SEVENTH: on the first Business Day of each month, into the Renewal and Replacement Fund, the lesser of the balance of the Revenues or an amount equal to one-twelfth of the then applicable Renewal and Replacement Requirement, plus any accrued deficiency in the amount necessary to satisfy the Renewal and Replacement Requirement resulting from insufficient Revenues in any prior month;

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EIGHTH: on the fifth day of January and July of each year, on the following Business Day if either such date falls on a day which is not a Business Day, to the Facilities Manager, the Facilities Management Fee (including any accrued and unpaid Facilities Management Fees, and accrued interest thereon); less the amount of the Facilities Management Fee applied by the Facilities Manager to the payment of the Franchise Fee paid out of the Operating Account during the same period, as set forth in a City Certificate (which the City covenants to provide to the Trustee no later than December 15th and June 15th of each year and any month during which an adjustment is necessary based on the amount paid out of the Operating Account; provided, that in no event shall failure to comply with such covenant give rise to any default or an Event of Default hereunder or under the Lease); provided that if no City Certificate is received by the Trustee by the second Business Day prior to the first Business Day of each month, Revenues shall be applied as set forth below; and

NINTH: into the Operating Reserve Fund, the amount required to bring the balance in the Operating Reserve Fund to the Operating Reserve Requirement.

After making the payments required above, any balance remaining in the Revenue Fund on each December 2°a shall be deposited at the direction of the City (as approved by the Facilities Manager, if and to the extend required under the Hotel Management Agreement, as represented to the Trustee by the City) into the Renewal and Replacement Fund, or into the Lease Prepayment Account of the Redemption Fund for the redemption of the Bonds at the next available redemption date, or, upon or in the absence of such direction of the City (as approved by the Facilities Manager, if and to the extent required under the Hotel Management Agreement), remain in the Revenue Fund; provided that, if all amounts payable pursuant to FIRST through NINTH above have been fully funded and there are no unpaid accruals in any of such accounts for the current or any prior year and the City certifies in a City Certificate that all such required amounts have been paid or deposited in the full amounts required, then any surplus amounts may be released to the City upon the Authority's written request to the Trustee for deposit in the City's General Fund and applied for any lawful purpose.

Notwithstanding anything to the contrary in the Indenture, after the deposit required by SEVENTH above, any Revenues to be applied under EIGHTH above shall be applied first to any accrued but unpaid balance owed to the Facilities Manager, if after such application the Revenue Fund will have a minimum balance of $300,000, and then to the current calendar year's amount due under EIGHTH. If the Facilities Manager is replaced, such manager shall be paid in full prior to any Revenues being disbursed to pay management fees to the new Facilities Manager. All disbursements to be made pursuant to this paragraph shall be made as set forth in a City Certificate delivered to the Trustee. The Trustee shall be under no obligation to make any such disbursement in the absence of a City Certificate. Notwithstanding anything in the Indenture to the contrary, the Trustee shall accept direction from the City in a City Certificate (which City Certificate must be provided to the Trustee at least two Business Days in advance of the desired date of payment) to disburse on any Business Day amounts held under the Indenture that are available, as represented by the City in the City Certificate, for payment of accrued and unpaid Facilities Management Fees and accrued interest thereon. Anything in the Indenture contained to the contrary notwithstanding, moneys deposited at any time in the Revenue Fund as the result of payments by the Authority, the Trustee or the City of (i) the proceeds of all or any part of the Leased Property taken in the exercise of the power of eminent domain ( or similar proceedings or related agreements) and related payments, insurance proceeds payable in connection with the loss, damage or destruction of the Leased Property and related payments with respect to the Leased Property as provided by the Lease shall be paid to the Insurance and Condemnation Award Fund by the Trustee on or prior to the fifth Business Day after the deposit thereof and (ii) the proceeds of any business interruption policy in accordance with the Lease shall be deposited in the Lease Payment Account to be used to pay principal and interest on the Bonds when due. Anything in the Indenture contained to the contrary notwithstanding, for purposes of Bond redemption moneys deposited at any time in the Insurance and Condemnation Award Fund

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from payments made to the Trustee pursuant to the Lease shall be transferred to the Lease Prepayment Account of the Redemption Fund by the Trustee as specified in the Lease.

Insurance and Condemnation Award Fund. Moneys in the Insurance and Condemnation Award Fund shall be applied by the Trustee for the following purposes: (a) disbursement to or at the written direction of an Authorized Officer of the City in accordance with requisitions meeting the requirements of the Indenture to pay the costs of repair or replacement of property lost, damaged, destroyed or taken in accordance with the Lease; (b) deposit by the Trustee in the Lease Prepayment Account of the Redemption Fund for the extraordinary redemption of Bonds in accordance with the Lease; provided, however, that in the event of the execution and delivery of any Parity Obligations, such moneys shall be allocated by the Trustee between the payment of Bonds and Parity Obligations, proportionately on the basis of the respective aggregate principal amounts of Bonds and Parity Obligations then outstanding as certified to the Trustee by an authorized Officer of the City; and ( c) payments and transfers from the Insurance and Condemnation Award Fund shall be made by the Trustee to pay costs of restoring or replacing the Project in accordance with the documents delivered by the City pursuant to the Lease (the "Restoration Project") pursuant to requisitions signed by an Authorized Officer of the City describing in reasonable detail the purposes for which such moneys are to be used and the amount thereof and certifying that the amount then being requested constitutes a proper cost of the Restoration Project which is then due or which has been paid by the City and which has not previously been the subject of a requisition from the Insurance and Condemnation Award Fund. Each requisition shall be sufficient evidence to the Trustee of the facts stated therein and the Trustee shall have no duty to confirm the accuracy of such facts.

Base Rental Payment Reimbursement Fund. The Trustee shall use all amounts deposited in the Base Rental Payment Reimbursement Fund, as such amounts become available, to reimburse the City for the Reimbursable Portion of all Base Rental payments paid by the City from amounts not constituting Project Gross Revenues, which then remain unreimbursed, as set forth in a City Certificate.

Renewal and Replacement Fund. Amounts on deposit in the Renewal and Replacement Fund shall be transferred by the Trustee for use for the following purposes in the following order of priority, as set forth in a requisition of the City: (a) payment of the costs of extensions, additions and capital improvements to, or the renewal and replacement of depreciable capital assets of, or the purchasing and installing of equipment for, the Project, as set forth in a City Certificate, or for paying any extraordinary maintenance and repair; and (b) payment of Project Operating Expenses to the extent a deficiency in amounts available to pay Project Operating Expenses exists. On the first Business Day of each month, the Trustee shall confirm that the balance in the Renewal and Replacement Fund does not exceed the maximum balance for such fund of $600,000 and shall transfer any amount in the Renewal and Replacement Fund in excess of $600,000 into the Operating Reserve Fund until the Operating Reserve Requirement is satisfied as provided in NINTH above and thereafter to the Revenue Fund.

Operating Reserve Fund. The money deposited with the Trustee in the Operating Reserve Fund, which shall be at least the amount of the Operating Reserve Requirement ($100,000) together with all investment income therefrom, shall be applied, as set forth in a City Certificate, to the payment of Project Operating Expenses to the extent a deficiency in amounts available to pay Project Operating Expenses exists.

Surplus. Any funds remaining in the Lease Payment Account after payment of all Bonds Outstanding, or provision made therefor satisfactory to the Trustee, shall be withdrawn by the Trustee and applied first to the payment of any fees and expenses owed to the Trustee, and then released to the City.

Reserve Fund. All moneys in the Reserve Fund in excess of the Reserve Requirement shall be transferred to the Lease Payment Account. All money in the Reserve Fund shall be used and withdrawn by the Trustee solely for the purpose of reimbursing the provider of the Qualified Reserve Fund Credit Instrument for amounts owed under a Qualified Reserve Fund Credit Instrument to the extent necessary or paying the principal of and interest on the Bonds as the same shall become due and payable in the event of any deficiency at any time in the Lease Payment Account of the Debt Service Fund, or for the purpose of paying the interest on or principal of or redemption

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premiums, if any, on the Bonds in the event that no other money (or amounts available to be drawn from a Qualified Reserve Fund Credit Instrument) of the Authority is lawfully available therefor, or for the retirement of all then Outstanding Bonds. The Reserve Requirement may be satisfied by crediting to the Reserve Fund moneys or a Qualified Reserve Fund Credit Instrument or any combination thereof, which in the aggregate make funds available in the Reserve Fund in an amount equal to the Reserve Requirement. Upon the deposit with the Trustee of such Qualified Reserve Fund Credit Instrument to satisfy the Reserve Requirement, the Trustee shall transfer any excess amounts then on deposit in the Reserve Fund into a segregated subaccount of the Lease Payment Account of the Debt Service Fund, to be known as the "Excess Reserve Amount Subaccount," to be established by the Trustee, which monies shall be applied at the written direction of the Authority either (i) to the payment within one year of the date of transfer of capital expenditures of the Authority permitted by law or (ii) to the redemption of Bonds on the earliest succeeding date on which such redemption is permitted by the Indenture, and pending such application shall in accordance with written direction of the Authority (on which the Trustee may conclusively rely and shall have no duty to determine whether such direction complies with this provision, including with the yield requirements of the Indenture) be held either not invested, or invested in property (as defined in section 148(b) of the Code constituting an Authorized Investment) to produce a yield that is not in excess of the yield on the Bonds; provided, however, that the Authority may by written direction to the Trustee cause an alternative use of such amounts if the Authority shall first have obtained a written opinion of Bond Counsel addressed and provided to the Trustee together with such written direction substantially to the effect that such alternative use will not adversely affect the exclusion pursuant to section 103 of the Code of interest on the Bonds from the gross income of the owners thereof for federal income tax purposes. In any case where a Reserve Fund is funded with a combination of cash, investments and a Qualified Reserve Fund Credit Instrument, the Trustee shall deplete all cash balances and investments, at the direction of the City set forth in a City Certificate, before drawing on the Qualified Reserve Fund Credit Instrument. Any available moneys not needed to pay debt service on the Bonds provided by the Authority to fund the Reserve Fund after a withdrawal shall first be used to reinstate the Qualified Reserve Fund Credit Instrument pursuant to its terms and second, to replenish the cash in the Reserve Fund. If the Qualified Reserve Fund Credit Instrument is drawn on, the Authority shall make payment of interest on amounts advanced under the Qualified Reserve Fund Credit Instrument after making any payments pursuant to this provision.

Investment of Moneys in Funds and Accounts. All moneys in any of the funds and accounts established pursuant to the Indenture shall be invested by the Trustee solely in Authorized Investments. Upon written request of an Authorized Representative of the Authority, the Trustee shall invest all moneys as directed by such Authority representative, provided such moneys are invested solely in Authorized Investments; provided, however, that the Trustee shall have received at least two (2) Business Days prior to the date of any such proposed investment or reinvestment, written directions of the Authority specifying the Authority's request for investment or reinvestment. In the absence of Request from the Authority, the Trustee shall invest such moneys solely in the investments described in subparagraph ( 4) of the definition of "Authorized Investments"; provided, however, that any such investment shall be made by the Trustee only if, prior to the date on which such investment is to be made, the Authority shall have been directed in writing specifying a specific money market fund and, if no such request in writing by the Authority is so received, the Trustee shall hold such moneys uninvested. Authorized Investments may be purchased at such prices as the Authority may in its discretion determine. All Authorized Investments shall be acquired subject to the limitations as to maturities set forth in this provision and such additional limitations or requirements consistent with the foregoing as may be established by Request of the Authority. Moneys in the funds and accounts shall be invested in Authorized Investments maturing not later than the date on which it is estimated that such moneys will be required by the Trustee or the Authority. Authorized Investments purchased under a repurchase agreement may be deemed to mature on the date or dates on which the Trustee may deliver such Authorized Investments for repurchase under such agreement. Authorized Investments acquired as an investment of moneys in any fund or account established under the Indenture shall be credited to such fund or account. Except as otherwise provided in this provision, all interest, profits and other income received from the investment of moneys in any fund or account shall be deposited therein. For the purpose of determining the amount in any fund, all Authorized Investments credited to such fund shall be valued at the lesser of (i) cost (exclusive of brokerage commissions or accrued interest, if any); (ii) the par amount thereof; or (iii) the market value thereof. The Trustee pricing service, as reflected on statements, constitutes "market value" for purposes of this paragraph.

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Particular Covenants

Punctual Payment. The Authority covenants and agrees that it will duly and punctually pay or cause to be paid the principal of and interest on each of the Bonds together with the premium thereon, if any, on the date, at the place and in the manner provided in said Bonds, solely from the Revenues and other funds as provided in the Indenture.

Extension of Payment of Bonds. The Authority shall not directly or indirectly extend or assent to the extension of the maturity of any of the Bonds or to a change in the amount or time of any mandatory sinking account payment or the time of payment of any claims for interest, whether by the purchase or funding of such Bonds or claims of interest or by any other arrangement, and in case the maturity of any of the Bonds or the time of payment of, or claims for, interest shall be extended, such Bonds or claims for interest shall not be entitled, in case of any default under the Indenture, to the benefits of the Indenture, except subject to the prior payment in full of the principal of all of the Bonds then Outstanding and of all claims for interest thereon which shall not have been so extended. Nothing in this provision shall be deemed to limit the right of the Authority to issue Bonds for the purpose of refunding any Outstanding Bonds and such issuance shall not be deemed to constitute an extension of maturity of Bonds.

Against Encumbrances. The Authority covenants and agrees that it will not issue any other obligations payable as to either principal or interest from the Revenues which have, or purport to have any lien upon the Revenues superior to or on a parity with the lien of the Bonds.

Power to Issue Bonds and Make Pledge and Assignment. The Authority is duly authorized to issue the Bonds and to enter into the Indenture and to pledge and assign the Revenues and other assets purported to be pledged and assigned under the Indenture in the manner and to the extent provided in the Indenture. The Bonds and the provisions of the Indenture are and will be the legally valid and binding limited obligations of the Authority in accordance with their terms, and the Authority and Trustee shall, subject to the provisions of the Indenture, at all times, to the extent permitted by law, defend, preserve and protect said pledge and assignment of Revenues and other assets and all the rights of the Owners under the Indenture against all claims and demands of all persons whomsoever. The Authority shall preserve and protect the security of the Bonds and the rights of the Owners and defend their rights against all claims and demands of all persons. Until such time as an amount has been set aside sufficient to pay at maturity, or to call and redeem prior to maturity, all Outstanding Bonds plus unpaid interest thereon to maturity, the Authority will (through its proper members, officers, agents or employees) faithfully perform and abide by all the covenants, undertakings and provisions contained in the Indenture or in any Bond issued under the Indenture for the benefit of the Owners.

Accounting Records and Financial Statements. The Authority covenants and agrees that it will at all times keep, or cause to be kept, proper and current books and accounts (separate from all other records and accounts) in which complete and accurate entries shall be made of all transactions relating to the Revenues and of the funds and accounts provided for in the Indenture. Such books of record and accounts shall at all times during business hours be subject to the inspection of the Trustee (who shall have no duty to inspect), or the Owners of not less than ten percent (10%) of the aggregate principal amount of the Bonds then Outstanding or their representative authorized in writing. The parties to the Indenture acknowledge that any such books, records or accounts will be maintained by the Trustee so long as all Base Rental Payments are made directly from the City to the Trustee and that the Authority shall not be responsible for keeping such books, records or accounts unless Base Rental Payments are received by it.

Waiver of Laws. The Authority shall not at any time insist upon or plead in any manner whatsoever, or claim to take the benefit or advantage of, any stay or extension of law now or at any time in force that may affect the covenants and agreements contained in the Indenture or in the Bonds, and all benefit or advantage of any such law or laws is expressly waived by the Authority to the extent permitted by law.

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Further Assurances. The Authority shall make, execute and deliver any and all such further indentures, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of the Indenture and for the better assuring and confirming unto the Owners of the Bonds of the rights and benefits provided in the Indenture.

Covenants to Maintain Tax-Exempt Status of the Bonds. The Authority covenants that it shall not use, and shall not permit the use of, and shall not omit to use Gross Proceeds or any other amounts ( or any property the acquisition, construction or improvement of which is to be financed directly or indirectly with Gross Proceeds) in a manner that if made or omitted, respectively, could cause the interest on any of the Bonds to fail to be excluded pursuant to Section 103(a) of the Code from the gross income of the owner thereof for federal income tax purposes.

Events of Default and Remedies of Bondowners

Events of Default. The following events shall be Events of Default:

(a) Default by the Authority in the due and punctual payment of the principal of any Bond when and as the same shall become due and payable, whether at maturity as therein expressed, by proceedings for redemption, by declaration or otherwise;

(b) Default by the Authority in the due and punctual payment of any installment of interest on any Bond when and as such interest installment shall become due and payable; and

( c) Default by the Authority in the observance of any of the other covenants, agreements or conditions on its part contained in the Indenture or in the Bonds if such default shall have continued for a period of sixty (60) days after written notice thereof, specifying such default and requiring the same to be remedied, shall have been given to the Authority by the Trustee, or to the Authority and the Trustee or the Owners of not less than twenty-five percent (25%) in aggregate principal amount of the Bonds at the time Outstanding; provided, however, that such default shall not constitute an Event of Default under the Indenture if the Authority shall commence to cure such default within said sixty-day period and thereafter diligently and in good faith proceed to cure such default within a reasonable period of time.

Remedies on Default. Upon the occurrence and continuance of any Event of Default specified in (a) or (b) above, the Trustee shall proceed, or upon the occurrence and continuance of any Event of Default specified in ( c) above, the Trustee may proceed and upon written request of the Owners of not less than a majority in aggregate principal amount of the Bonds then Outstanding, after receiving indemnification to its satisfaction shall proceed), to exercise the remedies set forth in the Lease or available to the Trustee under the Indenture; provided, however, that there shall be no right to accelerate maturities of the Bonds or otherwise to declare any Base Rental not then in default to be immediately due and payable.

Application of Revenues and Other Funds After Default. If an Event of Default shall occur and be continuing, all Revenues and any other funds then held or thereafter received by the Trustee under any of the provisions of the Indenture shall be applied by the Trustee as follows and in the following order of priority: (a) to the payment of any expenses (including those of its attorneys, agents and advisors) necessary in the opinion of the Trustee to protect the interests of the Owners of the Bonds and payment of all reasonable fees, charges and expenses of the Trustee incurred in and about the performance of its powers and duties under the Indenture; (b) if there has occurred an event of default under the Lease or the Hotel Management Agreement which has resulted in the Project Gross Revenues and amounts in the Operating Account being deposited directly into the Revenue Fund pursuant to the Lease, to the payment of Project Operating Expenses and the Franchise Fee in the manner set forth in the Indenture; and (c) to the payment of the principal of and interest then due on the Bonds (upon presentation of the Bonds to be paid, and stamping thereon of the payment if only partially paid, or surrender thereof if fully paid), subject to the provisions of the Indenture, as follows:

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First: To the payment to the Persons entitled thereto, of all interest then due and payable, and, if the amount available shall not be sufficient to pay in full all such interest, then to the payment thereof ratably, according to the amounts due thereon, to the Persons entitled thereto, without any discrimination or preference;

Second: To the payment to the Persons entitled thereto, of the unpaid principal of any Bonds which shall have become due and payable, whether at maturity or by call for redemption, in the order of their due dates, with interest on the overdue principal at the rate borne by the respective Bonds from the respective dates upon which such Bonds became due and payable, and, if the amount available shall not be sufficient to pay in full all the principal of the Bonds due on any date, together with such interest, then to the payment first of such interest, ratably, according to the amount of interest due on such date, and then to the payment of such principal, ratably, according to the amounts of principal due on such date to the Persons entitled thereto, without any discrimination or preference; and

Third: To the payment of the interest on and the principal of the Bonds, the purchase and retirement of the Bonds and to the redemption of the Bonds, all in accordance with the provisions of the Indenture.

Trustee to Represent Owners. The Trustee is irrevocably appointed (and the successive respective Owners of the Bonds, by taking and holding the same, shall be conclusively deemed to have so appointed the Trustee) as trustee and true and lawful attorney-in-fact of the Owners of the Bonds for the purpose of exercising and prosecuting on their behalf such rights and remedies as may be available to such Owners under the provisions of the Bonds, the Indenture, and applicable provisions of the Law. Upon the occurrence and continuance of an Event of Default or other occasion giving rise to a right in the Trustee to represent the Owners, the Trustee in its discretion may and upon the written request of the Owners of not less than twenty-five percent (25%) in aggregate principal amount of the Bonds then Outstanding and upon being indemnified to its satisfaction therefor, shall, proceed to protect or enforce its rights or the rights of such Owners by such appropriate action, suit, mandamus or other proceedings as it shall deem most effectual to protect and enforce any such right, at law or in equity, either for the specific performance of any covenant or agreement contained in the Indenture, or in aid of the execution of any power granted in the Indenture, or for the enforcement of any other appropriate legal or equitable right or remedy vested in the Trustee or in such Owners under the Indenture or any law; and upon instituting such proceeding, the Trustee shall be entitled, as a matter of right, to the appointment of a receiver of the Revenues and other assets pledged under the Indenture or the Bonds pending such proceedings.

All rights of action under the Indenture or the Bonds or otherwise may be prosecuted and enforced by the Trustee without the possession of any of the Bonds or the production thereof in any proceeding relating thereto, and any such suit, action or proceeding instituted by the Trustee shall be brought in the name of the Trustee for the benefit and protection of all the Owners of such Bonds, subject to the provisions of the Indenture.

Owners' Direction of Proceedings. The Owners of a majority in aggregate principal amount of the Bonds then Outstanding shall have the right, by an instrument or concurrent instruments in writing executed and delivered to the Trustee, to direct the method of conducting all remedial proceedings taken by the Trustee under the Indenture, provided that such direction shall not be otherwise than in accordance with law and the provisions of the Indenture, and that the Trustee shall have the right to decline to follow any such direction which in the opinion of the Trustee would be unjustly prejudicial to Owners not parties to such direction.

Limitation on Owners' Right to Sue. No Owner of any Bond shall have the right to institute any suit, action or proceeding at law or in equity, for the protection or enforcement of any right or remedy under the Indenture or any applicable law with respect to such Bond unless (1) such Owner previously shall have given to the Trustee written notice of the occurrence of an Event of Default; (2) the Owners of not less than twenty-five percent (25%) in aggregate principal amount of the Bonds then Outstanding shall have made written request upon the

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Trustee to exercise the powers granted in the Indenture or to institute such suit, action or proceeding in its own name; (3) such Owner or said Owners shall have tendered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; and ( 4) the Trustee shall have refused or omitted to comply with such request for a period of sixty (60) days after such written request shall have been received by, and said tender of indemnity shall have been made to, the Trustee. Such notification, request, tender of indemnity and refusal or omission are declared by the Indenture, in every case, to be conditions precedent to the exercise by any Owner of Bonds of any remedy under the Indenture or under law; it being understood and intended that no one or more Owners of Bonds shall have any right in any manner whatsoever by his or their action to affect, disturb or prejudice the security of the Indenture or the rights of any other Owners of Bonds, or to enforce any right under the Indenture or applicable law with respect to the Bonds, except in the manner provided in the Indenture, and that all proceedings at law or in equity to enforce any such right shall be instituted, had and maintained in the manner provided in the Indenture and for the benefit and protection of all Owners of the Outstanding Bonds, subject to the provisions of the Indenture.

Absolute Obligation of Authority. Nothing in the Indenture, or in the Bonds, contained, shall affect or impair the obligation of the Authority, which is absolute and unconditional, to pay the principal of and interest on the Bonds to the respective Owners of the Bonds at their respective dates of maturity or upon call for redemption, as provided in the Indenture, but only out of the Revenues and other assets pledged therefor in accordance with the Indenture, or affect or impair the right of such Owners, which is also absolute and unconditional, to enforce such payment by virtue of the contract embodied in the Bonds.

Termination of Proceeding. In case any proceedings taken by the Trustee or any one or more Owners on account of any Event of Default shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Trustee or the Owners, then in every such case the Authority, the Trustee, and the Owners, subject to any determination in such proceedings, shall be restored to their former positions and rights under the Indenture, severally and respectively, and all rights, remedies, powers and duties of the Authority, the Trustee and the Owners shall continue as though no such proceedings had been taken.

Remedies Not Exclusive. No remedy conferred upon or reserved to the Trustee or to the Owners of the Bonds in the Indenture is intended to be exclusive of any other remedy or remedies, and each and every such remedy, to the extent permitted by law, shall be cumulative and in addition to any other remedy given under the Indenture or now or thereafter existing at law or in equity or otherwise.

No Waiver of Default. No delay or omission of the Trustee or of any Owner of the Bonds to exercise any right or power arising upon the occurrence of any Event of Default shall impair any such right or power or shall be construed to be a waiver of any such default or an acquiescence therein; and every power and remedy given by the Indenture to the Trustee or to the Owners of the Bonds may be exercised from time to time and as often as may be deemed expedient.

The Trustee

Appointment, Duties and Immunities of Trustee. The Authority, with the consent of the City, may remove the Trustee at any time upon thirty (30) days written notice to the Trustee unless an Event of Default shall have occurred and then be continuing, and shall remove the Trustee if at any time requested to do so by an instrument or concurrent instruments in writing signed by the Owners of not less than a majority in aggregate principal amount of the Bonds then Outstanding ( or their attorneys duly authorized in writing) or if at any time, to the knowledge of the Authority, the Trustee shall cease to be eligible in accordance with the Indenture or shall become incapable of acting, or shall be adjudged bankrupt or insolvent, or a receiver of the Trustee or its property shall be appointed, or any public officer shall take control or charge of the Trustee or its property or affairs for the purpose of rehabilitation, conservation or liquidation; in each case by giving written notice of such removal to the Trustee, and thereupon shall appoint a successor Trustee by an instrument in writing. The Trustee may at any time resign by giving written notice of such resignation to the Authority and the City and by giving the Bondowners notice

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of such resignation by mail at their addresses appearing on the bond registration books maintained by the Trustee. Upon receiving such notice of resignation, the Authority, with the approval of the City, shall promptly appoint a successor Trustee by an instrument in writing. The Trustee, and any Trustee appointed under the provisions of the Indenture in succession to the Trustee, shall be a trust company, national banking association or bank having the powers of a trust company, having a corporate trust office in California, having (or, in the case of a corporation or trust company included in a bank holding company system, the related bank holding company shall have) a combined capital and surplus of at least fifty million dollars ($50,000,000), and subject to supervision or examination by federal or state authority.

Modification or Amendment oflndenture and Lease

Amendments Permitted With Consent. The Indenture and the rights and obligations of the Owners of the Bonds and the Lease and the rights and obligations of the parties thereto, may be modified or amended at any time by a supplement which shall become effective when the written consents of the Owners of at least a majority in aggregate principal amount of the Bonds then Outstanding, exclusive of Bonds disqualified as provided in the Indenture, shall have been filed with the Trustee and Moody's if the Bonds are rated by Moody's or S&P if the bonds are rated by S&P. No such modification or amendment shall (1) extend or have the effect of extending the fixed maturity of any Bond or reducing the interest rate with respect thereto or extending the time of payment of interest, or reducing the amount of principal thereof or reducing any premium payable upon the redemption thereof, without the express consent of the Owner of such Bond, or (2) reduce or have the effect of reducing the percentage of Bonds required for the affirmative vote or written consent to an amendment or modification of the Indenture or the Lease, or (3) modify any of the rights or obligations of the Trustee without its written assent thereto. Any such supplemental agreement shall become effective as provided in the Indenture.

Amendments Permitted Without Consent. The Indenture and the rights and obligations of the Owners of the Bonds, and the Lease and the rights and obligations of the parties thereto, may be modified or amended at any time by a supplemental agreement, without the consent of any such Owners, only to the extent permitted by law and only (1) to cure, correct or supplement any ambiguous or defective provision contained in the Indenture or therein, and which shall not adversely affect the interest of the Owners of the Bonds, (2) to reflect the comments of S&P and/or Moody's in order to maintain any applicable rating on the Bonds, or (3) in regard to matters arising under the Indenture or thereunder, as the parties to the Indenture or thereto may deem necessary or desirable and which shall not adversely affect the interest of the Owners of the Bonds. Any such supplemental agreement shall become effective upon execution and delivery by the parties to the Indenture or thereto as the case may be and shall be provided to Moody's, if the Bonds are rated by Moody's or S&P, if the Bonds are rated by S&P.

Defeasance

Discharge of Indenture. The Bonds may be paid, in whole or in part, by the Authority in any of the following ways, provided that the Authority also pays or causes to be paid any other sums payable under the Indenture by the Authority: (a) by well and truly paying or causing to be paid the principal of and interest and redemption premiums, if any, on such Bond, as and when the same become due and payable; (b) if prior to maturity and having given notice of redemption by irrevocably depositing with the Trustee, in trust, at or before maturity, an amount of cash which, together with amounts then on deposit in the Lease Payment Account and available for such purpose, is sufficient to pay all principal of and interest and redemption premiums, if any, on such Bonds; or (c) by irrevocably depositing with the Trustee, in trust, noncallable Authorized Investments described in paragraph (1) or (2) of the definition thereof, in such amount as will in the opinion of an independent certified public accountant, together with interest to accrue thereon and moneys then on deposit in the Lease Payment Account and available for such purpose, together with the interest to accrue thereon, be fully sufficient to pay and discharge such Bond (including all principal and interest represented thereby and redemption premiums, if any).

If all Outstanding Bonds shall be discharged and paid in one or more of the preceding ways and all Additional Rental shall have been paid or arrangements satisfactory to the Trustee shall have been made for the

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payment of such Additional Rental then, notwithstanding that any Bonds shall not have been surrendered for payment, all obligations of the Authority, the Trustee and the City with respect to all Outstanding Bonds shall cease and terminate, except only the covenants of the Authority under the Indenture to comply with the Code and the obligation of the Trustee to pay or cause to be paid, from Base Rental paid by or on behalf of the City from funds deposited pursuant to paragraphs (b) and ( c) above, to the Owners of the Bonds not so surrendered and paid all sums due with respect thereto, and in the event of deposits pursuant to paragraphs (b) and (c) above, the Bonds shall continue to represent direct and proportionate interests of the Owners thereof in Base Rental under the Lease. Any funds held by the Trustee, at the time of the defeasance of all Outstanding Bonds, which are not required for payment as required therein, shall be paid to the Trustee to pay any amounts owed to the Trustee under the Indenture, and the remainder, if any, shall be paid over to the City.

THE LEASE AGREEMENT

Certain Definitions

Unless the context otherwise requires, the terms defined below shall have the meanings defined below, the following definitions to be equally applicable to both the singular and plural forms of any of the terms defined in the Lease. All other capitalized terms used in the Lease without definition shall have the meanings as set forth in the Indenture.

"Additional Rental" means all amounts payable by the City pursuant to the Lease.

"Authority" means the Montebello Public Financing Authority, a joint powers authority duly created and lawfully existing under the Constitution and laws of the State.

"Base Rental" means all amounts payable by the City as Base Rental pursuant to the Lease.

"City" means the City of Montebello, a municipal corporation duly organized and existing under the Constitution and laws of the State.

"Completion Date" means the date the Project is completed and placed in service, as evidenced by a City Certificate.

"Facilities Manager" means Hotel Adventures LLC, its successors and assigns.

"Facilities Management Fee" means the fees payable to the Facilities Manager pursuant to the Hotel Management Agreement.

"Hazardous Substances" means any substances, wastes, pollutants or contaminants included in such (or any similar) term under any federal, state or local statute, regulation, ordinance or code enacted or amended.

"Hotel Management Agreement" means Agreement No. 3323, dated November 29, 2017, by and between the City and the Facilities Manager, or any similar agreement between the City and any Facilities Manager.

"Indenture" means that certain Indenture, dated as of December 1, 2019, by and between the Authority and The Bank of New York Mellon Trust Company, N.A., as originally executed and entered into and as it may from time to time be amended or supplemented in accordance therewith.

"Insurance Consultant" means an individual or firm employed by the City as an independent insurance consultant, experienced in the field of risk management.

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"Lease" means the Amended and Restated Lease Agreement, dated as of December 1 2019, by and between the City and the Authority, as originally executed and as it may from time to time be amended or supplemented in accordance therewith.

"Leased Property" means the Project and the underlying land described in Exhibit A to the Lease.

"Management Consultant" means an independent consultant experienced in the field of hotel management.

"Net Proceeds" means any insurance proceeds or condemnation award paid with respect to the Leased Property remaining after payment therefrom of all expenses incurred in the collection thereof.

"Opinion of Counsel" means a written opinion of counsel of recognized national standing in the field of law relating to municipal bonds, appointed and paid by the City.

"Permitted Encumbrances" when used with reference to the Leased Property means as of any particular time: (i) liens for general ad valorem taxes and assessments, if any, not then delinquent, or which the City may, pursuant to the Lease, permit to remain unpaid; (ii) the Lease and the Site and Facilities Lease; (iii) the Assignment Agreement; (iv) any right or claim of any mechanic, laborer, materialman, supplier or vendor filed or perfected in the manner prescribed by law after the date of the Lease; (v) easements, rights of way, mineral rights, drilling rights and other rights, reservations, covenants, conditions or restrictions that exist of record as of the date of initial issuance of the Bonds and that the City certifies in a written Certificate will not materially impair the use of the Leased Property by the City; and (vi) easements, rights of way, mineral rights, drilling rights and other rights, reservations, covenants, conditions or restrictions established following the date of recordation of the Lease and to which the Authority and the City consent in writing.

"Project" means the Hilton Garden Inn Hotel Project located at 801 Via San Clemente, Montebello, California 90640.

"Project Gross Revenues" means all revenues, income, receipts and money received by the City or by the Facilities Manager in connection with, or related to, the ownership and operation of the Project, including, but not limited to, (i) gross proceeds received from room charges and all other services including, but not limited to, telephone, fax, telecommunications, internet access, in-room movies or other televised programming charges, valet, and laundry services; (ii) gross proceeds received from the sale of merchandise of any type whatsoever; and (iii) all investment earnings from investment of any such revenues, income, receipts and money related to the City's ownership of the Project.

"Project Net Revenues" means, with respect to any period, the amount of Project Gross Revenues received during such period less the amount of Project Operating Expenses becoming payable during such period.

"Project Operating Expenses" means, for any specified period, the sum of expenses of the Project as shown on its "Statement of Revenues and Expenses" ( or equivalent financial statement) as its operating expenses (or equivalent items of expense) including extraordinary and nonrecurring items but excluding interest expense and depreciation and amortization, all as determined in accordance with generally accepted accounting principles.

"Trustee" means The Bank of New York Mellon Trust Company, N.A., a national banking association existing under and by virtue of the laws of the United States, the trustee acting in its capacity as such under the Indenture, or any successor as therein provided.

No Release, Substitution or Removal of Leased Property

No release, substitution or removal of Leased Property shall take place under the Lease.

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Tax Covenant

The City covenants that it shall not use, permit the use of, or omit to use Gross Proceeds or any other amounts (or any property the acquisition, construction or improvement of which is to be financed directly or indirectly with Gross Proceeds) in a manner that if made or omitted, respectively, would cause the interest on any of the Bonds to fail to be excluded pursuant to section 103(a) of the Code from the gross income of the owners thereof for federal income tax purposes.

Taxes, Other Governmental Charges and Utility Charges

The parties to the Lease contemplate that the Leased Property will be used for public purposes by the City and, therefore, that the Leased Property will be exempt from all taxes presently assessed and levied with respect to real and personal property. In the event that the use, possession or acquisition by the City or the Authority of the Leased Property is found to be subject to taxation in any form, the City will pay during the term of the Lease, as the same respectively become due, all taxes and governmental charges of any kind whatsoever that may at any time be lawfully assessed or levied against or with respect to the Leased Property and any other modification, improvement or addition to the Leased Property, as well as all gas, water, steam, electricity, heat, power, air conditioning, telephone, utility and other charges incurred in the operation, maintenance, use, occupancy and upkeep of the Leased Property; provided, that with respect to any governmental charges or taxes that may lawfully be paid in installments over a period of years, the City shall be obligated to pay only such installments as are accrued during such time as the Lease is in effect.

Insurance

The City shall procure or cause to be procured and maintain or cause to be maintained through the term of the Lease for the Leased Property insurance against the following risks in the following respective amounts:

(I) following the completion of the Project ( unless such perils are not otherwise fully covered by insurance obtained by the Facilities Manager or the contractor for the Project), insurance against loss or damage to the Leased Property or such structure or item of furniture or equipment caused by fire or lightning, with an extended coverage endorsement and vandalism and malicious mischief insurance, which such extended coverage insurance shall, as nearly as practicable, cover loss or damage by explosion, windstorm, riot, aircraft, vehicle damage, smoke and such other hazards as are normally covered by such insurance. The insurance required by this paragraph shall be in an amount equal to the replacement cost (without deduction for depreciation) of improvements located or to be located on the Leased Property but shall be not less than the principal amount of the Outstanding Bonds ( except that such insurance may be subject to deductible clauses of not to exceed ten percent (10%) of the amount of any one loss);

(2) rental interruption insurance against the Authority's loss of income due to events giving rise to the right of abatement on the part of the City under the Lease in an amount sufficient to pay the maximum total Base Rental payments attributable to the Leased Property occurring in any 24-month period; provided, that the amount of such insurance need not exceed the total remaining Base Rental payments attributable to the Leased Property;

(3) workers' compensation insurance covering all employees working in or on the Leased Property, in the same amount and type as other workers' compensation insurance maintained by the City for similar employees doing similar work; and the City shall also require any other person or entity working in or on the Leased Property to carry the foregoing amount of workers' compensation insurance;

( 4) a standard comprehensive public entity liability insurance policy or policies in protection of the City, the Authority, and their respective directors, officers and employees and the Trustee,

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indemnifying and defending such parties against all direct or contingent loss or liability for damages for personal injury, death or property damage occasioned by reason of the possession, operation or use of the Leased Property. Such public liability and property damage insurance shall be in the form of a single limit policy in the amount of not less than three million dollars ($3,000,000), subject to a deductible clause of not to exceed $250,000, covering all such risks; and

( 5) a CL TA standard coverage leasehold policy of title insurance on the Leased Property in an amount at least equal to the initial aggregate amount of the principal amount of Base Rental payments issued by a company of recognized standing duly authorized to issue the same. The title policy or policies shall insure the City's leasehold estate under the Lease with respect to the Leased Property, subject only to Permitted Encumbrances.

Insurance coverage required by paragraphs (1), (2), (3) and ( 4) may be maintained as part of or in conjunction with any other insurance coverage carried by the City, and may be maintained in whole or in part in the form of insurance maintained through a joint exercise of powers agency created for such purpose or other program providing pooled insurance.

Notwithstanding the above provisions, as an alternative to providing the insurance required by paragraphs (1), (2) and ( 4) above, the City may provide a self-insurance method or plan of protection. Any such self-insurance maintained by the City pursuant to the foregoing provisions, shall be similar in nature and scope to self-insurance programs maintained by other California cities of comparable size and operations, and shall be reviewed annually by an Insurance Consultant.

Damage, Destruction, Title Defect and Condemnation; Use of Net Proceeds

If prior to the termination of the term of the Lease (a) the Leased Property or any portion thereof is destroyed (in whole or in part) or is damaged by fire or other casualty; or (b) title to, or the temporary use of, the Leased Property or any portion thereof or the estate of the City or the Authority in the Leased Property or any portion thereof is defective or shall be taken under the exercise of the power of eminent domain by any governmental body or by any person or firm or corporation acting under governmental authority, then the City shall, as expeditiously as possible, continuously and diligently cause the repair or replacement thereof (unless the City elects not to repair or replace), and the City and the Authority will cause the Net Proceeds remaining after such work has been completed to be paid to the City; provided, that the City, at its option and provided the Net Proceeds together with any other moneys then available for the purpose are at least sufficient to prepay the aggregate annual amounts of principal of and interest on the Bonds attributable to the portion of the Leased Property so destroyed, damaged, defective or condemned ( determined by reference to the proportion which the fair rental value of the entire Leased Property bears to the fair rental value of the remaining portion of the Leased Property, and such that the fair rental value of the remaining portion of the Leased Property is sufficient to pay the Principal Components and Interest Components (assuming that the Interest Components will accrue at the Maximum Rate or if a Fixed Rate has been established, then at the Fixed Rate)), may elect not to repair, reconstruct or replace the damaged, destroyed, defective or condemned portion of the Leased Property and thereupon shall cause said Net Proceeds to be used for the redemption of Outstanding Bonds pursuant to the provisions of the Indenture.

In the event that the Net Proceeds, if any, are insufficient either to (i) repair, rebuild or replace the Leased Property so that the fair rental value of the Leased Property would be at least equal to the Base Rental payments or (ii) to prepay the Outstanding Bonds, both as provided in the preceding paragraph, then the City may, in its sole discretion, budget and appropriate an amount necessary to effect such repair, rebuilding or replacement or prepayment; provided that the failure of the City to so budget and/ or appropriate shall not be a breach of or default under the Lease.

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Default

The following events shall be events of default under the Lease:

(1) the City shall fail to pay any item of Additional Rental as and when the same shall become due and payable pursuant to the Lease; or

(2) the City shall fail to deposit with the Trustee any Base Rental payment required to be so deposited by the close of business on the day such deposit is required pursuant to the Lease, provided, that failure to pay any Base Rental payments abated pursuant to the Lease shall not constitute an event of default;

(3) the City shall breach any other terms, covenants or conditions contained in the Lease, and shall fail to remedy any such breach with all reasonable dispatch within a period of thirty (30) days after written notice thereof from the Authority or the Trustee to the City; provide~ however) that if the failure stated in the notice cannot be corrected within such period, then the Authority shall not unreasonably withhold its consent to an extension of such time if corrective action is instituted by the City within such period and is diligently pursued until the default is corrected.

In addition to any default resulting from breach by the City of any agreement, condition, covenant or term of the Lease, if (1) the City's interest in the Lease or any part thereof be assigned, sublet or transferred without the written consent of the Authority, either voluntarily or by operation of law; or (2) the City or any assignee shall file any petition or institute any proceedings under any act or acts, state or federal, dealing with or relating to the subject of bankruptcy or insolvency or under any amendment of such act or acts, either as a bankrupt or as an insolvent or as a debtor or in any similar capacity, wherein or whereby the City asks or seeks or prays to be adjudicated a bankrupt, or is to be discharged from any or all of its debts or obligations, or offers to its creditors to effect a composition or extension of time to pay its debts, or asks, seeks or prays for a reorganization or to effect a plan of reorganization or for a readjustment of its debts or for any other similar relief, or if the City shall make a general or any assignment for the benefit of its creditors; or (3) the City shall abandon or vacate the Leased Property or any portion thereof; then in each and every such case the City shall be deemed to be in default under the Lease.

Remedies

Upon the happening of any of the events specified in subparagraph (1) or (2) above of the paragraph entitled "Default" (in either case an "Event of Default"), then it shall be lawful for the Authority to exercise any and all remedies available or granted to it pursuant to law or under the Lease. Upon the breach of any agreement, condition, covenant or term contained in the Lease required to be observed or performed by the City, the Authority may exercise any and all rights of entry upon or repossession of the Leased Property, and also, at its option, with or without such entry, may terminate the Lease; provided, that no termination shall be effected either by operation of law or acts of the parties to the Lease except upon express written notice from the Authority to the City terminating the Lease, as provided below. In the event of such default and notwithstanding any entry by the Authority, the Authority may at any time thereafter (with or without notice and demand and without limiting any other rights or remedies the Authority may have):

(1) Maintain the Lease in full force and effect and recover rent and other monetary charges as they become due without terminating the City's right to possession of the Leased Property, regardless of whether or not the City has abandoned the Leased Property. In the event the Authority elects not to terminate the Lease, it shall have the right and the City irrevocably appoints the Authority as its agent and attorney-in-fact for such purpose to attempt to relet the Lease Property at such rent, upon such conditions and for such term, so long as the Trustee obtains an Opinion of Counsel that the tax-exempt status of the interest components of Base Rental payments will be preserved, and to do all other acts to maintain or

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preserve the Leased Property, including removal of persons or property therefrom or taking possession thereof, as the Authority deems desirable or necessary, and the City waives any and all claims for any damages that may result to the Leased Property thereby; provided, that no such actions shall be deemed to terminate the Lease and the City shall continue to remain liable for any deficiency that may arise out of such reletting, taking into account expenses incurred by the Authority due to such reletting, payable at the same time and manner as provided for Base Rental in the Lease.

(2) Terminate the City's right to possession of the Leased Property by giving a written notice of termination to the City. On the date specified in such notice (which shall be not less than three (3) days after the giving of such notice) the City's right to possession under the Lease shall terminate and the City shall surrender possession of the Leased Property, as the case may be, to the Authority, unless on or before such date all arrears of rental and all other sums payable by the City under the Lease, and all costs and expenses incurred by or on behalf of the Authority under the Lease, including attorney's fees incurred in connection with such defaults, shall have been paid by the City and all other defaults or breaches under the Lease by the City at the time existing shall have been fully remedied to the satisfaction of the Authority. Upon such termination, the Authority may recover, in addition to all other damages available by contract or at law, to the extent permitted by law, from the City: (i) the worth at the time of award of the unpaid rental which had been earned at the time of termination; and (ii) the worth at the time of award of the amount by which the unpaid rental which would have been earned after termination until the time of award exceeds the amount of such rental loss that the City proves could have been reasonably avoided. The "worth at the time of award" of the amounts referred to in clauses (i) and (ii) above is computed by allowing interest at the rate of twelve per cent (12%) per annum.

Without otherwise limiting any of the rights or remedies of the Authority set forth in the Lease, the Authority expressly waives the right to receive any amount from the City pursuant to Section 1951.2(a)(3) of the California Civil Code. Each and all of the remedies given to the Authority under the Lease or by any law now enacted are cumulative and the exercise of any one remedy shall not impair the right of the Authority to any or all other remedies. Neither the City nor the Authority shall be in default in the performance of any of its obligations under the Lease (except for the obligation to pay Base Rental and Additional Rental pursuant to the Lease) unless and until it shall have failed to perform such obligation within thirty (30) day after notice by the City or the Authority, as the case may be, to the other party properly specifying wherein it has failed to perform such obligation.

Amendments

The Lease may be amended in writing as may be mutually agreed by the Authority and the City, subject to the written approval of the Trustee; provided, that no such amendment which materially adversely affects the rights of the Owners shall be effective unless it shall have been consented to by the Owners of more than a majority in aggregate principal amount of the Bonds then Outstanding, and provided further, that no such amendment shall (a) extend the payment date of any Base Rental payment, without the prior written consent of the Owner of each Bond so affected, or (b) reduce the percentage of the Bonds the consent of the Owners of which is required for the execution of any amendment of the Lease.

The Lease and the rights and obligations of the Authority and the City under the Lease may also be amended or supplemented at any time by an amendment of the Lease or supplement to the Lease which shall become binding upon execution by the Authority and the City without the written consents of any Owners, and only to the extent permitted by law and only for any one or more of the following purposes -

(1) to add to the agreements, conditions, covenants and terms required by the Authority or the City to be observed or performed in the Lease and other agreements, conditions, covenants and terms thereafter to be observed or performed by the Authority or the City, or to surrender any right or power

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reserved in the Lease to or conferred in the Lease on the Authority or the City, and which in either case shall not materially adversely affect the interests of the Owners;

(2) to make such provisions for the purpose of curing any ambiguity of correcting, curing or supplementing any defective provision contained in the Lease or in regard to questions arising under the Lease which the Authority or the City may deem desirable or necessary and not inconsistent with the Lease, and which shall not materially adversely affect the interests of the Owners; or

(3) for any other purpose which shall not materially adversely affect the interests of the Owners.

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APPENDIXD

FORM OF CONTINUING DISCLOSURE AGREEMENT

This CONTINUING DISCLOSURE AGREEMENT (the "Disclosure Agreement"), dated as of December 1, 2019, is by and between the CITY OF MONTEBELLO (the "City") and HILL TOP SECURITIES INC., as dissemination agent ( the "Dissemination Agent") in connection with the issuance by the Montebello Public Financing Authority (the "Authority") of its $10,200,000 Lease Revenue Refunding Bonds, 2019 Series A (Hilton Garden Inn Project) (the "2019 Bonds"). The 2019 Bonds will be issued pursuant to an Indenture, dated as of December 1, 2019, by and between the Authority and The Bank of New York Mellon Trust Company, N.A., as trustee (the "Trustee"). The City covenants and agrees as follows:

Section 1. Definitions. In addition to the definitions set forth above and, in the Indenture, which apply to any capitalized term used in this Disclosure Agreement unless otherwise defined in this Section 1, the following capitalized terms shall have the following meanings:

"Annual Report" means any Annual Report provided by the City pursuant to, and as described in, Sections 3 and 4 of this Disclosure Agreement.

"Annual Report Date" means the March 31 after the end of the City's fiscal year.

"Dissemination Agent" shall mean, initially, Hilltop Securities Inc. or any successor Dissemination Agent designed in writing by the City and which has been filed with the then current Dissemination Agent a written acceptance of such designation.

"Fiscal Year" means any twelve-month period beginning on July 1 in any year and extending to the next succeeding June 30, both dates inclusive, or any other twelve-month period selected and designated by the City as its official fiscal year period under a Certificate of the City filed with the Trustee.

"MSRB" means the Municipal Securities Rulemaking Board, which has been designated by the Securities and Exchange Commission as the sole repository of disclosure information for purposes of the Rule, or any other repository of disclosure information that may be designated by the Securities and Exchange Commission as such for purposes of the Rule in the future.

"Official Statement" means the final official statement executed by the City in connection with the issuance of the 2019 Bonds.

"Participating Underwriter" means Cabrera Capital Markets, LLC, the original underwriter of the 2019 Bonds.

"Rule" means Rule 15c2-12(b )(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as it may be amended from time to time.

"Significant Events" means any of the events listed in Section S(a) of this Disclosure Agreement.

Section 2. Purpose of the Disclosure Agreement. This Disclosure Agreement is being executed and delivered by the City for the benefit of the holders and beneficial owners of the 2019 Bonds and in order to assist the Participating Underwriter in complying with S.E.C. Rule 15c2-12(b)(5).

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Section 3. Provision of Annual Reports.

(a) The City shall, or shall cause the Dissemination Agent to, not later than the Annual Report Date, commencing March 31, 2020, with the report for fiscal year 2018-19 provide to the MSRB, in an electronic format as prescribed by the MSRB, an Annual Report that is consistent with the requirements of Section 4 of this Disclosure Agreement. Not later than 15 Business Days prior to the Annual Report Date, the City shall provide the Annual Report to the Dissemination Agent (if other than the City). If by 15 Business Days prior to the Annual Report Date the Dissemination Agent (if other than the City) has not received a copy of the Annual Report, the Dissemination Agent shall contact the City to determine if the City is in compliance with the previous sentence. The Annual Report may be submitted as a single document or as separate documents comprising a package and may include by reference other information as provided in Section 4 of this Disclosure Agreement; provided that the audited financial statements of the City may be submitted separately from the balance of the Annual Report, and later than the Annual Report Date, ifnot available by that date. If the City's fiscal year changes, it shall give notice of such change in the same manner as for a Significant Event under Section 5(b). The City shall provide a written certification with each Annual Report furnished to the Dissemination Agent to the effect that such Annual Report constitutes the Annual Report required to be furnished by the City hereunder.

(b) If the City does not provide (or cause the Dissemination Agent to provide) an Annual Report by the Annual Report Date, the City in a timely manner shall provide ( or cause the Dissemination Agent to provide) to the MSRB, in an electronic format as prescribed by the MSRB, a notice in substantially the form attached as Exhibit A.

(c) With respect to each Annual Report, the Dissemination Agent shall:

(i) determine each year prior to the Annual Report Date the then-applicable rules and electronic format prescribed by the MSRB for the filing of annual continuing disclosure reports; and

(ii) if the Dissemination Agent is other than the City, file a report with the City certifying that the Annual Report has been provided pursuant to this Disclosure Agreement, and stating the date it was provided.

Section 4. Content of Annual Reports. The City's Annual Report shall contain or incorporate by reference the following:

(a) The City's audited financial statements prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board. If the City's audited financial statements are not available by the Annual Report Date, the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the final Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available.

(b) Unless otherwise provided in the audited financial statements filed on or prior to the annual filing deadline for Annual Reports provided for in Section 3 above, financial information and operating data with respect to the City for preceding fiscal year, substantially similar to that provided in the Official Statement, as follows:

(i) The Hilton Garden Inn current and historical Revenues and Expenses;

(ii) The Hilton Garden Inn current and historical Occupancy Rates;

(iii) The City's General Fund Balance Sheet;

(iv) The City's General Fund Revenues, Expenditures and Changes in Fund Balances;

(v) The City's General Fund Tax Revenues by Source;

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(vi) The City's current Assessed Valuations;

(vii) The City's current Top 20 Largest Property Taxpayers;

(viii) The City's current Secured Tax Charges and Delinquencies; and

(ix) The City's Other General Fund Revenue Sources.

( c) In addition to any of the information expressly required to be provided under this Disclosure Agreement, the City shall provide such further material information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading.

( d) Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the City or related public entities, which are available to the public on the MSRB' s Internet web site or filed with the Securities and Exchange Commission. The City shall clearly identify each such other document so included by reference.

Section 5. Reporting of Significant Events.

(a) The City shall give, or cause to be given, notice of the occurrence of any of the following Significant Events with respect to the 2019 Bonds:

(i) Principal and interest payment delinquencies;

(ii) Non-payment related defaults, if material;

(iii) Unscheduled draws on debt service reserves reflecting financial difficulties;

(iv) Unscheduled draws on credit enhancements reflecting financial difficulties;

(v) Substitution of credit or liquidity providers, or their failure to perform;

(vi) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the security, or other material events affecting the tax status of the security;

(vii) Modifications to rights of security holders, if material;

(viii) Bond calls, if material, and tender offers;

(ix) Defeasances;

(x) Release, substitution, or sale of property securing repayment of the securities, if material;

(xi) Rating changes;

(xii) Bankruptcy, insolvency, receivership or similar event of the City or other obligated person;

(xiii) The consummation of a merger, consolidation, or acquisition involving the City or an obligated person, or the sale of all or substantially all of the assets of the City or an obligated person ( other than in the

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ordinary course of business), the entry into a definitive agreement to undertake such an action, or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material;

(xiv) Appointment of a successor or additional trustee or the change ofname of a trustee, if material;

(xv) The incurrence of a financial obligation of the City or other obligated person, if material, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a financial obligation of the City or other obligated person, any of which affect security holders, if material; or

(xvi) A default, event of acceleration, termination event, modification of terms, or other similar events under the terms of a financial obligation of the City or other obligated person, any of which reflect financial difficulties.

(b) Whenever the City obtains knowledge of the occurrence of a Significant Event, the City shall, or shall cause the Dissemination Agent (if not the City) to, file a notice of such occurrence with the MSRB, in an electronic format as prescribed by the MSRB, in a timely manner not in excess of 10 business days after the occurrence of the Significant Event. Notwithstanding the foregoing, notice of Significant Events described in subsection (a)(viii) above need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to holders of affected 2019 Bonds under the Indenture.

(c) The City acknowledges that the events described in subparagraphs (a)(ii), (a)(vii), (a)(viii) (if the event is a bond call), (a)(x), (a)(xiii), (a)(xiv) and (a) (xv) of this Section 5 contain the qualifier "if material." The City shall cause a notice to be filed as set forth in paragraph (b) above with respect to any such event only to the extent that the City determines the event's occurrence is material for purposes of U.S. federal securities law. The City intends that the words used in paragraphs (xv) and (xvi) and the definition of "financial obligation" to have the meanings ascribed thereto in SEC Release No. 34-83885 (August 20, 2018).

(d) For purposes of this Disclosure Agreement, any event described in paragraph (a)(xii) above is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent, or similar officer for the City in a proceeding under the United States Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental City has assumed jurisdiction over substantially all of the assets or business of the City, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental City, or the entry of an order confirming a plan of reorganization, arrangement, or liquidation by a court or governmental City having supervision or jurisdiction over substantially all of the assets or business of the City.

Section 6. Identifying Information for Filings with the MSRB. All documents provided to the MSRB under this Disclosure Agreement shall be accompanied by identifying information as prescribed by the MSRB.

Section 7. Termination of Reporting Obligation. The City's obligations under this Disclosure Agreement shall terminate upon the legal defeasance, prior redemption or payment in full of all of the 2019 Bonds. If such termination occurs prior to the final maturity of the 2019 Bonds, the City shall give notice of such termination in the same manner as for a Significant Event under Section S(b ).

Section 8. Dissemination Agent. The City may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement, and may discharge any Dissemination Agent, with or without appointing a successor Dissemination Agent. Any Dissemination Agent may resign by providing 30 days' written notice to the City.

Section 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Agreement, the City may amend this Disclosure Agreement, and any provision of this Disclosure Agreement may be waived, provided that the following conditions are satisfied:

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(a) if the amendment or waiver relates to the provisions of Sections 3(a), 4 or S(a), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of an obligated person with respect to the 2019 Bonds, or type of business conducted;

(b) the undertakings herein, as proposed to be amended or waived, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the primary offering of the 2019 Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and

(c) the proposed amendment or waiver either (i) is approved by holders of the 2019 Bonds in the manner provided in the Indenture for amendments to the Indenture with the consent of holders, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the holders or beneficial owners of the 2019 Bonds.

If the annual financial information or operating data to be provided in the Annual Report is amended pursuant to the provisions hereof, the first annual financial information filed pursuant hereto containing the amended operating data or financial information shall explain, in narrative form, the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided.

If an amendment is made to the undertaking specifying the accounting principles to be followed in preparing financial statements, the annual financial information for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The comparison shall include a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information, in order to provide information to investors to enable them to evaluate the ability of the City to meet its obligations. To the extent reasonably feasible, the comparison shall be quantitative.

The Dissemination Agent shall not be obligated to enter into any amendment increasing or affecting its duties or obligations hereunder.

A notice of any amendment made pursuant to this Section 9 shall be filed in the same manner as for a Significant Event under Section S(b).

Section 10. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the City from disseminating any other information, using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Significant Event, in addition to that which is required by this Disclosure Agreement. If the City chooses to include any information in any Annual Report or notice of occurrence of a Significant Event in addition to that which is specifically required by this Disclosure Agreement, the City shall have no obligation under this Disclosure Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Significant Event.

Section 11. Default. If the City fails to comply with any provision of this Disclosure Agreement, the Participating Underwriter or any holder or beneficial owner of the 2019 Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the City to comply with its obligations under this Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed an Event of Default under the Indenture, and the sole remedy under this Disclosure Agreement in the event of any failure of the City to comply with this Disclosure Agreement shall be an action to compel performance.

Section 12. Duties, Immunities and Liabilities of Dissemination Agent.

(a) Section 27 of the Indenture is hereby made applicable to this Disclosure Agreement as if this Disclosure Agreement were (solely for this purpose) contained in the Indenture. The Dissemination Agent shall be entitled to the

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protections and limitations from liability afforded to the Trustee thereunder. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Agreement, and the City agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which they may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys' fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent's negligence or willful misconduct. The Dissemination Agent shall have no duty or obligation to review any information provided to it by the City hereunder and shall not be deemed to be acting in any fiduciary capacity for the City, the Bond holders or any other party. The obligations of the City under this Section shall survive resignation or removal of the Dissemination Agent and payment of the 2019 Bonds.

(b) The Dissemination Agent shall be paid compensation by the City for its services provided hereunder in accordance with its schedule of fees as amended from time to time, and shall be reimbursed for all expenses, legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder.

Section 13. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the City, the Dissemination Agent, the Participating Underwriter and the holders and beneficial owners from time to time of the 2019 Bonds and shall create no rights in any other person or entity.

Section 14. Counterparts. This Disclosure Agreement may be executed in several counterparts, each of which shall be regarded as an original, and all of which shall constitute one and the same instrument.

Date: December 1, 2019

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CITY OF MONTEBELLO

BY~~~~~~~~~~~~~~ Name~---------------~ Title _______________ _

HILL TOP SECURITIES INC., as Dissemination Agent

BY~---------------~ Name~---------------~ Title _______________ _

Name oflssuer:

Name of Obligor:

Name oflssue:

Date oflssuance:

EXHIBIT A

NOTICE TO EMMA OF FAILURE TO FILE ANNUAL REPORT

Montebello Public Financing Authority

City of Montebello

Montebello Public Financing Authority Lease Revenue Refunding Bonds, 2019 Series A (Hilton Garden Inn Project)

[Closing Date]

NOTICE IS HEREBY GIVEN that the Obligor has not provided an Annual Report with respect to the above-named Issue as required by the Continuing Disclosure Agreement, dated as of December 1, 2019, furnished by the Obligor in connection with the Issue. The Obligor anticipates that the Annual Report will be filed by ______ _

cc: Trustee

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HILL TOP SECURITIES INC., as Dissemination Agent

BY~~~~~~~~~~~~~~ Title _______________ _


APPENDIXE

BOOK-ENTRY SYSTEM

THE INFORMATION HEREIN CONCERNING DTC AND DTC'S BOOK-ENTRY SYSTEM HAS BEEN OBTAINED FROM SOURCES THAT THE AUTHORITY, THE TRUSTEE AND THE UNDERWRITER BELIEVE TO BE RELIABLE, BUT THE AUTHORITY, THE TRUSTEE AND THE UNDERWRITER TAKE NO RESPONSIBILITY FOR THE ACCURACY THEREOF. THE BENEFICIAL OWNERS SHOULD CONFIRM THE FOLLOWING INFORMATION WITH DTC OR THE DTC PARTICIPANTS (AS DEFINED HEREIN).

The Depository Trust Company ("DTC"), New York, NY, will act as securities depository for the 2019 Bonds. The 2019 Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fullyregistered 2019 Bond will be issued for each maturity of the 2019 Bonds of each Series, in the aggregate principal amount of such maturity, and will be deposited with DTC.

DTC is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17 A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has an S&P Global Ratings' rating of AA+. The DTC Rules applicable to DTC's Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com. The information on such website is not incorporated herein by reference.

Purchases of the 2019 Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the 2019 Bonds on DTC's records. The ownership interest of each actual purchaser of each 2019 Bond ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the 2019 Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the 2019 Bonds, except in the event that use of the book-entry system for the 2019 Bonds is discontinued.

To facilitate subsequent transfers, all 2019 Bonds deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative ofDTC. The deposit of the 2019 Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not affect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the 2019 Bonds; DTC's records reflect only the identity of the Direct Participants to whose

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http://www.dtcc.com

accounts such 2019 Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.

Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time.

Redemption notices shall be sent to DTC. Ifless than all of the 2019 Bonds within an issue are being prepaid, DTC' s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be prepaid.

Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the 2019 Bonds unless authorized by a Direct Participant in accordance with DTC's MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Authority ( or the Trustee on behalf thereof) as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts 2019 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).

Payments of principal of, premium, if any, and interest on the 2019 Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC 's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail information from the Authority or the Trustee, on payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC nor its nominee, the Trustee or the Authority, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of such principal, premium and interest to Cede & Co. ( or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Authority or Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

DTC may discontinue providing its services as depository with respect to the 2019 Bonds at any time by giving reasonable notice to the Authority or the Trustee. Under such circumstances, in the event that a successor depository is not obtained, bond certificates are required to be printed and delivered as described in the Indenture.

The Authority may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, certificates will be printed and delivered.

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APPENDIXF

FORM OF OPINION OF BOND COUNSEL

Montebello Public Financing Authority 1600 West Beverly Boulevard Montebello, California 90640

City of Montebello 1600 West Beverly Boulevard Montebello, California 90640

[Closing Date]

Re: $10,200,000 Montebello Public Financing Authority Lease Revenue Refunding Bonds, 2019 Series A (Hilton Garden Inn Project)

Ladies and Gentlemen:

We have served as bond counsel ("Bond Counsel") to the Montebello Public Financing Authority (the "Authority") in connection with the Authority's issuance and delivery of the above-captioned bonds ( the "Bonds"). The Bonds are being issued under the provisions of the Marks-Roos Local Bond Pooling Act of 1985, constituting Article 4 of Chapter 5 of Division 7 of Title 1 (commencing with Section 6584) of the California Government Code (the "Bond Law"), and pursuant to an Indenture, dated as of December 1, 2019 (the "Indenture"), by and between the Authority and The Bank of New York Mellon Trust Company, N.A., as trustee (the "Trustee").

The Bonds are limited obligations of the Authority secured under the Indenture by a pledge of Revenues and certain other moneys held under the Indenture. The Revenues consist of (i) all payments to the Trustee pursuant to a Lease Agreement, dated as of December 1, 2019 (the "Lease"), by and between the Authority, as lessor, and the City of Montebello, California (the "City"), as lessee, (ii) all amounts held in funds and accounts created under the Indenture, together with earnings thereon, and (iii) all other receipts of the Trustee (as assignee of the Authority) attributable to the ownership, leasing or operation of the Project, as defined in the Lease.

Pursuant to a Site and Facilities Lease, dated as of December 1, 2019 (the "Site Lease"), by and between the City and the Authority, the Authority will lease from the City certain real property and improvements, which consists of the Project (the "Leased Property"). Pursuant to the Lease, the Authority will lease the Leased Property back to the City. Pursuant to the Lease, the City will pay to the Trustee, as assignee of the Authority under an Assignment Agreement, dated as of December 1, 2019 (the "Assignment Agreement"), by and between the Authority and the Trustee, base rental payments ( the "Base Rental payments") in amounts equal to scheduled debt service on the Bonds. Capitalized terms used and not otherwise defined herein shall have the meanings ascribed thereto in the Indenture.

In connection with the foregoing, we have reviewed the Bond Law, the Bonds, the Indenture, the Site Lease, the Lease, the Assignment Agreement and such proceedings of the Authority and the City and other records, agreements, certificates and other documents as we deemed necessary to render the opinions set forth herein. We have assumed the genuineness of all documents and signatures presented to us. We have not undertaken to verify independently, and have assumed, the accuracy of the factual matters represented, warranted or certified in the documents. Furthermore, we have assumed compliance with all covenants and agreements contained in the Indenture, including (without limitation) covenants and agreements compliance with which is necessary to assure that future actions, omissions or events will not cause interest on the Bonds to be included in gross income of the owners thereof for federal income tax purposes.

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Based on the foregoing, and in reliance thereon, as of the date hereof, we are of the opinion that:

The Bonds constitute valid and binding limited obligations of the Authority as provided in the Indenture, and are entitled to the benefits of the Indenture, and are secured by a valid pledge of the Revenues and all moneys in the funds and accounts under the Indenture, as specified in the Indenture.

1. The Indenture has been duly and validly authorized, executed and delivered by the Authority and, assuming the enforceability thereof against the Trustee, constitutes the legally valid and binding obligation of the Authority, enforceable against the Authority in accordance with its terms. The Indenture creates a valid pledge, to secure the payment of principal and interest on the Bonds, of the Revenues and certain other amounts held by the Trustee in certain funds and accounts established pursuant to the Indenture, subject to the provisions of the Indenture permitting the application thereof for other purposes and on the terms and conditions set forth therein.

2. The Site Lease and Lease have been duly and validly authorized, executed and delivered by the Authority and the City and constitute the legally valid and binding obligations of the Authority and the City, enforceable against the Authority and the City in accordance with their terms.

3. The Assignment Agreement has been duly and validly authorized, executed and delivered by the Authority and, assuming the enforceability thereof against the Trustee, constitutes the legally valid and binding obligation of the Authority, enforceable against the Authority in accordance with its terms.

4. Under existing law, and assuming compliance with the covenants mentioned below after the date hereof, interest on the Bonds is excluded pursuant to section 103(a) of the Internal Revenue Code of 1986 as amended to the date hereof (the "Code") from the gross income of the owners thereof for federal income tax purposes and will not be included in computing the alternative minimum taxable income of the owners thereof. We are further of the opinion that interest on the Bonds is exempt from personal income taxes of the State of California under present state law.

5. The Code imposes certain requirements that must be met subsequent to the issuance and delivery of the Bonds for interest thereon to be and remain excluded pursuant to section 103(a) of the Code from the gross income of the owners thereof for federal income tax purposes. Non-compliance with such requirements could cause the interest on the Bonds to fail to be excluded from the gross income of the owners thereof retroactive to the date of issuance of the Bonds. Pursuant to the Indenture, the Lease and the Tax Certificate being delivered by the Authority and the City in connection with the issuance of the Bonds, the Authority and the City are making representations relevant to the determination of, and are undertaking certain covenants regarding or affecting, the exclusion of interest on the Bonds from the gross income of the owners thereof for federal income tax purposes. In reaching our opinions described in the immediately preceding paragraph, we have assumed the accuracy of and have relied upon such representations and the present and future compliance by the Authority and the City with such covenants. Further, except as stated in the preceding paragraph, we express no opinion as to any federal, state or local tax consequences of the receipt of interest with respect to, or the ownership or disposition of, the Bonds. Furthermore, we express no opinion as to any federal, state or local tax law consequences with respect to the Bonds, or the interest thereon, if any action is taken with respect to the Bonds or the proceeds thereof predicated or permitted upon the advice or approval of other counsel. Ownership of tax-exempt obligations such as the Bonds may result in collateral federal tax consequences to, among others, financial institutions, life insurance companies, property and casualty insurance companies, certain foreign corporations doing business in the United States, S corporations with subchapter C earnings and profits, owners of an interest in a financial asset securitization investment trust, individual recipients of Social Security or Railroad Retirement benefits, individuals otherwise qualifying for the earned income tax credit, and taxpayers

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who may be deemed to have incurred or continued indebtedness to purchase or carry, or who have paid or incurred certain expenses allocable to, tax-exempt obligations.

6. The opinions expressed in paragraphs 1, 2, 3 and 4 above are qualified to the extent the enforceability of the Bonds, the Indenture, the Site Lease, the Lease and the Assignment Agreement may be limited by applicable bankruptcy, insolvency, debt adjustment, reorganization, moratorium or similar laws or equitable principles relating to or limiting creditors' rights generally or as to the availability of any particular remedy. The enforceability of the Bonds, the Indenture, the Site Lease, the Lease and the Assignment Agreement is subject to the effect of general principles of equity, including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing, to the possible unavailability of specific performance or injunctive relief, regardless of whether considered in a proceeding in equity or at law, and to the limitations on legal remedies against governmental entities in the State of California.

No opinion is expressed herein on the accuracy, completeness or fairness of the Official Statement or other offering material relating to the Bonds.

Our opinions are based on existing law, which is subject to change. Such opinions are further based on our knowledge of facts as of the date hereof. We assume no duty to update or supplement our opinions to reflect any facts or circumstances that may hereafter come to our attention or to reflect any changes in any law that may hereafter occur or become effective. Moreover, our opinions are not a guarantee of results and are not binding on the Internal Revenue Service or the State of California; rather, such opinions represent our legal judgment based upon our review of existing law that we deem relevant to such opinions and in reliance upon the representations and covenants referenced above.

Respectfully submitted,

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MONTEBELLO PUBLIC FINANCING AUTHORITY• LEASE REVENUE REFUNDING BONDS, 2019 SERIES A (HILTON GARDEN INN PROJECT)

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Date post:	28-Apr-2023
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