$19,425,000 City of Tulare, California Sewer Revenue Bonds ...cdiacdocs.sto.ca.gov/2010-1624.pdf · City of Tulare, California Sewer Revenue Bonds, Series 2010 ... Hawkins Delafield

$19,425,000 City of Tulare, California Sewer Revenue Bonds, Series 2010 New Issue: Book Entry Only Rating: Standard & Poor’s "A‐"

Due: November 15, as shown below Dated: Date of Delivery

Tax Exemption: In the opinion of Hawkins Delafield & Wood LLP, Bond Counsel to the City, under existing statutes and court decisions and assuming continuing compliance with certain tax covenants described herein, (i) interest on the Series 2010 Bonds is excluded from gross income for Federal income tax purposes pursuant to Section 103 of the Internal Revenue Code of 1986, as amended (the “Code”), and (ii) interest on the Series 2010 Bonds is not treated as a preference item in calculating the alternative minimum tax imposed on individuals and corporations under the Code and is not included in the adjusted current earnings of corporations for purposes of calculating the alternative minimum tax. In addition, in the opinion of Bond Counsel to the City, under existing statutes, interest on the Bonds is exempt from personal income taxes imposed by the State of California. See “TAX MATTERS” herein.

Security: The Series 2010 Bonds, the Series 2009 Bonds, the Series 2006 Bonds, the Series 2003 Bonds, and any other Parity Debt (described in this Official Statement) are special obligations of the City payable solely from System Net Revenues and Refundable Credits as defined in the Indenture. System Net Revenues consist generally of all revenues of the City’s wastewater system after payment of operation and maintenance expenses, but do not include revenues used to pay the City’s 2001 Sewer Revenue Bonds, which have $16,590,000 of outstanding principal as of December 1, 2010. Refundable Credits are amounts payable by the Federal government and which the City has elected to receive as a result of issuing the Series 2009 Bonds as Build America Bonds. Neither the full faith and credit nor the taxing power of the City is pledged to the payment of principal of or interest on the Series 2010 Bonds.

Purpose: The Series 2010 Bonds will be used to finance capital improvements to the City's wastewater system, fund capitalized interest and a debt service reserve fund, and pay costs of issuing the Series 2010 Bonds.

Interest Payment Dates: May 15 and November 15, beginning May 15, 2011.

Denominations: Multiples of $5,000.

Redemption: The Series 2010 Bonds are subject to redemption prior to their stated date of maturity.

Closing: On or about December 23, 2010.

MATURITY SCHEDULE

Year Principal Interest CUSIP Year Principal Interest CUSIP(Nov. 15) Amount Rate Yield Price 899124 (Nov. 15) Amount Rate Yield Price 899124

2015 $350,000 3.250% 3.350% 99.549 HB0 2024 $575,000 5.500% 5.700% 98.091 HL82016 325,000 3.500% 3.750% 98.686 HC8 2025 560,000 5.500% 5.800% 97.028 HM62017 325,000 4.000% 4.150% 99.105 HD6 2026 600,000 5.625% 5.900% 97.181 HN42018 325,000 4.250% 4.450% 98.676 HE4 2027 645,000 5.750% 6.000% 97.361 HP92019 350,000 4.500% 4.700% 98.555 HF1 2028 650,000 5.800% 6.050% 97.282 HQ72020 365,000 4.750% 5.050% 97.681 HG9 2029 710,000 5.875% 6.100% 97.489 HR52021 370,000 5.000% 5.300% 97.535 HH7 2030 735,000 5.900% 6.150% 97.145 HS32022 530,000 5.250% 5.400% 98.690 HJ3 2031 760,000 6.000% 6.200% 97.667 HT12023 550,000 5.375% 5.550% 98.397 HK0

$10,700,000 6.50% due November 15, 2045 Yield 6.72% Price 97.043 899124HU8

The bonds are offered when, as and if delivered and received by the Underwriter, subject to approval as to their legality by Hawkins Delafield & Wood LLP, San Francisco, California, Bond Counsel, and subject to certain other conditions. Lewis Brisbois Bisgaard & Smith LLP, San Bernardino, California, is acting as Underwriter’s Counsel. Certain legal matters will be passed on for the City by Cota Cole LLP, Madera, California, as City Attorney. It is anticipated that the Series 2010 Bonds, in book‐entry form, will be available for delivery on or about December 23, 2010.

Official Statement Dated: December 14, 2010.

The City of Tulare is a full‐service city with a

population of about 59,500. The city is located in

California’s central San Joaquin Valley, roughly

halfway between San Francisco and Los Angeles

along U.S. Highway 99 in Tulare County. The

county is one of the leading agricultural and

dairy producing counties in the United States.

OFFICIAL STATEMENT City of Tulare

411 East Kern Avenue Tulare, California 93274

Incorporated 1888

City Council Members Craig Vejvoda1, Mayor

David Macedo, Council Member Skip Barwick2, Council Member Wayne Ross, Council Member Mark Watte, Council Member

Board of Public Utilities Wayne Hinman, Board President

Darlene Jensen, Board Vice President Lee Brehm, Member Dick Johnson, Member Ronald Quinn, Member

City Staff Darrel L. Pyle3, Interim City Manager

Darlene J. Thompson, Finance Director/Treasurer Lewis R. Nelson, Public Works Director

Professional Services Hawkins Delafield & Wood LLP, San Francisco, California, Bond Counsel

Bartle Wells Associates, Berkeley, California, Financial Advisor Cota Cole LLP, Madera, California, City Attorney

U.S. Bank National Association, Los Angeles, California, Trustee

This Official Statement provides information about the City and the Series 2010 Bonds. The Official Statement includes:

1. data supplied by the City and by others, as indicated herein;

2. estimates or projections which may or may not be realized and which should not be construed as assertions of fact; and

3. summaries and descriptions of legal and financial documents, or their contents, which do not purport to describe such documents completely and which are made expressly subject to the full provisions of the documents cited.

This Official Statement does not constitute a recommendation, express or implied, to purchase or not to purchase the Series 2010 Bonds or any other previous debt of the City. ________________ 1 A new Mayor may be selected by the City Council on December 21, 2010. 2 Skip Barwick was elected on November 2, 2010 and sworn in to office on December 7, 2010; he replaced Richard

Ortega, who did not run for re‐election. 3 Currently serving as Interim City Manager after resigning from the position of City Manager effective November

30, 2010. The City has initiated a search for a new City Manager.

GENERAL INFORMATION ABOUT THIS OFFICIAL STATEMENT

No Offering May Be Made Except by this Official Statement. No dealer, broker, salesperson or other person has been authorized to give any information or to make any representations with respect to the Series 2010 Bonds other than as contained in this Official Statement, and if given or made, such other information or representation must not be relied upon as having been authorized.

No Unlawful Offers or Solicitations. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy in any state in which such offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such offer or solicitation.

Effective Date. This Official Statement speaks only as of its date, and the information and expressions of opinion contained in this Official Statement are subject to change without notice. Neither the delivery of this Official Statement nor any sale of the Series 2010 Bonds will, under any circumstances, create any implication that there has been no change in the affairs of the City, any other parties described in this Official Statement.

Use of this Official Statement. This Official Statement is submitted in connection with the sale of the Series 2010 Bonds referred to in this Official Statement and may not be reproduced or used, in whole or in part, for any other purpose. This Official Statement is not a contract with the purchasers of the Series 2010 Bonds.

Preparation of this Official Statement. The information contained in this Official Statement has been obtained from sources that are believed to be reliable, but this information is not guaranteed as to accuracy or completeness.

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

Document References and Summaries. All references to and summaries of the Indenture, the Installment Purchase Agreement or other documents contained in this Official Statement are subject to the provisions of those documents and do not purport to be complete statements of those documents.

Bonds are Exempt from Securities Laws Registration. The issuance and sale of the Series 2010 Bonds have not been registered under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, in reliance upon exemptions for the issuance and sale of municipal securities provided under Section 3(a)(2) of the Securities Act of 1933 and Section 3(a)(12) of the Securities Exchange Act of 1934.

Stabilization of Prices. In connection with this offering, the Underwriter may overallot or effect transactions which stabilize or maintain the market price of the Series 2010 Bonds at a level above that which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time. The Underwriter may offer and sell the Series 2010 Bonds to certain dealers and others at prices lower than the public offering prices set forth on the cover page hereof and said public offering prices may be changed from time to time by the Underwriter.

Estimates and Projections. Certain statements included or incorporated by reference in this Official Statement constitute “forward‐looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended. Such statements are generally identifiable by the terminology used such as “plan,” “expect,” “estimate,” “budget” or other similar words.

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

CONTENTS

FINANCING PLAN......................................... 1 Purpose ................................................................. 1 The Project ............................................................ 1 Anticipated Sources and Uses of Funds ................ 1 Anticipated Sources and Uses of Funds ................ 2 Debt Service Schedule........................................... 2

THE 2010 BONDS ......................................... 5 Description of the Bonds....................................... 5 Authority for Issuance........................................... 6

SECURITY FOR THE SERIES 2010 BONDS....... 7 Pledge of System Net Revenues ........................... 7 Rate Covenant....................................................... 8 Reserve Fund......................................................... 9 Issuance of Bonds and Parity Debt ....................... 9 Rate Stabilization Fund ....................................... 10 Limited Liability ................................................... 11

THE CITY AND THE SYSTEM........................ 11 The City ............................................................... 11 Form of Government .......................................... 12 Residential, Educational, Commercial, and Industrial Growth ................................................ 13 The System.......................................................... 14 Water Pollution Control Facilities ....................... 15 City Actions to Resolve Wastewater Discharge Permit Issues ....................................................... 16 Future Wastewater System Capital Improvements..................................................... 17 Service Area and Sewer Customers .................... 18 Economics of the Dairy Industry in the City........ 22 Wastewater Flow ................................................ 24 Sewer Service Charges ........................................ 24 Billing & Collection .............................................. 26 Comparative Utility Rates ................................... 27 Connection Fees for New Development ............. 29

SYSTEM FINANCES..................................... 29 Assets and Liabilities ........................................... 30 Revenues, Expenses and Net Income ................. 32 Outstanding Debt................................................ 34 Debt Service Coverage ........................................ 36 Pension and Post‐Employment Benefits............. 41 City Investments ................................................. 43

CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES.............. 43 Article XIIIB Gann Limit ....................................... 43 Proposition 218 .................................................. 44 Future Initiatives................................................. 46

RISK FACTORS ........................................... 46 General ............................................................... 47 Revenues; Rate Covenant................................... 47 Enterprise Expenses............................................ 47 Existing and Future Parity Debt .......................... 47 Earthquakes and Other Natural Disasters .......... 48 Concentration of Wastewater Accounts ............ 48 Limitations on Remedies and Bankruptcy .......... 48 Environmental Regulation .................................. 49 Build America Bonds........................................... 49 Secondary Market for the 2010 Bonds............... 50

CONCLUDING INFORMATION .................... 51 Continuing Disclosure ......................................... 51 Legal Matters ...................................................... 51 Tax Matters......................................................... 51 Absence of Litigation .......................................... 55 Underwriting....................................................... 55 Rating.................................................................. 55 Miscellaneous ..................................................... 56 Execution of the Official Statement.................... 56

Appendix A – Definitions and Summary of Legal Documents

Appendix B – Area Statistical Information

Appendix C – Comprehensive Annual Financial Report for the Year Ended June 30, 2009

Appendix D – Form of Continuing Disclosure Certificate

Appendix E – Form of Bond Counsel Opinion

Appendix F – DTC and the Book‐Entry Only System

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$19,425,000 City of Tulare

Sewer Revenue Bonds, Series 2010

FINANCING PLAN

Purpose

The above‐captioned bonds (the “Series 2010 Bonds,”) are being issued to finance the acquisition and construction of capital improvements to the City of Tulare’s wastewater system (see “The Project” below); fund capitalized interest on the Series 2010 Bonds; fund a debt service reserve fund; and pay costs of issuing the Series 2010 Bonds.

The Project

Proceeds of the Series 2010 Bonds will be used to finance the construction of capital improvements to the City’s domestic wastewater treatment facility (the “Project”.) The improvements include construction of a new, expanded headworks for the City’s domestic wastewater treatment facility and construction of a sewer trunk line that will convey wastewater from areas in the north and east of the City. The City’s wastewater system operates under a Waste Discharge Permit issued by the Regional Water Quality Control Board. Wastewater effluent from the City’s domestic wastewater treatment facility has periodically exceeded the City’s permit levels for nitrate limits. The new, expanded domestic plant headworks is designed so that flows in excess of the domestic plant’s current treatment capacity can be conveyed to the City’s new industrial wastewater treatment plant for additional treatment after first going through the domestic plant’s new headworks. The new headworks is designed with 8 million gallons per day (mgd) of capacity, which includes substantial expansion capacity. Currently, the City domestic wastewater system has an average dry weather flow of approximately 4.2 mgd. The City has already received construction bids for the domestic plant headworks and anticipates awarding the construction contract for that project in December 2010. The new sewer trunk line is currently being designed; the City anticipates bidding out construction of the trunk line in 2011.

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Anticipated Sources and Uses of Funds

The following table sets forth the estimated sources and uses of funds with respect to the Series 2010 Bonds.

Sewer Revenue Bonds, Series 2010 Anticipated Sources & Uses of Funds

SOURCESPar Amount of Bonds $19,425,000.00Less Original Issue Discount (503,627.25)

Total Sources 18,921,372.75

USESProject Fund 16,000,000.00Reserve Fund 1,756,258.66Capitalized Interest Fund 870,000.00Underwriter's Discount 145,687.50Costs of Issuance* 149,426.59

Total Uses 18,921,372.75__________________

* Estimate includes costs for bond counsel, financial advisor, underwriter's counsel, trustee rating agency fee, printing, distribution, and other miscellaneous costs.

Debt Service Schedule

In addition to the Series 2010 Bonds, the City has four other outstanding bond issues secured by the net revenues of the sewer enterprise. The table on page 4 presents a schedule of debt service for the City’s Senior 2001 Bonds and parity obligations including the Series 2003 Bonds, Series 2006 Bonds, Series 2009 Bonds, and Series 2010 Bonds. Each of the outstanding series of bonds has its own dedicated cash‐funded debt service reserve fund. The City also anticipates fulfilling the reserve requirement for the Series 2010 Bonds with cash funding. See “SYSTEM FINANCES – Debt Service Coverage” for tables showing historical and projected debt service coverage. Senior Debt Senior 2001 Bonds: $20,000,000 City of Tulare 2001 Sewer Revenue Bonds (the “Senior 2001 Bonds”). These bonds are payable from Net Revenues of the System on a senior basis to the Series 2003 Bonds, Series 2006 Bonds, Series 2009 Bonds, and Series 2010 Bonds. The 2001 Senior Bonds mature on November 15 of each year through 2031. The 2001 Senior Bonds have a dedicated, cash‐funded debt service reserve fund and are insured by Financial Security Assurance Inc. As of December 1, 2010, $16,590,000 of principal of the 2001 Senior Bonds is outstanding.

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Parity Debt The following bonds are payable on parity from System Net Revenues remaining after payment of debt service on the Senior 2001 Bonds. The Series 2010 Bonds are secured by a lien on System Net Revenues that is on parity with that of the outstanding Series 2003 Bonds, Series 2006 Bonds, and Series 2009 Bonds. Series 2003 Bonds: $42,700,000 City of Tulare Sewer Revenue Bonds, Series 2003 (the “Series 2003 Bonds”). The Series 2003 Bonds were issued to defease three prior debt obligations and finance approximately $13.3 million of capital improvements to the System. The Series 2003 Bonds have a dedicated, cash‐funded debt service reserve fund and are insured by Syncora Guarantee, Inc. (formerly known as XL Capital Assurance, Inc.) As of December 1, 2010, $32,820,000 of principal of the Series 2003 Bonds remains outstanding. Series 2006 Bonds: $78,900,000 City of Tulare Sewer Revenue Bonds, Series 2006 (the “Series 2006 Bonds”). The Series 2006 Bonds were issued to finance capital improvements to the System, including a major reconstruction and expansion of the City’s industrial wastewater treatment facility. The Series 2006 Bonds have a dedicated, cash‐funded debt service reserve fund and are insured by Syncora Guarantee, Inc. (formerly known as XL Capital Assurance, Inc.) As of December 1, 2010, $78,280,000 of principal of the Series 2006 Bonds remains outstanding. Series 2009 Bonds: $54,775,000 City of Tulare Sewer Revenue Bonds, Series 2009 (Taxable Build America Bonds – Direct Pay) (the “Series 2009 Bonds”). The Series 2009 Bonds were issued to finance capital improvements to the System including completion of major reconstruction and additional expansion of the City’s industrial wastewater treatment facility and other improvements. The Series 2009 Bonds have a dedicated, cash‐funded debt service reserve fund and are insured by Financial Security Assurance Inc. As of December 1, 2010, $54,775,000 of principal of the Series 2009 Bonds remains outstanding.

Fiscal Year Senior 2001 Series 2003 Series 2006 Series 2010 Total Total TotalEnding Bonds Bonds Bonds Gross Refundable Net Bonds Net Parity Net GrossJune 30 Debt Service Debt Service Debt Service Debt Service Credits Debt Service1 Debt Service Debt Service1 Debt Service2 Debt Service

2011 $1,229,825 $2,981,575 $3,934,825 $4,792,813 ($1,677,484) $3,115,328 $0 $10,031,728 $11,261,553 $12,939,0382012 1,229,350 2,977,675 3,941,625 4,792,813 (1,677,484) 3,115,328 741,528 10,776,156 12,005,506 13,682,9912013 1,227,975 2,981,038 3,947,625 4,792,813 (1,677,484) 3,115,328 1,155,678 11,199,668 12,427,643 14,105,1282014 1,225,700 2,978,088 3,952,825 4,792,813 (1,677,484) 3,115,328 1,155,678 11,201,918 12,427,618 14,105,1032015 1,227,413 2,979,288 3,957,225 4,792,813 (1,677,484) 3,115,328 1,155,678 11,207,518 12,434,931 14,112,4152016 1,228,000 2,982,588 3,990,225 4,792,813 (1,677,484) 3,115,328 1,499,990 11,588,131 12,816,131 14,493,6152017 1,227,463 2,986,833 4,040,825 4,792,813 (1,677,484) 3,115,328 1,463,615 11,606,601 12,834,063 14,511,5482018 1,230,688 2,990,783 4,049,425 4,792,813 (1,677,484) 3,115,328 1,451,428 11,606,963 12,837,651 14,515,1352019 1,237,450 2,994,060 4,056,825 4,792,813 (1,677,484) 3,115,328 1,438,021 11,604,234 12,841,684 14,519,1692020 1,237,413 2,448,593 4,592,225 4,792,813 (1,677,484) 3,115,328 1,448,240 11,604,386 12,841,798 14,519,2832021 1,240,469 2,449,815 4,592,225 4,792,813 (1,677,484) 3,115,328 1,446,696 11,604,064 12,844,533 14,522,0182022 1,246,425 2,455,738 4,596,225 4,792,813 (1,677,484) 3,115,328 1,433,778 11,601,068 12,847,493 14,524,9782023 1,250,038 1,440,823 5,475,850 4,792,813 (1,677,484) 3,115,328 1,570,615 11,602,616 12,852,653 14,530,1382024 1,251,563 1,446,838 5,482,175 4,792,813 (1,677,484) 3,115,328 1,561,921 11,606,262 12,857,824 14,535,3092025 1,256,069 1,450,783 5,482,875 4,792,813 (1,677,484) 3,115,328 1,556,328 11,605,313 12,861,382 14,538,8662026 1,258,438 1,451,938 5,527,688 4,792,813 (1,677,484) 3,115,328 1,510,115 11,605,068 12,863,506 14,540,9902027 1,263,550 1,455,150 5,517,188 4,792,813 (1,677,484) 3,115,328 1,517,840 11,605,506 12,869,056 14,546,5402028 1,266,288 1,455,988 5,502,438 4,792,813 (1,677,484) 3,115,328 1,527,421 11,601,174 12,867,462 14,544,9462029 1,276,413 1,459,331 5,532,375 4,792,813 (1,677,484) 3,115,328 1,495,028 11,602,062 12,878,474 14,555,9592030 1,278,806 1,464,209 5,507,000 4,792,813 (1,677,484) 3,115,328 1,515,321 11,601,859 12,880,665 14,558,1492031 1,288,350 1,465,466 5,526,313 4,792,813 (1,677,484) 3,115,328 1,497,783 11,604,889 12,893,239 14,570,7232032 1,289,925 1,468,675 5,539,250 4,792,813 (1,677,484) 3,115,328 1,478,300 11,601,553 12,891,478 14,568,9632033 - 1,473,594 5,545,813 5,538,688 (1,665,541) 3,873,147 695,500 11,588,053 11,588,053 13,253,5942034 - 1,475,100 5,556,875 5,503,906 (1,641,117) 3,862,789 695,500 11,590,264 11,590,264 13,231,3812035 - - 5,643,750 6,843,063 (1,593,572) 5,249,491 695,500 11,588,741 11,588,741 13,182,3132036 - - 5,643,750 6,771,781 (1,521,373) 5,250,408 695,500 11,589,658 11,589,658 13,111,0312037 - - 5,633,750 6,703,031 (1,444,811) 5,258,220 695,500 11,587,470 11,587,470 13,032,2812038 - - 5,613,750 6,640,281 (1,363,348) 5,276,933 695,500 11,586,183 11,586,183 12,949,5312039 - - 5,583,750 6,586,563 (1,276,297) 5,310,266 695,500 11,589,516 11,589,516 12,865,8132040 - - 5,543,750 6,530,125 (1,183,044) 5,347,081 695,500 11,586,331 11,586,331 12,769,3752041 - - 5,518,125 6,460,094 (1,083,283) 5,376,811 695,500 11,590,436 11,590,436 12,673,7192042 - - 5,432,500 6,433,406 (975,942) 5,457,464 695,500 11,585,464 11,585,464 12,561,4062043 - - - 11,665,500 (775,425) 10,890,075 695,500 11,585,575 11,585,575 12,361,0002044 - - - 11,369,344 (477,520) 10,891,823 695,500 11,587,323 11,587,323 12,064,8442045 - - - 11,053,313 (162,159) 10,891,153 695,500 11,586,653 11,586,653 11,748,8132046 - - - - - - 11,047,750 11,047,750 11,047,750 11,047,750

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1 Net of anticipated Refundable Credit from the Federal government equal to 35% of the interest payable on the Series 2009 Bonds; the Refundable Credit can be reduced or eliminated under certain circumstances. See "RISK FACTORS - Build America Bonds" herein.Note: Amounts shown are rounded to nearest dollar and are net of capitalized interest.

PARITY DEBT Series 2009 Bonds

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THE 2010 BONDS

Description of the Bonds

Interest: Interest is payable on May 15 and November 15 of each year (each, an “Interest Payment Date”) to the respective dates of maturity of the City’s Sewer Revenue Bonds, Series 2010 (the “Series 2010 Bonds”) beginning May 15, 2011. Interest will accrue from the date of delivery.

Payment: The Series 2010 Bonds will be executed, sold, and delivered in fully registered form, without coupons in multiples of $5,000. The Series 2010 Bonds will be registered in the name of Cede & Co., as nominee of the Depository Trust Company (“DTC”), New York, New York, as the initial securities depository for the Series 2010 Bonds. Ownership interests in the Series 2010 Bonds may be purchased in book‐entry form only. Purchasers of the Series 2010 Bonds will not receive bond certificates representing their ownership interests in the Series 2010 Bonds purchased. Principal and interest payments with respect to the Series 2010 Bonds are payable directly to DTC by the Trustee. Upon receipt of payments of principal and interest, DTC will in turn distribute such payments to the beneficial owners of the Series 2010 Bonds. See Appendix F.

Optional Redemption: The Series 2010 Bonds maturing on or before November 15, 2019 are not subject to optional redemption prior to maturity. The Series 2010 Bonds maturing on or after November 15, 2020 may be called prior to maturity and redeemed at the option of the City on any date on or after November 15, 2019, as a whole or in part, from any source of available funds, at a redemption price equal to 100 percent of the principal amount of the Series 2010 Bonds to be redeemed together with a premium (expressed as a percentage of the principal amount of the Series 2010 Bonds to be redeemed) as set forth below, plus accrued interest to the date of redemption. Redemption Period Premium

November 15, 2019 through November 14, 2020 1%

November 15, 2020 and thereafter 0%

See Appendix A for a summary of the redemption notice provisions of the Indenture.

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Authority for Issuance

The Series 2010 Bonds are being issued pursuant to the Freeholder’s Charter of the City and the City of Tulare Revenue Bond Law, which was enacted by Ordinance No. 1030, adopted by the City Council of the City on February 1, 1972, as amended (collectively, the “Law”); Ordinance No. 10‐20, enacted by the City on November 16, 2010 and provisions of the Master Indenture, dated as of December 1, 2003 (the “Master Indenture”), by and between the City and U.S. Bank National Association, Los Angeles, California, as trustee (the “Trustee”), with respect to the Series 2010 Bonds, a Fourth Supplemental Indenture, dated as of December 1, 2010 (the “Fourth Supplemental Indenture”, and collectively with the First Supplemental Indenture dated as of December 1, 2003, the Second Supplemental Indenture dated as of December 1, 2006, the Third Supplemental Indenture dated as of June 1, 2009, the Master Indenture, and any future supplemental indentures, the “Indenture”), by and between the City and the Trustee.

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SECURITY FOR THE SERIES 2010 BONDS

Pledge of System Net Revenues

Parity Debt. All System Net Revenues (as described below), all Refundable Credits (as defined herein) and all amounts on deposit in the System Revenue Fund and in the funds or accounts established by the Indenture (except the Rebate Fund), are irrevocably pledged by the City to the punctual payment of the principal of and interest on the Series 2003 Bonds, the Series 2006 Bonds, the Series 2009 Bonds, the Series 2010 Bonds, and any additional bonds issued under the Indenture (collectively, the “Bonds”) and any Parity Obligations (along with the Bonds, “Parity Debt”). The System Net Revenues, the Refundable Credits and the other pledged assets may not be used for any other purpose while any of the Bonds remain Outstanding, except as otherwise provided in the Indenture. Senior 2001 Bonds. The pledge of System Net Revenues securing the Bonds and Parity Debt is subject to a senior lien on the revenues generated by the System for the benefit of the Senior 2001 Bonds. As of December 1, 2010, $16,590,000 principal amount of Senior 2001 Bonds was outstanding. The Senior 2001 Bonds mature on November 15 of each year through 2031. The City has agreed under the Indenture not to issue any other obligations secured by System Net Revenues and Refundable Credits that are senior to the Parity Debt (including any bonds on a parity with the Senior 2001 Bonds), provided that the City may issue senior bonds to refund the 2001 Bonds, so long as the refunding results in debt service savings in each year and the final maturity of the Senior 2001 Bonds is not extended. Defined Terms. The Indenture defines System Net Revenues, Refundable Credits and other relevant terms as follows:

“System Revenues” means all gross income and revenue received or receivable by the City from the ownership or operation of the System, determined in accordance with Generally Accepted Accounting Principles, including all fees, rates, charges and all amounts paid under any contracts received by or owed to the City in connection with the operation of the System and all proceeds of insurance relating to the System and all other income and revenue howsoever derived by the City from the ownership or operation of the System or arising from the System. “Operation and Maintenance Costs” means all management, operation and maintenance costs of the System, determined in accordance with Generally Accepted Accounting Principles, including all incidental costs, fees and expenses properly chargeable thereto and all amounts properly chargeable thereto by the general fund of the City; but excluding in all cases (i) payment of Parity Debt and Subordinate Obligations, (ii) costs of capital additions, replacements, betterments, extensions or improvements which under Generally Accepted Accounting Principles, are chargeable to a capital account, and (iii) depreciation, replacement and obsolescence charges or reserves therefor and amortization of intangibles or other bookkeeping entries of a similar nature.

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“System Net Revenues” means for any period System Revenues less Operation and Maintenance Costs for such period; provided that certain adjustments in the amount of System Net Revenue deemed collected during a Fiscal Year may be made in connection with amounts deposited in the Rate Stabilization Fund as provided in the Indenture; provided further, that System Net Revenues does not include any amounts pledged to pay debt service on the Senior 2001 Bonds. “Refundable Credits” means, with respect to a Series of Bonds that are Build America Bonds, the amounts which are payable by the Federal government under Section 6431 of the Code, which the City has elected to receive under Section 54AA(g)(1) of the Code. Refundable Credits shall not be considered System Net Revenues.

Under the Indenture, the City is required to deposit funds with the Trustee in the amount necessary to pay principal of and interest on the Bonds and any other Parity Debt that is due and owing on any Interest Payment Date or Principal Payment date three business days in advance of the Interest Payment Date or the Principal Payment Date. The Trustee is obligated under the Indenture to deposit all Refundable Credits into the Interest Account. See Appendix A for a summary of the flow of funds under the Indenture.

Rate Covenant

The City covenants under the Indenture that, at all times while any of the Bonds remain Outstanding, to the maximum extent permitted by law, it will fix, prescribe and collect rates, fees and charges and manage the operation of the System for each Fiscal Year so as to yield System Revenues at least sufficient, after making reasonable allowances for contingencies and errors in the estimates, to pay the following amounts during such Fiscal Year:

(i) All current Operation and Maintenance Costs.

(ii) The interest on and principal and Sinking Fund Account Installments of the Bonds and the payments for the other Parity Debt and the Repayment Obligations and the payment of the Subordinate Obligations as they become due and payable.

(iii) All payments required for compliance with the terms of this Official Statement, including restoration of the Reserve Fund to an amount equal to the Reserve Fund Requirement, and of any Supplemental Indenture.

(iv) All payments to meet any other obligations of the City which are charges, liens or encumbrances upon, or payable from, the System Net Revenues.

In addition to the foregoing requirements, the City will, at all times while any of the Bonds remain Outstanding, to the maximum extent permitted by law, fix, prescribe and collect rates, fees and charges and manage the operation of the System for each Fiscal Year so as to yield System Net Revenues during such Fiscal Year equal to at least 125% of the Annual Debt Service in such Fiscal Year; provided, an adjustment will be made to the amount of System Net

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Revenues for deposits to or withdrawals from the Rate Stabilization Fund as provided in the Indenture. The Indenture provides that Annual Debt Service will be reduced by the amount of Refundable Credits deposited in the Interest Account.

Reserve Fund

Series 2010 Reserve Account. Pursuant to the Master Indenture, a Reserve Fund has been established and held and maintained by the Trustee. Pursuant to the Fourth Supplemental Indenture, a Series 2010 Reserve Account is created within the Reserve Fund (the “Series 2010 Reserve Account”). Amounts in or available to the Series 2010 Reserve Account are only available to pay the principal of and interest on the Series 2010 Bonds. Similarly, amounts within the Series 2003 Reserve Account, the Series 2006 Reserve Account, and the Series 2009 Reserve Account within the Reserve Fund are only available to pay debt service on the Series 2003 Bonds, the Series 2006 Bonds, and the Series 2009 Bonds respectively. Pursuant to the Indenture, and as described more completely in Appendix A, on or before the first Business Day of each month, the City is required, from available moneys in the System Revenue Fund, to transfer to the Trustee for deposit in the various reserve accounts relating to Parity Debt (including the Series 2010 Reserve Account) amounts necessary to restore each account to an amount equal to the “Reserve Fund Requirement” (as defined in Appendix A) for the applicable series of Bonds; provided that payments to restore the various Reserve Accounts after a withdrawal may be made in monthly installments equal to one‐twelfth of the aggregate amount needed to restore the reserve accounts to the Reserve Fund Requirement as of the date of the withdrawal.

Issuance of Bonds and Parity Debt

The City may at any time issue additional Bonds and Parity Debt; provided it complies with the following requirements: 1. The City must be in compliance with all agreements, conditions, covenants and terms

contained in the Indenture required to be observed or performed by it, and a Certificate of the City to that effect must have been filed with the Trustee (with the consent of the Bond Insurer, this condition will not apply where the purpose of the proposed Bonds and/or Parity Debt is to cure non‐compliance).

2. The Bonds and/or Parity Debt must have been duly authorized pursuant to the Law and all

applicable laws, and the issuance of a Series of the Bonds must have been provided for by a Supplemental Indenture duly adopted by the City that specifies the requirements contained in the Indenture.

3. The System Net Revenues for the last completed Fiscal Year or for any 12 consecutive

months within the last 18 months preceding the date of execution of such Parity Debt, as shown by a Certificate of the City on file with the Trustee, plus an allowance for increased

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System Net Revenues arising from any increase in the rates, fees and charges of the System which was duly adopted by the governing board of the City prior to the date of the execution of such Parity Debt (including rates that are scheduled to go into effect during the next three Fiscal Years) but which, during all or any part of such 12‐month period, was not in effect, in an amount equal to the amount by which the System Net Revenues would have been increased if such increase in rates, fees and charges had been in effect during the whole of such 12‐month period, as shown by a Certificate of the City on file with the Trustee, must have produced a sum equal to at least 125% of the Maximum Annual Debt Service as calculated after the execution of such Parity Debt; provided, that in the event that all or a portion of such Parity Debt is to be issued for the purpose of refunding and retiring any Parity Debt then outstanding, principal and interest payments on the Parity Debt to be so refunded and retired from the proceeds of such Parity Debt being issued may be excluded from the foregoing computation of Maximum Annual Debt Service; provided further, that the City may at any time issue Parity Debt without compliance with the foregoing conditions if the Annual Debt Service for each Fiscal Year during which such Parity Debt is outstanding will not be increased by reason of the issuance of the Parity Debt; and provided further, an adjustment will be made in the amount of System Net Revenues for deposit to or withdrawals from the Rate Stabilization Fund as provided in the Indenture (see “Rate Stabilization Fund” below). The Indenture provides that Annual Debt Service will be reduced by the amount of Refundable Credits deposited in the Interest Account and that, for purposes of computing Maximum Annual Debt Service in connection with issuing Parity Debt, Annual Debt Service shall be reduced by the amount of Refundable Credits the City projects it will receive during each Fiscal Year.

Nothing contained in the tests listed above limits the issuance of any Subordinate Obligation. See Appendix A.

Rate Stabilization Fund

The Indenture creates a Rate Stabilization Fund which is held by the City. The City may, during or within 210 days after a Fiscal Year, deposit System Net Revenues attributable to such Fiscal Year (on the basis of Generally Accepted Accounting Principles) into the Rate Stabilization Fund. The City may at any time withdraw moneys from the Rate Stabilization Fund. System Net Revenues deposited into the Rate Stabilization Fund will not be taken into account as System Net Revenues for purposes of the calculations required by the covenants in the Indenture summarized under the headings “Rate Covenant” and “Issuance of Bonds and Parity Debt” above in the Fiscal Year to which such deposit is attributable, and amounts withdrawn from the Rate Stabilization Fund, during or within 210 days after a Fiscal Year, may be taken into account as System Revenues for purposes of the calculations required by such covenants in such Fiscal Year, provided that, for purposes of the calculation summarized under “Issuance of Bonds and Parity Debt” above, the amount of System Net Revenues before any credits for withdrawals from the Rate Stabilization Fund may not be less than 100% of Maximum Annual Debt Service for outstanding Parity Debt and the proposed additional Parity Debt.

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Limited Liability

The Bonds, including the Series 2010 Bonds, are limited obligations of the City and are payable exclusively from System Net Revenues, Refundable Credits and the other funds identified in the Indenture. The City is not required to advance any money derived from any source of income other than the System Revenues, the Refundable Credits, the System Revenue Fund and the other funds as provided in the Indenture for the payment of debt service on the Bonds or for the observance or performance of any agreements, conditions, covenants or terms contained in the Indenture.

THE CITY AND THE SYSTEM

The City

The City is located in Tulare County, approximately halfway between the cities of Fresno and Bakersfield in central California. The City is approximately 175 miles north of Los Angeles and 200 miles southeast of San Francisco. The City is the second most populous in Tulare County, with a January 1, 2010 population of 59,535 as estimated by the California State Department of Finance. The City encompasses about 16 square miles within its corporate limits. The City is located along U.S. Highway 99 and is about 55 miles east of Interstate 5. The ports of Stockton, Sacramento, Los Angeles, and San Francisco are all within approximately 200 miles of the City. The main line of Union Pacific Railroad runs through the City. The City is a full‐service city that provides police and fire protection; general administrative services; parks and community services; water, solid waste, and sewer utilities; public works and capital improvements; street maintenance, sweeping, and construction; planning, zoning, and building inspection; public transit; municipal airport; library; and housing and community development services. The City is situated in the Central San Joaquin Valley, an area of approximately 1,800 square miles that contains some of the most intensive and productive agricultural development in the world. Tulare County has consistently ranked as one of the top two counties in the United States for both milk production and total agricultural production. Milk is the leading agricultural product in the County with a 2009 total value of almost $1.2 billion. Wholesale milk prices have declined substantially in the past few years; this has hurt milk producers but also resulted in lower costs of milk supply for dairy processing industries. The dairy industry has thrived in Tulare County due to range of regional economic advantages and favorable production conditions. See “Economic of the Dairy Industry in the City” below. Tulare County dairy farms are concentrated around the City, which serves as a regional hub for processing local milk supplies. A number of major industrial dairy processing facilities are located in the City. Most of the local milk supply is processed in these facilities and used to create value‐added dairy products such as cheese, powdered milk, ice‐cream, yogurt, and butter.

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Form of Government

The City was incorporated as a general law city on April 5, 1888 and became a charter city on May 1, 1923. The City is governed by a five‐member City Council whose members are elected at large for four‐year overlapping terms. The current Council members are: City Council Members Title Term Expires

Craig Vejvoda1 Mayor Nov‐2012 David Macedo Council Member Nov‐2014 Skip Barwick Council Member Nov‐2014 Wayne Ross Council Member Nov‐2012 Mark Watte Council Member Nov‐2012

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1 A new Mayor may be selected by the City Council on December 21, 2010. Skip Barwick was elected to the Tulare City Council in the November 2, 2010 election and was sworn in to office on December 7, 2010; he replaced Richard Ortega, who did not run for re‐election. Additionally, the City Council appointed Mark Watte to fill a currently‐vacant seat and complete the term of a prior Council Member who voluntarily resigned from office in October 2010. Mr. Watte was sworn into office on November 16, 2010. The City operates under a council‐manager form of government. The City Council appoints a City Manager who is responsible for day‐to‐day management of the City under policy guidelines set by the Council. The City Manager recently tendered his resignation effective November 16, 2010. On November 17, the City announced that City Council will initiate a search for an interim City Manager to fill the vacancy until completion of the recruitment process for a new City Manager. The water, sewer, and solid waste utilities operate as separate enterprises under direction of the Board of Public Utilities Commissioners (the “Board”). The Board was established by the Freeholder’s Charter of the City of Tulare and consists of five commissioners appointed by the City Council to four‐year terms. The Board sets rates and charges for the City’s utility enterprises, subject to the approval of the City Council by resolution or ordinance. The current Board members are: Board of Public Utilities Commissioners Title Term Expires

Wayne Hinman President Dec 31, 2013 Darlene Jensen Vice President Dec 31, 2011 Lee Brehm Member Dec 31, 2013 Dick Johnson Member Dec 31, 2011 Ronald Quinn Member Dec 31, 2011

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Residential, Educational, Commercial, and Industrial Growth

Residential. From January 2000 through January 2010, the City added approximately 15,500 new residents and had a 10‐year population growth of approximately 35%. However, residential growth has slowed in recent years. The City’s assessed valuation has more than doubled over the past decade but experienced a 4.5% decrease in fiscal year 2009‐10 followed by a small 1.4% increase in fiscal year 2010‐11. Since fiscal year 2008/09, the Assessor of Tulare County Assessor/Clerk‐Recorder Department has been independently reviewing the assessed values of selected residential properties in the County. As a result, the assessed valuations of a number of properties have decreased. Educational. To help serve the City’s growing student population and mitigate overcrowding, a new high school opened in the August 2008 and a new elementary school opened in 2007. Another new elementary school is currently in the planning stages. The College of the Sequoias is developing a new approximately 500‐acre campus adjacent to the City that will be annexed into the City and served by the System. The project is currently under construction. Classes are expected to start in fall 2012. In addition, the Tulare County University of California Cooperative Extension (affiliated with the University of California, Davis), which is located in the City, is planning a 70,000‐square‐foot expansion. Commercial and Industrial. The City has also experienced substantial commercial and industrial growth over the past five years. A number of major retail stores – including a SuperTarget, Home Depot, and Lowe’s – have opened in the City in recent years, along with three new hotels. A new Super Walmart is in the environmental planning stages. Tulare Preferred Outlets, an outlet mall located next to Highway 99 in the City, expanded in recent years and is in the process of constructing an additional 150,000 square‐foot expansion. The City anticipates substantial additional commercial development along Highway 99 and has been moving forward with a railroad grade separation and improvements to the Cartmill/Highway 99 freeway interchange to facilitate some large commercial and mixed‐use development projects. The City’s industrial base has also been expanding with the construction of a new $150 million major dairy processing plant in 2007, a subsequent substantial expansion to that facility, and the recent and planned expansions of other major dairy processing facilities and operations, including completion of an approximately $80 million first phase of a planned $200 million expansion of an existing cheese processing plant. The City has also approved entitlements for a new industrial kosher chicken processing plant and a new estimated $70 million beef processing plant, although it is not currently known if and when these facilities will be constructed. In addition, a team of private developers has been pursuing the development of a major motor sports complex in the City. As proposed, the Tulare Motor Sports Complex would be a modern racing complex that would occupy an approximately 700‐acre site in the southern part of the City and would include a one‐mile race track, drag strip, and residential, commercial and retail development including hotels, restaurants and entertainment venues. Preliminary cost estimates for the full build‐out of the project and related development are in the $1 billion

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range. On December 29, 2008, the City Council certified the Final Environmental Impact Report (“FEIR”) for the project and adopted a related General Plan Amendment. The Sierra Club subsequently initiated a lawsuit against the FEIR primarily regarding environmental mitigation measures. On April 1, 2009, the Tulare County Local Agency Formation Commission approved an extension of the City’s sphere of influence and a 965‐acre land annexation to the City, largely for the proposed motor sports complex. In September 2010, the Tulare County Superior Court issued a preliminary ruling that the City must revise the FEIR, in part because adequate analysis was not provided supporting the FEIR’s findings regarding environmental mitigation measures. The Court's final ruling also requires the City to set aside or void its approval of the projects and associated zoning changes, general plan amendments and other related land use entitlements of the City's approval of the Tulare Motor Sports Complex. The City is currently responding to the ruling. Pursuant to an agreement with the City, the developer of the racetrack project is supposed to repay the City for the approximately $1 million cost of the FEIR, and legal fees related to the Sierra Club lawsuit currently estimated at approximately $350,000. The developer has not yet released funds to reimburse the City for these costs in default of the agreement. The City is currently in negotiation with the developer to get reimbursed for these expenditures. On November 23, 2010 the Board of Directors of the International Agri‐Center (IAC), a non‐profit corporation that produces the annual World Ag Expo in Tulare, unanimously voted not to continue negotiations to sell approximately 350 acres of land to the developer of the Tulare Motorsports Complex. The IAC owns land adjacent to the World Ag Expo that the developer anticipated purchasing. The IAC had entered into two previous contracts to sell the property to the developer; the contracts expired while the developer was seeking to line up financing for the purchase. It is not currently known if or when the project will move forward. If the project is built, the City projects that wastewater flows from the proposed motor sports complex will be approximately 480,000 gallons as a result of each periodic event and that there will be ongoing wastewater flows from related local development.

The System

The City owns and operates a wastewater collection, treatment, and effluent disposal system. The System operates under direction of the Board and is managed by the City’s Public Works Director in two divisions: a sewer division and a wastewater division. The sewer division operates, maintains, expands, cleans, and repairs the City’s sanitary sewer pipelines, lift stations, and pumps. This division also performs inspection services to ensure that installation of new sewer facilities is in conformance with the City’s plans and specifications. The sewer division maintains approximately 150 miles of sewer lines with City equipment.

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The City’s wastewater division operates and maintains the City’s water pollution control facilities. This includes physical maintenance of wastewater treatment structures, such as sedimentation tanks, digesters, filters, pumps, and control buildings; and laboratory analysis of waste samples to ensure compliance with the discharge requirements set by the California Regional Water Quality Control Board, Central Valley Region. The System consists of two separate collection systems and wastewater treatment facilities:

Domestic System: A domestic collection system and treatment facility that collects and treats wastewater from most of the City’s residential, commercial, and public customers. The domestic sewer system began operating in the early 1920s and has been expanded over the years as growth occurred. The domestic sewer pipelines serve approximately 16 square miles of service area.

Industrial System: An industrial collection system and treatment facility that

collects and treats wastewater predominantly from areas of the City zoned for major industrial uses. The industrial collection system was originally constructed in the early 1940s, primarily to segregate the higher‐strength wastewater discharge from the City’s major dairy processing facilities. The industrial system serves six dairy processing facilities, including four large cheese producing plants and a number of commercial and residential customers located in or adjacent to the industrially‐zoned areas of the City. The dairy processing facilities produce large volumes of higher‐strength wastewater that can be more economically treated via a different treatment process than that used for standard, domestic‐strength wastewater.

Water Pollution Control Facilities

The City’s Tulare Water Pollution Control Facilities (“WPCF”) are located approximately 2½ miles southwest of the City on a site that includes both the domestic and industrial wastewater treatment plants. The City owns the WPCF and approximately 880 acres of land used for sewage treatment and effluent disposal. The WPCF operates under a single Waste Discharge Permit issued by the California Regional Water Quality Control Board, Central Valley Region (“RWQCB”). The City’s waste discharge permit requires both the domestic and industrial treatment facilities to each meet the permit requirements independently. Domestic Treatment Facility The domestic treatment plant consists of a dual process of activated biofiltration and activated sludge. Industrial flows are treated via an anaerobic process in a Bulk Volume Fermenter (“BVF”). The effluent from the BVF process is further treated in aerated lagoons, then flows through a series of partially aerated facultative ponds. The industrial plant effluent is combined with the domestic plant effluent prior to disposal via percolation and irrigation on 3,125 acres of farmland permitted for effluent disposal. The City currently owns about 880 acres and leases about 2,245 acres of farmland for effluent disposal, which includes percolation ponds and irrigation on land used for agricultural purposes.

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The WPCF was originally constructed in the early 1920s and was remodeled in 1948 to consist of a trickling filter secondary treatment facility. In 1998, the domestic wastewater plant was expanded to its current permit capacity of 6.0 mgd. Wastewater effluent from the City’s domestic wastewater treatment facility has periodically exceeded the City’s permit levels for nitrate limits. An engineering study of the domestic plant conducted in 2009 indicated that the plant currently has a firm operational capacity of approximately 3.0 mgd and is need of various capital improvements to bring the capacity of some of the plant’s components up to its 6.0 mgd permit capacity. The Project to be funded by the Series 2010 Bonds includes construction of a new, expanded headworks at the domestric treatment plant. The new headworks is designed with 8.0 mgd of capacity and is designed so that flows in excess of the domestic plant’s current operational treatment capacity can be conveyed to the City’s new industrial wastewater treatment plant for additional treatment after first going through the domestic plant’s new headworks. The City is not currently planning to upgrade and expand the other components of the domestic treatment plant until necessitated by future growth. Industrial Wastewater Treatment Facility The City finished construction of a new industrial wastewater treatment plant in 2009. The industrial plant treatment process includes anaerobic BVF, aerated lagoons for flow equalization, Sequential Batch Reactors (SBR), and denitrification filters. Waste‐activated sludge is anaerobically digested and dried in solar ponds. The new industrial plant is the largest SBR facility in the United States and fourth largest in the world. The new industrial plant has a design capacity of up to 12.0 mgd of average dry weather flow capacity and is designed to be expandable up to 24.0 mgd.

City Actions to Resolve Wastewater Discharge Permit Issues

On October 18, 2002, the RWQCB issued a) new wastewater discharge permit requirements for the City’s wastewater treatment facilities, and b) a Cease and Desist Order (“CDO”) citing the City for chronic Biological Oxygen Demand (BOD) and Electrical Conductivity (EC) violations at the treatment plant and also for groundwater degradation due to high nitrates in the groundwater. The CDO provided a deadline for compliance of October 2009. In 2002, City adopted an industrial pretreatment program requiring industrial customers to reduce the EC in their wastewater discharge. The industrial dischargers are now in compliance with the City’s EC pretreatment requirements. In 2009, the City completed construction of a new industrial wastewater treatment facility and complied with the CDO deadline. In April 2009, the City applied to the Regional Water Quality Control Board for a new waste discharge permit reflecting the 12.0 mgd design capacity of the new industrial plant. The new permit application is pending. The City anticipates needing to expand the capacity of its wastewater effluent storage ponds and effluent disposal system as industrial growth occurs in order to handle the full 12.0 mgd of treatment capacity of the new industrial plant. Because of this, the City anticipates that the new plant may be permitted in phases up to 12.0 mgd. The new industrial plant was designed so that it can be expanded to a future capacity of 24.0 mgd in stages to accommodate future industrial growth.

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The City’s new industrial wastewater treatment facility is currently operating in compliance with the City’s waste discharge permit. However, wastewater effluent from the City’s domestic wastewater treatment facility has periodically exceeded permitted nitrate limits. Proceeds of the Series 2010 Bonds will be partially used to fund construction of a new, expanded headworks at the domestic treatment plant. In order to help ensure compliance with the City's permit requirements, the new headworks is designed so that flows in excess of the domestic plant’s current operational treatment capacity can be conveyed to the City’s new industrial wastewater treatment plant for additional treatment after first going through the domestic plant’s new headworks. The following table shows the wastewater treatment capacities and flows of the City’s domestic and industrial treatment facilities. Wastewater Treatment Plant Capacity & Flow

Domestic Industrial Treatment Treatment Facility Facility Plant Capacity (mgd) Permit Capacity, Average Dry Weather Flow1,2 6.00 6.70 Design Capacity2 6.00 12.00 Peak Wet Weather Flow Capacity 13.00 18.70 Wastewater Flows (mgd) Average Dry Weather Flow3 4.19 6.83 Peak Monthly Flow4 6.56 9.23

1 Industrial treatment plant permit capacity based on operation of four out of five treatment trains. 2 An engineering analysis conducted in 2009 indicated that portions of the domestic plant can reliably process approximately 3 mgd of wastewater flow to permit standards.

3 Based on average monthly flows from May 2009 through May 2010. 4 Based on domestic flows from October 2009 and industrial flows from December 2009. Source: City of Tulare.

Future Wastewater System Capital Improvements

Other than improvements to be funded by the Series 2010 Bonds and remaining project funds available from the Series 2009 Bonds, future wastewater system capital improvement needs are predominantly growth‐related. With the 2009 completion of the new industrial wastewater treatment plant and planned construction of the new, expanded headworks for the domestic treatment plant, the City’s wastewater treatment facilities will have a combined firm operational capacity of approximately 15 mgd. Combined domestic and industrial wastewater flows currently total approximately 11 mgd; resulting in roughly 4 mgd of treatment capacity

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available for future expansion. This level of expansion capacity is adequate to handle the equivalent flows from approximately 10,000 to 15,000 single family homes. Based on the level of growth over the next 5 years, the City anticipates that it may need to add capacity to its effluent storage ponds and effluent disposal facilities. The City estimates that it could spend approximately $3 million to $5 million on these facilities over the next 5 years. These costs would be incurred only as necessitated by growth in the City’s wastewater flows. The City anticipates funding these projects on a pay‐as‐you‐go basis. In addition, the City anticipates funding ongoing repairs and replacements on a pay‐as‐you‐go basis. Historically, the City has funded roughly $300,000 to $1 million per year on repairs and replacements. Over the longer term, the City may eventually need to expand its domestic and/or industrial wastewater treatment facilities beyond their current capacities depending on future growth. The City’s new 12 mgd industrial treatment plant was designed to be expandable up to 24 mgd. The cost of any potential future expansion of the industrial treatment plant is not currently known. The domestic treatment plant currently has a firm operational capacity of approximately 3 mgd. With completion of the new, expanded headworks, the City estimates that it would cost approximately $16 to $20 million to bring the operational capacity of the domestic plant up to 6 mgd and an additional $5 million to bring the operational capacity up to 8 mgd.

Service Area and Sewer Customers

The City provides sewer services to customers located within an approximately 16‐square mile service area consisting primarily of the City of Tulare. All City residents, including commercial and industrial companies located within City limits, are required to connect to the System. The following table shows the historical number of sewer accounts. Most of the new connections are residential customers.

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Historical Sewer Accounts

FiscalYear

1999/00 11,362 109 1.0%2000/01 11,660 298 2.6%2001/02 11,852 192 1.6%2002/03 12,181 329 2.8%2003/04 12,506 325 2.7%2004/05 12,776 270 2.2%2005/06 13,229 453 3.5%2006/07 13,681 452 3.4%2007/08 14,531 850 6.2%2008/09 15,284 753 5.2%2009/10 15,533 249 1.6%____________________

Source: City of Tulare

Accounts Increase %Sewer AnnualNew

Connections

The following table shows the number of sewer accounts with annual sewer service charge revenues broken down by customer class for fiscal year 2009‐10. Sewer Accounts & Service Charge Revenues by Customer Class, Fiscal Year 2009/10 Number of Accounts Service Charge % of Gross

User Group Accounts % of Total Revenues Revenues

Single Family Residential 14,026 90.3% $5,377,282 27.9% Multi‐Family Residential* 651 4.2% 1,105,789 5.7% Commercial 813 5.2% 1,048,229 5.4% Industrial 8 0.1% 10,350,304 53.8% Schools 35 0.2% 207,884 1.1% Total Service Charges 15,533 100.0% $18,089,488 94.0% Gross Revenues $19,249,962 * Includes mobile homes Source: City of Tulare

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The following table shows the 10 largest customers for fiscal year 2009‐10 based on service charge revenue 10 Largest Customers, by Service Charge Revenue, Fiscal Year 2009‐10

Customer Service Charge

Revenues % of Gross Revenues

Saputo(1) $4,778,688 24.8% Land O’Lakes, Inc. (2) 3,492,091 18.1% Kraft 1,379,579 7.2% Morningstar(3) 349,985 1.8% Nestle Ice Cream 338,853 1.8% Ruiz Foods(4) 53,819 0.3% Oaks Estate Mobilehome Park 44,662 0.2% US Cold Storage 43,695 0.2% Als Tulare (Apartment) 30,474 0.2% Royal Palm Mobilehome Park 31,069 0.2% Total $10,542,915 54.8% 2009‐10 Gross Revenues $19,249,962 _________ (1) Previously Stella Cheese. (2) Previously Dairymen’s Cooperative Creamery Assoc. (3) Previously Tulare Culture Specialty (Avoset Foods, Inc.); the Tulare plant is a dairy processing facility. (4) Ruiz Foods produces frozen Mexican food products. Source: City of Tulare

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The City’s industrial wastewater system serves 12 accounts. The following table lists the customers served by the City’s industrial wastewater system along with their flows and annual service charge revenues for fiscal year 2009‐10. Industrial System Customers, Fiscal Year 2009‐10

Customer Annual

Flow (MG) % of Total Flow Sewer Service

Charges % of Gross Revenues

Saputo(1) 1,071 26.6% $4,778,688 24.8% Land O’ Lakes, Inc.(2) 808 20.1% 3,492,091 18.1% Kraft USA 351 8.7% 1,379,579 7.2% Morningstar(3) 81 2.0% 349,985 1.8% Nestle Ice Cream/Dreyers(4) 48 1.2% 338,853 1.8% Ruiz Foods 18 0.4% 53,819 0.3% K&M Paint & Truck Repair 3 0.1% 11,396 0.1% Other Industrial Accounts 5 0.1% 16,626 0.1% Totals 2,385 59.3% $10,421,037 54.1% __________________ (1) Previously Stella Cheese (2) Previously Dairymen’s Cooperative Creamery Assoc. (3) Previously Tulare Culture Specialty (Avoset Foods, Inc.) (4) Previously Häagen‐Dazs Source: City of Tulare

The City’s three largest industrial customers are major industrial dairy processing facilities. These three customers accounted for 50.1% of the System’s gross revenues in fiscal year 2009‐10. Due to the City’s strategic location and access to fresh milk – Tulare County and adjacent Fresno County rank as the top two counties in the United States for milk production – a number of large dairy processing facilities are located in the City. Saputo: Saputo Cheese Co. is the City’s largest System customer and accounted for approximately 24.8% of total System gross revenues in fiscal year 2009‐10. The company is one of the top twenty dairy processors in the world, the largest dairy processor in Canada, and among the top three cheese producers in the United States. The company employs approximately 9,500 employees and operates 48 plants, predominantly located in North America (26 in Canada and 16 in the United States). Saputo has historically operated one of the major dairy processing facilities in Tulare, but recently expanded with the purchase of another major facility. In 2007, Saputo purchased Land O’Lakes, Inc.’s Cheese & Protein International operations in Tulare for approximately $216 million. This dairy processing facility was originally built for approximately $150 million by Cheese & Protein International, LLC, a joint venture between Land O’Lakes and Mitsui USA, and began operating in July 2002. The facility’s capacity was subsequently expanded before being sold to Saputo in 2007. The transaction included a long‐term milk supply agreement. The main products produced at Saputo’s facilities in the City include mozzarella and shredded cheese, predominantly for American markets, and whey

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powder, much of which is exported internationally. Saputo has a diverse customer base for its products including retail, food manufacturing, and direct food service. Saputo has made substantial investments in its facilities in the City in recent years and anticipates future expansion of its production lines in the City in upcoming years, particularly because there is a substantial amount of land adjacent to Saputo’s Tulare facilities that will accommodate expansion, which is not true for most of its other North American facilities. Land O’Lakes. The City’s second largest System customer, Land O’Lakes, Inc., was founded in 1921 and is a national farmer‐owned food and agricultural cooperative with sales of approximately $10 billion in 2009. The company is owned by more than 7,000 producer members and about 1,400 local community cooperatives. Land O’Lakes merged with Dairyman’s Cooperative Creamery Association of Tulare in July 1998. The Dairyman’s facility in the City, now owned and operated through Land O’Lakes Dairyman’s Division, is the largest single‐site dairy complex in the United States, according to the company. The Tulare plant is a multiple‐function dairy facility that produces cheese, butter, powdered milk, and other dairy‐based products. Approximately one‐third of the total butter and powdered milk produced in California is manufactured annually at this facility. Land O’Lakes recently expanded its operations and hired approximately 40 new employees at its facility in the City. The company recently completed construction of an $80 million expansion to its facility in the City. The expansion includes construction and renovation of buildings and installation of machinery and equipment for new food processing operations. This expansion was the first phase of a planned $200 million expansion. Kraft USA. Kraft USA, the City’s third largest System customer, is the world’s second largest food and beverage company with 2009 net revenues of approximately $40.4 billion. In recent years, Kraft has expanded its operations in the City due to a transfer of cheese production lines from its Visalia plant to its facility in the City.

Economics of the Dairy Industry in the City

Tulare County leads the nation in the number of cows and milk production. The County also ranks as the second largest agricultural producing county in the United States, second only to neighboring Fresno County. Tulare County dairy farms are concentrated around the City, which serves as a regional hub for processing local milk supplies. Most of the local milk supply is processed in a handful of major industrial dairy‐processing facilities that are located in the City and used to create value‐added dairy products such as cheese, powdered milk, ice‐cream, yogurt, and butter. The dairy industry has been operating in the County since approximately 1860. In 1890, the first creamery was built to process local milk. Growth in the industry was spurred by access to railroad lines, expansion of local operations and development of new regional dairies, including companies that transferred operations from the urbanizing areas of Southern and Northern California. By the mid‐1990s, Tulare had become the largest dairy‐producing county in the nation. Tulare County has remained a national leader in the production of milk and value‐added dairy products ever since.

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The dairy industry has thrived in and around the City due to range of regional economic advantages and favorable production conditions including the local climate, access to low‐cost land and labor, access to low‐cost feed and water, locally‐developed technical and managerial expertise, and access to major markets in both northern and southern California. Favorable dairy production conditions include: Local climate. The local climate is ideal for efficient year‐round milk production. Temperate

winter temperatures allow local dairies to keep herds outside year‐round, unlike some other dairy regions in the United States (such as the Northeast and upper Midwest) where cows must be housed during winter months. Higher summer temperatures can be more cost‐effectively mitigated using outdoor shaded rest areas. With year‐round operations, individual cow production in the region is about 10% higher than the national average.

Access to low‐cost land and labor. Relatively low regional land prices and access to low‐cost

farm labor have helped facilitate expansion of the local dairy industry and regional milk supplies.

Access to low‐cost feed. Many regional dairies grow their own feed on site. In addition, a

large part of the feed ration is made up of agricultural byproducts from other local crops such as almond hulls, citrus and sugar beet peels, cottonseed, and other vegetable byproducts.

Reliable water supply. Farms and dairies in Tulare County rely on groundwater as their

source of water supply and do not rely on imported water. The local Tulare Lake groundwater aquifer is fed from snow melt from the eastern Sierra Madre mountains.

Large local herd sizes. The average herd size in Tulare County is approximately 1,200 cows,

over 10 times as large as the national average. Economies of scale due to the favorable local production conditions result in further efficiencies of the local dairy industry.

Local technical and managerial dairy industry expertise. Most of the regional dairies are

incorporated family businesses, with many being second‐ and third‐generation family operations.

Transportation. State Highway 99, which bisects the City, provides ready access to Northern

and Southern California. The Union Pacific rail line, which also traverses the City, provides bulk shipping alternatives for local dairy operations.

Because of economic and operational advantages of processing milk close to its source, a number of national and international dairy processing companies – including Saputo, Land O’Lakes, and Kraft – have constructed major industrial facilities in the City. For dairy product distribution, the City is strategically located in central California with easy access to major markets and international shipping ports in both northern and southern California.

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The City has also been the beneficiary of expansion and consolidation in the dairy processing industry. In addition to the relatively recent construction and expansion of the $200+ million Cheese and Protein International facility currently owned by Saputo, all three of the City’s major industrial customers (Saputo, Land O’Lakes, and Kraft) have recently expanded operations and/or are planning future expansions.

Wastewater Flow

The following table shows a history of the System’s average daily wastewater flow as measured in million gallons per day (mgd). From 1999 to 2009, average daily wastewater flow increased by a total of approximately 3.5 mgd, or roughly 47%. A sizeable portion of the increase in 2002 and 2003 was due to the startup of the new Cheese and Protein International dairy processing facility, now owned by Saputo Cheese Co. Weather also plays a factor in annual fluctuations.

Average Daily System Flow

Year1999 7.50 8.9%2000 7.85 4.7%2001 8.08 2.9%2002 9.02 11.6%2003 10.16 12.6%2004 10.48 3.1%2005 11.05 5.4%2006 11.40 3.2%2007 11.29 -1.0%2008 11.39 0.9%2009 11.02 -3.2%____________________


Flow (mgd) Annual Increase

Sewer Service Charges Sewer rates are based on customer classification. All connections to the System must pay a minimum monthly charge for sewer service. Residential ‐ Residential customers predominantly pay flat monthly rates for sewer service. Commercial customers are charged based on customer class and amount of metered water use. Schools are billed based on number of students. Non‐Residential ‐ The City’s non‐residential customer classifications are summarized in the following table. Most commercial customers pay a wastewater charge per 1,000 gallons of metered water use. The charge varies by customer class. Industrial customers pay charges based on measured flow and estimated wastewater strength as measured by biological oxygen demand (BOD) and total suspended solids (TSS). The City also charges penalties for exceeding permitted levels of various wastewater constituents including BOD, TSS, and electrical conductivity (EC).

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City of Tulare Non‐Residential Sewer Customer Classes

Class I Auto dealers Motels without dining facilities Barber and beauty shops Professional offices Bars without dining facilities Public transportation Churches Repair shows & service stations Department & retail stores Schools (except those in Class VII) Hospitals & convalescent homes Service clubs Markets without garbage grinders Storage facilities Miscellaneous offices Truck repair facilities Class II Car washes Class III Laundromats and fairgrounds Class IV Auto steam cleaning Markets with garbage disposal Retail bakeries Motels with dining facilities Butcher shops Mortuaries Industrial/commercial laundries Restaurants and drive‐ins Dry cleaners Class V Major commercial and industrial users Class VI Food processing plants discharging exclusively into the industrial system Class VII Schools without independent landscape irrigation meters or sub‐meters

Septic tank waste is accepted from haulers at the City’s water pollution control facilities only if the waste source is within Tulare County. The rates for sewer service are set by resolution of the Board, subject to approval by the City Council, and are not subject to review by any other state or local government agency. On January 22, 2009, the Board adopted sewer rate increases for the next three years by Resolution 09‐02. The rates were adopted pursuant to procedures established by Proposition 218. The rate increases were ratified by the Tulare City Council on February 17, 2009. The following table shows the City’s adopted sewer rates from July 1, 2008 through July 1, 2011.

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City of Tulare Adopted Sewer Rates

Maximum Jul-1 Jul-1 Jul-1 Jul-1 Adopted

Customer Class 2008 2009 2010 2011 Rate

ResidentialSingle family dwelling $29.93 $34.00 $38.00 $42.00 $42.00Multiple unit - each unit 23.05 26.18 29.26 32.34 32.34 Mobile home parks - each space 23.74 26.97 30.14 33.31 33.31 Low income senior discount rate 14.80 20.40 22.80 25.20 25.20

Commercial (per 1,000 gallons)Class I 2.67 3.03 3.39 3.75 3.75 Class II 2.56 2.91 3.25 3.59 3.59 Class III 2.53 2.87 3.21 3.55 3.55 Class IV 3.89 4.42 4.94 5.46 5.46

Class V: Major Commercial/IndustrialFlow - per 1,000 gallons 1.81 2.06 2.30 2.54 2.54 BOD - per 100 pounds 10.77 12.23 13.67 15.11 15.11 TSS - per 100 pounds 13.93 15.82 17.68 19.54 19.54

Class VI: Food Processing PlantsFlow - per 1,000 gallons 1.81 2.06 2.30 2.54 2.54 BOD - per 100 pounds 10.77 12.23 13.67 15.11 15.11 TSS - per 100 pounds 13.93 15.82 17.68 19.54 19.54

Class VII: Schools (per student per month)K-5/parochial 1.06 1.20 1.34 1.48 1.48 Middle schools (6-8) 1.06 1.20 1.34 1.48 1.48 High schools 1.06 1.20 1.34 1.48 1.48

Septic Tank Waste (per 1,000 gallons) 66.59 75.65 84.55 93.45 93.45

Fats, Oil and Grease (per 1,000 gallons) 66.59 75.65 84.55 93.45 93.45

Billing & Collection

The City bills for sewer charges on a combined utility bill, along with billing for water service and solid waste service. The City typically sends out bills on the first day of each month. Bills are due by the 20th of each month. If an account has not been paid in full by the 21st of the month, the City adds a 10% penalty to the account and sends a delinquent notice to the customer and the property owner stating that payment is due by the end of the month. Accounts that remain delinquent by the following bill are notified that they have 48 hours to pay the delinquent amount or service will be disconnected. Delinquent accounts are typically given until the second Friday of the month to make payment. The City begins shutting off water service to delinquent accounts a few days later. To restore service, a customer must pay off the delinquent balance, the 10% penalty, and a $25 service fee, or enter into a payment agreement with the City.

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The City may eventually section out portions of a delinquent customer’s water and sewer lines. Once a customer’s sewer line is disconnected, service will not be reconnected until all delinquent bills, penalties, and a $940 charge for disconnection and reconnection have been paid. The following table shows utility billing payment delinquencies as of June 30, 2009 and 2010. The table shows delinquent amounts for the City’s combined utility bills which include bills for water, sewer, and garbage services. Utility Billing Delinquencies Days Delinquent

Amount Delinquent June 30, 2009

Amount Delinquent June 30, 2010

1 – 30 Days $168,985 $189,890 31 – 60 Days 35,173 28,974 61 – 90 Days 22,404 19,661 91 – 120 Days 19,793 16,436 Over 120 Days 20,778 60,094 Total $267,133 $315,055

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Source: City of Tulare.

Comparative Utility Rates

The following table shows monthly utility charges for a typical single family residence located in a number of cities in the region. The table shows sewer, water, and garbage service charges effective November 2010. The City anticipates that its combined utility bills will remain in the middle range of regional agencies in future years.

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Monthly Single Family Residential Utility Charges

Sewer Water* Garbage Total

Hanford $21.60 $16.49 $21.95 $60.04Porterville 29.93 16.75 17.85 64.53Visalia 21.05 26.56 22.30 69.91Tulare 38.00 10.35 23.00 71.35Kingsburg 23.28 26.25 23.70 73.23Fresno 25.75 22.87 25.37 73.99Selma 23.28 33.73 26.25 83.26Lindsay 36.86 30.17 22.73 89.76Corcoran 22.65 51.56 31.60 105.81_______________

* Assumes 15 hundred cubic feet (hcf) of monthly water consumption.Source: Prepared by Bartle Wells Associates based on data provided by each agency. The following table shows comparative industrial sewer rates as of November 2010 for other regional agencies that serve large industrial accounts. For each of the agencies shown, large industrial customers are charged rates for volume of discharged wastewater and wastewater strength, as measured by Biological Oxygen Demand (BOD) and either Suspended Solids (SS) or Total Suspended Solids (TSS).

Comparative Industrial Sewer Rates Flow

per 1,000 gallons BOD

per 100 pounds SS or TSS

per 100 pounds

Tulare $2.54 $15.11 $19.54 Fresno (High Industrial Rate) 0.75 26.10 29.60 Visalia 1.15 19.60 27.80 Selma‐Kingsburg‐Fowler County Sanitation District1

1.64 21.49 35.25

_______________ 1 Includes Sewer Service Charge and Sewer Capital Charge. Note: Rates shown are rounded to nearest $0.01. Source: Prepared by Bartle Wells Associates based on information provided by each agency.

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Connection Fees for New Development

The City is in the process of updating its development impact fees and anticipates adopting substantially higher Sewer Connection Fees in fiscal year 2010/11. With the anticipated fee increases, the residential fee is projected to increase from $245 to $2,422 for a typical single family home. The fee for commercial accounts is projected to increase from the current level of $909 per acre to a new fee of $2,422 per equivalent dwelling unit, with one equivalent dwelling unit equal to the wastewater flow and loadings of a typical single‐family residence. The fee for industrial accounts is projected to increase from the current level of $670 per acre to a new charge based on wastewater flow and strength. The City may decide to adopt different fees or not to increase current fees. In addition, the City also charges a Main Footage Fee to recover costs for sewer collection pipelines. The fee is currently set at $25 per linear foot of property fronting the sewer collection line that serves that property, and is payable upon issuance of a building permit.

SYSTEM FINANCES The City accounts for the System as an independent enterprise fund. System operations and capital improvements are financed with sewer service charges, fees, and other System revenues, without reliance on any other City funds. The sewer enterprise fund is accounted for on the accrual basis of accounting. Revenues are recognized when they are earned and expenses are recognized when the liability is incurred. The City’s financial policies and procedures include:

Rate Adjustments – Sewer rates and charges are reviewed and adjusted periodically with the goal of providing adequate revenues to fund operating, capital programs, and debt service requirements. The City has increased sewer service charges every year since 1997. Rates were most recently increased by approximately 11.8% effective July 1, 2010. Additionally, the City has already adopted an additional increase of approximately 10.5% to become effective as of July 1, 2011. All sewer rate increases since 2008 have been adopted pursuant to the procedural requirements of Proposition 218.

Budget Process – The City Manager, Finance Director, and Public Works Director annually update projections of revenues, operating expenses, capital expenses, and fund reserves for the sewer enterprise. The update is prepared as part of the City’s annual budget process and is presented to the City Council and the Board for approval.

Monthly Financial Reporting – Every month, the City analyzes and monitors its revenues, expenses, and overall financial position with respect to the budget. This analysis is presented in monthly financial reports which are provided to all department heads.

Monthly Approval of Expenditures – All wastewater system expenditures are reviewed and approved by the City Council and the Board each month.

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Billing and Collection – As described earlier, the City bills customers monthly for sewer service on a combined utility bill and has a strict process for dealing with delinquencies.

Investment Policy – The City has adopted a conservative investment policy. The general objective of the policy is to obtain the highest yield possible while assuring that all investments are safe from loss. The “prudent person” policy of safety, liquidity and yield prevails at all times.

Investment Review Committee – The City’s Investment Review Committee consists of the Finance Director/Treasurer, a member appointed by the City Council (currently the Mayor), a member of the Board, a member of the Redevelopment Agency Board of Directors, and the Redevelopment Agency Director. The committee reviews investments, formulates investment strategy, and ensures adherence to the City’s investment policy. The committee reviews monthly investment reports and meets at least quarterly, or more frequently when deemed necessary.

Monthly Investment Report Approval – Monthly investment reports are presented to the City Council and the Board for review and approval.

Awards for Financial Reporting – The City has received Outstanding Awards from the California Society of Municipal Finance Officers (CSMFO) for its annual financial reports and Government Finance Officers Association (GFOA) Awards of Financial Reporting Achievement in each of the past 10 years.

Audited Financial Statements – The City’s audited financial statements for the fiscal year ending June 30, 2009 are attached as Appendix C. The City has not requested nor received the consent of its independent auditor, McCown Starbuck Thornburgh & Keeter, to include the audited financial statements in this Official Statement.

Assets and Liabilities

The table on the following page shows a history of the sewer enterprise’s assets, liabilities, and fund equity based on information from the City’s audited financial statements. This table has not been reviewed by the City’s auditor.

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System Assets, Liabilities, and Fund Equity

2005‐06 2006‐07 2007‐08 2008‐09 Assets Current Assets Cash and Investments(1) $(1,590,308) $2,106,890 $11,622,132 $5,812,210 Cash and Investments with Fiscal Agent(2) 4,393,229 72,379,459 33,289,090 39,901,088 Restricted Cash and Investments 6,076,031 6,028,723 5,943,054 4,929,194 Accounts Receivable 1,144,378 1,452,175 1,907,087 1,740,612 Intergovernmental Receivable 238,733 ‐ ‐ ‐ Inventories ‐ ‐ ‐ ‐ Due from Other Funds ‐ ‐ ‐ ‐ Advances to Other Funds ‐ ‐ ‐ ‐ Deferred Charges(3) 843,885 812,254 780,622 4,416,992

Total Current Assets 11,105,948 82,779,501 53,541,985 56,800,096

Noncurrent Assets Capital Assets Nondepreciable:

Land 1,544,349 1,544,349 1,544,349 1,544,349 Construction in Progress 20,860,870 24,844,563 55,430,653 94,986,513

Depreciable: Buildings 396,132 396,132 396,132 396,132 Improvements Other Than Buildings 71,556,321 80,542,116 93,288,913 114,279,007 Machinery and Equipment 3,475,667 3,559,492 3,613,311 3,677,068 Accumulated Depreciation (17,795,654) (19,391,473) (21,130,077) (23,406,368)

Total Noncurrent Assets 80,037,685 91,495,179 133,143,281 191,476,701

Total Assets $91,143,633 $174,274,680 $186,685,266 $248,276,797

Liabilities Current Liabilities Accounts Payable and Accrued Liabilities $1,005,255 $2,590,982 $7,507,717 $6,846,984 Deposits Payable 209,370 232,772 147,946 159,958 Due to other Funds ‐ ‐ ‐ ‐ Compensated Absences ‐ Current 9,912 9,912 Advances from Other Funds – Current ‐ 16,987 Leases Payable ‐ Current 12,621 9,091 Revenue Bonds Payable ‐ Current 1,863,587 2,213,587 Insurance Claims Payable ‐ ‐ Current Portion of Debt 1,761,438 1,841,679

Total Current Liabilities 2,976,063 4,665,433 9,541,783 9,256,519

Noncurrent Liabilities Advances from Other Funds ‐ ‐ ‐ 237,817 Compensated Absences Payable 112,782 106,440 121,545 131,966 Leases Payable ‐ 494,398 492,637 487,419 Revenue Bonds Payable 56,910,000 134,632,944 132,769,091 185,330,504

Total Noncurrent Liabilities 57,022,782 135,233,782 133,388,273 186,204,043

Total Liabilities 59,998,845 139,899,215 142,925,056 195,460,582

Net Assets Invested in Capital Assets, Net of Related Debt 21,372,685 32,942,623 32,942,623 48,266,382 Restricted(4) 4,141,650 4,141,650 4,141,650 44,042,738 Unrestricted(5)(6) 5,630,453 (2,708,808) 6,675,937 (39,492,885)

Total Net Assets $31,144,788 $34,375,465 $43,760,210 $52,816,235

Footnotes listed on following page

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________________________

(1) The negative balance in fiscal year 2005‐06 reflects the fact that the City paid construction costs in fiscal year 2005‐06 with available funds and did not reimburse itself with bond proceeds available for that purpose until fiscal year 2006‐07. The variance in this category between fiscal year 2006‐07 and fiscal year 2007‐08 is attributable to moneys set aside to pay construction costs (see Accounts Payable and Accrued Liabilities below) and higher revenues attributable to increased service charges.

(2) Reflects the issuances of the Series 2006 Bonds and the Series 2009 Bonds. (3) 2008‐19 Deferred Charges includes costs related to the Series 2009 Bonds. (4) The increase in fiscal year 2008‐09 reflects the receipt of bond proceeds from the Series 2009 Bonds. (5) The negative balance in fiscal year 2006‐07 reflects the fact that the City paid construction costs in fiscal year

2006‐07 with available funds and did not reimburse itself with bond proceeds available for that purpose until fiscal year 2007‐08.

(6) The negative balance in fiscal year 2008‐09 reflects the fact that the City paid construction costs in fiscal year 2008‐09 with available funds and did not reimburse itself with bond proceeds available for that purpose until the following fiscal year.

Source: City of Tulare.

Revenues, Expenses and Net Income

The table on the following page shows revenues, expenses, and net income for the System based on information provided in the City’s audited financial statements. This table has not been reviewed by the City’s auditor.

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System Revenues, Expenses, and Changes in Retained Earnings

2005‐06 2006‐07 2007‐08 2008‐09 Operating Revenues Charges for Services $11,253,032 $12,007,298 $14,397,771 $16,595,791 Connection Fees 67,951 87,311 148,196 69,921 Employee Contributions ‐ ‐ ‐ ‐ Other(1) 406,144 209,017 4,266,676 221,554

Total Operating Revenues 11,727,127 12,303,626 18,812,643 16,887,266 Operating Expenses General Administration ‐ ‐ ‐ ‐ Personal Services 1,250,249 1,433,250 1,474,236 1,497,872 Contractual Services ‐ ‐ ‐ ‐ Maintenance and Supplies(2) 4,560,087 5,330,141 7,107,330 7,642,019 Equipment Usage and Operation ‐ ‐ ‐ ‐ Insurance ‐ ‐ ‐ ‐ Depreciation 1,484,348 1,595,819 1,738,605 2,276,091

Total Operating Expenses 7,294,684 8,359,210 10,320,171 11,416,182 Operating Income (Loss) 4,432,443 3,944,416 8,492,472 5,471,084 Nonoperating Revenues Interest Income(3) 513,317 1,074,720 704,599 4,624,285 Interest Expense (2,659,308) (2,491,708) (2,476,860) (2,503,860) Grants ‐ ‐ ‐ ‐ Gain on Sale of Assets ‐ ‐ ‐ ‐ Other Income ‐ ‐ ‐ ‐

Total Nonoperating Revenues (2,145,991) (1,416,988) (1,772,261) 2,120,425 Income (Loss) Before Contributions and Transfers 2,286,452 2,527,428 6,720,211

7,591,509

Capital Contributions(4) 177,880 769,676 3,194,974 1,360,768 Transfers In ‐ 31,603 ‐ 410,347 Transfers Out (30,970) (98,030) (530,440) (360,624) Change in Net Assets 2,433,362 3,230,677 9,384,745 9,056,027 Net Assets, Beginning 28,711,426 31,144,788 34,375,465 43,760,208 Net Assets, Ending $31,144,788 $34,375,465 $43,760,210 $52,816,235

__________________________________

(1) The Other revenue category includes a $4,050,000 grant from Southern California Edison for a co‐generation plant in fiscal year 2007‐08.

(2) Increases in Maintenance and Supplies expenses are largely attributable to the cost of chemicals the City uses to treat industrial effluent and also to the cost of purchased electricity. Electricity and chemical costs are projected to decrease in future years.

(3) Interest Income in 2008‐09 includes an interest accrual from funds related to the Series 2006 Bonds. (4) The fiscal year 2007‐08 Capital Contribution category reflects the dedication to the City of sewer lines built by

developers for 13 new subdivisions. Source: City of Tulare.

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Outstanding Debt

The Enterprise has four outstanding debt obligations secured by the net revenues of the System as described below. Senior Debt

2001 Senior Bonds: In September 2001, the City issued $20,000,000 initial principal amount of 2001 Senior Bonds to finance improvements to the System. The 2001 Senior Bonds mature on November 15 of each year through 2031. The 2001 Senior Bonds were structured with approximately level annual debt service. The 2001 Senior Bonds have a dedicated, cash‐funded debt service reserve fund and are insured by Financial Security Assurance Inc. As of December 1, 2010, $16,590,000 of principal of the 2001 Senior Bonds is outstanding. System Net Revenues from which Net System Revenues are derived do not include amounts pledged to pay debt service on the Senior 2001 Bonds. Parity Debt

The Series 2010 Bonds are secured by a lien on System Net Revenues that is on parity with that of the outstanding Series 2003 Bonds, Series 2006 Bonds, and Series 2009 Bonds. Series 2003 Bonds: In December 2003, the City issued the Series 2003 Bonds to defease three prior debt obligations and finance approximately $13.3 million of capital improvements to the System. The Series 2003 Bonds mature on November 15 of each year through 2033. The Series 2003 Bonds have a dedicated, cash‐funded debt service reserve fund and are insured by Syncora Guarantee, Inc. (formerly known as XL Capital Assurance, Inc.) As of December 1, 2010, $32,820,000 of principal of the Series 2003 Bonds remains outstanding. Series 2006 Bonds: In December 2006, the City issued the Series 2006 Bonds to finance capital improvements to the System, including a major reconstruction and expansion of the City’s industrial wastewater treatment facility and other improvements. The Series 2006 Bonds mature on November 15 of each year from 2009 through 2041. The Series 2006 Bonds have a dedicated, cash‐funded debt service reserve fund and are insured by Syncora Guarantee, Inc. (formerly known as XL Capital Assurance, Inc.) As of December 1, 2010, $78,280,000 of principal of the Series 2006 Bonds remains outstanding. Series 2009 Bonds: In July 2009, the City issued the Series 2009 Bonds to finance capital improvements to the System including completion of major reconstruction and additional expansion of the City’s industrial wastewater treatment facility and other improvements. The Series 2009 Bonds mature November 15, 2044 with mandatory sinking fund payments due November 15 of each year from 2032 through 2044. The Series 2009 Bonds have a dedicated, cash‐funded debt service reserve fund and are insured by Financial Security Assurance Inc. As of December 1, 2010, $54,775,000 of principal of the Series 2009 Bonds remains outstanding. The Series 2009 Bonds were issued as taxable Build America Bonds pursuant to Section 54AA of the Internal Revenue Code of 1986 (the “Code”), as amended. The Bonds are “qualified bonds”

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under Section 54AA(g)(2) of the Code which makes the City eligible for a cash subsidy payment from the United States Treasury equal to 35% of the interest payable on the Series 2009 Bonds. Such cash subsidy payments received by the City are referred to in the Indenture as “Refundable Credits,” and are pledged to the payment of the Series 2009 Bonds, the Series 2003 Bonds, the Series 2006 Bonds and all Parity Debt. Refundable Credits is defined in the Indenture to mean, with respect to a Series of Bonds that are Build America Bonds, the amounts which are payable by the Federal government under Section 6431 of the Code, which the City has elected to receive under Section 54AA(g)(1) of the Code. The City received a letter from the Internal Revenue Service (the “IRS”) dated September 29, 2010 indicating that the Series 2009 Bonds were selected for examination and requesting documents and information related to the Series 2009 Bonds. The letter noted that the IRS routinely examines municipal debt issues to determine compliance with Federal tax requirements and further stated that the IRS has no reason to believe that the Series 2009 Bonds fail to comply with any of the applicable tax requirements. The City is in the process of complying with the information request and believes that the Series 2009 Bonds comply with all applicable tax requirements. If the IRS determines that the Series 2009 Bonds do not comply with the requirements for Build America Bonds, the IRS could reduce or eliminate the Refundable Credit payable to the City which would have a negative impact on System finances. See “FINANCING PLAN – Debt Service Schedule” for a debt service schedule for the Senior 2001 Bonds, the Series 2003 Bonds, the Series 2006 Bonds, the Series 2009 Bonds, and the Series 2010 Bonds. See “Debt Service Coverage” below for tables showing historical and projected debt service coverage on the Senior 2001 Bonds and the Series 2003 Bonds, the Series 2006 Bonds, the Series 2009 Bonds, and the Series 2010 Bonds.

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Debt Service Coverage

Historical Revenues, Expenditures, and Debt Service Coverage The following table shows historical debt service coverage based on audited financial statements for fiscal years 2005/06 through 2008/09 and unaudited data for fiscal year 2009/10. Revenues for fiscal year 2007/08 exclude grant proceeds, and Operating & Maintenance Expenses are adjusted to exclude City estimates of non‐operating costs including capital costs funded by the City’s wastewater operating fund and administrative fees paid in excess of actual operating costs. This table has not been reviewed by the City’s auditor.

Historical Revenues, Expenses, and Debt Service Coverage of the Wastewater System

2005/06 2006/07 2007/08 2008/09 2009/10 System Revenues Service Charges $11,140,518 $12,007,298 $14,397,771 $16,595,791 $18,291,765 Connection Fees 67,951 87,311 148,196 69,921 77,952 Interest Income(1) 513,317 1,074,720 704,599 4,624,285 601,772 Other/Miscellaneous Income(2) 406,144 209,017 216,676 221,554 278,473 Total Revenues 12,127,930 13,378,346 15,467,242 21,511,551 19,249,962

Operating & Maintenance Expenses(3), (4)

5,656,653 6,160,330 6,919,511 7,761,041 8,876,557

Net Revenues 6,471,277 7,218,016 8,547,731 13,750,510 10,373,405

Debt Service on Senior Bonds Senior 2001 Bonds 1,340,269 1,228,795 1,231,733 1,233,188 1,229,400 Debt Service Coverage on Senior Bonds

4.83 5.87 6.94 11.76 8.44

System Net Revenues(5) 5,131,008 5,989,221 7,315,998 12,517,322 9,144,005

Debt Service on Parity Bonds Series 2003 Bonds 3,034,038 3,023,088 3,006,313 2,993,713 2,985,138 Series 2006 Bonds 0 0 1,416,613 2,533,225 3,927,225 Series 2009 Bonds(6) 0 0 0 0 1,825,912 Subtotal 3,034,038 3,023,088 4,422,925 5,526,938 8,738,275 Debt Service Coverage on Parity Bonds

1.69 1.98 1.65 2.26 1.05

Net Income After Parity Debt 2,096,970 2,966,133 2,893,073 6,990,384 405,730

(1) Interest Income in 2008‐09 includes an interest accrual from funds related to the Series 2006 Bonds. (2) Excludes $4,050,000 in grant proceeds received in fiscal year 2007‐08. (3) Net of depreciation and amortization; excludes City estimates of non‐operating costs including capital costs

funded by the City’s wastewater operating fund and administrative fees in excess of actual operating costs. (4) The City incurred substantial expenses related to the start‐up of its new industrial wastewater treatment

plant in 2009‐10; some of these costs were one‐time expenses that the City anticipates will be reduced in the current and future fiscal years including higher‐than‐typical expenditures for chemicals, utilities, and professional and technical services.

(5) Calculated as Net Revenues less Debt Service on Senior Bonds. Pursuant to the Indenture, System Net Revenues does not include any amounts pledged to pay debt service on the Senior 2001 Bonds.

(6) Net of capitalized interest and the Refundable Credit received from the Federal government equal to 35% of the interest on the Series 2009 Bonds.

Source: Based on Audited Financial Statements and other information provided by the City of Tulare.

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The City did not meet its required debt service coverage covenants on parity debt in fiscal year 2009/10. The City estimates that in 2009/10, System Net Revenues were 1.05 times annual debt service due on parity debt including the Series 2003 Bonds, Series 2006 Bonds, and Series 2009 Bonds. In 2009/10, the City incurred substantial expenses related to the start‐up of its new industrial wastewater treatment plant and transition of operations from the old industrial plant to the new treatment facility including higher‐than‐typical expenditures for chemicals, utilities, staffing, and professional and technical services. Some of these costs were one‐time expenses that the City already has reduced or anticipates will be reduced in the current and future fiscal years. Many of these costs were incurred to help ensure the City complied with its wastewater permit requirements during the startup and initial operation of the new industrial wastewater treatment facility. These costs include:

Chemicals ‐ In 2009/10, the City spent approximately $800,000 on chemicals for operating a Fats Oil and Grease Dissolved Air Flotation (FOGDAF) system. Analysis conducted by the City indicated that the new industrial plant would meet permit requirements without operation of the FOGDAF system. The City stopped operating the FOGDAF system in April 2010 but continued receiving shipments for chemicals for the FOGDAF system until June 2010. These excess chemicals were returned to the supplier for credit.

Startup of New Anaerobic Sludge Digester ‐ The City estimates that it spent approximately $250,000 of one‐time expenses related to startup of the new industrial treatment facility’s anaerobic sludge digester and odor control system.

Startup of SCADA Synch ‐ The City estimates that it spent approximately $150,000 of one‐time expenses related to startup of the supervisory control and data acquisition (SCADA) system at the new industrial treatment facility.

Utility Costs ‐ In 2009/10, the City operated two wastewater treatment system blowers at its new industrial wastewater treatment plant to help ensure permit compliance during plant startup. Analysis conducted by the City indicates that the new industrial plant will likely meet its permit requirements with operation of only one blower. The City is currently testing operations with one blower and anticipates operating with one blower until growth in customer wastewater flow warrants otherwise. The City estimates that operation of one blower will reduce utility costs by approximately $500,000 on an annualized basis. The City estimates that its utility costs will be reduced by approximately $250,000 this fiscal year due to operation of one blower instead of two for approximately half of the fiscal year.

Staffing Costs ‐ In 2009/10, the City spent approximately $175,000 on overtime salaries related to startup of the new industrial wastewater treatment plant.

Professional and Technical Services ‐ In 2009/10, the City spent approximately $350,000 on professional and technical services including engineering consulting costs related to the startup of the new industrial wastewater treatment facility.

Other Non‐Recurring Transition Expenses ‐ In order to help ensure the City met its permit requirements during the transition, the City temporarily operated both the old and new

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treatment plants simultaneously during the transition phase. The City estimates that it spent approximately $350,000 of other non‐recurring expenses related to the transition from the old to the new industrial treatment plant.

Additionally, the City previously adopted rate increases including an approximately 11.8% increase that became effective on July 1, 2010, and an additional approximately 10.5% increase scheduled to become effective on July 1, 2011. Compounded, these adopted rate increases total slightly over 23.5%. The City anticipates that these rate increases will enable the System to achieve it debt service coverage requirements in the current and future years. Projected Revenues, Expenditures, and Debt Service Coverage The table on the following page shows a projection of System Revenues, Operation and Maintenance Costs, debt service, and debt service coverage. The financial projections are based on a number of assumptions listed below. While the City believes the estimates and projections shown are reasonable, no assurance can be given that the results shown will be achieved.

Sewer Service Charges. The projections include adopted rate increases through fiscal year 2011‐12 and small projected rate adjustments in subsequent years including: a) a $0.50 per month increase per single family home or about a 1.2% overall increase effective 2012‐13, b) a $0.50 per month increase per single family home or about a 1.2% overall increase effective 2013‐14, and c) and $0.50 per month increase per single family home or about a 1.2% overall increase effective 2014‐15. Future rate increases are subject to Proposition 218; see “CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES – Proposition 218”).

Domestic Customer Base. As detailed in the following table, the projections assume growth in the City’s domestic wastewater customer base of 0.5% in 2010‐11, and 1.0% per year thereafter.

Industrial Wastewater Flows. As detailed in the following table, the projections assume growth in the City’s industrial wastewater discharge of 0.5% in 2010‐11, then at 2.0% per year thereafter. The City anticipates a gradual increase in flows due to (i) implementation of a planned expansion by Land O'Lakes, (ii) implementation of a planned expansion by Saputo, and (iii) implementation of a planned expansion by Morningstar Foods, and (iv) other industrial growth anticipated in future years.

Beginning Fund Reserves. Beginning fund reserves for fiscal year 2010‐11 include a) unaudited year‐end estimates for the fiscal year ended June 30, 2010, which indicate the City’s wastewater enterprise funds had approximately $1,005,000 in cash, and b) reimbursement for an approximately $870,000 drawdown from the City’s wastewater funds on capital projects near the end of the fiscal year ended June 30, 2010 that were reimbursed to the wastewater enterprise in September, 2010 from proceeds of the Series 2009 Bonds.

Service Charge Revenue. Fiscal year 2010‐11 service charge revenues are projected based on fiscal year 2009‐10 actual revenues adjusted for adopted rate increases. Future service charge revenue projections are based on fiscal year 2009‐10 year‐end estimates adjusted for adopted and projected rate increases and projected growth as discussed above.

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Development Impact and Connection Fees. The projections assume development impact and connection fees at $100,000 in 2010‐11 and at $200,000 per year thereafter. The City anticipates adopting a new, higher connection fee to recover costs for wastewater treatment facilities benefiting new development. Potential revenues from this new fee are not included in the projections.

Interest Earnings. Interest earnings are estimated based on a) beginning fund reserves each year multiplied by the projected interest rate of 0.5% in 2010‐11 and 2011‐12, and an interest rate of 1.0% thereafter, and b) interest earnings on debt service reserve funds based on existing investment agreements and the addition of the debt service reserve fund for the Series 2010 Bonds.

Operating Expenses. Operating expenses are primarily based on the fiscal year 2010‐11 budget with adjustments to more accurately reflect estimated annual expenses, and escalate at the annual rate of 3.5% to account for annual cost inflation.

Utilities Expenses. Projected utilities expenses are based on results from fiscal year 2009‐10 adjusted to account for (i) transition to operating of the new industrial wastewater treatment facility, (ii) transition to use of one high‐efficiency blower at the City’s industrial wastewater treatment facility, instead of two blowers, (iii) operation of a fourth fuel cell starting January 2011, and (iv) operation of new solar electricity generation facilities starting March 2011.

Administrative Fees. Administrative fees included in the projections are based on an updated cost‐allocation study completed in fiscal year 2008‐09.

System Net Revenues. System Net Revenues are calculated as Net Revenues less annual debt service payments due on the Senior 2001 Bonds. Pursuant to the Indenture, System Net Revenues does not include any amounts pledged to pay debt service on the Senior 2001 Bonds.

Debt Service. Debt service projections shown for parity debt are net of capitalized interest. The Refundable Credit for the Series 2009 Bonds is listed separately.

Debt Service Coverage. Debt service coverage on parity debt is calculated based on projected System Net Revenues divided by projected debt service on the Series 2010 Bonds and all parity obligations.

System Net Revenues Less Parity Debt. This line calculates the amount of revenues remaining after payment of operating and maintenance costs, the Senior 2001 Bonds, and all parity debt.

Pay‐Go Capital & Other Non‐Operating. The projections assume the City will fund $2.0 million in fiscal year 2010‐11 and $3.0 million to $3.5 million per year of pay‐as‐you‐go capital improvements and other non‐operating expenditures each year thereafter.

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2010/11 2011/12 2012/13 2013/14 2014/15 DAdopted Adopted Projected Projected Projected

Monthly Single Family Residential Rate $38.00 $42.00 $42.50 $43.00 $43.50Rate Adjustment % 11.8% 10.5% 1.2% 1.2% 1.2%Growth in Domestic Customer Base 0.5% 1.0% 1.0% 1.0% 1.0%Growth in Industrial Wastewater Flows 0.0% 1.0% 2.0% 2.0% 2.0%Annual Cost Escalation 3.5% 3.5% 3.5% 3.5% 3.5%Interest Rate 0.5% 0.5% 1% 1% 1%

Beginning Fund Reserves $1,875,000 $2,684,000 $3,720,000 $4,717,000 $6,088,000

REVENUESService charges, domestic 8,920,000 9,948,000 10,166,000 10,387,000 10,612,000Service charges, industrial 11,568,000 12,901,000 13,313,000 13,736,000 14,170,000 Subtotal service charges 20,488,000 22,849,000 23,479,000 24,123,000 24,782,000Development impact & connection fees 100,000 200,000 200,000 200,000 200,000Interest earnings 484,000 513,000 537,000 547,000 561,000Rents and concessions/misc/other 225,000 225,000 225,000 225,000 225,000 Total revenues 21,297,000 23,787,000 24,441,000 25,095,000 25,768,000

OPERATING & MAINTENANCE EXPENSESSalaries and benefits 2,049,000 2,121,000 2,195,000 2,272,000 2,352,000Maintenance & operation, sewer system 354,000 366,000 379,000 392,000 406,000Maintenance & operation, treatment plant 2,047,000 2,119,000 2,193,000 2,270,000 2,349,000Utilities, treatment plant 1,600,000 1,300,000 1,346,000 1,393,000 1,442,000Chemicals, magnesium hydroxide 1,500,000 1,553,000 1,607,000 1,663,000 1,721,000Administrative fees/other 275,000 285,000 295,000 305,000 316,000 Subtotal operating expenses 7,825,000 7,744,000 8,015,000 8,295,000 8,586,000

NET REVENUES 13,472,000 16,043,000 16,426,000 16,800,000 17,182,000

Debt service ‐ 2001 Senior Bonds 1,230,000 1,229,000 1,228,000 1,226,000 1,227,000 Debt svc coverage on 2001 Senior Bonds 10.95 13.05 13.38 13.70 14.00

SYSTEM NET REVENUES 12,242,000 14,814,000 15,198,000 15,574,000 15,955,000

Debt service ‐ Series 2003 Bonds 2,982,000 2,978,000 2,981,000 2,978,000 2,979,000Debt service ‐ Series 2006 Bonds 3,935,000 3,942,000 3,948,000 3,953,000 3,957,000Debt service ‐ Series 2009 Bonds 4,193,000 4,793,000 4,793,000 4,793,000 4,793,000 Less Series 2009 Refundable Credit (1,677,000) (1,677,000) (1,677,000) (1,677,000) (1,677,000)Debt service ‐ Series 2010 Bonds 0 742,000 1,156,000 1,156,000 1,156,000 Subtotal parity debt service 9,433,000 10,778,000 11,201,000 11,203,000 11,208,000

Debt service coverage on Parity Bonds 1.30 1.37 1.36 1.39 1.42

System Net Revenues Less Parity Debt 2,809,000 4,036,000 3,997,000 4,371,000 4,747,000

Pay‐go capital & other non‐operating 2,000,000 3,000,000 3,000,000 3,000,000 3,000,000

Total expenses 20,488,000 22,751,000 23,444,000 23,724,000 24,021,000

REVENUES LESS EXPENSES 809,000 1,036,000 997,000 1,371,000 1,747,000

Ending Fund Reserves 2,684,000 3,720,000 4,717,000 6,088,000 7,835,000

City of Tulare Wastewater System Cash Flows Projections

Source: Prepared by Bartle Wells Associates based on information provided by the City of Tulare.

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Pension and Post‐Employment Benefits

The City provides pension and other post employment health care benefits to qualified retirees. A portion of these costs are funded by the City’s System. Costs for the System include retirement benefit costs for System employees, as well as a portion of retirement benefit costs for other City employees performing functions – such as finance, billing, engineering, and administration – that provide benefit the System. Based on the 2010/11 Budget, the equivalent of approximately 23.65 full‐time employees (FTEs) are employed in the City’s Sewer and Wastewater Divisions. This represents approximately 6.5% of the City’s total FTEs. Pension

The City participates in the Public Agency portion of the California Public Employees’ Retirement System (CalPERS), which acts as a common investment and administrative agent for participating public employers within the State of California. Benefit provisions and other requirements are established by State Statutes within the Public Employees’ Retirement Law. The City of Tulare selects optional benefit provisions by contract with CalPERS and adopts those benefits through local ordinance. City employees, other than public safety personnel, currently contribute a portion of their annual covered salaries through payroll withholding. In addition, the City is required to contribute the actuarially determined remaining amounts necessary to fund the benefits for its members. The actuarial methods and assumptions used are those adopted by the CalPERS Board of Administration. The required employer contribution rate for the year ended June 30, 2010 was 13.893% for employees other than public safety personnel. The contribution requirements of plan members are established by State statute and the employer contribution rate is established and may be amended by CalPERS. For the year ended June 30, 2009, the City’s required pension cost was $2,502,299 for public safety employees plus $2,202,654 for other employees. The amounts paid by the City in fiscal year ended June 30, 2009 include the employee contribution amount of 8% (non‐public safety) and 9% (public safety), which the City paid on behalf of the employees. Historically, the City has paid employee contributions to CalPERS. However, over the past two years, certain employee groups have opted to pay their own contributions instead. As of July, 2009, City department heads elected to pay their own contribution to CalPERS and their wages were increased in a corresponding amount. As of January, 2009, non‐public safety management started to pay their CalPERS contribution and their wages were increased in a corresponding amount. As of June 30, 2010, Fire Department employees and Police Department management staff started to pay their CalPERS contribution and their wages were increased a corresponding amount. See Appendix C, “Note 7” and “Required Supplementary Information.”

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Post‐Employment Benefits

The City provides health care insurance benefits to qualified retired employees under an agreement with City employee bargaining units. The City is self‐insured and has a third party administrator that reviews and administers payments. The City also currently has a coinsurance policy that limits the City's medical payment liabilities to approximately $80,000 per year per covered individual, with the exception that the coinsurance policy may require a higher stop‐loss level for some individuals. The City currently has a stop‐loss payment liability that exceeds this level for one individual currently covered by the City's health insurance plan. The City’s agreement with the employee bargaining units regarding post‐employment health care insurance benefits was amended in June 1984. Pursuant to this amendment, the City’s obligation under the agreements continues until the death of the employee unless the employee chooses to discontinue the insurance. Employees hired before June 24, 1984, must retire after the age of 50 and have a minimum of 10 years of service to the City in order to qualify for retiree health care insurance benefits. These retirees are required to pay the employee insurance premium being charged at the time of their retirement. For these retirees, their premium is frozen and any increases in the cost of providing the benefit must be funded by the City. Starting at age 65, when a retiree is eligible for Medicare, the City’s health insurance becomes secondary to Medicare. Employees hired on or after June 24, 1984, must retire after the age of 55 and have a minimum of 10 years of service to the City in order to qualify for retiree health care insurance benefits. These retirees are eligible to participate in the City’s health insurance program but must pay the full health insurance premium each year after retiring, and the City pays the excess of the cost over the amount of the employees' cost of the premium subject to the stop‐loss level set by the City's coinsurance policy. Starting at age 65, when a retiree is eligible for Medicare, the City’s health insurance becomes secondary to Medicare. The cost of the retiree health care insurance benefit is recognized as an expenditure as insurance premiums are paid on a monthly basis in advance. For the fiscal year ended June 30, 2009, the City paid a net amount of approximately $443,628 for eligible health care expenditures above the premiums paid to the City on behalf of approximately 63 retired employees. This amount was higher‐than‐normal due to certain medical expenses incurred on behalf of one or more employees. Pursuant to GASB 45, the City engaged an actuary to determine the City's Other Post‐Employment Benefit (OPEB) obligations. An actuarial analysis dated October 16, 2008 calculates the annual amount the City would need to set aside into an irrevocable trust to fund future post‐employment health insurance costs. The actuary determined the plan's unfunded actuarial accrued liability to be $5,600,000 as of July 1, 2007. The City has not established a separate irrevocable trust to fund its OPEB obligations. The City plans to use the pay‐as‐you‐go method to fund its postretirement benefit obligations. See Appendix C, “Note 10” for more information.

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City Investments

The City invests its funds, including funds of the System, in accordance with the City’s Investment Policy, which is subject to annual review and approval by the City Council. The purpose of the policy is to establish the investment objectives of safety, liquidity, and yield. The City’s Investment Policy complies with the provisions of the California government Code, Sections 53600 through 53659 (the authority governing investments for municipal governments in the State). The Finance Director submits a monthly investment report to the City Manager and the City Council.

According to the report for the month ended June 30, 2010, the City’s pooled investment portfolio (including City and Redevelopment Agency funds) was invested as set forth in the following table. The weighted annual yield of the City’s pooled investment portfolio as of June 30, 2010 was 2.122%. As of June 30, 2010, the market value of the portfolio ($78,110,827) was approximately 99.97% of the book value ($78,137,257). City of Tulare Current Investments as of June 30, 2010

Type of Investment

Market Value

Book Value

Percent of Total Book Value(1)

Cash $808,287 $808,287 1.0% LAIF 11,170,000 11,183,215 14.3% Bond Funds 52,749,903 52,749,903 67.5% Restricted Insurance Deposits 1,305,353 1,305,353 1.7% Fixed Income Investments 12,077,284 12,090,499 15.5%

Total: $78,110,827 $78,137,257 100.0% _______________________ Source: City of Tulare

CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES

Article XIIIB Gann Limit Article XIIIB of the California State Constitution limits the annual appropriations of the State and of any city, county, school district, authority or other political subdivision of the State to the level of appropriations of the particular governmental entity for the prior fiscal year, as adjusted for changes in the cost of living and population. The “base year” for establishing such appropriation limit is the 1978‐79 fiscal year and the limit is to be adjusted annually to reflect changes in population and consumer prices. Adjustments in the appropriations limit of an entity may also be made if (i) the financial responsibility for a service is transferred to another public entity or to a private entity, (ii) the financial source for the provision of services is transferred from taxes to other revenues, or (iii) the voters of the entity approve a change in the limit for a period of time not to exceed four years.

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Appropriations subject to Article XIIIB generally include the proceeds of taxes levied by the State or other entity of local government, exclusive of certain State subventions and refunds of taxes. “Proceeds of taxes” include, but are not limited to, all tax revenues and the proceeds to an entity of government from (i) regulatory licenses, user charges, and user fees (but only to the extent such proceeds exceed the cost of providing the service or regulation), and (ii) the investment of tax revenues. Article XIIIB includes a requirement that if an entity’s revenues in any year exceed the amounts permitted to be spent, the excess would have to be returned by revising tax rates or fee schedules over the subsequent two years. Certain expenditures are excluded from the appropriations limit including payments of indebtedness existing or legally authorized as of January 1, 1979, or of bonded indebtedness thereafter approved by the voters and payments required to comply with court or federal mandates which without discretion require an expenditure for additional services or which unavoidably make the providing of existing services more costly. The City is of the opinion that their charges with respect to wastewater service do not exceed the costs they reasonably bear in providing wastewater service and are not subject to the limits of Article XIIIB.

Proposition 218

General. On November 5, 1996, California voters approved Proposition 218, the so‐called “Right to Vote on Taxes Act.” Proposition 218 added Articles XIIIC and XIIID to the State Constitution, which affect the ability of local governments to levy and collect both existing and future taxes, assessments, and property‐related fees and charges. Proposition 218, which generally became effective on November 6, 1996, changed, among other things, the procedure for the imposition of any new or increased property‐related “fee” or “charge,” which is defined as “any levy other than an ad valorem tax, a special tax or an assessment, imposed by a (local government) upon a parcel or upon a person as an incident of property ownership, including user fees or charges for a property related service” (and referred to in this section as a “property‐related fee or charge”). Specifically, under Article XIIID, before a municipality may impose or increase any property‐related fee or charge, the entity must give written notice to the record owner of each parcel of land affected by that fee or charge. The municipality must then hold a hearing upon the proposed imposition or increase at least 45 days after the written notice is mailed, and, if a majority of the property owners of the identified parcels present written protests against the proposal, the municipality may not impose or increase the property‐related fee or charge. Further, under Article XIIID, revenues derived from a property‐related fee or charge may not exceed the funds required to provide the “property‐related service” and the entity may not use such fee or charge for any purpose other than that for which it imposed the fee or charge. The amount of a property‐related fee or charge may not exceed the proportional cost of the service attributable to the parcel, and no property‐related fee or charge may be imposed for a service unless that service is actually used by, or is immediately available to, the owner of the property in question.

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In addition, Article XIIIC states that “the initiative power shall not be prohibited or otherwise limited in matters of reducing or repealing any local tax, assessment, fee or charge. The power of initiative to affect local taxes, assessments, fees and charges shall be applicable to all local governments and neither the Legislature nor any local government charter shall impose a signature requirement higher than that applicable to statewide statutory initiatives.” Judicial Interpretation of Proposition 218. After Proposition 218 was enacted in 1996, appellate court cases and an Attorney General opinion initially indicated that fees and charges levied for water and wastewater services would not be considered property‐related fees and charges, and thus not subject to the requirements of Article XIIID regarding notice, hearing and protests in connection with any increase in the fees and charges being imposed. However, three recent cases have held that certain types of water and wastewater charges could be subject to the requirements of Proposition 218 under certain circumstances. In Richmond v. Shasta Community Services District (9 Cal. Rptr. 3rd 121), the California Supreme Court addressed the applicability of the notice, hearing and protest provisions of Article XIIID to certain charges related to water service. In Richmond, the Court held that connection charges are not subject to Proposition 218. The Court also indicated in dictum that a fee for ongoing water service through an existing connection could, under certain circumstances, constitute a property‐related fee and charge, with the result that a local government imposing such a fee and charge must comply with the notice, hearing and protest requirements of Article XIIID. In Howard Jarvis Taxpayers Association v. City of Fresno (March 23, 2005), the California Court of Appeal, Fifth District, concluded that water, sewer and trash fees are property‐related fees subject to Proposition 218 and a municipality must comply with Article XIIID before imposing or increasing such fees. The California Supreme Court denied the City of Fresno’s petition for review of the Court of Appeal’s decision on June 15, 2005. In July 2006 the California Supreme Court, in Bighorn‐Desert View Water Agency v. Verjil (S127535, July 24, 2006), addressed the validity of a local voter initiative measure that would have (a) reduced a water agency’s rates for water consumption (and other water charges), and (b) required the water agency to obtain voter approval before increasing any existing water rate, fee, or charge, or imposing any new water rate, fee, or charge. The court adopted the position indicated by its statement in Richmond that a public water agency’s charges for ongoing water delivery are “fees and charges” within the meaning of Article XIIID, and went on to hold that charges for ongoing water delivery are also “fees” within the meaning of Article XIIIC’s mandate that the initiative power of the electorate cannot be prohibited or limited in matters of reducing or repealing any local tax, assessment, fee or charge. Therefore, the court held, Article XIIIC authorizes local voters to adopt an initiative measure that would reduce or repeal a public agency’s water rates and other water delivery charges. (However, the court ultimately ruled in favor of the water agency and held that the entire initiative measure was invalid on the grounds that the second part of the initiative measure, which would have subjected future water rate increases to prior voter approval, was not supported by Article XIIIC and was therefore invalid.)

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The court in Bighorn specifically noted that it was not holding that the initiative power is free of all limitations; the court stated that it was not determining whether the electorate’s initiative power is subject to the statutory provision requiring that water service charges be set at a level that will pay for operating expenses, provide for repairs and depreciation of works, provide a reasonable surplus for improvements, extensions, and enlargements, pay the interest on any bonded debt, and provide a sinking or other fund for the payment of the principal of such debt as it may become due. Proposition 218 and the City’s Sewer Rates. The City’s current sewer rate structure was approved by the Board of Public Utilities on January 22, 2009 and ratified by the City Council on February 17, 2009. Before approving the rates, the City sent notices to property owners at least 45 days prior to a protest hearing. The City will continue to comply with the provisions of Proposition 218 in connection with future rate increases. Conclusion. It is not possible to predict how courts will further interpret Article XIIIC and Article XIIID in future judicial decisions, and what, if any, further implementing legislation will be enacted. Under the Bighorn case, local voters could adopt an initiative measure that reduces or repeals the City’s rates and charges, although it is not clear whether (and California courts have not decided whether) any such reduction or repeal by initiative would be enforceable in a situation in which such rates and charges are pledged to the repayment of bonds or other indebtedness. There can be no assurance that the courts will not further interpret, or the voters will not amend, Article XIIIC and Article XIIID to limit the ability of local agencies to impose, levy, charge and collect increased fees and charges for utility service, or to call into question previously adopted utility rate increases.

Future Initiatives

Articles XIIIB, XIIIC and XIIID were adopted as measures that qualified for the ballot pursuant to California’s initiative process. From time to time other initiatives could be proposed and adopted affecting the revenues of the City.

RISK FACTORS The following section describes special considerations and risk factors that may affect the payment of and security for the Series 2010 Bonds. The following discussion is not meant to be an exhaustive list of all risks associated with the purchase of the Series 2010 Bonds and does not necessarily reflect the relative importance of the risk factors. Potential investors are advised to consider the following special factors, along with all other information in this Official Statement, in evaluating the Series 2010 Bonds. There can be no assurance that other risk factors will not become material in the future.

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General

The payment of principal of and interest on the Series 2010 Bonds, along with debt service on other Parity Debt, are payable solely from and secured solely by a pledge of System Net Revenues under the Indenture, together with amounts on deposit in certain funds and accounts held by the Fiscal Agent. No assurance can be made that System Net Revenues, estimated or otherwise, will be realized in an amount sufficient to pay the principal of and interest on the Series 2010 Bonds and other Parity Debt. The realization of future System Net Revenues is subject to, among other things, the capabilities of management of the City, the ability of the City to provide sewer collection, treatment, and disposal services to its customers, and the ability of the City to establish and maintain charges sufficient to provide the required debt service coverage and to pay for operating and maintenance expenses. Among other matters, general and local economic conditions and changes in law and government regulations (including initiatives and moratoriums on growth) could adversely affect the amount of System Revenues realized by the City and ultimately the ability of the City to pay principal of and interest on the Senior 2001 Bonds, the Series 2010 Bonds and other Parity Debt.

Revenues; Rate Covenant

System Net Revenues are dependent upon the demand for sewer services, which can be affected by population factors, concentration of demand, more stringent regulation, or problems with the City’s collection and treatment facilities. There can be no assurance that demand will be consistent with the levels contemplated in this Official Statement. A decrease in the demand for services could require an increase in rates or charges in order to comply with the rate covenant. The City’s ability to meet its rate covenant is dependent upon its capacity to increase rates without driving down demand to a level insufficient to meet debt service on the Senior 2001 Bonds, the Series 2010 Bonds and other Parity Debt.

Enterprise Expenses

There can be no assurance that expenses of the City will be consistent with the levels contemplated in this Official Statement. Changes in technology, changes in treatment standards and increases in the cost of operation or other expenses could require increases in rates or charges in order to comply with the rate covenant in the Indenture. Such rate increases could drive down demand for related services or otherwise increase the possibility of nonpayment of the Series 2010 Bonds.

Existing and Future Parity Debt

The Series 2010 Bonds are payable from System Net Revenues and Refundable Credits on a parity with the Series 2003 Bonds, the Series 2006 Bonds, and the Series 2009 Bonds. As described in “SECURITY FOR THE 2010 BONDS ‐ Issuance of Bonds and Parity Debt” above, the Indenture permits the City to issue additional Parity Debt that would be payable from System Net Revenues

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and Refundable Credits on a parity with the payment of debt service on the Series 2003 Bonds, the Series 2006 Bonds, the Series 2009 Bonds, and the Series 2010 Bonds.

Earthquakes and Other Natural Disasters

Earthquakes and other natural disasters could interrupt operation of the System and result in unanticipated expenses, thereby interrupting the ability of the City to meet its financial obligations. Earthquakes and other natural disasters could also impact the receipt of System Revenues as a result of damage within the City’s service area. The City is not obligated under the Indenture to procure and maintain earthquake insurance on the facilities of the System, nor does the City plan to procure and maintain earthquake insurance. According to the Five County Seismic Safety Element dated April 1974, which was prepared for Fresno, Kings, Madera, Mariposa and Tulare Counties and the incorporated cities in those counties:

there are no active faults known to be present in the five‐county area; the principal earthquake hazard affecting the five‐county area is ground shaking as

opposed to surface rupture or ground failure; known active faults that pose a serious hazard to the five‐county area as a result of

strong ground shaking include the San Andreas fault (west of the five‐county area), the Owens Valley fault (east of the five‐county area), and the White Wolf fault (south of the five‐county area);

small local earthquakes may occur from time to time but their regional effect is overshadowed in terms of public hazard by the principal faults listed above; and

secondary seismic hazards (landslides, liquefaction, subsidence due to groundwater withdrawal) are considered minimal for the five‐county area.

Concentration of Wastewater Accounts

Approximately 54% of total System gross revenues were derived from five dairy‐processing companies during the fiscal year ending June 30, 2010. See “THE CITY AND THE SYSTEM ‐ Service Area and Sewer Customers.” If one or more of these companies were to relocate or otherwise reduce wastewater flow, the finances of the System would be materially impacted. In such event, the City would have the legal authority to raise sewer rates to make up any shortfall, and it could be obligated to do so under the Indenture, although any such rates could adversely impact the attractiveness of the City to existing and future industrial customers. The City has covenanted under the Indenture to maintain rates at certain levels. See “SECURITY FOR THE 2010 BONDS – Rate Covenant.”

Limitations on Remedies and Bankruptcy

The rights and remedies provided in the Indenture may be limited by and are subject to bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other similar laws affecting creditors’ rights, to the application of equitable principles if equitable remedies are sought, and to the exercise of judicial discretion in appropriate cases and to limitations on

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legal remedies against public agencies in the State of California. The various opinions of counsel to be delivered with respect to such documents, including the opinion of Bond Counsel (the form of which is attached as Appendix E), will be similarly qualified. The enforcement of the remedies provided in the Indenture could prove both expensive and time consuming. In the event of a default, the Trustee is not empowered to sell any part of the System in order to pay debt service on the Series 2010 Bonds. In addition, the rights and remedies provided in the Indenture may be limited by and are subject to provisions of the federal bankruptcy laws, as now or hereafter enacted, and to other laws or equitable principles that may affect creditors’ rights. If the City were to file a petition under Chapter 9 of the Bankruptcy Code (Title 11, United States Code), the Bondholders and the Trustee could be prohibited or severely restricted from taking any steps to enforce their rights under the Indenture and from taking any steps to collect amounts due from the City under the Indenture.

Environmental Regulation

The kind and degree of wastewater treatment which is effected through the System is regulated, to a large extent, by the federal government and the State of California. If the federal government, acting through the Environmental Protection Agency or additional legislation, or the State should impose stricter treatment standards upon the System, its expenses could increase accordingly and rates and charges would have to be increased to offset those expenses. It is not possible to predict the direction which federal or State regulation will take with respect to water treatment standards. See “THE CITY AND THE SYSTEM – City Actions to Resolve Wastewater Discharge Permit Issues” for information about current non‐compliance by the City with its waste discharge requirements and actions it is taking to achieve compliance.

Build America Bonds

The City must comply with certain requirements of the Code in order for the Series 2009 Bonds to be treated as Qualified Bonds and to continue to be eligible for the Refundable Credit. The City has covenanted to comply with each of these requirements. However, failure by the City to comply with these requirements may result in a delay or forfeiture of all or a portion of the Refundable Credit and may cause the Series 2009 Bonds to cease to be treated as Qualified Bonds either prospectively from the date of determination of a failure to comply with the requirements or retroactively to the date of issuance of the Series 2009 Bonds. Should such an event occur, the Series 2009 Bonds are not subject to a special redemption and will remain outstanding until maturity or until redeemed under one of the other redemption provisions contained in the Indenture. In addition, it is important to note that Build America Bonds are a new product introduced by the American Recovery and Reinvestment Act, which was signed into law on February 17, 2009. As such, the City can provide no assurance that future legislation or clarifications or amendments to the Code, if enacted into law, or future court decisions will not reduce or eliminate the Refundable Credit with respect to the Bonds. The Refundable Credit does not constitute a full faith and credit guarantee of the United States government, but is required to be paid by the Treasury under the American Recovery and Reinvestment Act.

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The Series 2009 Bonds were issued as taxable Build America Bonds, and as a result, the City expects to receive subsidy payments (Refundable Credits) from the federal government. Pursuant to the Indenture, any Refundable Credits received by the City are pledged to the payment of debt service on Parity Debt. The U.S. Treasury may offset any subsidy payment to which the City is otherwise entitled against any other liability of the City payable to the United States of America, including without limitation withholding or payroll taxes, or other penalties or interest that may be owed at any time to the United States of America. The Code authorizes federal regulations and other guidance to carry out the Build America Bond program, which may reduce the certainty of receipt of subsidy payments by the City. Subsidy payments do not constitute full faith and credit obligations of or guarantees by the United States of America, but are to be paid as tax credits by the U.S. Treasury under ARRA. Accordingly, no assurance can be given that the U.S. Treasury will make payment of the subsidy payments in the amounts which the City expects to receive, or that such payments will be made in a timely manner. No assurance can be given that Congress will not amend or repeal provisions of the program and thereby affect the payment of subsidy payments. If the City fails to comply with the conditions to receiving the subsidy payments throughout the term of the Series 2009 Bonds or other Parity Debt designated as Build America Bonds, it may no longer receive such payments and could be subject to a claim for the return of previously received payments. The City received a letter from the Internal Revenue Service (the “IRS”) dated September 29, 2010 indicating that the Series 2009 Bonds were selected for examination and requesting documents and information related to the Series 2009 Bonds. The letter noted that the IRS routinely examines municipal debt issues to determine compliance with Federal tax requirements and further stated that the IRS has no reason to believe that the Series 2009 Bonds fail to comply with any of the applicable tax requirements. The City is in the process of complying with the information request and believes that the Series 2009 Bonds comply with all applicable tax requirements. If the IRS determines that the Series 2009 Bonds do not comply with the requirements for Build America Bonds, the IRS could reduce or eliminate the Refundable Credit payable to the City which would have a negative impact on System finances.

Secondary Market for the 2010 Bonds

There can be no guarantee that there will be a secondary market for the Series 2010 Bonds or, if a secondary market exists, that any Series 2010 Bonds can be sold for any particular price. Occasionally, because of general market conditions or because of adverse history or economic prospects connected with a particular issue, secondary marketing practices in connection with a particular issue are suspended or terminated. Additionally, prices of issues for which a market is being made will depend upon then‐prevailing circumstances. Such prices could be substantially different from the original purchase price.

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CONCLUDING INFORMATION

Continuing Disclosure

The City has covenanted for the benefit of the holders and beneficial owners of the Series 2010 Bonds to provide certain financial information and operating data relating to the System. These covenants have been made in order to assist the Underwriter in complying with SEC Rule 12c2‐12(b)(5). A form of the Continuing Disclosure Certificate is attached in Appendix D. The City has complied in all material respects with its continuing disclosure undertakings in the past five years.

Legal Matters

The legality and enforceability of the Series 2010 Bonds are subject to the approval of Hawkins, Delafield & Wood, San Francisco, California, acting as Bond Counsel. The form of such legal opinion is attached hereto as Appendix E.

Tax Matters

Opinion of Bond Counsel In the opinion of Hawkins Delafield & Wood LLP, Bond Counsel to the City, under existing statutes and court decisions and assuming continuing compliance with certain tax covenants described herein, (i) interest on the Series 2010 Bonds is excluded from gross income for Federal income tax purposes pursuant to Section 103 of the Internal Revenue Code of 1986, as amended (the “Code”), and (ii) interest on the Series 2010 Bonds is not treated as a preference item in calculating the alternative minimum tax imposed on individuals and corporations under the Code and is not included in the adjusted current earnings of corporations for purposes of calculating the alternative minimum tax. In rendering its opinion, Bond Counsel has relied on certain representations, certifications of fact, and statements of reasonable expectations made by the City in connection with the Series 2010 Bonds, and Bond Counsel has assumed compliance by the City with certain ongoing covenants to comply with applicable requirements of the Code to assure the exclusion of interest on the Series 2010 Bonds from gross income under Section 103 of the Code. In addition, in the opinion of Bond Counsel to the City, under existing statutes, interest on the Series 2010 Bonds is exempt from personal income taxes imposed by the State of California. Bond Counsel expresses no opinion regarding any other Federal or state tax consequences with respect to the Series 2010 Bonds. Bond Counsel renders its opinion under existing statutes and court decisions as of the issue date, and assumes no obligation to update, revise or supplement its opinion to reflect any action hereafter taken or not taken, or any facts or circumstances that may hereafter come to its attention, or changes in law or in interpretations thereof that may hereafter occur, or for any other reason. Bond Counsel expresses no opinion on the effect of any action hereafter taken or not taken in reliance upon an opinion of other counsel on the exclusion from

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gross income for Federal income tax purposes of interest on the Series 2010 Bonds, or under state and local tax law. Certain Ongoing Federal Tax Requirements and Covenants The Code establishes certain ongoing requirements that must be met subsequent to the issuance and delivery of the Series 2010 Bonds in order that interest on the Series 2010 Bonds be and remain excluded from gross income under Section 103 of the Code. These requirements include, but are not limited to, requirements relating to use and expenditure of gross proceeds of the Series 2010 Bonds, yield and other restrictions on investments of gross proceeds, and the arbitrage rebate requirement that certain excess earnings on gross proceeds be rebated to the Federal government. Noncompliance with such requirements may cause interest on the Series 2010 Bonds to become included in gross income for Federal income tax purposes retroactive to their issue date, irrespective of the date on which such noncompliance occurs or is discovered. The City has covenanted to comply with certain applicable requirements of the Code to assure the exclusion of interest on the Series 2010 Bonds from gross income under Section 103 of the Code. Certain Collateral Federal Tax Consequences The following is a brief discussion of certain collateral Federal income tax matters with respect to the Series 2010 Bonds. It does not purport to address all aspects of Federal taxation that may be relevant to a particular owner of a Series 2010 Bond. Prospective investors, particularly those who may be subject to special rules, are advised to consult their own tax advisors regarding the Federal tax consequences of owning and disposing of the Series 2010 Bonds. The Series 2010 Bonds are not taken into account (subject to certain limitations) in determining the portion of a financial institution’s interest expense subject to the pro rata interest disallowance rule of Section 265(b) of the Code for costs of indebtedness incurred or continued to purchase or carry certain tax‐exempt obligations. The Series 2010 Bonds, however, are taken into account in the calculation of the amount of a financial institution’s preference items under Section 291 of the Code. Prospective owners of the Series 2010 Bonds should be aware that the ownership of such obligations may result in collateral Federal income tax consequences to various categories of persons, such as corporations (including S corporations and foreign corporations), financial institutions, property and casualty and life insurance companies, individual recipients of Social Security and railroad retirement benefits, individuals otherwise eligible for the earned income tax credit, and taxpayers deemed to have incurred or continued indebtedness to purchase or carry obligations the interest on which is excluded from gross income for Federal income tax purposes. Interest on the Series 2010 Bonds may be taken into account in determining the tax liability of foreign corporations subject to the branch profits tax imposed by Section 884 of the Code.

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Original Issue Discount “Original issue discount” (“OID”) is the excess of the sum of all amounts payable at the stated maturity of a Series 2010 Bond (excluding certain “qualified stated interest” that is unconditionally payable at least annually at prescribed rates) over the issue price of that maturity. In general, the “issue price” of a maturity means the first price at which a substantial amount of the Series 2010 Bonds of that maturity was sold (excluding sales to bond houses, brokers, or similar persons acting in the capacity as underwriters, placement agents, or wholesalers). In general, the issue price for each maturity of Series 2010 Bonds is expected to be the initial public offering price set forth on the cover page of the Official Statement. Bond Counsel further is of the opinion that, for any Bonds having OID (a “Discount Bond”), OID that has accrued and is properly allocable to the owners of the Discount Bonds under Section 1288 of the Code is excludable from gross income for Federal income tax purposes to the same extent as other interest on the Series 2010 Bonds. In general, under Section 1288 of the Code, OID on a Discount Bond accrues under a constant yield method, based on periodic compounding of interest over prescribed accrual periods using a compounding rate determined by reference to the yield on that Discount Bond. An owner’s adjusted basis in a Discount Bond is increased by accrued OID for purposes of determining gain or loss on sale, exchange, or other disposition of such Series 2010 Bond. Accrued OID may be taken into account as an increase in the amount of tax‐exempt income received or deemed to have been received for purposes of determining various other tax consequences of owning a Discount Bond even though there will not be a corresponding cash payment. Owners of Discount Bonds should consult their own tax advisors with respect to the treatment of original issue discount for Federal income tax purposes, including various special rules relating thereto, and the state and local tax consequences of acquiring, holding, and disposing of Discount Bonds.

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Original Issue Premium In general, if an owner acquires a Series 2010 Bond for a purchase price (excluding accrued interest) or otherwise at a tax basis that reflects a premium over the sum of all amounts payable on the Series 2010 Bond after the acquisition date (excluding certain “qualified stated interest” that is unconditionally payable at least annually at prescribed rates), that premium constitutes “bond premium” on that Series 2010 Bond (a “Premium Bond”). In general, under Section 171 of the Code, an owner of a Premium Bond must amortize the bond premium over the remaining term of the Premium Bond, based on the owner’s yield over the remaining term of the Premium Bond determined based on constant yield principles (in certain cases involving a Premium Bond callable prior to its stated maturity date, the amortization period and yield may be required to be determined on the basis of an earlier call date that results in the lowest yield on such bond). An owner of a Premium Bond must amortize the bond premium by offsetting the qualified stated interest allocable to each interest accrual period under the owner’s regular method of accounting against the bond premium allocable to that period. In the case of a tax‐exempt Premium Bond, if the bond premium allocable to an accrual period exceeds the qualified stated interest allocable to that accrual period, the excess is a nondeductible loss. Under certain circumstances, the owner of a Premium Bond may realize a taxable gain upon disposition of the Premium Bond even though it is sold or redeemed for an amount less than or equal to the owner’s original acquisition cost. Owners of any Premium Bonds should consult their own tax advisors regarding the treatment of bond premium for Federal income tax purposes, including various special rules relating thereto, and state and local tax consequences, in connection with the acquisition, ownership, amortization of bond premium on, sale, exchange, or other disposition of Premium Bonds. Information Reporting and Backup Withholding Information reporting requirements apply to interest paid on tax‐exempt obligations, including the Series 2010 Bonds. In general, such requirements are satisfied if the interest recipient completes, and provides the payor with, a Form W‐9, “Request for Taxpayer Identification Number and Certification,” or if the recipient is one of a limited class of exempt recipients. A recipient not otherwise exempt from information reporting who fails to satisfy the information reporting requirements will be subject to “backup withholding,” which means that the payor is required to deduct and withhold a tax from the interest payment, calculated in the manner set forth in the Code. For the foregoing purpose, a “payor” generally refers to the person or entity from whom a recipient receives its payments of interest or who collects such payments on behalf of the recipient. If an owner purchasing a Series 2010 Bond through a brokerage account has executed a Form W‐9 in connection with the establishment of such account, as generally can be expected, no backup withholding should occur. In any event, backup withholding does not affect the excludability of the interest on the Series 2010 Bonds from gross income for Federal income tax purposes. Any amounts withheld pursuant to backup withholding would be allowed as a refund or a credit against the owner’s Federal income tax once the required information is furnished to the Internal Revenue Service.

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Miscellaneous Tax legislation, administrative actions taken by tax authorities, or court decisions, whether at the Federal or state level, may adversely affect the tax‐exempt status of interest on the Series 2010 Bonds under Federal or state law and could affect the market or marketability of the Series 2010 Bonds. Prospective purchasers of the Series 2010 Bonds should consult their own tax advisors regarding the foregoing matters.

Absence of Litigation

There is no action, suit, or proceeding known to be pending or threatened, restraining or enjoining the execution or delivery of the Series 2010 Bonds, in any way contesting or affecting the validity of the foregoing or any proceedings of the City taken with respect to any of the foregoing, or, if determined adversely to the City, which would have a material adverse affect on the finances or operations of the Enterprise.

Underwriting

Series 2010 Bonds. The Series 2010 Bonds are being purchased by J.K. Chilton & Associates, a division of O'Connor & Company Securities, Inc. as underwriter (the “Underwriter”). The Underwriter has agreed, subject to certain conditions, to purchase all of the Series 2010 Bonds described on the inside cover page of this Official Statement at an aggregate purchase price of $18,775,685.25 (which is equal to the $19,425,000 par amount of the Series 2010 Bonds, less underwriter’s discount of $145,687.50 and an original issue discount of $503,627.25). General. The initial public offering prices stated on the inside cover of this Official Statement may be changed from time to time by the Underwriter. The Underwriter may offer and sell the Series 2010 Bonds to certain dealers (including dealers depositing Series 2010 Bonds into investment trusts), dealer banks, banks acting as agent and others at prices lower than such public offering prices.

Rating

Standard & Poor’s, a division of McGraw‐Hill Companies, Inc., has assigned its underlying municipal bond rating of “A‐” to the Series 2010 Bonds. Such rating reflects only the views of such organization, and any desired explanation of the significance of such rating should be obtained from the rating agency at the following address: Standard & Poor’s, One Market, Steuart Tower, 15th Floor, San Francisco, California 94105. Generally, a rating agency bases its rating on the information and materials furnished to it, and on investigations, studies, and assumptions of its own. There is no assurance that such ratings will continue for any given period of time, or that such rating will not be revised downward or withdrawn entirely by the rating agency, if in the judgment of such rating agency, circumstances so warrant. Any downward revision or withdrawal of such rating may have an adverse effect on the market price of the Series 2010 Bonds.

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Miscellaneous

This Official Statement is not to be construed as a contract or agreement between the City and the purchasers or holders of any of the Series 2010 Bonds. Any statements made in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended merely as an opinion and not as representations of fact. The information and expressions of opinion in this Official Statement are subject to change without notice, and neither the delivery of this Official Statement nor any sale made of the Series 2010 Bonds shall, under any circumstances, create any implication that there has been no change in affairs in the City since the date of this Official Statement.

Execution of the Official Statement

The City has duly authorized the execution and delivery of this Official Statement. City of Tulare /s/ Darlene J. Thompson Darlene J. Thompson Finance Director/Treasurer

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APPENDIX A

DEFINITIONS AND SUMMARY OF LEGAL DOCUMENTS

The following is a brief summary of certain of the definitions and provisions of the Indenture. This summary is not intended to be comprehensive or definitive, and reference is made to the Indenture for the complete terms thereof.

DEFINITIONS

Annual Debt Service

"Annual Debt Service" means, for any Fiscal Year, the sum of (1) the interest accruing on all Parity Debt during such Fiscal Year, assuming that all Parity Debt is retired as scheduled, plus (2) the principal amount (including principal due as sinking fund payments) allocable to all Parity Debt in such Fiscal Year, calculated as if such principal amounts were deemed to accrue daily during such Fiscal Year in equal amounts from, in each case, each payment date for principal or the date of delivery of such Parity Debt (provided that principal shall not be deemed to accrue for greater than a 365-day period prior to any payment date), as the case may be, to the next succeeding payment date for principal, provided, that the following adjustments shall be made to the foregoing amounts in the calculation of Annual Debt Service:

A. with respect to any such Parity Debt bearing or comprising interest at other than a fixed interest rate, the rate of interest used to calculate Annual Debt Service shall be (i) with respect to such Parity Debt then outstanding, one hundred ten per cent (110%) of the greater of (1) the daily average interest rate on such Parity Debt during the twelve (12) calendar months next preceding the date of such calculation (or the portion of the then current Fiscal Year that such Parity Debt has borne interest) or (2) the most recent effective interest rate on such Parity Debt prior to the date of such calculation or (ii) with respect to such Parity Debt then proposed to be issued, eighty percent (80%) of the interest rate on actively traded 10-year United States Treasury obligations;

B. with respect to any such Parity Debt having twenty-five per cent (25%) or more of the aggregate principal amount thereof due in any one Fiscal Year, Annual Debt Service shall be calculated for the Fiscal Year of determination as if the interest on and principal of such Parity Debt were being paid from the date of incurrence thereof in substantially equal annual amounts over a period of twenty (20) years from the date of such Parity Debt provided, however that the full amount of such Parity Debt shall be included in Annual Debt Service if the date of calculation is within 24 months of the actual maturity of the payment;

C. with respect to any such Parity Debt or portions thereof bearing no interest but which are sold at a discount and which discount accretes with respect to such Parity Debt or portions thereof, such accreted discount shall be treated as due when scheduled to be paid;

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D. Annual Debt Service shall not include interest on Parity Debt which is to be paid from amounts constituting capitalized interest;

E. if an interest rate swap agreement is in effect with respect to any Parity Debt, the net payments scheduled to be paid under such swap agreement and the interest payable on such Parity Debt, shall be considered to be the Annual Debt Service, and for this purpose, the variable amount under any such interest rate swap agreement shall be determined in accordance with the procedure set forth in subparagraph (A) of this definition;

F. Repayment Obligations proposed to be entered into as Parity Debt shall be deemed to be payable at the scheduled amount due under such Repayment Obligation as calculated under this definition; and

G. Annual Debt Service shall be adjusted by the amount of Refundable Credits to be deposited in the Interest Account; provided that to compute Maximum Annual Debt Service for the purpose of issuing Parity Debt pursuant to the Master Indenture, Annual Debt Service shall be reduced by the amount of Refundable Credits the City projects it will receive during each Fiscal Year in a Certificate of the City.

Authorized Investments

"Authorized Investments" means any of the following obligations which at the time of investment are legal investments of funds of the City under the laws of the State of California for the money proposed to be invested therein:

(1) (a) Cash (insured at all times by the Federal Deposit Insurance Corporation), (b) 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), or (c) Senior debt obligations of other Government Sponsored Agencies approved by the Bond Insurer.

(2) Obligations of any of the following federal agencies which obligations represent the full faith and credit of the United States of America, including:

-Export-Import Bank -Rural Economic Community Development Administration -U.S. Maritime Administration -Small Business Administration -U.S. Department of Housing & Urban Development (PHAs) -Federal Housing Administration -Federal Financing Bank (3) Direct obligations of any of the following federal agencies which obligations are

not fully guaranteed by the full faith and credit of the United States of America:

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-Senior debt obligations issued by the Federal National Mortgage Association (FNMA) or Federal Home Loan Mortgage Corporation (FHLMC).

-Obligations of the Resolution Funding Corporation (REFCORP) -Senior debt obligations of the Federal Home Loan Bank System

-Senior debt obligations of other Government Sponsored Agencies approved by the Bond Insurer

(4) U.S. dollar denominated deposit accounts, federal funds and bankers’ acceptances with domestic commercial banks including the Trustee, its parent company if any, and their 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” or “A-1+” by S&P and maturing not more than 360 calendar days after the date of purchase. (Ratings on holding companies are not considered as the rating of the bank); (5) Commercial paper which is rated at the time of purchase in the single highest classification, “P-1” by Moody’s and “A-1+” by S&P and which matures not more than 270 calendar days after the date of purchase; (6) Investments in a money market fund rated “AAAm” or “AAAm-G” or better by S&P, including funds for which the Trustee, its parent holding company, if any, or any affiliates or subsidiaries of the Trustee or such holding company provide investment advisory or other management services; (7) Pre-refunded Municipal Obligations defined as follows: any bonds or other obligations of any state of the United States of America or of any agency, instrumentality or local governmental unit of any such state which are not callable at the option of the obligor prior to maturity or as to which irrevocable instructions have been given by the obligor to call on the date specified in the notice; and

(A) which are rated, based on an irrevocable escrow account or fund (the “escrow”),

in the highest rating category of Moody’s or S&P or any successors thereto; or (B) (i) which are fully secured as to principal and interest and redemption premium,

if any, by an escrow consisting only of cash or obligations described in paragraph (1)(B) above, which escrow may be applied only to the payment of such principal of and interest and redemption premium, if any, on such bonds or other obligations on the maturity date or dates thereof or the specified redemption date or dates pursuant to such irrevocable instructions, as appropriate, and (ii) which escrow is sufficient, as verified by a nationally recognized independent certified public accountant, to pay principal of and interest and redemption premium, if any, on the bonds or other obligations described in this paragraph

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on the maturity date or dates specified in the irrevocable instructions referred to above, as appropriate;

(8) Municipal obligations rated “Aaa/AAA” or general obligations of States with a rating of “A2/A” or higher by both Moody’s and S&P; (9) Investment agreements approved in writing by the Bond Insurer (supported by appropriate opinions of counsel);

(10) Local California agency investment pools, so long as such pool is rated in one of the two highest rating categories by S&P and Moody's;

(11) The Local Agency Investment Fund administered by the State of California or

(12) Any other investment approved in writing by the Bond Insurer.

Bond Insurer or Insurer

"Bond Insurer" or "Insurer" means any issuer of the Municipal Bond Insurance Policy and/or the Reserve Policy obtained by the City relating to any Series of the Bonds.

Bonds

"Bonds" means all Series of the Bonds authorized, executed and delivered under all Supplemental Indentures.

Build America Bonds

"Build America Bonds" shall mean a Series of Bonds that are subject to Code Section 54AA pursuant to an irrevocable election of the City.

Code

"Code" means the Internal Revenue Code of 1986, as amended, and the regulations of the United States Department of the Treasury issued thereunder, and in this regard reference to any particular section of the Code shall include reference to all successors to such section of the Code.

Continuing Disclosure Certificate

"Continuing Disclosure Certificate" means that certain Continuing Disclosure Certificate or Certificates executed by the City with respect to a Series of the Bonds.

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Interest Account

"Interest Account" means the account by that name established pursuant to the Indenture that is held by the Trustee.

Interest Payment Date

"Interest Payment Date" means any May 15 or November 15, on which interest on any Series of the Bonds or Parity Debt is scheduled to be paid (Parity Debt may have different interest payments dates to the extent required by law or a governmental loan program or to the extent variable rate interest is paid monthly or quarterly).

Law

"Law" means (1) the Freeholder’s Charter of the City and the City of Tulare Revenue Bond Law, enacted by Ordinance No. 1030, adopted by the Council of the City on February 1, 1972, as amended and/or (2) Articles 10 and 11 of Chapter 3 of Part 1 of Division 2 (commencing with Section 53570) of the California Government Code (commonly referred to as the Refunding Bond Law).

Maximum Annual Debt Service

"Maximum Annual Debt Service" means, as of any date of calculation, the largest Annual Debt Service during the period from the date of such calculation through the final maturity date of all Parity Debt.

Municipal Bond Insurance Policy

"Municipal Bond Insurance Policy" means the policy or policies of municipal bond insurance or other unconditional credit enhancement issued by a Bond Insurer.

Operation and Maintenance Costs

"Operation and Maintenance Costs" means all management, operation and maintenance costs of the System, determined in accordance with Generally Accepted Accounting Principles, including all incidental costs, fees and expenses properly chargeable thereto and all amounts properly chargeable thereto by the general fund of the City, but excluding in all cases (i) payment of Parity Debt and Subordinate Obligations, (ii) costs of capital additions, replacements, betterments, extensions or improvements which under are chargeable to a capital account, and (iii) depreciation, replacement and obsolescence charges or reserves therefor and amortization of intangibles or other bookkeeping entries of a similar nature.

Outstanding

"Outstanding," when used as of any particular time with reference to Bonds, means (subject to the provisions of the Indenture) all Bonds issued and delivered hereunder except–

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(1) Bonds theretofore cancelled by the Trustee or surrendered to the Trustee for cancellation;

(2) Bonds paid or deemed to have been paid within the meaning of the Indenture; and

(3) Bonds in lieu of or in substitution for which other Bonds shall have been executed, issued and delivered by the City pursuant hereto.

Parity Debt

"Parity Debt" means the Bonds and any Parity Obligations.

Parity Obligations

"Parity Obligations" means all obligations of the City, the payments under which are secured by a pledge of the System Net Revenues on a parity with payments of principal of and interest on the Bonds as provided in the Indenture, including but not limited to any Repayment Obligations secured by System Net Revenues on a parity with the Bonds.

Parity Obligation Payments

"Parity Obligation Payments" means the payments scheduled to be paid by the City under and pursuant to the Parity Obligations, which payments are secured by a pledge of System Net Revenues on a parity with the Bonds as provided in the Indenture.

Principal Account

"Principal Account" means the account by that name, established pursuant to The Indenture hereof that is held by the Trustee.

Principal Payment Date

"Principal Payment Date" means any November 15 on which the principal of any Series of the Bonds or Parity Debt is scheduled to be paid (Parity Debt may have different principal payments dates to the extent required by law or a governmental loan program).

Rate Stabilization Fund

"Rate Stabilization Fund" means the fund by that name established pursuant to the Indenture.

Record Date

"Record Date" means the close of business on the 15th day of the month preceding any Interest Payment Date, whether or not such day is a Business Day.

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Refundable Credits

"Refundable Credit" shall mean, with respect to a Series of Bonds that are Build America Bonds, the amounts which are payable by the Federal government under Section 6431 of the Code, which the City has elected to receive under Section 54AA(g)(1) of the Code. Refundable Credits shall not be considered System Net Revenues.

Repayment Obligation

"Repayment Obligation" means the reimbursement obligation or any other payment obligation of the City under a written agreement between the City and a credit provider to reimburse the credit provider for amounts paid pursuant to a credit facility for the payment of the principal amount or purchase price of and/or interest on any Parity Debt.

Reserve Fund

"Reserve Fund" means the fund by that name established pursuant to The Indenture that is held by the Trustee.

Reserve Fund Requirement

"Reserve Fund Requirement" shall mean the aggregate amount, as calculated from time to time with respect to each Series of the Bonds, equal to the least of (i) maximum annual debt service on the Series of the Bonds (based on a year ending June 30), (ii) 125% of average annual debt service on the Series of the Bonds (based on a year ending June 30) or (iii) 10% of the original principal amount of the Series of Bonds or, if more than a de minimis of original issue discount or premium on such Series of Bonds under the Code, 10% of the issue price of the Series of Bonds; provided, that if the City utilizes a common Reserve Fund for two or more Series of the Bonds hereunder, then the City at its option may substitute for clause (i) above the amount necessary to be added to such common Reserve Fund to equal the maximum annual aggregate debt service for such Series of the Bonds; provided further that notwithstanding any provision hereof to the contrary, with the prior written consent of the Bond Insurer, all or any portion of the Reserve Fund Requirement may (following written notification to the rating agencies then rating the Bonds) be satisfied by the provision of a policy of insurance, a surety bond, a letter of credit or other comparable credit facility, or a combination thereof, which, together with money on deposit in such Reserve Fund, provide an aggregate amount equal to the Reserve Fund Requirement, so long as (i) the provider of any such policy of insurance, surety bond, letter of credit or other comparable credit facility is rated in one of the two highest rating categories (at all times) by Moody's and by S&P, (ii) in the case of a substitution of cash for a credit facility, the Trustee has received an opinion of counsel of recognized standing in the field of law relating to municipal bonds substantially to the effect that such substitution is authorized or permitted under the Indenture and will not adversely affect the exclusion from gross income of interest on the Bonds for federal income tax purposes, (iii) if such credit facility is not an irrevocable surety bond in the highest rating category of both Moody's and S&P, the Trustee has received written confirmation from the rating agencies then

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rating the Bonds that such substitution will not cause a lowering or withdrawal of any ratings on the Bonds, and (iv) the Trustee has received an opinion of counsel to the effect that the credit facility to be substituted is a valid, binding and legally enforceable obligation; and provided further, that in the event that any previously funded cash portion of the Reserve Fund Requirement is satisfied by the provision of such a policy of insurance, surety bond, letter of credit or other comparable credit facility, or a combination thereof, the amount of money then in such Reserve Fund equal to the portion of the Reserve Fund Requirement then being satisfied by such credit facility shall (upon receipt of a Written Request of the City) be withdrawn by the Trustee from the Reserve Fund and transferred to the City.

Reserve Policy

"Reserve Policy" means a debt service reserve fund insurance policy issued by a Bond Insurer, placed in the Reserve Fund for a Series of the Bonds, guaranteeing the scheduled payment of principal of and interest on the Bonds subject to the limitations set forth therein.

Senior 2001 Bonds

"Senior 2001 Bonds" means the City of Tulare, California 2001 Sewer Revenue Bonds, issued in the original aggregate principal amount of $20,000,000.

Series 2003 Bonds

"Series 2003 Bonds" means the City of Tulare Sewer Revenue Bonds, Series 2003, issued in the original aggregate principal amount of $42,700,000.

Series 2006 Bonds


Series 2009 Bonds


Series 2010 Bonds


Series of the Bonds

"Series of the Bonds" means when used with respect to the Bonds, means all the Bonds designated as being of the same series, authenticated and delivered in a simultaneous transaction, and identified in a Supplemental Indenture authorizing such Bonds as separate

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Series of the Bonds, and any Bonds thereafter authenticated and delivered upon a transfer or exchange or in lieu of or in substitution for such Bonds pursuant hereto.

System

"System" means the whole and each and every part of the sewer system of the City, including the portion thereof existing on the date hereof, and including all additions, betterments, extensions and improvements to such system or any part thereof hereafter acquired or constructed.

System Net Revenues

"System Net Revenues" means for any period System Revenues less Operation and Maintenance Costs for such period; provided that certain adjustments in the amount of System Net Revenue deemed collected during a Fiscal Year may be made in connection with amounts deposited in the Rate Stabilization Fund as provided in the Indenture; provided, that System Net Revenues shall not include any amounts pledged to pay debt service on the Senior 2001 Bonds.

System Revenue Fund

"System Revenue Fund" means the fund by that name created pursuant to The Indenture.

System Revenues

"System Revenues" means all gross income and revenue received or receivable by the City from the ownership or operation of the System, determined in accordance with Generally Accepted Accounting Principles, including all fees, rates, charges and all amounts paid under any contracts received by or owed to the City in connection with the operation of the System and all proceeds of insurance relating to the System and all other income and revenue howsoever derived by the City from the ownership or operation of the System or arising from the System.

Tax Certificate

"Tax Certificate" means a certificate, executed by the City and dated the date of the original issuance and delivery of a Series of the Bonds, with respect to the requirements of certain provisions of the Code, as such certificate may from time to time be modified or supplemented in accordance with the terms thereof.

Tax-Exempt

"Tax-Exempt" means, with respect to interest on any obligations of a state or local government, including the Bonds, that such interest is excluded from the gross income of the holders thereof for federal income tax purposes, whether or not such interest is includable as

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an item of tax preference or otherwise includable directly or indirectly for purposes of calculating other tax liabilities, including any alternative minimum tax or environmental tax under the Code.

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SUMMARY OF INDENTURE

The following is a summary of certain of the provisions of the Indenture. This summary is not intended to be comprehensive or definitive, and reference is made to the actual document for the complete terms thereof.

Terms of Redemption.

Whenever less than all the Outstanding Bonds of any Series maturing on any one date are called for redemption at any one time, the Trustee shall select the Bonds to be redeemed (from the Outstanding Bonds maturing on such date not previously selected for redemption) by lot in any manner which the Trustee deems fair; provided, that if less than all Outstanding Term Bonds of any Series of the Bonds maturing on any one maturity date are called for redemption from proceeds other than Sinking Fund Account Installment Payments at any one time, the City shall specify in a Certificate of the City filed with the Trustee a reduction in Sinking Fund Account Installments required to be made with respect to such Term Bonds (in an amount equal to the amount of Outstanding Term Bonds of such Series of the Bonds to be redeemed) which, to the extent practicable, results in approximately equal Annual Debt Service on the Outstanding Bonds of such Series of the Bonds following such redemption. The City shall deposit with the Trustee money sufficient to redeem any Outstanding Bonds not later than five (5) days prior to the redemption date of the Bonds to be redeemed.

In lieu of redemption of any Term Bonds of any Series of the Bonds, amounts on deposit in the Sinking Fund Account allocable to such Term Bond shall be used and withdrawn by the Trustee at any time, upon receipt of a Written Request of the City, for the purchase of such Term Bonds at public or private sale as and when at such prices (including brokerage and other charges, but excluding accrued interest, which is payable from the Interest Account) as the City may, in its discretion determine, but not in excess of the principal amount thereof plus accrued interest to the purchase date; provided, that no Term Bonds shall be purchased under this subsection with a settlement date following that day which is seventy-five (75) days prior to the redemption date of such Term Bonds. The principal amount of any Term Bonds so purchased by the Trustee in any twelve (12) month period ending on that date which is seventy-five (75) days prior to any Sinking Fund Account Payment Date in any Bond Year shall be credited toward and shall reduce the principal amount of the Term Bonds required to be redeemed on such sinking Account Payment Date in such Bond Year.

Notice of redemption of any Bonds or any portions thereof shall be mailed by first class mail, postage prepaid, by the Trustee not less than thirty (30) nor more than sixty (60) days prior to the redemption date of such Bonds (i) to the respective Owners of the Bonds designated for redemption at their addresses appearing on the bond registration books kept by the Trustee, (ii) to the Information Services (iii) to the Securities Depositories and (iv) to the Bond Insurer. Each notice of redemption shall state the date of such notice, the Bonds to be redeemed, the date of issue of such Bonds, the redemption date, the redemption price, whether funds are then on deposit sufficient to pay the redemption price, the place of redemption (including the name and appropriate address), the CUSIP number (if any) of the

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maturity or maturities, and, if less than all Bonds of any such maturity are to be redeemed, the distinctive numbers of the Bonds of such maturity to be redeemed and, in the case of Bonds to be redeemed in part only, the respective portions of the principal amount thereof to be redeemed. Each such notice shall also state that on such redemption date there will become due and payable on each of such Bonds the redemption price thereof or of the specified portion of the principal amount thereof in the case of a Bond to be redeemed in part only, together with interest accrued thereon to the redemption date, and that from and after such redemption date interest thereon shall cease to accrue, and shall require that such Bonds be then surrendered at the Corporate Trust Office of the Trustee specified in the redemption notice as the place of redemption; provided, that failure by the Trustee to give notice pursuant to the Indenture to any one or more of the Information Services or Securities Depositories, or the insufficiency of any such notice or the failure of any Owner to receive any redemption notice mailed to such Owner or any immaterial defect in the notice so mailed shall not affect the sufficiency of the proceedings for the redemption of any Bonds.

Upon surrender of any Bond redeemed in part only, the City shall execute and the Trustee shall (upon receipt of a Written Request of the City) authenticate and deliver to the Owner thereof, at the expense of the City, a new Bond or Bonds of authorized denominations equal in aggregate principal amount to the unredeemed portion of the Bond surrendered and of the same maturity.

From and after the date fixed for redemption of any Bonds or any portions thereof, if notice of such redemption shall have been duly given and funds available for the payment of such redemption price of the Bonds or such portions thereof so called for redemption shall have been duly provided, no additional interest shall accrue on such Bonds or such portions thereof from and after the redemption date specified in such notice.

All Bonds redeemed or purchased pursuant to the provisions of the Indenture shall be destroyed by the Trustee in accordance with its retention policy then in effect and the Trustee shall deliver a certificate of destruction to the City.

System Revenue Fund.

The Indenture establishes a special fund designated as the "System Revenue Fund", which fund the City agrees and covenants to maintain and to hold separate and apart from other funds so long as any Bonds remain Outstanding. To the extent the City has an existing fund or funds which satisfies the foregoing requirements, then such fund or funds shall be deemed to be the "System Revenue Fund" and the City shall not be required to create a new fund. The City may maintain separate accounts within the System Revenue Fund.

The City shall, from the moneys in the System Revenue Fund, pay all Operation and Maintenance Costs (including amounts reasonably required to be set aside in contingency reserves for Operation and Maintenance Costs, the payment of which is not then immediately required) as such Operation and Maintenance Costs become due and payable. Thereafter, all funds in the System Revenue Fund shall be applied, used and withdrawn only for the purposes

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described below and in the following order of priority. The City shall transfer amounts to the Trustee for payment of interest on and principal of the Bonds and any Parity Debt pursuant to paragraphs (a), (b), and (c) below at least three (3) Business Days prior to the Interest Payment Dates and Principal Payment Dates. If insufficient funds are available to satisfy the requirements of one or more of the paragraphs below, the funds shall be allocated pro rata in proportion to the amount due with respect to the paragraph relating to the highest priority for which funds are available. Payments due with respect to Parity Obligations may be made to the parties provided in such Parity Obligation instead of the Trustee. Any moneys in the System Revenue Fund in excess of the amount necessary to satisfy the requirements of paragraphs (a), (b) or (c) below may be used by the City for any lawful purpose.

Pursuant to the Indenture, the City irrevocably transfers, assigns and sets over to the Trustee, all of the Refundable Credits and all rights of the City to receive the Refundable Credits. The City shall submit all documentation, and take all actions, as may be required to receive and collect the Refundable Credits when due, provided that the City may engage a consultant to perform or assist with this task. Any Refundable Credits collected or received by the City shall be deemed to be held, and to have been collected or received, by the City as the agent of the Trustee and shall forthwith be paid by the City to the Trustee. The City shall take all steps, actions and proceedings necessary to enforce, either jointly with the City or separately, all of the rights of the City to receive and collect the Refundable Credits. Notwithstanding anything to the contrary in the Indenture, upon receipt, the Trustee shall deposit all Refundable Credits in the Interest Account.

(a) Interest Account. The Interest Account is created with the Trustee to be held in trust for the benefit of Bondholders. The City shall transfer to the Trustee for deposit in the Interest Account before May 15 and November 15 of each year (and on such other dates as provided in a Supplemental Indenture), an amount of money from the System Revenue Fund which is equal to the aggregate amount of the interest becoming due and payable on all Outstanding Bonds and Parity Obligations (subject to the terms of such Parity Obligations providing for such payments to be made to other parties) on such Interest Payment Date. No deposit need be made into the Interest Account if the amount contained therein is at least equal to the amount of the interest becoming due and payable on all Outstanding Bonds and Parity Obligations on such Interest Payment Date. All money in the Interest Account shall be used and withdrawn by the Trustee solely for the purpose of paying the interest on the Outstanding Bonds and Parity Obligations (including accrued interest on any Bonds and Parity Obligations (or portions thereof) purchased or redeemed prior to maturity); provided that any earnings on deposit in the Interest Account after payment of interest on Bonds and Parity Obligations on an Interest Payment Date shall be transferred to the System Revenue Fund.

(b) Principal Account. The Principal Account is created with the Trustee to be held in trust for the benefit of Bondholders. The City shall transfer to the Trustee for deposit in the Principal Account before November 15 of each year (and on such other

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dates as provided in a Supplemental Indenture) an amount of money from the System Revenue Fund which, together with any money contained in the Principal Account, is equal to the aggregate amount of the principal becoming due and payable on all Outstanding Bonds and Parity Obligations (subject to the terms of such Parity Obligations) on such Principal Payment Date. No deposit need be made into the Principal Account if the amount contained therein is at least equal to the aggregate amount of the principal of all Outstanding Bonds and Parity Obligations on such Principal Payment Date. All money in the Principal Account shall be used and withdrawn by the Trustee solely for the purpose of paying the principal of the Outstanding Bonds and Parity Obligations as they shall become due and payable; provided that any earnings on deposit in the Principal Account after payment of principal of the Bonds on a Principal Payment Date shall be transferred to the System Revenue Fund. Within the Principal Account is created the Sinking Fund Account. The Trustee shall deposit in the Sinking Fund Account before November 15 of each year (and on such other dates as provided in a Supplemental Indenture), an amount of money from the System Revenue Fund equal to the Sinking Fund Account Installments payable on such Sinking Fund Account Payment Date. All money in the Sinking Fund Account shall be used by the Trustee to redeem or purchase the Term Bonds in accordance with Article II hereof.

(c) Reserve Fund. The Reserve Fund is created by the Trustee to be held in trust for the benefit of Bondholders. As provided in a Supplemental Indenture, the Reserve Fund may contain segregated accounts established for the benefit of one or more Series of the Bonds or Parity Obligations.

On or before the first Business Day of each month, the City shall, from the remaining moneys in the System Revenue Fund, thereafter, without preference or priority, and in the event of any insufficiency of such moneys ratably without any discrimination or preference, transfer to the Trustee for deposit in the Reserve Fund and to the applicable trustee for such other reserve accounts, if any, as may have been established in connection with Parity Obligations that sum, if any, necessary to restore the Reserve Fund to an amount equal to the Reserve Fund Requirement and otherwise replenish the Reserve Fund for any withdrawals (including draws upon the Reserve Policy or any credit facility) to pay the interest or principal due hereunder and necessary to restore such other reserve accounts to an amount equal to the amount required to be maintained therein; provided that payments to restore the Reserve Fund after a withdrawal may be made in monthly installments equal to 1/12 of the aggregate amount needed to restore the Reserve Fund to the Reserve Fund Requirement as of the date of the withdrawal. To the extent that draws on the Reserve Fund are from a credit facility as permitted under the definition of Reserve Fund Requirement in the Indenture, transfers hereunder to restore the Reserve Fund shall be made to reimburse the provider of such credit facility as provided in a Supplemental Indenture.

All amounts in the Reserve Fund shall be used and withdrawn by the Trustee solely for the purpose of making up any deficiency in the Interest Account or the

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Principal Account, or (together with any other funds available) for the payment or redemption of all Outstanding Bonds.

Events of Default and Acceleration of Maturities.

If one or more of the following events (herein an "Event of Default") shall happen, that is to say:

(a) If default shall be made in the due and punctual payment of the interest on any Bond or on any Parity Debt or when and as the same shall become due and payable; or

(b) If default shall be made in the due and punctual payment of the principal of any Bond or for any Parity Debt (including any sinking fund payments) when and as the same shall become due and payable, whether at maturity as therein expressed, by declaration or otherwise; or

(c) If default shall be made by the City in the performance of any of the other agreements or covenants in the Indenture required to be performed by it, and such default shall have continued for a period of thirty (30) days after the City shall have been given notice in writing of such default by the Trustee; provided that such default shall not constitute an Event of Default hereunder, if the City shall commence to cure such default within such thirty (30) day period and thereafter diligently and in good faith shall proceed to cure such default within a reasonable period of time; or

(d) If the City shall file a petition or answer seeking arrangement or reorganization under the federal bankruptcy laws or any other applicable law of the United States of America or any state therein, or if a court of competent jurisdiction shall approve a petition filed with or without the consent of the City seeking arrangement or reorganization under the federal bankruptcy laws or any other applicable law of the United States of America or any state therein, or if under the provisions of any other law for the relief or aid of debtors any court of competent jurisdiction shall assume custody or control of the City or of the whole or any substantial part of its property; or

(e) If payment of the principal of any Parity Debt is accelerated in accordance with its terms;

then, and in each and every such case during the continuance of such Event of Default, the Trustee may, and upon the written request of the Owners of not less than twenty-five per cent (25%) in aggregate principal amount of the Bonds at the time Outstanding, shall, by notice in writing to the City, declare the principal of the Bonds then Outstanding, and the interest accrued thereon, to be due and payable immediately, and upon any such declaration the same shall become and shall be immediately due and payable, anything contained in the Indenture or in the Bonds to the contrary notwithstanding; provided, that any such declaration shall be subject to the prior written consent of the Bond Insurer; and provided further, that if, at any

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time after the principal of the Bonds shall have been so declared due and payable and before any judgment or decree for the payment of the money due shall have been obtained or entered, there shall be deposited with the Trustee a sum sufficient to pay all principal on the Bonds matured prior to such declaration and all matured installments of interest (if any) upon all the Bonds, and the expenses of the Trustee, including attorneys' fees, together with interest on any such amounts advanced as provided in the Indenture, and any and all other defaults known to the Trustee (other than in the payment of interest and principal on the Bonds due and payable solely by reason of such declaration) shall have been made good or cured or provision shall have been made therefor, then, and in every such case, the Owners of at least a majority in aggregate principal amount of the Bonds then Outstanding, by written notice to the Agency and to the Trustee, may, on behalf of the Owners of all the Bonds, rescind and annul such declaration and its consequences; except that no such rescission or annulment shall occur without the prior written consent of the Bond Insurer, and no such rescission or annulment shall extend to or shall affect any subsequent default or shall impair or exhaust any right or power consequent thereon.

Anything in the Indenture to the contrary notwithstanding, upon the occurrence and continuance of an Event of Default, the Bond Insurer shall be entitled to control and direct the enforcement of all rights and remedies granted to the Owners or the Trustee for the benefit of the Owners under the Indenture, including, without limitation: (i) the right to accelerate the principal of the Bonds as described in the Indenture, and (ii) the right to annul any declaration of acceleration, and the Bond Insurer shall also be entitled to approve all waivers of Events of Default.

Application of Funds Upon Acceleration.

All money in the accounts and funds provided for in the Indenture upon the date of the declaration of acceleration by the Trustee as provided in the Indenture, and all System Revenues thereafter received by the City hereunder, shall be transmitted to the Trustee and shall be applied by the Trustee in the following order:

First, to the payment of the costs, fees and expenses of the Trustee, if any, including reasonable compensation to its agents, attorneys and counsel, and thereafter to the payment of the costs and expenses of the Owners in providing for the declaration of such Event of Default, including reasonable compensation to their agents, attorneys and counsel;

Second, to the payment of Operation and Maintenance Costs;

Third, upon presentation of the several Bonds, and the stamping thereon of the amount of the payment if only partially paid, or upon the surrender thereof if fully paid, to the payment of the whole amount then owing and unpaid upon the Bonds for interest and principal and in case such money shall be insufficient to pay in full the whole amount so owing and unpaid upon such Bonds then to the payment of such interest, principal, interest on overdue interest and principal and without preference or priority among such interest, principal, interest on overdue

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interest and principal and, ratably to the aggregate of such interest and principal and on the same or an equivalent basis to the payment of any Parity Obligations.

Fourth, to the Bond Insurer, any applicable amounts.

Insurance.

(1) The City will procure and maintain at all times insurance on the System against such risks (including accident to or destruction of the System) as are usually insured in connection with operations similar to the System and, to the extent such insurance is available for reasonable premiums from a reputable insurance company, such insurance shall be adequate in amount and, as to the risks insured against, shall be maintained with responsible insurers; provided, that such insurance coverage may be satisfied under a self-insurance program which is actuarially sound.

(2) The City shall procure and maintain or cause to be procured and maintained public liability insurance covering claims against the City (including its directors, officers and employees) for bodily injury or death, or damage to property occasioned by reason of the City's operations, including any use of the System, and such insurance shall afford protection in such amounts as are usually covered in connection with operations similar to the System; provided, that such insurance coverage may be satisfied under a self-insurance program which is actuarially sound.

(3) If all or any part of the System shall be damaged or destroyed such that Net Proceeds of $1,000,000 or more are received by the City, such Net Proceeds realized by the City therefrom shall be deposited by the City with the Trustee in a special fund which the Trustee shall establish as needed in trust and applied by the City to the cost of acquiring and constructing additions, betterments, extensions or improvements to the System if the City first secures and files with the Trustee a Certificate of the City showing that the damage or destroyed facilities can be repaired or replaced in such a manner that the ability of the City to pay interest and principal with respect to the Bonds and any Parity Obligations when due will not be substantially impaired (such Certificate of the City shall be final and conclusive) and any balance of such proceeds not required by the City for such purpose shall be deposited in the System Revenue Fund and applied as provided in Section 3.1 hereof, provided, that if the foregoing conditions are not met, then such proceeds shall be deposited with the Trustee in a special escrow account and applied to make payments of interest and principal with respect to the Bonds and any Parity Obligations as they come due.

If such damage or destruction have had no effect, or at most an immaterial effect, upon the System Revenues, and a Certificate of the City to such effect has been filed with the Trustee, then the City shall forthwith deposit such proceeds in the System Revenue Fund, to be applied as provided in Section 3.1 hereof.

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Eminent Domain Proceeds.

If all or any part of the System shall be taken by eminent domain proceedings, the Net Proceeds realized by the City therefrom shall be deposited by the City with the Trustee in a special fund which the Trustee shall establish as needed in trust and applied by the City to the cost of acquiring and constructing additions, betterments, extensions or improvements to the System if the City first secures and files with the Trustee a Certificate of the City showing that the taken facilities can be replaced so that the ability of the City to pay interest and principal with respect to the Bonds and any Parity Obligations when due will not be substantially impaired, and such Certificate of the City shall be final and conclusive, and any balance of such proceeds not required by the City for such purpose shall be deposited in the System Revenue Fund and applied as provided in The Indenture, provided, that if the foregoing conditions are not met, then such proceeds shall be deposited with the Trustee in a special escrow account and applied to pay interest and principal with respect to the Bonds and Parity Obligations as they become due.

If such eminent domain proceedings have had no effect, or at most an immaterial effect, upon the System Revenues and the security interest on the System Net Revenues created by the Indenture, and a Certificate of the City to such effect has been filed with the Trustee, then the City shall forthwith deposit such proceeds in the System Revenue Fund, to be applied as provided in the Indenture.

Procedure for Amendment of the Indenture.

The Indenture and the rights and obligations of the City and of the Owners of the Bonds hereunder may be amended at any time by a Supplemental Indenture which shall become binding when the written consents of the Owners of at least sixty per cent (60%) in aggregate principal amount of the Bonds then Outstanding (exclusive of Bonds disqualified as provided in the Indenture) and the written consent of the Bond Insurer are filed with the Trustee; provided that so long as a Municipal Bond Insurance Policy is in effect with respect to Bonds, the Bond Insurer may give consent to amendments in place of the Owners of such Bonds. No such amendment shall (1) extend the maturity of or reduce the interest rate on, or otherwise alter or impair the obligation of the City to pay the interest or principal or redemption premium, if any, of any Bond, without the express written consent of the Owner of the affected Bond, or (2) permit the creation by the City of any mortgage, pledge or lien upon the Revenues superior to or on a parity with the pledge and lien created by the Indenture for the benefit of the Bonds, or (3) reduce the percentage of Bonds required for the written consent to any such amendment, or (4) modify the rights or obligations of the Trustee without its prior written assent thereto.

The Indenture and the rights and obligations of the City and of the Owners may also be amended at any time by a Supplemental Indenture which shall become binding upon execution, without the consent of any Owners or Bond Insurer, but only to the extent permitted by law and only for any one or more of the following purposes:

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(a) To add to the agreements and covenants of the City other agreements and covenants thereafter to be observed, or to surrender any right or power reserved to or conferred upon the City by the Indenture;

(b) To make such provisions for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective provision, or in regard to questions arising hereunder, as may deem necessary or desirable and not inconsistent herewith or therewith, and which shall not materially adversely affect the interests of the Owners of the Outstanding Bonds;

(c) To modify, amend or supplement the Indenture in such manner as to permit the qualification hereof under the Trust Indenture Act of 1939, as amended, or any similar federal statute hereafter in effect, and to add such other terms, conditions and provisions as may be permitted by said act or similar federal statute, and which shall not materially adversely affect the interests of the Owners of the Bonds;

(d) To maintain the exclusion under the Code of interest on the Bonds from gross income for federal income tax purposes;

(e) To the extent necessary to maintain any then existing rating by Moody's (if Moody's is then rating the Bonds) or S&P (if S&P is then rating the Bonds) or in connection with placing a credit facility in the Reserve Fund;

(f) To issue Bonds and enter into Parity Debt in accordance with the Indenture.

(g) For any other purpose that does not materially adversely affect the interests of the Owners of the Outstanding Bonds.

Discharge of Bonds.

If there shall be paid, to the Owners of all or a portion of the Outstanding Bonds the interest thereon and principal thereof and redemption premiums, if any, thereon at the times and in the manner stipulated therein and in the Indenture, then the owners of such Bonds shall cease to be entitled to the pledge of System Net Revenues as provided in the Indenture, and all agreements, covenants and other obligations of the City to the Owners of such Bonds hereunder shall thereupon cease, terminate and become void and be discharged and satisfied; provided, that notwithstanding anything contained in the Indenture to the contrary, in the event that the interest on or principal of any Bonds shall be paid by the Bond Insurer pursuant to the Municipal Bond Insurance Policy or the Reserve Policy, then such Bonds shall remain Outstanding for all purposes hereof and shall not be defeased or otherwise satisfied and shall not be considered paid, and the assignment and pledge hereunder and all agreements and covenants to the Owners of such Bonds shall continue to exist and shall run to the benefit of such Bond Insurer, and such Bond Insurer shall be subrogated to the rights of such Owners. In such event, the Trustee shall execute and deliver all such instruments as may be desirable to evidence such discharge and satisfaction, and the Trustee shall pay over or deliver to the City all

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money or securities held by it pursuant hereto which secure only such Bonds (or are properly allocable under the terms hereof to such Bonds to be defeased) which are not required for the payment of such interest, principal and redemption premiums, if any, on such Bonds, other than the money, if any, in the Rebate Fund.

Any Outstanding Bonds for the payment of which money shall have been set aside to be held in trust by the Trustee for such payment at the maturity or redemption date thereof shall be deemed, as of the date of such setting aside, to have been paid within the meaning and with the effect expressed in the first paragraph of the Indenture.

Any Outstanding Bonds shall prior to the maturity date thereof be deemed to have been paid within the meaning and with the effect expressed in the first paragraph under "Discharge of Bonds" if (1) there shall have been deposited with the Trustee either money in an amount which shall be sufficient, or Authorized Investments identified in paragraph 1(a), (b) or (c) of the definition thereof ("Federal Securities") which are not subject to redemption prior to maturity (including any Federal Securities issued or held in book-entry form on the books of the Department of Treasury of the United States of America) the interest on and principal of which when paid will provide money which, together with the money, if any, deposited with the Trustee at the same time, shall be sufficient (as evidenced by a report of an Independent Certified Public Accountant obtained by the City and filed with the Trustee) to pay when due the interest due and to become due on such Bonds on and prior to the maturity date or redemption date thereof, and the principal of and redemption premiums, if any, on such Bonds on the maturity date or redemption date thereof, and (2) the City shall have given the Trustee a Written Request of the City containing irrevocable instructions to mail, as soon as practicable, a notice to the Owners of such Bonds that the deposit required by (1) above has been made with the Trustee and that such Bonds are deemed to have been paid in accordance with certain sections of the Indenture and stating the maturity date or redemption date upon which money is to be available for the payment of the principal of and redemption premiums, if any, on such Bonds; provided, that neither the Federal Securities nor any money deposited with the Trustee pursuant to certain sections of the Indenture nor any interest or principal payments on any such Federal Securities shall be withdrawn or used for any purpose other than, and such Federal Securities shall be held in trust for, the payment of the interest on and principal of and redemption premiums, if any, on such Bonds as provided in the Indenture; and provided further, that any cash received from such interest or principal payments on such Federal Securities deposited with the Trustee, if not then needed for such purpose, shall, to the extent practicable, be reinvested as specified in a Written Request of the City in Federal Securities maturing at times and in amounts sufficient to pay when due the interest on and principal of and redemption premiums, if any, on such Bonds on and prior to such maturity date or redemption date thereof, and interest earned from such reinvestments shall be deposited in the System Revenue Fund.

A-21

Liability of City Limited to System Revenues and Other Funds.

Notwithstanding anything contained in the Indenture, the City shall not be required to advance any money derived from any source of income other than the System Revenues, the System Revenue Fund and the other funds as provided in the Indenture for the payment of the interest on or the principal of or the redemption premiums, if any, on the Bonds or for the observance or performance of any agreements, conditions, covenants or terms contained in the Indenture.

The Bonds are limited obligations of the City and are payable, as to interest thereon and principal thereof and redemption premiums, if any, thereon, exclusively from the System Net Revenues and such other funds as provided under the Indenture, and the City is not obligated to pay them except from the System Net Revenues and such other funds. The obligation of the City to pay interest on, principal of and redemption premiums on, if any, the Bonds is a special obligation of the City payable solely from the System Net Revenues, and does not constitute a debt of the City or of the State of California or of any political subdivision thereof in contravention of any constitutional or statutory debt limitation or restriction.

Investment of Money in Funds and Accounts.

Unless otherwise directed by the City, the Trustee is directed to invest all money in the Reserve Fund, the Interest Account, the Principal Account, the Rebate Fund and any fund or account established under a Supplemental Indenture and held by the Trustee in the Authorized Investments.

All investment earning on any funds and accounts created by the Fourth Supplemental Indenture related to the Series 2010 Bonds will be transferred to the City to pay for capital expenditures related to the System.


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APPENDIX B

AREA STATISTICAL INFORMATION The following information is provided to give prospective investors an overview of the City of Tulare and the general economic condition of the City and Tulare County. Debt service on the 2010 Bonds is payable from the City’s System Net Revenues.

Population The City of Tulare is the second largest city in the Tulare County with an estimated population of 59,535 as of January 1, 2010. As shown on the table below, the City’s population has increased by approximately 35% over the past 10 years. City of Tulare Population

Year Percent of Increase (As of Jan. 1) Population Annual Cumulative

2000 43,994 ‐ ‐ 2001 44,588 1.4% 1.4% 2002 45,358 1.7% 3.1% 2003 46,544 2.6% 5.8% 2004 47,913 2.9% 8.9% 2005 49,338 3.0% 12.1% 2006 51,105 3.6% 16.2% 2007 55,435 8.5% 26.0% 2008 57,089 3.0% 29.8% 2009 58,414 2.3% 32.8% 2010 59,535 1.9% 35.3%

_______________ Source: State of California, Department of Finance, E‐4 Population Estimates for Cities, Counties and the State, 2001‐2010, with 2000 Benchmark; dated May 2010.

B‐2

Assessed Valuation All property in Tulare County is assessed by the County Assessor, except public utility property and railroads, which are assessed by the State Board of Equalization. Under the California Constitution, property is assessed at 100% of full cash value. Property is assessed at its market value when constructed or upon change of ownership. The value of property that does not change ownership may be adjusted annually by not more than 2% to account for inflation. The county assessment roll is not proportionate to market value. Since fiscal year 2008/09, the Assessor of Tulare County Assessor/Clerk‐Recorder Department has been independently reviewing the assessed values of selected residential properties in the County. As a result, the assessed valuations of a number of properties have decreased. These reductions are a component of the annual assessment amounts shown on the table below. The following table shows a history of assessed valuation for the City. City of Tulare Assessed Valuation

Fiscal Year Secured Unsecured Total Annual Cumulative

2000/01 $1,385,519,972 $63,812,222 $1,449,332,194 ‐ ‐ 2001/02 1,431,235,607 63,927,877 1,495,163,484 3.2% 3.2%2002/03 1,484,343,994 65,990,013 1,550,334,007 3.7% 7.0%2003/04 1,562,323,196 67,852,847 1,630,176,043 5.1% 12.5%2004/05 1,666,885,107 68,073,906 1,734,959,013 6.4% 19.7%2005/06 1,891,681,055 73,181,208 1,964,862,263 13.3% 35.6%2006/07 2,281,534,333 79,440,106 2,360,974,439 20.2% 62.9%2007/08 2,751,300,875 99,377,099 2,850,677,974 20.7% 96.7%2008/09 2,960,375,724 109,793,770 3,070,169,494 7.7% 111.8%2009/10 2,821,529,666 111,490,540 2,933,020,206 ‐4.5% 102.4%2010/11 2,867,056,082 107,447,481 2,974,503,563 1.4% 105.2%

_______________

Source: County of Tulare, Office of the Auditor‐Controller

Percent IncreaseAssessed Valuation

B‐3

Income The following table shows a history of the median household effective buying income (EBI) for the City, Tulare County, two adjacent counties, California, and the United States. Median Household Effective Buying Income

2004 2005 2006 2007 2008 City of Tulare $33,091 $33,982 $35,106 $36,760 $35,012 Tulare County 33,326 34,381 35,551 37,207 35,853 Fresno County 33,833 34,938 36,593 37,897 39,348 Kern County 34,220 34,883 36,344 37,892 39,256 State of California 43,915 44,681 46,275 48,203 48,952 United States 39,324 40,529 41,255 41,792 42,303

_____________________ Source: Sales & Marketing Management’s “Survey of Buying Power”

Building Activity The following table summarizes building permit valuation and number of single family and multiple family units for the past five calendar years for the City of Tulare. City of Tulare Building Valuation and Permits

2005 2006 2007 2008 2009

Building ValuationResidential $80,750,808 $106,967,157 $82,139,798 $46,100,644 $27,026,899Non‐Residential 39,765,884 37,669,032 52,290,245 59,373,893 14,541,091

Total $120,516,692 $144,636,189 $134,430,043 $105,474,537 $41,567,990

Dwelling UnitsSingle Family 520 678 574 283 180Multi‐Family 141 200 5 92 4

Total 661 878 579 375 184________________

Source: Construction Industry Research Board

B‐4

Employment The City is part of the Visalia‐Tulare‐Porterville Standard Metropolitan Statistical Area which encompasses Tulare County. The following tables summarize historical labor force and employment information for the City and the County. According to preliminary data from the California Employment Development Department, the unemployment rate (not seasonally adjusted) as of September 2010 was 13.6% for the City, 15.9% for the County, 12.2% for the State of California, and 9.2% for the United States. City of Tulare Employment

UnemploymentYear Labor Force Employment Unemployment Rate

2000 20,000 18,200 1,800 8.8%2001 20,400 18,400 2,000 9.7%2002 21,100 18,900 2,100 10.2%2003 21,200 19,000 2,200 10.4%2004 21,000 18,900 2,100 9.9%2005 21,400 19,700 1,700 8.0%2006 22,000 20,400 1,600 7.2%2007 22,500 20,700 1,800 7.8%2008 23,300 21,200 2,100 9.1%2009 23,700 20,600 3,100 13.1%_______________

Source: California Employment Development Department; not seasonally adjusted.

Tulare County Employment

2005 2006 2007 2008 2009Civilian Labor Force 183,700 188,500 192,700 200,000 205,400Civilian Employment 166,300 172,500 174,900 178,500 174,100Civilian Unemployment 17,400 16,000 17,700 21,500 31,400Civilian Unemployment Rate 9.5% 8.5% 9.2% 10.7% 15.3%

Total Farm 32,200 33,700 35,000 36,700 37,300Natural Resources, Mining & Constr. 7,600 8,400 7,600 6,200 4,600Manufacturing 11,600 11,900 12,000 11,900 11,500Trade, Transportation & Utilities 23,000 24,000 24,800 25,100 23,300Finance & Insurance 3,200 3,100 3,100 3,100 2,800Real Estate & Rental & Leasing 1,300 1,300 1,400 1,400 1,300Professional & Business Services 9,800 10,800 9,900 10,100 8,700Educational & Health Services 9,800 10,300 10,700 10,800 10,800Leisure & Hospitality 8,100 8,600 9,000 8,900 9,000Other Services 2,900 2,900 3,000 3,100 2,900Government 29,900 30,200 31,000 31,800 31,500Total, All Industries 140,500 146,300 148,600 150,200 144,800_________________

Source: California Employment Development Department

B‐5

The following table lists the principal employers located within the City of Tulare. City of Tulare Principal Employers 2010

Employees(Approx.)

Commercial/IndustrialLand O'Lakes 560 Dairy ProductsJ.D. Heiskell & Company 300 Grain ProductsSouthern California Edison 300 Utility ServicesIce Cream Partners (Haagen‐Dazs & Nestles) 280 Ice CreamKraft USA South 250 Cheese & Dairy ServicesSaputo Cheese USA, Inc. 250 Cheese & Dairy ServicesU.S. Cold Storage 200 Cold Food StorageRuiz Food Products 120 Food ProductsRuan Transportation Corp. 120 Transportation ServicesTulare Cultured Specialties (formerly Morningstar 120 Dairy ProductsJ.I.T. 110 Electronic PartsFisher Manufacturing 110 Faucet Manufacturing

Non‐Manufacturing EmploymentTulare City School District 860 EducationTulare Joint Union High School District 620 EducationTulare Regional Medical Center 520 Medical FacilitiesWal‐Mart / Target 420 RetailGrocery Stores (cumulative) 350 SupermarketsRestaurants (cumulative) 320 Eating FacilitiesCity of Tulare 300 MunicipalityBanks, Savings & Loans (cumulative) 100 Financial InstitutionsUnited States Post Office 80 Civil ServiceMerritt Manor Convalescent Hospital 75 Medical Facilities_________________


Employer Name Industry

B‐6

Retail Sales Total taxable transactions reported in the City during the first three quarters of calendar year 2009 were reported to be $3,037,217,000, a 16.8% decrease over the total taxable transactions of $3,650,462,000 reported during the first three quarters of calendar year 2008. A summary of historic taxable sales within the City is shown in the following table. Total annual figures for 2009 are not yet available. Taxable Sales & Total Outlets

2004 2005 2006 2007 2008

Total Taxable Sales ($000)City of Tulare $563,982 $615,670 $668,121 $699,461 $718,575Tulare County 4,001,207 4,486,207 4,844,476 4,897,164 4,755,406

Total OutletsTulare County 8,716 8,901 8,839 8,855 8,795 ________________

Source: California State Board of Equalization.

Agriculture Tulare County is situated in the Central San Joaquin Valley, an area of approximately 1,800 square miles that contains some of the most intensive and productive agricultural development in the world. The strategic location makes Tulare very attractive to food processors and distributors because of the central location and abundant supply of locally grown products. In 2009, Tulare County’s gross agricultural production value totaled over $4 billion. Milk has historically been the leading agricultural product in Tulare County with a 2009 total gross value of $1.2 billion. Tulare has consistently ranked as one of the top counties in the United States for both milk production and total agricultural production. Due to the City’s strategic location and access to local agricultural products, a number of large dairy processing facilities, including cheese production facilities, are located in the City.

World Ag Expo In February of each year, the City of Tulare hosts the World Ag Expo (formerly the California Farm Equipment Show and International Exposition). This massive trade show is the largest annual farm equipment show in the world. The three‐day show began in 1968 and has grown over the years to encompass 95 acres of exhibits with 100 acres of parking. Exhibitors and growers come from all over the world to participate in this show.

B‐7

Transportation The main line of the Union Pacific Railroad runs through Tulare, offering rail access to major cities throughout the United States. Amtrak offers passenger rail service from nearby Corcoran and Hanford. U.S. Highway 99 passes through the City and is the main north‐south artery. State Routes 63 and 137 also pass through the City. Domestic and international flights are available at Fresno/Yosemite International Airport and Bakersfield’s Meadows Field Airport. Visalia Municipal Airport, nine miles to the north, provides scheduled passenger and air freight services. Stockton, California port is 170 miles, and Sacramento port is only 207 miles away; L.A. and San Francisco ports are each approximately 200 miles, via an excellent freeway system.

Recreation More than half of Tulare County’s 4,935 square miles is mountainous. A number of high mountain resorts and recreational areas, including Sequoia National Forest and Sequoia National Park are located in the County. The combined acreage of Sequoia National Forest and Sequoia National Park constitutes about 55% of the County’s total area. Sequoia National Park attracts more than one million visitors annually.


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APPENDIX C

COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2009

CALIFORNIA

COMPREHENSIVE

A.NNUA.L

FINANCIAL

REPORT

FOR THE FISCAL YEAR ENDED

JUNE 30, 2009

CALIFORNIA

COMPREHENSIVE

A.NNUA.L

FINANCIAL

REPORT

FOR THE FISCAL YEAR ENDED JUNE 30,2009

PREPARED BY THE FINANCE DEPARTMENT STAFF' DARLENE J. THOMPSON, C.P.A.

FINANCE DIRECTOR/TREASURER

CITY OF TULARE, CALIFORNIA

COMPREHENSIVE ANNUAL FINANCIAL REPORT

JUNE 30, 2009

CITY OF TULARE, CALIFORNIA

JUNE 30, 2009

TABLE OF CONTENTS

Page

INTRODUCTORY SECTION

Letter of Transmittal ..................................................................................................................................... i

Principal City Officials ................................................................................................................................... vi

Organizational Chart of City Government ................................................................................................... vii

Certificate of Award – Outstanding Financial Reporting ............................................................................ viii

FINANCIAL SECTION

Independent Auditor’s Report ...................................................................................................................... 1

Management’s Discussion and Analysis .................................................................................................... 3

Basic Financial Statements:

Government-wide Financial Statements:

Statement of Net Assets ............................................................................................................ 15

Statement of Activities ......................................................................................................................... 16

Fund Financial Statements:

Balance Sheet – Governmental Funds .............................................................................................. 20

Reconciliation of the Governmental Funds Balance Sheet to the Government-Wide Statement of Net Assets .................................................................... 21

Statement of Revenues, Expenditures, and Changes in Fund Balances – Governmental Funds .................................................................................................................... 22

Reconciliation of the Governmental Fund Statement of Revenues, Expenditures, and Changes in Fund Balances to the Government-Wide Statement of Activities ........................................................................................................................................ 23

Statement of Net Assets – Proprietary Funds ................................................................................... 24

Statement of Revenues, Expenses, and Changes in Fund Net Assets – Proprietary Funds ......................................................................................................................... 26

Statement of Cash Flows – Proprietary Funds .................................................................................. 28

Statement of Net Assets – Fiduciary Funds ....................................................................................... 30

Statement of Changes in Net Assets Fiduciary Funds ................................................................... 31

Notes to Basic Financial Statements .................................................................................................. 32

Required Supplementary Information:

Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual (GAAP Basis) – General Fund .................................................................... 62

Schedule of Expenditures by Department – Budgetary Level of Control – Budget and Actual (GAAP Basis) – General Fund .................................................................... 63

Page

Required Supplemental Information for Pension Plan with CalPERS ...................................................................................................... 64

Required Supplemental Information for Other Postemployment Benefit Plan .......................................................................................... 65

OTHER SUPPLEMENTARY INFORMATION

Combining Balance Sheet – Nonmajor Governmental Funds .................................................................. 68

Combining Statement of Revenues, Expenditures, and Changes in Fund Balances – Nonmajor Governmental Funds .................................................................................. 69

Combining Balance Sheet – Nonmajor Special Revenue Funds .............................................................. 72

Combining Statement of Revenues, Expenditures, and Changes in Fund Balances – Nonmajor Special Revenue Funds ............................................................................ 76

Senior Services Fund – Schedule of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual ....................................................................................................... 79

Gas Tax Fund – Schedule of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual ....................................................................................................... 80

Traffic Safety Fund – Schedule of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual ....................................................................................................... 81

COPS – State Grant Fund – Schedule of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual ....................................................................................................... 82

Landscape and Lighting Fund – Schedule of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual ................................................................................... 83

OTS Grant Fund – Schedule of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual ....................................................................................................... 84

Auto Theft Deterrence Fund – Schedule of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual ................................................................................... 85

Police Forfeiture Fund – Schedule of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual ....................................................................................................... 86

Vehicle Abatement Fund – Schedule of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual ....................................................................................................... 87

Library Adult Literacy Fund – Schedule of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual ....................................................................................................... 88

Measure R Fund – Schedule of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual ....................................................................................................... 89

Combining Balance Sheet – Nonmajor Capital Projects Funds ................................................................ 92

Combining Statement of Revenues, Expenditures, and Changes in Fund Balances – Nonmajor Capital Projects Funds .............................................................................. 93

Combining Balance Sheet – All Internal Service Funds ............................................................................ 96

Combining Statement of Revenues, Expenses, and Changes in Net Assets – All Internal Service Funds .................................................................................................. 98

Combining Statement of Cash Flows – All Internal Service Funds ........................................................... 100

Agency Funds – Combining Statement of Changes in Assets and Liabilities – Fiduciary Funds ........................................................................................................................................ 106

Measure I Sales Tax Revenue and Related Expenditures – Budget and Actual .................................................................................................................................... 107

Page

STATISTICAL SECTION (UNAUDITED)

Net Assets by Component ........................................................................................................................... 112

Changes in Net Assets ................................................................................................................................ 114

Fund Balances of Governmental Funds ..................................................................................................... 118

Changes in Fund Balances of Governmental Funds ................................................................................. 120

Assessed Value and Estimated Actual Value of Taxable Property ........................................................... 122

Direct and Overlapping Property Tax Rates ............................................................................................... 123

Historical Sales and Use Tax Rates ............................................................................................................ 124

Principal Property Tax Payers ..................................................................................................................... 125

Property Tax Levies and Collections ........................................................................................................... 127

Schedule of Taxable Sales by Category ..................................................................................................... 128

Ratios of Outstanding Debt by Type ........................................................................................................... 130

Ratio of General Bonded Debt Outstanding ............................................................................................... 132

Direct and Overlapping Debt ....................................................................................................................... 133

Legal Debt Margin Information .................................................................................................................... 134

Pledged-Revenue Coverage ....................................................................................................................... 136

Demographic and Economic Statistics ....................................................................................................... 138

Principal Employers ..................................................................................................................................... 139

Full-Time and Part-Time City Employees ................................................................................................... 141

Operating Indicators by Function ............................................................................................................... 142

Capital Asset Statistics by Function ............................................................................................................ 144

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i

January 22, 2010

Honorable Mayor and Members of the City Council Darrel L. Pyle, City Manager City of Tulare, California

State law requires that local governments prepare a complete set of audited financial statements. This report is published to fulfill that requirement for the fiscal year ending June 30, 2009.

Management assumes full responsibility for the completeness and reliability of the information contained in this report, based upon comprehensive framework of internal control that it has established. Because the cost of internal control should not exceed anticipated benefits, the objective is to provide reasonable, rather than absolute, assurance that the financial statements are free of material misstatements.

The auditing firm of Brown Armstrong Accountancy Corporation has issued an unqualified (“clean”) opinion on the City of Tulare’s financial statements for the year ending June 30, 2009. The independent auditor’s report is located at the front of the financial section of this report.

Our Comprehensive Annual Financial Report (CAFR) is divided into the following sections:

The Introductory Section includes this transmittal letter and other information to familiarize the reader with the City, a directory of officials and City’s organization chart.

The Financial Section includes the independent Auditor’s report on the Basic Financial Statements, management’s discussion and analysis (MD&A), the Basic Financial Statements, required supplementary information, non-major governmental funds and an additional schedule for Measure I. The Basic Financial Statements include the government-wide financial statements that present an overview of the City’s entire financial operations and the fund financial statements that present the financial information of each of the City’s major funds as well as non-major government, internal service and other funds.

The Statistical Section includes selected financial and demographic information, generally presented on a multi-year basis.

Government Profile. The City of Tulare was incorporated on April 5, 1888 as a general law city. On May 1, 1923, the City was granted a Freeholders Charter by the State of California and operates under the Council-Manager form of government. The City Council is comprised of five members who are elected at large to alternating four-year terms staggered every two years. The Council selects one of its members to serve as Mayor for a two-year term. City Council is responsible for making policy, passing ordinances, adopting the budget, appointing committees and hiring the City Manager and the City Attorney. The City Manager is responsible for carrying out the ordinances and policies of the City Council and overseeing operations. All other department heads are appointed by the City Manager.

ii

Tulare is located in California’s central valley, the San Joaquin Valley, approximately midway between the cities of Fresno and Bakersfield and approximately sixty-five miles south of the center of state. An agricultural community anchored by the dairy industry (Tulare County is number one in dairy production and number one in overall agricultural nationwide), Tulare has developed a balanced economic base by expanding its light industrial opportunities, food production capabilities, retail sales outlets, and residential housing markets. The City currently has a land area of approximately 21 square miles with a population of 58,506 as of January 2009.

The City provides a full range of municipal services including those required by statute or charter. These services include police and fire; parks and community services (including, a cross-town trail, a senior center, a teen center, and a cycle park); engineering; water, solid waste, sewer and wastewater treatment and collection (public utilities); street maintenance, sweeping, and construction; planning, zoning, and building inspection; a public transit system; a municipal airport; a library; economic development; housing and community development; finance, treasury, and accounting; and human resources, risk management, and general administration. The public utilities are governed by the Board of Public Utilities Commissioners, which consists of five commissioners appointed by the City Council.

The City of Tulare Charter requires the City Manager to submit an estimated revenue and proposed expenditure budget for the ensuing year to the City Council on or before the second regular meeting in May of each year. This budget serves as a foundation for the City’s fiscal planning and financial control. The budget is prepared by fund (e.g. Public Utilities), division (e.g. Solid Waste), and by department (e.g. Residential). The budget is legally adopted annually by the Council by resolution no later than the close of the prior fiscal year. Each department head is responsible for monitoring departmental expenditures incurred compared to appropriations established by the City Council or Board of Public Utilities Commissioners, as applicable. Department heads may make transfers of appropriations within a department. Transfers of appropriations between departments or changes in appropriations that affect the fund balance require the approval of the City Council. Oversight functions are provided by the City Manager and the Finance Director/Treasurer through administrative policies and periodic review.

Local Economy. Development in the last several years has been rapid. This year, however, development slowed and showed signs of a severe drop in activity. Single family dwelling construction for past three years has gone from 681 to 406 to 176 homes this past year. Five months in to the fiscal year the pace has increased with 91 new home permits being issued.

At the same time, a number of business related projects are complete, about to be complete or have been issued a building permit. Among these projects are the following:

2 CVS Pharmacies opened, one at Bardsley and Mooney and another on Tulare and West Street The opening of a branch office of Bank of the Sierra on Prosperity Avenue The construction of a new Burger King at Bardsley and O Street The ground breaking of the $80 million expansion and retrofitting of the Tulare Regional Hospital The construction of a House of David chicken processing plant The construction of a new Holiday Inn Express at Hillman and Highway 99

At the same time, slower economic activity has led to a slowdown in business activity, such as:

The closing of a Starbucks at Prosperity at the Super Target Shopping Center The closing of the Mervyn’s in the Tulare Pavilion Shopping Center The closing of the Jim Boy Taco at Prosperity Avenue Layoffs in various construction related firms

The City of Tulare is part of the Visalia/Porterville Metropolitan Area. This includes the City of Tulare, City of Visalia, City of Porterville and developed areas of the County of Tulare in and around the various cities in the county. The population of the area is approximately 440,750. The anticipated growth in population of the Metropolitan Area is approximately 1.80%, with Tulare estimated to grow by about 2.30%. There are approximately 183,000 jobs in Tulare County. The countywide unemployment rate is about 14.7%, not seasonally adjusted. The City of Tulare has an unemployment rate of about 12.5% with 21,700 employed out of a workforce of 24,800.

iii

City Capital Improvements. Although the private sector may be slowing, many of the governmental projects take time to accumulate resources and lag private sector activity. A number of significant projects were completed, started or in process. Some of the major projects in 2008-09 fiscal year include:

The completion of a new 16,500 square feet fleet maintenance facility Near completion of a 28 acre Del Lago Community Park which will feature a 2-acre lake, 6 large picnic

pavilions, 3 small picnic shelters, tiny tots playground, 2 school age playgrounds, a water feature, 2 lighted tennis courts, and over 2 miles of walkways and trails

Began the construction of a new 2,100 square feet library that will increase the library capacity by 100 times

Near completion of the new Industrial Wastewater Plant that will increase capacity from 4 million gallons per day (MGD) to 12 MGD

The City completed a number of street and storm drain projects, including:

J Street Storm Drain West Street Street Reconstruction K Street Downtown Streetscape Bardsley Avenue Street Reconstruction Tulare Drive Street Reconstruction I Street Basin Improvements Pine Avenue Storm Drain Improvements

Long-Term Financial Events. An integral part of the City’s budget process, the Council adopts City Goals inApril of each year. These goals address the highest priority issues, community-wide concerns and needs. The City Budget process is the City’s main tool for programming implementation of these goals, plans and policies by allocating the resources necessary to do so.

The following is a brief summary of New Goals adopted by the Council on April 6, 2009:

City Manager

Develop an environmental impact report policy related to the City’s participation as “lead agency”

Engineering

To purse the design, easement acquisition, funding, and construction of a new industrial sewer trunk line to serve future industrial properties located between the UPRR and Pratt Street, south of Paige Avenue, south of Avenue 200, between the UPRR and State Highway 99, and east of Highway 99, south of the Elk Bayou

Do a complete update of the City’s Development Impact Fee Program Expand sidewalk construction pursuing grant funding through the Safe Route to Schools program

(working jointly with Public Works in the application process)

Fire

Relocate Station 62, construct new Station 64 and remodel Station 61

Police

Staff two existing Community Policing Neighborhood Centers and the Problem Oriented Policing Team

Public Works

Upgrade and expand domestic/commercial wastewater treatment capacity Expand sidewalk construction pursuing grant funding through the Safe Route to Schools program

(working jointly with Engineering in the application process) Establish an Energy Independence/Sustainable Community Program Development of an alley fencing and lighting policy/program

iv

Recreation and Parks

Pursue funding to purchase, plan and build a neighborhood park in Sunrise Estates Seek funding to replace antiquated registration program Seek funding to acquire and develop 30 acres of defunct subdivision land on the east side of North Street

for six practice soccer fields and two practice football fields Seek funding and a location to construct a dog park Creation of a neighborhood park on the south end of Mulcahy Middle School Seek funding to acquire the new undeveloped 11.25 acre Alpine Park

Cash Management Policies and Practices. Cash temporarily idle during the fiscal year, was invested in certificates of deposit, obligations of the U.S. Treasury, and State of California’s Local Agency Investment Fund (LAIF). The maturities of the investments generally range from 30 days to five years. The average yield on investments was 3.43 percent and earned interest revenue of $1,860,000 for the fiscal year ended June 30, 2009. The City’s investment portfolio at June 30, 2009, included $12.1 million in LAIF, $13 million in U.S. Securities, and $17.5 million in the certificate of deposit and cash in the bank.

Risk Management. The City is self-insured for worker’s compensation and general liability insurance, and participates in the Central San Joaquin Valley Risk Management Authority (CSJVRMA), a consortium of fifty-four (54) entities in the San Joaquin Valley. Note 8 of the Notes to the Financial Statements provides a more detailed explanation of the City’s insurance coverage.

The City’s risk management program has enabled the City to minimize its exposure to risk and control the associated costs of providing the program. In addition, an active employee safety training and inspection program has continued to provide a safe work environment.

The employee health insurance benefit is not part of the CSJVRMA program. The City contracts with Gallagher Benefit Services of California Insurance Service which acts as broker for the City. The City is partially self-insured and utilizes a third party administrator, Brickmore Risk Services, for processing claims.

Pension and Other Post-Employment Benefits (OPEB). The City contributes to the California Public Employees’ Retirement System (CalPERS), an agent multiple-employer public employee defined benefit pension plan. CalPERS provides retirement and disability benefits, annual cost-of-living adjustments and death benefits to plan members and beneficiaries. CalPERS acts as a common investment and administrative agent for participating public entities within the State of California. Benefit provision and all other requirements are established by State statute and City ordinance. The amount of the City’s required annual contribution is determined actuarially. It is the policy of the City to fully fund the annual contribution to ensure that the plan will be able to fully meet its obligation to retired employees on a timely basis. See Note 7 in the notes of the financial statements for additional information.

The City’s primary OPEB cost obligation is for retiree health benefits. The City operates under an agreement to continue to provide health care insurance benefits to all employees who retire after the age of 50 and who have 10 years of service with the City. As of the end of the current fiscal year, there were 63 retired employees receiving this benefit, which is financed on a pay-as-you-go-basis. See Note 10 in the notes of the financial statements for additional information.

Awards and Acknowledgements. The Governmental Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Tulare for its Comprehensive Annual Financial Report (CAFR) for the fiscal year ended June 30, 2008. This was the 12

th

consecutive year Tulare has received this prestigious award. In order to be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized CAFR. The CAFR must satisfy both generally accepted accounting principles and applicable legal requirements.

A Certificate of Achievement is valid for a period of one year only. We believe our current CAFR continues to meet these requirements and we will submit it for GFOA’s Award program.

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The divider pages for the Introductory, Financial and Statistical Sections feature various activities of the City of Tulare Parks and Recreation Department. The Parks and Recreation Department, led by Milton Stowe, was honored as the City’s department of the year for calendar year 2008 because of its extraordinary efforts for the benefit of the community.

The preparation of this document could not have been accomplished without the dedicated services of the entire staff of the Finance Department. I would also like to thank the Mayor, City Council, and the City Manager for their interest and support in planning and conducting the financial operations of the City in a responsible and progressive manner. Recognition is also extended to our auditors, Brown Armstrong Accountancy Corporation for their significant and competent assistance.

Respectfully submitted,

Darlene J. Thompson, CPA Finance Director

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1

INDEPENDENT AUDITOR’S REPORT

The Honorable City Council of the City of Tulare, California

We have audited the accompanying financial statements of the governmental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Tulare, California (the City), as of and for the year ended June 30, 2009, which collectively comprise the City’s basic financial statements as listed in the table of contents. These financial statements are the responsibility of the City of Tulare’s management. Our responsibility is to express an opinion 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 of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

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, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Tulare, California, as of June 30, 2009, and the respective changes in financial position and cash flows, where applicable, thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.

During the fiscal year 2009, the City adopted the provisions of GASB Statements No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions, No. 49, Accounting and Financial Reporting for Pollution Remediation Obligations, No. 55, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments, and No. 56, Codification of Accounting and Financial Reporting Guidance Contained in the AICPA Statements of Auditing Standards.

The management’s discussion and analysis and schedules of funding progress as listed in the accompanying table of contents are not a required part of the City’s basic financial statements, but are supplementary information required by the Governmental Accounting Standards Board. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we do not audit the information and express no opinion on it.

Main Office 4200 Truxtun Ave., Suite 300 Bakersfield, California 93309 Tel 661.324.4971 Fax 661.324.4997 e-mail: [email protected]

560 Central Avenue Shafter, California 93263 Tel 661.746.2145 Fax 661.746.1218

8365 N. Fresno Street, Suite 440 Fresno, California 93720 Tel 559.476.3592 Fax 559.476.3593

Peter C. Brown, CPA

Burton H. Armstrong, CPA, MST

Andrew J. Paulden, CPA

Steven R. Starbuck, CPA

Chris M. Thornburgh, CPA

Eric H. Xin, CPA, MBA

Richard L. Halle, CPA, MST

Aileen K. Keeter, CPA

REGISTERED with the Public Company Accounting Oversight Board and MEMBER of the American Institute of Certified Public Accountants

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Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise the City of Tulare, California’s basic financial statements. The introductory section, the major fund budgetary comparison schedule, combining and individual non-major fund financial statements and schedules, and the statistical tables identified in the table of contents, where applicable, are presented for the purposes of additional analysis and are not a required part to the basic financial statements. These financial statements and schedules are also the responsibility of the management of the City of Tulare, California. The major fund budgetary comparison schedule and the combining and individual non-major fund financial statements and schedules have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. The introductory section and statistical information listed in the table of contents 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 thereon.

In accordance with Government Auditing Standards, we have also issued our report dated January 22, 2010, on our consideration of the City’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 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 internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.

BROWN ARMSTRONG ACCOUNTANCY CORPORATION

Bakersfield, California January 22, 2010

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Management’s Discussion and Analysis

This discussion and analysis of the City of Tulare’s financial performance provides an overview of the City’s financial activities for the fiscal year ended June 30, 2009. We encourage readers to consider the information presented here in conjunction with the accompanying letter of transmittal, the basic financial statements, and the accompanying notes to those financial statements.

FINANCIAL HIGHLIGHTS

The assets of the City of Tulare exceeded its liabilities at the close of the most recent fiscal year by $320,978,508 (net assets). Of this amount, $90,546,694 (unrestricted net assets) may be used to meet the government’s ongoing obligations to citizens and creditors.

The government’s total net assets increased by $24,183,051 over the prior fiscal year. The majority of this increase is attributable to an increase in depreciable and nondepreciable capital assets, advances to component units and deferred charges.

As of the close of the current fiscal year, the City of Tulare’s governmental funds reported combined ending fund balances of $57,836,045, a decrease of $6,130,584 in comparison with the prior year. Approximately 26% of this total amount, $15,023,558 is available for spending at the government’s discretion (unreserved fund balance).

At the end of the current fiscal year, unreserved fund balance for the general fund was $9,409,100, or 18% of total general fund expenditures excluding re-appropriations of past-approved expenses.

The City of Tulare total debt showed a net increase of $52,625,727 (26%) during the current fiscal year. The increase in debt was a result of a sewer revenue issuance for $54,775,000 to complete the expansion and upgrade of the industrial wastewater treatment plant, design of domestic treatment plant, extension of the City’s industrial wastewater collection system for the new Industrial Park and a cross town sewer line.

THE FINANCIAL STATEMENTS

The financial statements presented herein include all of the activities of the City of Tulare (City) and its component units, using the integrated approach as prescribed by Governmental Accounting Standards Board (GASB) Statement No. 34. The City’s basic financial statements are comprised of three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves.

The City has fully complied with the GASB 34 infrastructure reporting requirements. The current financial statements include all current and historical infrastructure assets for governmental activities constructed or acquired through the 2008-09 fiscal year.

The Government-Wide Financial Statements are designed to provide readers with a broad overview of the City’s finances, in a manner similar to a private-sector business. The statements present the financial picture of the City from the economic resources measurement focus using the accrual basis of accounting. They present governmental activities and business-type activities separately. Additionally, certain eliminations have occurred as prescribed by the GASB statements in regards to inter-fund activity, payables and receivables.

The Fund Financial Statements include statements for each of the three categories of activities – governmental, business-type and fiduciary. The governmental activities are prepared using the current financial resources measurement focus and modified accrual basis of accounting. The business-type activities are prepared using the economic resources measurement focus and the accrual basis of accounting. The fiduciary activities are agency funds, which only report a balance sheet and do not have a measurement focus. Reconciliations of the Fund Financial Statements to the Government-Wide Financial Statements are provided to explain the difference created by the integrated approach.

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OVERVIEW OF THE FINANCIAL STATEMENTS Government-Wide Financial Statements

The Statement of Net Assets and the Statement of Activities and Changes in Net Assets

The Statement of Net Assets and the Statement of Activities and Changes in Net Assets 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 of the current year’s revenue and expenses are taken into account, regardless of when cash is received or paid.

These two statements report the City’s net assets and changes in them. Net assets are the difference between assets and liabilities, which is one way to measure the City’s financial health, or financial position. Over time, increases or decreases in the City’s net assets are one indicator of whether its financial health is improving or deteriorating. Other factors to consider are changes in the City’s property tax base and sales tax base.

In the Statement of Net Assets and the Statement of Activities and Changes in Net Assets, we separate the City activities as follows:

Governmental Activities – Most of the City’s basic services are reported in this category, including the General Government, Police, Fire, Public Works, Parks, Recreation, Community Development and Library. Property and sales taxes, user fees, interest income, franchise fees, and state and federal shared revenues and grants generally finance these activities.

Business-Type Activities – The City charges a fee to customers to cover all or most of the cost of certain services it provides. The City’s Water Fund, Sewer and Wastewater Fund, Solid Waste and Street Sweeping Fund, Aviation Fund and Transit Fund are reported in this category.

FUND FINANCIAL STATEMENTS

The City, like other state and local governments, uses fund accounting to account for a number of funding sources and activities. In general, fund accounting provides a mechanism for separately accounting for a variety of different funding sources, and enables the City to demonstrate compliance with legal and/or contractual requirements that may be associated with these funds. Thus, the accompanying fund financial statements present individual funds, organized into one of three groups based on the nature of the activities and their purpose: Governmental, Proprietary or Fiduciary Funds. Note that the fund financial statements only present the most significant (or “major”) funds. In addition, the fund financial statements include a schedule that reconciles the fund financial statements to the Government-Wide Financial Statements. This is designed to explain the difference created by the integrated approach.

Governmental Funds – Most of the City’s basic services are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at year-end that are available for spending. These funds are reported using an accounting method called modified accrual accounting, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the City’s general government operations and the basic services it provides. Governmental fund information helps determine whether there are more or fewer financial resources that can be spent in the near future to finance the City’s programs. The differences of results in the Governmental fund financial statements to those in the Government-Wide financial statements are explained in a reconciliation schedule following each Governmental Fund financial statement.

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Proprietary Funds – When the City charges customers for the services it provides, whether to outside customers or to other units of the City, these services are generally reported in proprietary funds. Proprietary funds are reported in the same way that all activities are reported in the Statement of Net Assets and the Statement of Revenues, Expenses and Changes in Fund Net Assets. In fact, the City’s enterprise funds are the same as the business-type activities reported in the government-wide statements, but provide more detail and additional information, such as cash flows, for proprietary funds. We use internal service funds (the other component of proprietary funds) to report activities that provide supplies and services for the City’s other programs and activities – such as the City’s self-insurance, fleet maintenance and purchasing funds. The internal service funds are reported with governmental activities in the government-wide financial statements.

Fiduciary Funds – The City is the trustee, or fiduciary, for certain funds held on behalf of various third parties. The City’s fiduciary activities are reported in a separate Statement of Fiduciary Net Assets. We exclude these activities from the City’s other financial statements because the City cannot use these assets to finance its operations. The City is responsible for ensuring that the assets reported in these funds are used for their intended purposes.

Notes to the Financial Statements – The notes to the financial statements provide information that is essential to a full understanding of the data provided in the Government-Wide and Fund Financial Statements.

Other Information – In addition to the basic financial statements and accompanying notes, this report also presents certain “required supplementary information” concerning the City’s progress in funding its obligation to provide pension benefits to its employees, budgetary comparison schedules for the general fund and other major funds.

GOVERNMENT-WIDE FINANCIAL ANALYSIS

Statement of Net Assets

As noted earlier, net assets may serve over time as a useful indicator of a government’s financial position. In the case of the City of Tulare, assets exceeded liabilities by $320,978,508 at the close of the most recent fiscal year.

By far the largest portion of the City of Tulare’s net asset (49.80%) reflects its investment in capital assets (e.g., land, buildings, machinery, infrastructure and equipment), less any related debt used to acquire those assets that is still outstanding and cash and investments with fiscal agent which is restricted for capital assets. The City of Tulare uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City of Tulare’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.

Of the total current assets ($106,886,116), approximately 93.52% ($99,963,000) consists of cash and investments. These funds are invested in accordance with State law and the City’s investment policy, and include funds legally and/or contractually restricted as to its use.

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City of Tulare Statement of Net Assets

As of June 30, 2008 and 2009

2008 2009 2008 2009 2008 2009

Assets:

Current and Other Assets 122,141,569$ 123,426,102$ 57,971,169$ 56,093,715$ 180,112,738$ 179,519,817$

Capital Assets (Net of

Depreciation) 145,879,132 161,843,186 172,012,285 233,449,930 317,891,417 395,293,116

Total Assets 268,020,701 285,269,288 229,983,454 289,543,645 498,004,155 574,812,933

Liabilities:

Current and Other Liabilities 8,075,876 9,918,056 11,095,860 10,664,660 19,171,736 20,582,716

Long-Term Liabilities 40,527,524 39,399,682 141,509,438 193,852,027 182,036,962 233,251,709

Total Liabilities 48,603,400 49,317,738 152,605,298 204,516,687 201,208,698 253,834,425

Net Assets:

Invested in Capital Assets,

Net of Related Debt 129,555,443 142,261,018 107,113,034 86,649,558 236,668,477 228,910,576

Restricted 23,652,940 19,215,692 44,617,222 51,229,220 68,270,162 70,444,912

Unrestricted 66,208,918 74,474,840 (74,352,100) (52,851,820) (8,143,182) 21,623,020

Total Net Assets 219,417,301$ 235,951,550$ 77,378,156$ 85,026,958$ 296,795,457$ 320,978,508$

Governmental Activities Business-Type Activities Total

An additional portion of the City of Tulare’s net assets $70,444,912 represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net assets $21,623,020 may be used to meet the government’s ongoing obligations to citizens and creditors.

At the end of the current fiscal year, the City of Tulare is able to report positive balances in all three categories of net assets, both for the government as a whole, as well as for its governmental and business-type activities. The same situation held true for the prior fiscal year. This means the City has sufficient current assets to satisfy both its current and long-term liabilities, fulfill its obligations pursuant to external restrictions imposed on City assets, and still have assets remaining for discretionary spending.

The government’s net assets increased by $23,984,882 compared to the prior fiscal year. This increase is due primarily to additions to infrastructure and construction in progress throughout the City. The construction in progress increase relates to the ongoing work on the wastewater treatment facility and the continuing road improvements throughout the City.

Statement of Activities

As discussed earlier, the Statement of Net Assets provides a measure of the financial health of an entity at a specific date in time (usually year end). The Statement of Activities provides details of how net assets changed from the beginning of the year to the end of the year, and whether net assets increased or decreased. Thus, it indicates whether the City as a whole is better off at June 30, 2009 than it was at June 30, 2008.

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City of Tulare Statement of Activities

Fiscal Year Ended June 30, 2008 and 2009

2008 2009 2008 2009 2008 2009

REVENUES:

Programs Revenues:

Charges for Services 6,098,091$ 5,633,479$ 33,320,208$ 29,751,328$ 39,418,299$ 35,384,807$

Operating Grants and

Contributions 153,895 153,891 - - 153,895 153,891

Capital Grants and

Contributions 931,941 150,871 7,543,285 4,604,955 8,475,226 4,755,826

General Revenues:

Taxes 32,896,131 31,712,792 - - 32,896,131 31,712,792

Investment Earnings 6,504,081 6,709,281 1,076,297 4,777,743 7,580,378 11,487,024

Other Revenue 16,517,375 10,079,332 - - 16,517,375 10,079,332

TOTAL REVENUES 63,101,514 54,439,646 41,939,790 39,134,026 105,041,304 93,573,672

EXPENSES:

Governmental Activities:

General Government 2,855,538 4,372,097 - - 2,855,538 4,372,097

Intergovernmental 28,228 3,904 - - 28,228 3,904

Public Safety 17,234,653 17,919,518 - - 17,234,653 17,919,518

Public Works 2,816,141 2,655,054 - - 2,816,141 2,655,054

Community Development 7,791,822 5,367,023 - - 7,791,822 5,367,023

Community Services 4,075,367 4,161,627 - - 4,075,367 4,161,627

Library and Cultural 3,331,468 4,082,194 - - 3,331,468 4,082,194

Debt Service 668,323 2,649,504 - - 668,323 2,649,504

Business-Type Activities

Aviation - - 149,838 135,527 149,838 135,527

Transit - - 2,373,838 2,569,527 2,373,838 2,569,527

Water - - 5,774,160 5,360,552 5,774,160 5,360,552

Solid Waste and

Street Sweeping - - 6,828,700 6,392,221 6,828,700 6,392,221

Sewer and Wastewater - - 12,797,031 13,920,042 12,797,031 13,920,042

TOTAL EXPENSES 38,801,540 41,210,921 27,923,567 28,377,869 66,725,107 69,588,790

Increase in Net Assets

Before Transfers 24,299,974 13,228,725 14,016,223 10,756,157 38,316,197 23,984,882

Transfers 530,440 3,305,524 (530,440) (3,305,524) - -

Increase in Net Assets 24,830,414 16,534,249 13,485,783 7,450,633 38,316,197 23,984,882

Net Assets, Beginning of

Year, as Restated 194,586,887 219,417,301 63,892,373 77,576,325 258,479,260 296,993,626

Net Assets, End of Year 219,417,301$ 235,951,550$ 77,378,156$ 85,026,958$ 296,795,457$ 320,978,508$


Revenue from all activities in fiscal year 2009 decreased by $11,502,555 or 11%. Total governmental revenues for the year were $54,264,554, which is $8,696,791 or 14% less than in 2008 and business-type revenues decreased by $2,805,764 or 7%. Taxes, which include property, sales, utility users, business license/franchise, and other taxes, account for $31,712,792 or 58% of the City's governmental activities revenue and only slightly less than 2008. Capital grants and contributions for both governmental and business-type decreased $3,719,400 or 44% from the previous year, due mostly to a decrease in capital donated by developers and other revenue decreased $6,472,966 or 40% due mostly to a decrease in development impact fees. Investment earnings increased by $3,906,646 or 52% mainly due from interest earned from idled bond proceeds.

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Expenses of the City totaled $69,588,790, an increase of $2,863,683, which represents a 4.0% increase from the prior year. The largest individual categories of expense are public safety, representing 26%, and sewer/wastewater, representing 20% of total expense. General Government showed the largest increase for government activities in expenses over the prior year, with an increase of $1,516,559. This increase in cost resulted from legal cost for environmental impact studies and general plan and master plans. The sewer/wastewater fund showed the largest increase in expenses over the prior year for the business-type activities, with an increase of $1,106,610. This increase in costs resulted from depreciation and chemicals to treat the effluent.

As depicted in Statement of Net Assets, net assets increased during the year. In those funds included within the Governmental Activities category, net assets increased by $16,534,249, an increase of 7%. Net assets increased in those funds included within the Business-Type Activities category by $7,648,802, or an increase of 10%.

FINANCIAL ANALYSIS OF THE GOVERNMENT’S FUNDS

As previously noted, the City of Tulare uses fund accounting to demonstrate compliance with legal and contractual requirements. This section provides an analysis and discussion of individual funds and fund types presented in the financial statements.

Governmental Funds – The focus of the City of Tulare’s governmental funds is on short-term inflows and outflows and balances of spendable resources. Such information is useful in assessing the City’s financial requirements. In particular, unreserved fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year.

At June 30, 2009, the City’s governmental funds reported total ending fund balance of $57,836,045, a decrease of $6,130,584 from the beginning of the year. Approximately 26% of this total amount, $15,023,558, is available for spending at the government’s discretion (unreserved fund balance). The remainder of fund balance is “reserved” to indicate that it is not available for new spending because it has already been committed 1) for repayment from other funds ($26,437,732) and 2) to pay debt service ($16,374,755).

The General Fund is the chief operating fund of the City of Tulare. At the end of the fiscal year, unreserved fund balance of the General Fund (consisting of general fund and various capital project funds) was $9,409,100, while total fund balance reached $35,846,832. As a measure of the General Fund’s liquidity, it may be useful to compare both unreserved fund balance and total fund balance to total expenditures. Total unreserved fund balance for the General Fund represents approximately 18% of general fund expenditures.

The fund balance of the City of Tulare General Fund is $129,769 higher than the prior fiscal year. The major factors in General Fund activity that resulted in this increase are as follows:

$6,221,497 in decreases in other revenue compared to the prior year. This represents a 42% decrease over the prior fiscal year. This decrease is a result a down turn in new construction and the collection of development impact fees and the acceptance of contributed capital from development on completed subdivisions.

$10,141,324 decrease in capital outlay compared to the prior year. This represents a 35% decrease over the prior fiscal year. As mentioned above, due to the down turn in construction.

Other Governmental Funds realized a net decrease in fund balance, including the Capital Improvement Funds. These funds are primarily used to account for capital improvement projects that span more than one year. Therefore, the decrease in fund balance is generally due to the timing of funding, which generally occurs in one year, in relation to the timing of expenditures, which occur over more than one year. Any remaining fund balances are either reserved or earmarked specifically for the continuing cost of the related projects.

Financing Authority – The City Financing Authority Fund accounts for the annual debt service on the 2002 and 2008 Lease Revenue Bonds. Lease revenues are derived from lease payments made by the City's General Fund.

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At June 30, 2009, the Financing Authority Fund had decreased its reserved fund balance by $7,053,214 due to usage for loan proceeds on qualified projects.

Interest and fiscal charges increased by $1,209,086 due to a full year of interest on the 2008 Lease Revenue Bond and a decrease of $5,230,000 in principal for the 1997 Lease Revenue Bond was defeased with the issuance of the 2008 Lease Revenue Bonds in the prior fiscal year.

Proprietary Funds – The City proprietary funds include the Water, Solid Waste and Sewer/Wastewater Funds, and Aviation and Transit Funds. All of the proprietary funds are highly capital intensive, requiring a significant investment in capital equipment and facilities to conduct operation, whether it be in water and sewer lines, water and wastewater treatment facilities or runways.

The Transit Fund has total net assets of $4,523,087 at the end of the fiscal year, an increase of $830,780 or 23%. Total net asset include $4,549,940 invested in capital assets, net of related debt, which are not available to cover current expenses. The increase to net assets was due to an increase to charges for services ($734,670 or 55%) from the prior fiscal year. The City received $100,000 from the County ½ cent district sales tax for starting a new route and due to the increase cost of fuel, the transit service saw an increase in ridership.

The Water Fund has total net assets of $31,229,979 at the end of the fiscal year, an increase of $792,593 over the prior year. Total net assets include $31,570,744 invested in capital assets, net of related debt, which are not available to cover current expenses. $6,504,275 of total net assets is restricted for capital improvements (including plant and equipment replacement).

The Solid Waste Fund has total negative net assets of $(5,339,585) at the end of the fiscal year, a decrease of $3,650,345 over the prior year. Total net assets include $53,220 invested in capital assets, which are not available to cover current expenses.

The Sewer/Wastewater Fund has total net assets of $52,816,235 at the end of the fiscal year, an increase of $9,056,027 over the prior year. Total net assets include $48,266,382 invested in capital assets, which are not available to cover current expenses. $44,042,738 of total net assets is restricted for capital improvements.

The Aviation Fund has total net assets of $1,797,242 at the end of the fiscal year, and increase of $421,581 or 31%. The major factor for this increase is due to grants ($421,980) received for various capital projects that were completed in current fiscal year.

CAPITAL ASSET AND DEBT ADMINISTRATION

Capital Assets – The City of Tulare’s investment in capital assets for its governmental and business type activities as of June 30, 2009, amounts to $395,293,116 (net of accumulated depreciation). This investment in capital assets includes land, buildings and system, improvements, machinery and equipment, park facilities and roads. The total increase in the City’s investment in capital assets for the current fiscal year was $77,401,700. (Please refer to Note 4 – Capital Assets, page 45)

The majority of the increase is a result of infrastructure constructed or acquired during the fiscal year. These financial statements include infrastructure assets constructed or acquired through 2008-09 fiscal years.

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

A variety of street construction projects, rehabilitation and maintenance for $4,327,260.

A dairy waste line replacement, the expansion, and various upgrades to sewer and wastewater treatment facilities for $54,339,260.

The completion of a corporation yard for $3,874,610.

The construction of Del Lago Park for $3,758,400.

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A variety of water projects and new wells for $791,720.

The construction of a new library building, which will house the council chamber for $2,726,250 which is scheduled to be completed in fiscal year 2009-10.

City of Tulare Capital Assets

As of June 30, 2008 and 2009

2008 2009 2008 2009 2008 2009

Land and Construction

In Progress 19,828,971$ 24,076,836$ 60,354,943$ 100,429,310$ 80,183,914$ 124,506,146$

Depreciable Buildings,

Property, Equipment

and Infrastructure, Net

of Depreciation 126,050,161 137,766,350 111,657,341 133,020,620 237,707,502 270,786,970

Total Capital Assets 145,879,132$ 161,843,186$ 172,012,284$ 233,449,930$ 317,891,416$ 395,293,116$


Long-Term Debt – At the end of the fiscal year, the City of Tulare had a total debt outstanding of $234,676,214. (Please refer to Note 6 – Long Term Debt, page 47)

City of Tulare Outstanding Debt

As of June 30, 2008 and 2009

2008 2009 2008 2009 2008 2009

Lease Revenue Bonds 38,438,958$ 37,397,009$ -$ -$ 38,438,958$ 37,397,009$

Lease Payable 1,537,672 1,400,851 8,628,016 8,334,263 10,165,688 9,735,114

Notes Payable - - - - -

Revenue Bonds Payable - - 134,632,678 187,544,091 134,632,678 187,544,091

Total Outstanding Debt 39,976,630$ 38,797,860$ 143,260,694$ 195,878,354$ 183,237,324$ 234,676,214$


With respect to the Governmental Activities, the outstanding $37,397,009 in lease revenue bonds consisted of two bonds issuance. One was issued in 2002 for $3,690,000 for street repairs and to remodel or purchase land for the library. The other bond was issued in 2008 for $33,050,000 to fund the new library building, downtown storm drain project, South Tulare industrial sewer extensions, Del Lago Park Phase II and preliminary work on railroad grade separation crossings.

Of the $195,878,354 outstanding debt in the Business–Type Activities, $187,544,091 relates to the Sewer/Wastewater fund for the expansion and upgrade of the sewer and wastewater plant. These bonds have been rated “Aaa” by Moody’s Investors Services and “AAA” by Standard & Poors. A new Sewer Revenue Bond 2009 bond was issued in June 2009 for $54,775,000.

GENERAL FUND BUDGETARY HIGHLIGHTS

Differences between the original budget and the final amended budget reflects an increase in appropriation of $4,900,000 and can be briefly summarized as follow:

$4,400,000 in increase for the completion of the Skate Park and Phase II of Del Lago Park $600,000 in increase for capital outlay to complete various projects from prior year

11

The final amended budget figures were higher than actual expenditures in the General Fund by $1,115,018 and can be briefly summarized as follow:

$447,885 difference between actual and final budget in public safety was due to the elimination of booking fees and vacancies.

$345,157 difference between actual and final budget in capital outlay was due to various projects requiring multi years to complete.

$403,896 difference between actual and final budget in community services was also due to various projects requiring multi years to complete.

The interest and fiscal charges budget exceeded appropriations by $388,532 due to the accrued interest due to developers for oversize agreements. (See Note 11 – Excess of Expenditures over Appropriations, page 60).

ECONOMIC FACTORS AND NEXT YEAR’S BUDGET AND RATES

The key assumptions in the General Fund forecast for fiscal year 2009-10 were:

Because of general economic slowdown property tax revenues are projected at a 5% decrease in the upcoming year.

Sales tax revenues are projected with a 10% decrease from 2008-09.

City Council approved the use of around $1,800,000 in reserve to balance the 2009-10 budget.

A repayment from the Redevelopment Agency of $1,800,000.

Golden handshake and vacancies from employee attrition remain unfilled unless deemed critical to the operation of the City.

The elimination of two general positions.

As the population increases, additional personnel are needed in the police department. One additional police position has been included in the 2009-10 budget. Funding to be provided from the ½% general sales tax.

There's a continuing need to expand and upgrade the wastewater treatment plant for the seven dairy industries in Tulare combined with new state requirements. The 2009-10 budget includes the completion of the expansion of the industrial treatment plant to meet the demands from the seven dairy industries.

Various street widening projects and preliminary study report for railroad grade separation have been budgeted for $9,480,000 through Gas Tax Fund, Prop 1B, Measure I (½% general sales tax) and General Fund.

REQUESTS FOR INFORMATION

This financial report is designed to provide our citizens, taxpayers, customers and investors and creditors with a general overview of the City’s finances and to show the City’s accountability for the money it receives. Questions concerning any of the information provided in this report or requests for additional financial information can be sent via e-mail to: [email protected]. Formal written requests should be addressed to: City of Tulare, Attn: Finance Department, 411 East Kern Avenue, Tulare, California 93274.

12


13

BASIC FINANCIAL STATEMENTS

GOVERNMENT-WIDE FINANCIAL STATEMENTS

14


The accompanying notes are an integral part of these financial statements.

15

CITY OF TULARE STATEMENT OF NET ASSETS

JUNE 30, 2009

ComponentPrimary Government Unit

Governmental Business-Type RedevelopmentActivities Activities Total Agency

AssetsCash and Investments 28,364,300$ 2,675,026$ 31,039,326$ 2,071,939$

Cash and Investments with Fiscal Agent 19,215,692 39,901,088 59,116,780 255,482

Restricted Cash and Investments - 9,806,894 9,806,894 -

Receivables:Accounts 1,144,761 2,890,664 4,035,425 609,381

Interest 69,084 - 69,084 17,990

Taxes 1,565,928 - 1,565,928 -

Intergovernmental 912,916 339,763 1,252,679 921,870

Deposits - - - 150,000

Inventories 208,444 - 208,444 -

Note Receivable 14,805 - 14,805 1,394,407

Interfund Balances:Due from Other Funds 2,786,860 (2,786,860) - -

Advances to Other Funds 1,149,852 (1,149,852) - -

Advances to Component Units 66,311,763 - 66,311,763 (66,311,763)

Deferred Charges - 4,416,992 4,416,992 -

Deferred Loans Receivable - - - 8,484,226

Land Held for Resale - - - 8,627,081

Nondepreciable Capital Assets 24,076,836 100,429,310 124,506,146 -

Depreciable Capital Assets, Net 137,766,350 133,020,620 270,786,970 -

Bond Issuance Costs, Net of Amortization 1,681,697 - 1,681,697 89,035

Total Assets 285,269,288$ 289,543,645$ 574,812,933$ (43,690,352)$

LiabilitiesAccounts Payable and Accrued Liabilities 6,718,484$ 7,895,532$ 14,614,016$ 1,790,457$

Accrued Interest Payable 506,403 - 506,403 62,480

Deposits Payable 944,824 300,907 1,245,731 -

Unearned Revenue 80,544 - 80,544 128,550

Long-Term Liabilities:Due Within One Year:

Compensated Absences Payable 150,517 28,616 179,133 1,996

Leases Payable 145,336 226,018 371,354 -

Notes Payable - - - 207,000

Tax Allocation Bonds Payable - - - 205,000

Revenue Bonds Payable 1,371,948 2,213,587 3,585,535 -

Total Due Within One Year 1,667,801 2,468,221 4,136,022 413,996

Due After One Year:Compensated Absences Payable 1,918,799 362,847 2,281,646 25,308

Leases Payable 1,255,515 8,108,245 9,363,760 -

Notes Payable - - - 2,664,598

Tax Allocation Bonds Payable - - - 1,325,000

Net Post Employment Benefits Obligation 200,307 50,431 250,738 4,262

Revenue Bonds Payable 36,025,061 185,330,504 221,355,565 -

Total Due After One Year 39,399,682 193,852,027 233,251,709 4,019,168

Total Liabilities 49,317,738 204,516,687 253,834,425 6,414,651

Net AssetsInvested in Capital Assets, Net of Related Debt 142,261,018 86,649,558 228,910,576 -

Restricted for Capital Improvements 19,215,692 51,229,220 70,444,912 255,482

Unrestricted 74,474,840 (52,851,820) 21,623,020 (50,360,485)

Total Net Assets 235,951,550$ 85,026,958$ 320,978,508$ (50,105,003)$


16

CITY OF TULARE STATEMENT OF ACTIVITIES

FOR THE YEAR ENDED JUNE 30, 2009

Operating Capital

Charges for Grants and Grants and

Functions/Programs Expenses Services Contributions Contributions Total

Primary Government:

Governmental Activities

General Government 4,372,097$ 465,136$ -$ -$ 465,136$

Intergovernmental 3,904 176,350 - - 176,350

Public Safety 17,919,518 2,139,721 - - 2,139,721

Public Works 2,655,054 282,465 - - 282,465

Community Development 5,367,023 1,692,768 - 150,871 1,843,639

Community Services 4,161,627 442,745 153,891 - 596,636

Library and Cultural 4,082,194 434,294 - - 434,294

Interest on Long-Term Debt 2,649,504 - - - -

Total Governmental Activities 41,210,921 5,633,479 153,891 150,871 5,938,241

Business-Type Activities:

Aviation 135,527 111,999 - 445,109 557,108

Transit 2,569,527 2,131,920 - 1,251,273 3,383,193

Water 5,360,552 4,673,549 - 1,547,805 6,221,354

Solid Waste 6,392,221 5,946,594 - - 5,946,594

Sewer 13,920,042 16,887,266 - 1,360,768 18,248,034

Total Business-Type Activities 28,377,869 29,751,328 - 4,604,955 34,356,283

Total Primary Government 69,588,790$ 35,384,807$ 153,891$ 4,755,826$ 40,294,524$

Component Units:

Redevelopment Agency 12,065,109$ -$ -$ 601,057$ 601,057$

Program Revenues

(Continued)


17

CITY OF TULARE STATEMENT OF ACTIVITIES (Continued) FOR THE YEAR ENDED JUNE 30, 2009

Component Unit

Governmental Business-Type Redevelopment

Functions/Programs Activities Activities Total Agency

Primary Government:


General Government (3,906,961)$ -$ (3,906,961)$ -$

Intergovernmental 172,446 - 172,446 -

Public Safety (15,779,797) - (15,779,797) -

Public Works (2,372,589) - (2,372,589) -

Community Development (3,523,384) - (3,523,384) -

Community Services (3,564,991) - (3,564,991) -

Library and Cultural (3,647,900) - (3,647,900) -

Interest on Long-Term Debt (2,649,504) - (2,649,504) -

Total Governmental Activities (35,272,680) - (35,272,680) -


Aviation - 421,581 421,581 -

Transit - 813,666 813,666 -

Water - 860,802 860,802 -

Solid Waste - (445,627) (445,627) -

Sewer - 4,327,992 4,327,992 -

Total Business-Type Activities - 5,978,414 5,978,414 -

Total Primary Government (35,272,680)$ 5,978,414$ (29,294,266)$ -$

Component Units:

Redevelopment Agency -$ -$ -$ (11,464,052)$

General Revenues:

Sales Tax 14,466,030$ -$ 14,466,030$ -$

Property Tax 4,583,226 - 4,583,226 5,968,505

Utility Tax 5,295,978 - 5,295,978 -

Motor Vehicle-in-Lieu Tax

(Intergovernmental, Unrestricted) 4,819,229 - 4,819,229 -

Motel/Hotel and Franchise Tax 2,548,329 - 2,548,329 -

Grants and Contributions Not Restricted to

Specific Programs 955,672 - 955,672 -

Investment Earnings - Unrestricted 6,709,281 4,777,743 11,487,024 -

Use of Money and Property - - - 2,548,378

Miscellaneous 9,123,660 - 9,123,660 1,058,428

Gain on Sale of Capital Assets - - - -

Transfers 3,305,524 (3,305,524) - -

Total General Revenues and Transfers 51,806,929 1,472,219 53,279,148 9,575,311

Change in Net Assets 16,534,249 7,450,633 23,984,882 (1,888,741)

Net Assets - Beginning of Year, As Restated 219,417,301 77,576,325 296,993,626 (48,216,262)

Net Assets - End of Year 235,951,550$ 85,026,958$ 320,978,508$ (50,105,003)$

Primary Government

and Changes in Net Assets

Net (Expense) Revenue

18


19

BASIC FINANCIAL STATEMENTS

FUND FINANCIAL STATEMENTS


20

CITY OF TULARE BALANCE SHEET

GOVERNMENTAL FUNDS JUNE 30, 2009

Financing Other Total

General Authority Governmental Governmental

Fund Fund Funds Funds

Assets

Cash and Investments 11,936,019$ -$ 6,061,242$ 17,997,261$

Cash and Investments with Fiscal Agent - 17,735,392 - 17,735,392

Receivables

Accounts 1,385,078 - 2,240 1,387,318

Interest 30,055 12,174 26,855 69,084

Taxes 1,370,678 - 195,250 1,565,928

Intergovernmental 654,579 - 136,602 791,181

Due from Other Funds 3,905,852 - - 3,905,852

Advances to Other Funds 686,369 - - 686,369

Advances to Component Units 66,311,763 - - 66,311,763

Total Assets 86,280,393$ 17,747,566$ 6,422,189$ 110,450,148$

Liabilities and Fund Balances

Liabilities

Accounts Payable and Accrued Liabilities 5,197,274$ 444,240$ 584,119$ 6,225,633$

Deposits Payable 944,824 - - 944,824

Due to Other Funds 32,548 928,571 143,068 1,104,187

Deferred Revenue 44,258,915 - 80,544 44,339,459

Total Liabilities 50,433,561 1,372,811 807,731 52,614,103

Fund Balances

Reserved, Reported in:

General Fund 26,437,732 - - 26,437,732

Debt Service Funds - 16,374,755 - 16,374,755

Unreserved, Undesignated Reported in:

General Fund 9,409,100 - - 9,409,100

Special Revenue Funds - - 6,069,714 6,069,714

Capital Projects Funds - - (455,256) (455,256)

Total Fund Balances 35,846,832 16,374,755 5,614,458 57,836,045

Total Liabilities and Fund Balances 86,280,393$ 17,747,566$ 6,422,189$ 110,450,148$


21

CITY OF TULARE RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE GOVERNMENT-WIDE STATEMENT OF NET ASSETS GOVERNMENTAL ACTIVITIES

JUNE 30, 2009

Amount

Total Fund Balances - Total Governmental Funds 57,836,045$

Amounts reported for Governmental Activities in the Statement of Net Assets

are difference because:

Capital assets used in governmental activities are not financial resources

and, therefore, are not reported in the funds. 147,731,120

Bond issuance costs do not require current financial resources. Therefore,

they are not reported in the Governmental Funds Balance Sheet. 1,681,697

Internal service funds are used by management to charge the costs of

fleet maintenance, purchasing, employee welfare, workers' compensation,

general and unemployment insurance to individual funds. The assets and

liabilities of the internal service funds are included in governmental activities

in the statement of net assets. 25,657,913

Interest payable on long-term debt does not require current financial resources.

Therefore, interest payable is not reported as a liability in the Governmental

Funds Balance Sheet. (506,403)

In governmental funds, future payments for notes receivable are treated as

Unearned revenue. In governmental-wide statements, future payments of

notes receivable are recorded as offset of notes receivable. 44,258,915

Long-term liabilities are not due and payable in the current period and

therefore are not reported in the Governmental Funds Balance Sheet.

Bonds Payable (37,397,009)

Advances from Other Funds (18,099)

Net Post Employment Benefit Obligation (200,307)

Capital Leases Payable (1,087,482)

Compensated Absences Payable (2,004,840)

Net Assets of Governmental Activities 235,951,550$


22

CITY OF TULARE STATEMENT OF REVENUES, EXPENDITURES, AND

CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS


Financing Other TotalGeneral Authority Governmental Governmental

Fund Fund Funds FundsRevenues

Taxes 28,934,927$ -$ 2,777,865$ 31,712,792$Intergovernmental 170,892 - 146,232 317,124 Licenses and Permits 640,257 - - 640,257 Fines and Forfeitures (3,542) - 236,850 233,308 Charges for Services 4,102,455 - - 4,102,455Interest and Rentals 2,206,834 396,057 290,330 2,893,221Grants 1,001,690 - 231,244 1,232,934Meals - - 57,093 57,093 Assessments 84,430 - 397,097 481,527 Other 8,583,687 - 37,049 8,620,736

Total Revenues 45,721,630 396,057 4,173,760 50,291,447

ExpendituresCurrent

General Government 4,194,242 - - 4,194,242Intergovernmental - 3,904 - 3,904 Public Safety 16,834,805 - 99,947 16,934,752Public Works 2,398,132 - - 2,398,132Community Development 5,216,836 - 2,728,349 7,945,185Community Services 2,829,184 - 1,205,522 4,034,706Library and Cultural 794,986 - 60,586 855,572

Capital Outlay 18,496,463 - 28,024 18,524,487Debt Service

Principal 929,942 985,000 - 1,914,942Interest and Fiscal Charges 554,272 2,050,282 - 2,604,554

Total Expenditures 52,248,862 3,039,186 4,122,428 59,410,476

Excess (Deficiency) of Revenues Over Expenditures (6,527,232) (2,643,129) 51,332 (9,119,029)

Other Financing Sources (Uses)Transfers In 16,989,705 2,643,129 2,937,358 22,570,192Transfers Out (10,332,704) (7,053,214) (2,195,829) (19,581,747)

Total Other Financing Sources (Uses) 6,657,001 (4,410,085) 741,529 2,988,445

Net Change in Total Fund Balances 129,769 (7,053,214) 792,861 (6,130,584)

Fund Balances - Beginning 35,717,063 23,427,969 4,821,597 63,966,629

Fund Balances - Ending 35,846,832$ 16,374,755$ 5,614,458$ 57,836,045$


23

CITY OF TULARE RECONCILIATION OF THE GOVERNMENTAL FUND STATEMENT OF REVENUES, EXPENDITURES, AND

CHANGES IN FUND BALANCES TO THE GOVERNMENT-WIDE STATEMENT OF ACTIVITIES

GOVERNMENTAL ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2009

Amount

Net Change in Fund Balances - Total Governmental Funds (6,130,584)$

Amounts reported for Governmental Activities in the Statement of Net Assets

are different because:

Governmental funds report capital outlays as expenditures. However, in the

statement of activities, the cost of those assets is allocated over their

estimated useful lives and reported as depreciation expense. This is the

amount by which capital outlays exceeded depreciation in the current period. 10,243,072

The issuance of long-term debt (e.g. bonds, leases) 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 assets. Also,

Governmental Funds report the effect of issuance costs, premiums, discounts,

and similar items when debt is first issued, whereas these amounts are

deferred and amortized in the Government-wide Statement of Activities.

This amount represents long-term debt repayments 2,079,629

This amount represents amortization of bond issuance costs (84,588)

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.

This amount represents costs of compensated absences (307,889)

This amount represents costs of post employment benefit (200,307)

Interest expense on long-term debt is reported in the Government-wide

Statement of Activities and Changes in Net Assets, but they do not require

the use of current financial resources. Therefore, the interest expense is

not reported as expenditures in Governmental Funds. The following amount

represents the change in accrued interest from the prior year. (209,636)

In governmental funds, interest earned on advances to component units are

treated as unearned revenue. In governmental-wide statements, interest earned

from advances to component units are recognized as investment earnings. 3,483,248

Internal service funds are used by management to charge the costs of fleet

maintenance, purchasing, employee welfare, workers' compensation, general

and unemployment insurance to individual funds. The net revenue of certain

activities of internal service funds is reported with governmental activities. 7,661,304

Change in Net Assets of Governmental Activities 16,534,249$


24


PROPRIETARY FUNDS JUNE 30, 2009

Governmental

Activities

Total Internal

Solid Service

Transit Water Waste Sewer Aviation Funds Funds

Assets

Current Assets

Cash and Investments 59,786$ (3,251,342)$ -$ 5,812,210$ 54,372$ 2,675,026$ 10,367,039$

Cash and Investments with

Fiscal Agent - - - 39,901,088 - 39,901,088 1,480,300

Restricted Cash and

Investments - 4,877,700 - 4,929,194 - 9,806,894 -

Deposits - - - - - - -

Accounts Receivable 90,908 435,583 621,380 1,740,612 2,181 2,890,664 387,443

Intergovernmental Receivable 9,710 - 53,669 - 276,384 339,763 121,735

Inventories - - - - - - 208,444

Due from Other Funds - - - - - - 376,190

Advances to Other Funds - 3,422,086 - - - 3,422,086 18,099

Deferred Charges - - - 4,416,992 - 4,416,992 -

Total Current Assets 160,404 5,484,027 675,049 56,800,096 332,937 63,452,513 12,959,250

Noncurrent Assets

Capital Assets

Nondepreciable:

Land 193,261 2,347,356 - 1,544,349 279,215 4,364,181 75,000

Construction in Progress - 83,836 - 94,986,513 994,780 96,065,129 -

Depreciable:

Buildings 4,211,998 6,900 - 396,132 161,451 4,776,481 6,187,770

Improvements Other Than

Buildings - 45,264,820 8,992 114,279,007 2,849,493 162,402,312 1,596,932

Machinery and Equipment 3,280,265 692,240 138,836 3,677,068 47,830 7,836,239 15,485,284

Accumulated Depreciation (2,505,584) (13,864,355) (94,608) (23,406,368) (2,123,497) (41,994,412) (9,232,920)

Total Noncurrent Assets 5,179,940 34,530,797 53,220 191,476,701 2,209,272 233,449,930 14,112,066

Total Assets 5,340,344$ 40,014,824$ 728,269$ 248,276,797$ 2,542,209$ 296,902,443$ 27,071,316$

Enterprise

Business-Type Activities - Enterprise Funds

(Continued)


25

CITY OF TULARE STATEMENT OF NET ASSETS (Continued)

PROPRIETARY FUNDS JUNE 30, 2009

Governmental

Activities

Total Internal

Solid Enterprise Service


Liabilities

Current Liabilities

Accounts Payable and

Accrued Liabilities 171,790$ 669,966$ 149,319$ 6,846,984$ 57,473$ 7,895,532$ 492,851$

Deposits Payable - 140,949 - 159,958 - 300,907 -

Due to Other Funds - - 2,786,860 - - 2,786,860 376,190

Compensated Absences - Current 928 8,347 7,486 9,912 62 26,735 3,963

Advances from Other Funds - Current 90,000 - 200,051 16,987 686,369 993,407 14,590

Leases Payable - Current - 216,927 - 9,091 - 226,018 99,445

Revenue Bonds Payable - Current - - - 2,213,587 - 2,213,587 -

Total Current Liabilities 262,718 1,036,189 3,143,716 9,256,519 743,904 14,443,046 987,039

Noncurrent Liabilities

Advances from Other Funds 540,000 - 2,800,714 237,817 - 3,578,531 151,927

Compensated Absences

Payable 13,829 115,755 102,115 131,966 1,063 364,728 60,513

Leases Payable - 7,620,826 - 487,419 - 8,108,245 213,924

Net Post Employment Benefits Obligation 710 12,075 21,309 16,337 - 50,431 -

Revenue Bonds Payable - - - 185,330,504 - 185,330,504 -

Total Noncurrent Liabilities 554,539 7,748,656 2,924,138 186,204,043 1,063 197,432,439 426,364

Total Liabilities 817,257 8,784,845 6,067,854 195,460,562 744,967 211,875,485 1,413,403

Net Assets

Invested in Capital Assets,

Net of Related Debt 4,549,940 31,570,744 53,220 48,266,382 2,209,272 86,649,558 13,798,697

Restricted for Capital Improvements 313,441 6,504,275 - 44,042,738 368,766 51,229,220 75,000

Unrestricted (340,294) (6,845,040) (5,392,805) (39,492,885) (780,796) (52,851,820) 11,784,216

Total Net Assets 4,523,087$ 31,229,979$ (5,339,585)$ 52,816,235$ 1,797,242$ 85,026,958$ 25,657,913$



26

CITY OF TULARE STATEMENT OF REVENUES, EXPENSES, AND

CHANGES IN FUND NET ASSETS PROPRIETARY FUNDS


Governmental

Activities

Total Internal



Operating Revenues

Charges for Services 2,075,103$ 4,569,336$ 5,898,169$ 16,595,791$ 112,644$ 29,251,043$ 8,458,979$

Connection Fees - 39,724 - 69,921 - 109,645 -

Employee Contributions - - - - - - 1,083,904

Other 56,817 64,489 48,425 221,554 (645) 390,640 -

Total Operating Revenues 2,131,920 4,673,549 5,946,594 16,887,266 111,999 29,751,328 9,542,883

Operating Expenses

General Administration - - - - - - 10,889

Personal Services 84,507 1,183,778 1,841,695 1,497,872 18,201 4,626,053 849,095

Contractual Services - - - - - - 196,385

Maintenance and Supplies 2,253,209 3,076,871 4,541,488 7,642,019 35,570 17,549,157 -

Equipment Usage and Operation - - - - - - 1,920,973

Insurance - - - - - - 4,405,623

Depreciation 231,811 1,099,903 4,798 2,276,291 81,756 3,694,559 1,578,971

Total Operating Expenses 2,569,527 5,360,552 6,387,981 11,416,182 135,527 25,869,769 8,961,936

Operating Income (Loss) (437,607) (687,003) (441,387) 5,471,084 (23,528) 3,881,559 580,947

Nonoperating Revenues

Interest Income 17,111 136,347 - 4,624,285 - 4,777,743 332,812

Interest Expense - - (4,240) (2,503,860) - (2,508,100) -

Grants 1,251,273 - - - 445,109 1,696,382 27,500

Other Income - - - - - - 270,740

Total Nonoperating Revenues 1,268,384 136,347 (4,240) 2,120,425 445,109 3,966,025 631,052

Income (Loss) Before Contributions

and Transfers 830,777 (550,656) (445,627) 7,591,509 421,581 7,847,584 1,211,999

Capital Contributions - 1,547,805 - 1,360,768 - 2,908,573 -

Transfers In - - - 410,374 - 410,374 6,600,212

Transfers Out - (204,556) (3,204,718) (306,624) - (3,715,898) (150,907)

Change in Net Assets 830,777 792,593 (3,650,345) 9,056,027 421,581 7,450,633 7,661,304

Net Assets, Beginning, as Restated 3,692,310 30,437,386 (1,689,240) 43,760,208 1,375,661 77,576,325 17,996,609

Net Assets, Ending 4,523,087$ 31,229,979$ (5,339,585)$ 52,816,235$ 1,797,242$ 85,026,958$ 25,657,913$


27



28

CITY OF TULARE STATEMENT OF CASH FLOWS

PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2009

Governmental

Activities

Total Internal



Cash Flows from Operating Activities:

Cash Received from Customers/Current Services 2,237,273$ 5,317,388$ 6,009,451$ 17,053,740$ 111,438$ 30,729,290$ 10,277,308$

Cash Paid for Salaries and Benefits (81,353) (1,171,703) (1,810,073) (1,471,114) (18,201) (4,552,444) (848,058)

Cash Paid for Services and Supplies (2,227,677) (6,615,367) (4,611,372) (11,671,307) (248,353) (25,374,076) (6,398,290)

Net Cash Provided by (Used for) Operating

Activities (71,757) (2,469,682) (411,994) 3,911,319 (155,116) 802,770 3,030,960

Cash Flows from Non-Capital Financing Activities:

Grants 1,251,273 - - - 445,109 1,696,382 27,500

Advances from Other Funds (90,000) - - (9,748) 281,676 181,928 -

Due to Other Funds - - 3,671,954 - - 3,671,954 -

Transfers from Other Funds - - - 410,374 - 410,374 6,600,212

Transfers to Other Funds - (204,556) (3,204,718) (306,624) - (3,715,898) (150,907)

Net Cash Provided by (Used for) Non-Capital

Financing Activities 1,161,273 (204,556) 467,236 94,002 726,785 2,244,740 6,476,805

Cash Flows from Capital and Related Financing Activities:

Proceeds from the Sale of Assets (1,226,134) - - - - (1,226,134) -

Capital Contribution - 1,547,805 - 1,360,768 - 2,908,573 -

Principal and Interest Paid on Notes Payable - (271,604) (4,240) - 301 (275,543) -

Principal and Interest Paid on Revenue Bonds - - - 50,407,553 - 50,407,553 -

(Acquisition) of Capital Assets - (2,524,571) (51,002) (60,609,711) (522,615) (63,707,899) (7,366,607)

Net Cash Provided by (Used for) Capital

and Related Financing Activities (1,226,134) (1,248,370) (55,242) (8,841,390) (522,314) (11,893,450) (7,366,607)

Cash Flows from Investing Activities:

Interest Income 17,111 136,347 - 4,624,285 - 4,777,743 332,812

Net Increase (Decrease) in Cash and Cash

Equivalents (119,507) (3,786,261) - (211,784) 49,355 (4,068,197) 2,473,970

Cash and Cash Equivalents, July 1 179,293 5,412,619 - 50,854,276 5,017 56,451,205 9,373,369

Cash and Cash Equivalents, June 30 59,786$ 1,626,358$ -$ 50,642,492$ 54,372$ 52,383,008$ 11,847,339$


(Continued)


29

CITY OF TULARE STATEMENT OF CASH FLOWS (Continued)

PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2009

Governmental

Activities

Total Internal



Reconciliation of Operating Income (Loss) to

Net Cash Provided (Used) by Operating Activities:

Operating Income (Loss) (437,607)$ (687,003)$ (441,387)$ 5,471,084$ (23,528)$ 3,881,559$ 580,947$

Other Income - - - - - - 270,740

Adjustments to Reconcile Operating Income (Loss) to

Net Cash Provided by (Used for) Operating Activities:

Depreciation 231,811 1,099,903 4,798 2,276,291 81,756 3,694,559 1,578,971

Changes in Assets and Liabilities:

(Increase) Decrease in Accounts Receivable 51,838 642,144 80,746 166,475 (561) 940,642 (238,004)

(Increase) Decrease in Inventory - - - - (258,884) (258,884) 24,752

(Increase) Decrease in Intergovernmental Receivable 53,515 1,695 (17,889) - - 37,321 - (Increase) Decrease in Advance to Other Fund - (3,391,886) - - - (3,391,886) 859,776

(Increase) Decrease in Due from Other Fund - - - - - - (158,092)

(Increase) Decrease in Deferred Charges - - - (3,636,370) - (3,636,370) -

Increase (Decrease) in Accounts Payable

and Accrued Liabilities 25,532 (146,610) (69,883) (404,931) 46,101 (549,791) (194,465)

Increase (Decrease) in Deposits Payable - - - 12,012 - 12,012 -

Increase (Decrease) in Due to Other Funds - - - - - - 308,999

Increase (Decrease) in Advance from Other Funds - - - - - - (14,590)

Increase (Decrease) in Net Post Employment Benefits - - - - - - -

Obligation 710 12,075 21,309 16,337 - 50,431 -

Increase (Decrease) in Compensated

Absences Payable 2,444 - 10,312 10,421 - 23,177 11,926

Net Cash Provided by (Used for) Operating Activities (71,757)$ (2,469,682)$ (411,994)$ 3,911,319$ (155,116)$ 802,770$ 3,030,960$

Reconciliation of Cash and Cash Equivalents Per

Statement of Cash Flows to the Balance Sheet:

Cash and Investments 59,786$ (3,251,342)$ -$ 5,812,210$ 54,372$ 2,675,026$ 10,367,039$

Restricted Cash and Investments - 4,877,700 - 4,929,194 - 9,806,894 -

Cash and Investments with Fiscal Agents - - - 39,901,088 - 39,901,088 1,480,300

Cash and Cash Equivalents Per Statement of Cash Flows 59,786$ 1,626,358$ -$ 50,642,492$ 54,372$ 52,383,008$ 11,847,339$



30


FIDUCIARY FUNDS JUNE 30, 2009

Private

Purpose Agency

Trust Fund Funds

Assets

Cash and Investments 10,170$ 4,628,610$

Due from Other Governments - 509,827

Accounts Receivable 33 25,703

Prepaid Expense - 79,805

Total Assets 10,203$ 5,243,945$



Accrued Liabilities -$ 459,131$

Due to Other Funds - 14,805

Deposits Payable - 4,770,009

Total Liabilities - 5,243,945

Net Assets 10,203$ -$


31

CITY OF TULARE STATEMENT OF CHANGES IN NET ASSETS

FIDUCIARY FUNDS FOR THE YEAR ENDED JUNE 30, 2009

Private

Purpose

Trust Fund

Revenues

Interest and Rentals 311$

Expenditures

Books and Magazines -

Change in Net Assets 311

Net Assets, July 1 9,892

Net Assets, June 30 10,203$

32

CITY OF TULARE NOTES TO BASIC FINANCIAL STATEMENTS

JUNE 30, 2009

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying financial statements of the City of Tulare (the “City”) have been prepared in conformity with accounting principles generally accepted in the United States of America as prescribed by the Governmental Accounting Standards Board.

The accompanying financial statements present the financial position of the City and the various funds and fund types, the results of operations of the City and the various funds and fund types, and the cash flows of the proprietary funds. The financial statements are presented as of June 30, 2009, and for the year then ended.

A. Description of the Reporting Entity

The City of Tulare was incorporated as a General Law city on April 5, 1888, and became a Charter city on May 1, 1923, under the charter laws of the State of California. The City operates under a Council-Administrator form of government and provides the following services: Public safety (police and fire), community development, community services, public works, library and cultural, general administrative services, and capital improvements.

As required by accounting principles generally accepted in the United States of America, these financial statements present the City of Tulare (the primary government) and its component units. The component units discussed below are included in the City's reporting entity because of the significance of their operational or financial relationship with the City. However, elected officials of the City of Tulare have a continuing accountability for fiscal matters of the other entities. The financial reporting entity consists of: (1) the City (2) organizations for which the City is financially accountable and (3) organizations for which the nature and significance of their relationship with the City are such that exclusion would cause the City's financial statements to be misleading or incomplete.

An organization is fiscally dependent on the primary government if it is unable to adopt its budget, levy taxes or set rates or charges, or issue bonded debt without approval by the primary government. In a blended presentation, component unit balances and transactions are reported in a manner similar to the balances and transactions of the City. A component unit is presented on a blended basis when the component unit's governing body is substantially the same as the City's or the component unit provides services almost entirely to the City, otherwise the component unit is presented discretely.

Blended Component Unit:

The Tulare Public Financing Authority (Authority) is a joint exercise of powers authority duly organized and existing under a Joint Exercise of Powers Agreement dated as of August 15, 1997, by and between the City and the Tulare Redevelopment Agency. The Authority was formed to assist the City in the financing and refinancing of public capital improvements. The Authority is governed by a five-member board whose members are the same as the City Council. The Authority’s financial data and transactions are included in the Debt Service Funds of the City.

Discretely Presented Component Unit:

The Tulare Redevelopment Agency (Agency) was established pursuant to the State of California Health and Safety Codes, Section 33000 entitled "Community Redevelopment Law." Its purpose is to eliminate blighted areas by encouraging the development of residential, commercial, industrial, recreational, and public facilities. The City's Council members appoint the Agency's directors, designate management, and have full accountability for the Agency's fiscal matters. The City is financially accountable for the Agency because the City’s Council approves the Agency’s budget, levies taxes (if necessary), and must approve any debt issuance. The Agency's financial data and transactions are presented as a governmental fund type.

33

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

A. Description of the Reporting Entity (Continued)

Complete financial statements for the Tulare Redevelopment Agency can be obtained from the City of Tulare Finance Department, 411 East Kern Avenue; Tulare, CA 93274. Separate financial statements are not prepared for the Tulare Public Financing Authority.

B. Basis of Presentation

Government-wide Financial Statements

The Government-wide financial statements (the statement of net assets and the statement of activities) report information of all of the nonfiduciary activities of the primary government and its component units. For the most part, eliminations have been made to minimize the double counting on internal activities. These statements distinguish between the governmental and business-type activities of the City and between the City and its discretely presented component unit. Governmental activities, which normally are supported by taxes and inter-governmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees charged to external parties.

The statement of activities presents a comparison between direct expenses and program revenues for each segment of the business-type activities of the City and for each function of the City’s governmental activities. Direct expenses are those that are specifically associated with a program or function and; therefore, are clearly identifiable to a particular function. Certain indirect costs are included as part of the program expense reported for individual functions and activities. Program revenues include 1) charges paid by the recipients of goods or services offered by the programs, 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program, and 3) interfund services provided and used. Interfund services provided and used are not eliminated in the process of consolidation. Revenues that are not classified as program revenues, including all taxes, are presented instead as general revenues.

Net assets are restricted when constraints placed on them are either externally imposed or are imposed by constitutional provisions or enabling legislation. Internally imposed designations of resources are not presented as restricted net assets. When both restricted and unrestricted resources are available for use, generally it is the City’s policy to use restricted resources first, then unrestricted resources as they are needed.

Governmental Fund Financial Statements

The governmental fund financial statements provide information about the City’s funds, including fiduciary funds and the blended component unit. Separate statements for each fund category – governmental, proprietary and fiduciary – are presented. The emphasis of fund financial statements is on major governmental and enterprise funds, each displayed in a separate column. All remaining governmental and enterprise funds are separately aggregated and reported as nonmajor funds.

Proprietary fund operating revenues, such as charges for services, result from exchange transactions associated with the principal activity of the fund. Exchange transactions are those in which each party receives and gives up essentially equal values. Nonoperating revenues, such as subsidies and investment earnings, result from nonexchange transactions or ancillary activities.

The City reports the following major governmental funds:

General Fund – The General Fund is the principle operating fund of the City. It is used to account for all financial resources except those required to be accounted for in other funds. For the City, the general fund includes basic governmental activities such as general government, public safety, public works and community services.

Financing Authority Fund – The Financing Authority Fund accounts for the annual debt service on the 2008 Lease Revenue Bonds. Lease revenues are derived from lease payments made by the City’s General Fund.

34


B. Basis of Presentation (Continued)

The City reports the following major enterprise funds:

Transit Fund – The Transit Fund accounts for the financial activity of the City’s transit system which offers fixed route and dial-a-ride transportation services.

Water Fund – The Water Fund is used to account for the financial activities of water utility of the City.

Solid Waste Fund – The Solid Waste Fund is used to account for the financial activities of the collection of solid waste and disposal utility of the City.

Sewer Fund – The Sewer Fund is used to account for financial activities of sewage collection and wastewater treatment utility of the City.

Aviation Fund – The Aviation Fund accounts for the financial activity of the City’s municipal airport.

The City reports the following additional fund types:

Special Revenue Funds – Special Revenue funds are used to account for the proceeds of specific revenue sources that are legally restricted to expenditures for specified purposes.

Debt Service Funds – Debt Service funds are used to account for the accumulation of resources for, and the payment of, general long-term debt principal, interest, and related costs of the City other than debt service payments made by proprietary funds.

Capital Projects Funds – Capital Projects funds are used to account for financial resources to be used for the acquisition or construction of major capital facilities other than those financed by proprietary funds.

Internal Service Funds – Internal Service funds are used to account for fleet management, insurance and purchase services provided by one department or agency of the City to another on a cost-reimbursement basis.

Private Purpose Trust Fund – Private Purpose Trust Fund is used to account for revenue and expenditures of the Zumwalt Trust.

Agency Funds – Agency funds are used to account for assets held by the City as an agent for youth service bureau and development impact fees collected for construction companies and contractors.

C. Basis of Accounting

The government-wide, proprietary fund financial statements, and private-purpose trust fund are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the City gives (or receives) value without directly receiving (or giving) equal value in exchange, include property and sales taxes, grants, entitlements and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenues from sales tax are recognized when the underlying transactions take place. Revenues from grants, entitlements and donations are recognized in the fiscal year in which all eligible requirements have been satisfied. Unbilled water utility receivables are not recorded at year end. However, the amount of unbilled receivables is not material to the financial statements.

35


C. Basis of Accounting (Continued)

Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available. Property and sales taxes, interest, certain state and federal grants and charges for services are accrued when their receipt occurs within sixty days after the end of the accounting period so as to be both measurable and available. Expenditures are generally recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments are recorded only when payment is due. General capital assets acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term debt and capital leases are reported as other financing sources.

For its government-wide activities and enterprise funds, the City has elected under GASB Statement No. 20, Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities That Use Proprietary Fund Accounting, to apply all applicable GASB pronouncements as well as any applicable pronouncements of the Financial Accounting Standards Board, the Accounting Principles or any Accounting Research Bulletins issued on or before November 30, 1989 unless those pronouncements conflict with or contradict GASB pronouncements. The GASB periodically updates its codification of the existing Governmental Accounting and Financial Reporting Standards which, along with subsequent GASB pronouncements (Statements and Interpretations), constitutes GAAP for governmental units.

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. Revenues and expenses not meeting this definition are reported as nonoperating.

D. Assets, Liabilities, Net Assets or Equity, and Other Financial Statement Items

Cash and Investments

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 cash equivalents.

Investments

Investments are stated at fair value (the value at which a financial instrument could be exchanged in a current transaction between willing parties, other than a forced or liquidation sale).

Further cash and investment disclosures are presented in Note 2.

36


D. Assets, Liabilities, Net Assets or Equity, and Other Financial Statement Items (Continued)

Interfund Transactions

Interfund transactions are reflected as either loans, services provided, reimbursements or transfers. Loans are reported as receivables and payables as appropriate, are subject to elimination upon consolidation and are referred to as either “due to/from other funds” (i.e., the current portion of interfund loans) or “advances to/from other funds” (i.e., the noncurrent portion of interfund loans). Any residual balances outstanding between the governmental activities and the business-type activities are reported in the government wide financial statement as “internal balances.” Advances between funds, as reported in the fund financial statements, are offset by a fund balance reserve account in applicable governmental funds to indicate that they are not available for appropriation and are not available financial resources.

Services provided, deemed to be at market or near market rates, are treated as revenues and expenditures/expenses. Reimbursements are when one fund incurs a cost, charges the appropriate benefiting fund and reduces its related cost as a reimbursement. All other interfund transactions are treated as transfers. Transfers between governmental or proprietary funds are netted as part of the reconciliation to the government-wide presentation.

Receivables

In the government-wide statements, receivables consist of all revenues earned at year-end and not yet received. Allowances for uncollectible accounts receivable are based upon historical trends and the periodic aging of accounts receivable. Major receivable balances for the governmental activities include intergovernmental and taxes receivable. Business-type activities report trade and intergovernmental as their major receivables.

Inventory

Inventories of materials and supplies in the Proprietary and Internal Services Funds are valued at the lower of cost or market, carried on a first-in, first-out (FIFO) basis. The City follows the consumption method of accounting for inventories.

Land Held for Resale

Land held for resale is recorded at the lower of cost or estimated realizable value. Fund balances are reserved in amounts equal to the carrying value of the land held for resale because such assets are not available to finance the City's current operations.

Capital Assets

The accounting treatment over property, plant and equipment (capital assets) depends on whether the assets are used in governmental fund operations or proprietary fund operations and whether they are reported in the government-wide or fund financial statements.

Government-Wide Statements

In the government-wide financial statements, capital assets are accounted for as capital assets. All capital assets are valued at historical cost, or estimated historical cost if actual is unavailable, except for donated capital assets which are recorded at their estimated fair value at the date of donation.

The City’s capitalization threshold is $5,000. In other words, capital assets are capitalized only if they have a cost in excess of $5,000 and have an expected useful life of three years or more. Capital assets that have a cost below $5,000 are expended during the fiscal year they are acquired.

37



Capital Assets (Continued)

Government-Wide Statements (Continued)

Depreciation of all exhaustible capital assets is recorded as an allocated expense in the Statement of Activities, with accumulated depreciation reflected in the Statement of Net Assets. Depreciation is provided over the assets’ estimated useful lives using the straight-line method of depreciation. The range of estimated useful lives by type of asset is a follows:

Infrastructure 20 to 50 years

Buildings 20 to 50 years

Improvements other than buildings 20 to 50 years

Machinery and equipment 5 to 20 years

The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. Betterments and major improvements which significantly increase values, change capacities or extend useful lives are capitalized. Upon sale or retirement of capital assets, the cost and related accumulated depreciation are removed from the respective accounts and any resulting gain or loss is included in the results of operations.

Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of business-type activities is included as part of the capitalized value of the assets constructed.

Fund Financial Statements

In the fund financial statements, capital assets used in governmental fund operations are accounted for as capital outlay expenditures of the governmental fund upon acquisition. Capital assets used in proprietary fund operations are accounted for the same as in the government-wide statements.

Compensated Absences

It is the City’s policy to permit employees to accumulate earned but unused vacation, sick pay benefits and compensatory time. All vacation, sick and compensatory pay is accrued when incurred in the government-wide, proprietary, and fiduciary fund financial statements. A liability for these amounts is reported in governmental funds only if they have matured, for example, as a result of employee resignations and retirements. For additional information regarding compensated absences, see Note 6.

Long-Term Obligations

In the government-wide financial statements, and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type statement of net assets. Debt principal payments of both government and business-type activities are reported as decreases in the balance of the liability on the Statement of Net Assets. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are reported as deferred charges and amortized over the term of the related debt.

38



Long-Term Obligations (Continued)

In the fund financial statements, however, debt principal payments of governmental funds are recognized as expenditures when paid. Governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures.

Non-Current Governmental Assets/Liabilities

GASB Statement No. 34 eliminates the presentation of account groups, but provides for these records to be maintained and incorporates the information into the Governmental Activities column in the government-wide statement of net assets.

Net Assets/Fund Equity

The government-wide and business-type activities fund financial statements utilize a net assets presentation. Net assets are categorized as invested capital assets (net of related debt), restricted and unrestricted.

Invested In Capital Assets, Net of Related Debt – This category groups all capital assets, including infrastructure, into one component of net assets. Accumulated depreciation and the outstanding balances of debt that are attributable to the acquisition, construction or improvement of these assets reduce the balance in this category.

Restricted Net Assets – This category presents external restrictions imposed by creditors, grantors, contributors or laws or regulations of other governments and restrictions imposed by law through constitutional provisions or enabling legislation.

Unrestricted Net Assets – This category represents net assets of the City, not restricted for any project or other purpose.

In the fund financial statements, reserves and designations segregate portions of fund balances that are either not available or have been earmarked for specific purposes. The various reserves and designations are established by actions of the Board and management and can be increased, reduced or eliminated by similar actions.

Reserved fund balances for June 30, 2009 are as follows:

Financing

General Authority

Fund Fund

Advance to Other Funds and Component Units 26,437,732$ -$

Debt Service - 16,374,755

Total 26,437,732$ 16,374,755$

39



Property Taxes

In 1978, a state constitutional amendment (Proposition 13) provided that the tax rate be limited to 1% of market value, levied only by the County and shared with all other jurisdictions. Such limitation on the rate may only be increased through voter approval. The County collects property taxes and distributes them to taxing jurisdictions on the basis of the taxing jurisdiction's assessed valuations and on the tax rate for voter-approved debt. In the fund financial statements, property tax is recorded as revenue in the period levied to the extent they are collected within 60 days of year-end.

The property tax calendar for the City and the Discretely Presented Component Unit is as follows:

Lien date January 1 Levy dates July 1 through June 30 Due dates November 1 – 1

st installment

February 1 – 2nd

installment Collection dates December 10 – 1

st installment

April 10 – 2nd

installment

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/expenses during the reporting period. Actual results could differ from those estimates.

E. Stewardship, Compliance, and Accountability

Budgets and Budgetary Accounting

The procedures established by the City Council in adopting the budgetary data reflected in the financial statements are as follows:

On or before the second meeting in May, the City Manager submits to the City Council a proposed operating and capital projects budget for the fiscal year commencing the following July 1st. Following publication and public hearings, the budget is legally enacted by resolution.

The City Manager is authorized to transfer funds appropriated with respect to all classifications within the same department. The City Manager may transfer appropriated funds from any classification within other expenditure categories to existing capital outlay and capital projects classifications within the same department only; however, any revisions that alter the total expenditures of any department or create additional projects must be approved by the City Council.

Supplemental budgetary appropriations were negligible for the fiscal year ended June 30, 2009. All unencumbered appropriations lapse at year end.

For budgeting purposes, the General Fund is composed of several departments while all other budgeted funds are considered a single department. Revenues are budgeted on a line item basis. A comparison of budgeted and actual revenues by line item would be too voluminous for this report.

40


E. Stewardship, Compliance, and Accountability (Continued)

Budgets and Budgetary Accounting (Continued)

Budgets for the General, Special Revenue, and Debt Service Funds are presented on a basis consistent with accounting principles generally accepted in the United States of America. Budgets for Capital Projects Funds are not presented because they are budgeted on a project basis rather than on an annual basis. No budgets are adopted for the Proprietary and Fiduciary Fund types.

Budgeted amounts are as originally adopted, or as amended by the City Council. During the fiscal year ended June 30, 2009 the City Council approved $11,958,180 of increases to the originally adopted General Fund budget, including carryovers of prior year encumbered balances and selected capital appropriations.

Deficit Fund Equity

The Solid Waste Enterprise Fund had a deficit fund balance of $5,318,276. The deficit is expected to be eliminated in future years through increase in charges for services and cost reductions. Library expansion capital project fund had a deficit fund balance of $543,025. The deficit is expected to be eliminated in future years through revenues or transfers from other funds. Purchasing Internal Service Fund had a deficit fund balance of $61,396. The deficit is expected to be eliminated in future years through departmental charges. Landscape and Lighting Fund had a deficit fund balance of $139,035. The deficit is expected to be eliminated in future years through additional grants revenue anticipated from the state.

F. Reconciliation of Government-Wide and Fund Financial Statements

Explanation of differences between governmental fund operating statements and the government-wide statement of activities.

The governmental fund statement of revenues, expenditures, and changes in fund balances includes a reconciliation between net changes in fund balances – total governmental funds and changes in net assets of governmental activities as reported in the government-wide statement of activities. One element of that reconciliation explains that “Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense.” The details of this $10,243,072 difference are as follows:

Capital Outlay 21,550,959$

Transfer of Capital Assets to Proprietary Funds (6,132,227)

Depreciation Expense (5,175,660)

Difference 10,243,072$

G. Reclassification and Eliminations

Interfund balances must generally be eliminated in the government-wide financial statements, except for net residual amounts due between governmental activities. Amounts involving fiduciary funds should be reported as external transactions. Any allocations must reduce the expenses of the function from which the expenses are being allocated, so that expenses are reported only once – in the function in which they are allocated.

Certain reclassifications have been made to the prior year financial statements to be in conformity with fiscal year 2009 presentation.

41

NOTE 2 – CASH AND INVESTMENTS

Cash and investments as of June 30, 2009 are classified in the accompanying financial statements as follows:

Statement of Net Assets:Primary Government

Cash and Investments 31,039,326$ Cash and Investments with Fiscal Agent 59,116,780 Restricted Cash and Investments 9,806,894

Component Unit:Cash and Investments 2,071,939 Cash and Investments with Fiscal Agent 255,482

Fiduciary Funds:Cash and Investments 4,638,780

Total Cash and Investments 106,929,201$

Deposits and investments as of June 30, 2009 consist of the following:

Deposits:Cash on Hand 7,445$ Cash with Financial Institutions 16,597,484 Investments 26,022,906 Cash and Investment with Fiscal Agents 64,301,366

Total Cash and Investments 106,929,201$

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, were 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 MaximumAuthorized Maximum Percentage/Amount Investment

Investment Type Maturity of Portfolio in One Issuer

Time Certificates of Deposit N/A 30% N/A

Local Agency Investment Funds (LAIF) N/A $20 million N/A

Banker's Acceptances 270 days 40% 30%

Treasury Bonds and Notes 10 years N/A N/A

Treasury Bills (T-Bills) 1 year N/A N/A

Federally Sponsored Agency Securities N/A N/A N/A

Repurchase Agreements 90 days N/A N/A

Medium Term Notes/Corporate Bonds 5 years 30% N/A

Mutual Funds N/A 15% N/A

Commercial Paper N/A 25% N/A

Zero Coupon Bonds N/A N/A N/A

Passbook Savings Account Demand Deposits N/A N/A N/A

42

NOTE 2 – CASH AND INVESTMENTS (Continued)

Investments Authorized by Debt Agreements

Investments of debt proceeds held by bond trustees are governed by the 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 agreement that address interest rate risk, credit risk, and concentration of credit risk.

Maximum MaximumAuthorized Maximum Percentage Investment

Investment Type Maturity Allowed in One Issuer

U.S. Treasury Obligations None None None

U.S. Agency Securities None None None

Banker's Acceptances 180 days None None

Commercial Paper 270 days None None

Money Market Mutual Funds N/A 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 is, the greater the sensitivity of its fair value will be to changes in market interest rates. All the City’s investments, as shown below, are not adversely affected by changes in interest rates.

Weighted Average Maturity

Investment Type Amount (in years)

Federal Agency Securities 13,191,136$ 2.4Certificates of Deposit 99,000 1.0Local Agency Investment Fund (LAIF) 12,087,000 N/AHeld by Bond Trustee:

Money Market Funds 59,608,853 0.2Investment Contracts 9,651,539 1.5

Held by Insurance AdministratorPooled Investments 1,481,254 N/A

Total 96,118,782$

Investments with Fair Values Highly Sensitive to Interest Rate Fluctuations

None of the City’s investments (including investments held by bond trustees) are highly sensitive to interest rate fluctuations.

43


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 of year end for each investment type:

Minimum

Legal Not Required

Investment Type Amount Rating To Be Rated AAA Unrated

Federal Agency Securities 13,191,136$ N/A -$ 13,191,136$ -$

Certificates of Deposit 99,000 N/A - - 99,000

Local Agency Investment Fund (LAIF) 12,087,000 Collateralized - - 12,087,000

Held by Bond Trustee:

Money Market Funds 59,608,853 A 59,608,853 - -

Investment Contracts 9,651,539 N/A 9,651,539 - -

Held by Insurance Administrator

Pooled Investments 1,481,254 N/A - - 1,481,254

Total 96,118,782$ 69,260,392$ 13,191,136$ 13,667,254$

Rating as of Year End

Concentration of Credit Risk

The investment policy of the City contains no limitations on the amount that can be invested in any one issuer beyond that stipulated by the California Government Code. Investments in any one issuer that represent 5% or more of total City’s investments are as follows:

Reported

Issuer Investment Type Amount

Federal Home Loan Federal Agency Securities 3,048,636$

Federal Farm Credit Banks Federal Agency Securities 10,142,500

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.

GASB Statement No. 40 requires that the following disclosure be made with respect to custodial credit risks relating to deposits and investments: At June 30, 2009, $17,530,280 of the City’s deposits with a financial institution were in excess of federal depository insurance limits. However, the financial institution participates in the FDIC’s Temporary Liquidity Guarantee Program, whereby unlimited deposit insurance coverage is available through December 31, 2009 for non-interest bearing transaction accounts. As of June 30, 2009, $96,019,782 was collateralized in accordance with Section 53652 of the California Government Code by the pledging financial institution in the City’s name.

44


Investments in State Investment Pool

The City is a voluntary participant in the Local Agency Investment Fund (LAIF) that is regulated by California Government Code Section 16429 under the oversight of the Treasurer of the State of California. The State Treasurer’s Office reports its investments at fair value. The fair value of securities in the State Treasurer’s pooled investment program, including LAIF, generally is based on quoted market prices. The State Treasurer’s Office performs a quarterly fair market valuation of the pooled investment program portfolio. In addition, the State Treasurer’s Office performs a monthly fair market valuation of all securities held against carrying cost. These valuations and financial statements are posted to the State Treasurer’s Office website at www.treasurer.ca.gov. The fair value of the City’s investment in this pool is reported in the accompanying financial statements at amounts based upon 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.

NOTE 3 – NOTES RECEIVABLE

Notes receivable for the component unit consist of:

Secured notes receivable from the Salvation Army, Tulare Residence, Inc., a third

party, dated March 18, 2005, bearing no interest, due on March 18, 2055, for

managing sixty units of affordable senior housing project. 221,407$

Secured note receivable from Western Pacific Meat Packing, LLC, a third party, dated

November 7, 2006, bearing no interest and due November 6, 2016, for acquiring certain

real property and development of a beef harvesting facility in Tulare, California. 375,000

Secured note receivable from Tulare Family Housing Partners, L.P., a third party, dated

October 23, 2007, bearing simple interest at the rate of three percent (3%) per annum,

for construction of a multi-family tax credit low-income apartment complex project in

Tulare, California. For the first thirty (30) years from the date a Certificate of Occupancy

is issued for the Apartment Complex, the note amount will be paid by the borrower's

annual payment to the Agency of the interest which has accrued on the note amount

during the previous year. After the thirtieth (30th) annual payment is made, the parties

shall calculate the amount of annual payments necessary to fully repay the note amount

through twenty-five (25) annual, fully amortized level payments, and Borrower shall

make such payments annually beginning upon the thirty-first (31st) anniversary of the

date a Certificate of Occupancy is issued for the Apartment Complex. Any remaining

portion of the note amount shall be due and payable on the fifty-fifth (55th) anniversary

of the date a Certificate of Occupancy is granted for the Apartment Complex. 298,000

Secured Note Receivable from Self-Help Enterprises, a California nonprofit public

benefit corporation, a third party, dated July 24, 2008 bearing no interest and due on

August 1, 2009. Self-Help will use the loan proceeds to pay for the acquisition of the 22

parcels of land located at the north west corner of North "E" Street and Gail Avenue. 500,000

Total 1,394,407$

45

NOTE 4 – CAPITAL ASSETS

Capital assets activities for the year ended June 30, 2009 were as follows:

Balance Balance

Governmental Activities July 1, 2008 Additions Deletions June 30, 2009

Nondepreciable Capital Assets:

Land 8,673,524$ 17,575$ -$ 8,691,099$

Construction in Progress 11,155,447 9,854,043 (5,623,753) 15,385,737

Subtotal 19,828,971 9,871,618 (5,623,753) 24,076,836

Depreciable Capital Assets:

Infrastructure 173,749,666 10,104,107 (106,518) 183,747,255

Structures and Improvements 23,186,863 9,514,321 (978,051) 31,723,133

Equipment 19,446,942 1,405,343 (688,708) 20,163,577

Subtotal 216,383,471 21,023,771 (1,773,277) 235,633,965

Accumulated Depreciation:

Infrastructure (71,623,558) (5,552,713) 316,259 (76,860,012)

Structures and Improvements (7,872,689) (1,899,952) 686,958 (9,085,683)

Equipment (10,837,063) (1,675,371) 590,514 (11,921,920)

Subtotal (90,333,310) (9,128,036) 1,593,731 (97,867,615)

Net Capital Assets 145,879,132$ 21,767,353$ (5,803,299)$ 161,843,186$

Balance Balance

Business Activities July 1, 2008 Additions Deletions June 30, 2009

Nondepreciable Capital Assets:

Land 4,354,080$ 10,101$ -$ 4,364,181$

Construction in Progress 56,000,863 54,232,756 (14,168,490) 96,065,129

Subtotal 60,354,943 54,242,857 (14,168,490) 100,429,310

Depreciable Capital Assets:

Buildings 4,573,068 203,413 - 4,776,481

Improvements Other Than Buildings 138,685,368 23,649,668 - 162,335,036

Equipment 7,130,164 1,204,757 (498,682) 8,833,603

Subtotal 150,388,600 25,057,838 (498,682) 175,945,120

Accumulated Depreciation:

Buildings (734,847) (101,857) - (836,704)

Improvements Other Than Buildings (31,787,513) (3,258,213) - (35,045,726)

Equipment (6,208,899) (334,489) 498,682 (7,042,070)

Subtotal (38,731,259) (3,694,559) 498,682 (42,924,500)

Net Capital Assets 172,012,284$ 75,606,136$ (14,168,490)$ 233,449,930$

46

NOTE 4 – CAPITAL ASSETS (Continued)

Depreciation expense for the fiscal year ending June 30, 2009 was charged to the following activities:


General Government 1,802,593$

Public Safety 1,441,342

Public Works 393,004

Community Development 194,303

Community Services 170,213

Library and Cultural 5,126,581

Total Governmental Activities Depreciation Expense 9,128,036$

Business Activities:

Aviation 81,756$

Transit 231,811

Water 1,099,903

Solid Waste 4,798

Sewer 2,276,291

Total Business-Type Activities Depreciation Expense 3,694,559$

NOTE 5 – ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

The City’s accounts payable and accrued liabilities for the year ended June 30, 2009 for the major funds, nonmajor funds and internal service funds are as follows:

Governmental Activities:General Fund 5,197,274$ Financing Authority Fund 444,240 Nonmajor Governmental Funds 584,119 Internal Service Funds 492,851

Total Governmental Activities 6,718,484$

Business-Type Activities:Transit 171,790$ Water 669,966 Solid Waste 149,319 Sewer 6,846,984 Aviation 57,473

Total Business-Type Activities 7,895,532$

47

NOTE 6 – LONG-TERM DEBT

The following is a summary of the long-term debt activity for the year ended June 30, 2009:

Amounts Due

Balance Balance Within

Type of Debt July 1, 2008 Additions Deletions June 30, 2009 One Year


Lease Revenue Bonds 36,740,000$ -$ 985,000$ 35,755,000$ 1,315,000$

Bond Premium 1,698,958 - 56,949 1,642,009 56,949

Leases Payable 1,537,672 - 136,821 1,400,851 145,336

Net Post Employment Benefits

Obligation - 200,307 - 200,307 -

Compensated Absences Payable 1,857,239 319,814 107,737 2,069,316 150,517

Total Governmental Activities 41,833,869$ 520,121$ 1,286,507$ 41,067,483$ 1,667,802$


Revenue Bonds Payable 134,632,678$ 54,775,000$ 1,863,587$ 187,544,091$ 2,213,587$

Leases Payable 8,628,016 - 293,753 8,334,263 226,018


Obligation - 50,431 - 50,431 -

Compensated Absences Payable 354,583 36,880 - 391,463 28,616

Total Business-Type Activities 143,615,277$ 54,862,311$ 2,157,340$ 196,320,248$ 2,468,221$

Primary Government:

Revenue Bonds Payable 171,372,678$ 54,775,000$ 2,848,587$ 223,299,091$ 3,528,587$

Bond Premium 1,698,958 - 56,949 1,642,009 56,949

Leases Payable 10,165,688 - 430,574 9,735,114 371,354


Obligation - 250,738 - 250,738 -

Compensated Absences Payable 2,211,822 356,694 107,737 2,460,779 179,133

Total Primary Government: 185,449,146$ 55,382,432$ 3,443,847$ 237,387,731$ 4,136,023$

Discretely Presented Component Unit:

Tax Allocation Bonds 1,725,000$ -$ 195,000$ 1,530,000$ 205,000$

Notes Payable 2,550,000 387,000 65,402 2,871,598 207,000


Obligation - 4,262 - 4,262 -

Compensated Absences Payable 27,047 257 - 27,304 1,996

Total Discretely Presented

Component Unit: 4,302,047$ 391,519$ 260,402$ 4,433,164$ 413,996$

The compensated absences and the post employment benefits obligation for governmental activities will be paid by the General Fund. The compensated absences and the post employment benefits obligation for business-type activities will be paid by the respective proprietary funds. The compensated absences and the post employment benefits obligation for discretely presented component unit will be paid by the respective Tulare Redevelopment Agency Funds.

48

NOTE 6 – LONG-TERM DEBT (Continued)

Governmental Activities -

Lease Revenue Bonds (City of Tulare Public Financing Authority):

On September 5, 2002, the Authority issued $6,020,000 in Lease RevenueBonds. The bonds are payable in amounts ranging from $380,000 to $880,000 per year on October 1, each year, commencing October 1, 2003through October 1, 2013 and bear an interest at rates ranging from 2.00% to3.30% depending upon the date of maturity. 3,080,000$

On February 1, 2008, the Authority issued $33,050,000 in Lease Revenueand Refunding Bonds. The bonds are payable in amounts ranging from $375,000to $1,775,000 per year on April 1, each year, commencing April 1, 2009through April 1, 2038 and bear interest at rates ranging from 4.00% to4.50% depending upon the date of maturity. At June 30, 2009, the outstanding balance, including the related bond premium, was: 34,317,009$

Compensated Absences:

The City accounts for compensated absences (unpaid vacation, sick leaveand compensatory time) in accordance with GASB Code Sec. C60.In governmental funds, compensated absences are recorded as expenditures in the year paid, as it is the City’s intention to liquidateany unpaid compensated absences at June 30 from future resources,rather than current available financial resources. Accordingly, theunpaid liability for governmental funds is recorded in the government-widestatement of net assets. 2,069,316$

Net Post Employment Benefits Obligation:

The City accounts for net post employment benefits obligationin accordance with GASB Statement No. 45. Unfunded annualrequired contribution is recorded as a libility in the government-wide statement of net assets. 200,307$

Lease Payable:

Obligation of $310,558 on a capital lease for a street grinder: Interest at3.74% per annum and five annual payments of $66,755. 64,348$

Obligation of $416,702 on a capital lease for various energy retrofit capitalexpenditures: Interest at 5.38% and semi-annual payments of $27,212 for ten years. 26,499$

Obligation of $1,345,009 on a capital lease for various energy retrofit capital expenditures: Interest at 4.49% per annum and semi-annual payments range from $36,417 to $540,316 until July 2022. 1,310,004$

49


The annual requirements to amortize the lease payable outstanding, including interest of $502,147 are as follows:

Year Ending Street Energy Retrofit Citi Capital

June 30, Grinder Project Muni Totals

2010 66,755$ 27,212$ 82,486$ 176,453$

2011 - - 69,682 69,682

2012 - - 103,281 103,281

2013 - - 147,960 147,960

2014 - - 147,960 147,960

2015-2019 - - 739,801 739,801

2020-2023 - - 517,861 517,861

66,755 27,212 1,809,031 1,902,998

Less Interest 2,407 713 499,027 502,147

Total 64,348$ 26,499$ 1,310,004$ 1,400,851$

Business-Type Activities -

Lease Payable:

In December 1999, the City entered into a lease agreement to obtain an obligation of $1,181,047 on a capital lease for various energy retrofit capital expenditures. The ten-year lease bears an interest rate at 5.38% and has semi-annual payments of $77,127 due on May 17 and November 17 of each year. At June 30, 2009, the outstanding balance was $75,107.

In September 2006, the City entered into a lease agreement to obtain an obligation of $8,448,136 on a capital lease for various energy retrofit capital expenditures. The sixteen-year lease bears an interest rate at 4.49% and has semi-annual payments in the range of $36,417 and $540,316 each year. At June 30, 2009, the outstanding balance was $8,259,156.

The annual requirements to amortize the lease payable outstanding, including interest of $3,146,152 are as follows:

Energy Retrofit Citi Capital Year Ending June 30, Project Muni Totals

2010 77,127$ 519,953$ 597,080$2011 - 439,241 439,2412012 - 651,038 651,0382013 - 932,672 932,6722014 - 932,672 932,672

2015-2019 - 4,663,360 4,663,3602020-2023 - 3,264,352 3,264,352

77,127 11,403,288 11,480,415Less Interest 2,020 3,144,132 3,146,152

Total 75,107$ 8,259,156$ 8,334,263$

50


2003 Sewer Revenue Bonds:

On December 18, 2003, the City Issued $42,700,000 in Sewer Revenue Bonds. Serial bonds totaling $32,035,000 are payable in amounts ranging from $825,000 to $2,085,000 per year on November 15, each year, commencing November 15, 2004 through November 15, 2024 and bear interest rates from 1.0% to 4.6%. Term bonds totaling $4,145,000 are due November 15, 2028 at an interest rate of 4.75%. Other term bonds totaling $6,520,000 are due November 15, 2033 at an interest rate of 4.875%. At June 30, 2009, the outstanding balance was $35,805,000.

On September 1, 2001, the City issued $20,000,000 in sewer revenue bonds. The bonds are payable in amounts ranging from $320,000 to $1,260,000 per year on November 15, each year, commencing November 15, 2002 through November 15, 2031 and bear interest rates from 4.375% to 4.750%. At June 30, 2009, the outstanding balance was $17,460,000.


On December 7, 2006, the City issued $78,900,000 in sewer revenue bonds. The bonds are payable in amounts ranging from $0 to $5,300,000 per year on November 15, each year, commencing 2008 through 2042 and bear interest rates from 3.33% to 4.39%. At June 30, 2009, the outstanding balance, including the related bond premium, was $79,504,091.


On June 30, 2009, the City issued $54,775,000 in sewer revenue bonds. The bond principals are payable in amounts ranging from $780,000 to $10,590,000 per year on November 15, each year, commencing November 15, 2032 through November 15, 2044 and bear interest rate of 8.75%. The bond interests are payable twice a year respectively on May 15 and November 15, each year. The City is eligible for a cash subsidy payment from the United States Treasury equal to 35% of the interest payable on the Series 2009 Bonds. At June 30, 2009, the outstanding balance was $54,775,000.


The City accounts for net post employment benefits obligation in accordance with GASB Statement No. 45. Unfunded annual required contribution is recorded as a liability in the Enterprise Fund and Government-wide Statement of Net Assets. At June 30, 2009, the net post employment benefits obligation totaled $50,431.


The City accounts for compensated absences (unpaid vacation, sick leave, and compensatory time) in accordance with GASB Code Sec. C60. At June 30, 2009, the compensated absences payable totaled $391,463 for business-type activities.

Discretely Presented Component Unit -


The Tulare Redevelopment Agency accounts for compensated absences(unpaid, vacation, sick leave and compensatory time) in accordance withGASB Code Sec. C60. In governmental funds, compensated absencesare recorded as expenditures in the year paid, as it is the TulareRedevelopment Agency's intention to liquidate any unpaid compensated

absences at June 30 from future resources, rather than current availablefinancial resources. Accordingly, the unpaid liability for governmental fundsis recorded in the Statement of Net Assets. 27,304$

51



The Tulare Redevelopment Agency accounts for net post employment benefitsobligation in accordance with GASB Statement No. 45. Its share of unfundedannual required contribution is recorded as a liability in the government-widestatement of net assets. 4,262$

Tax Allocation Bonds:

On July 1, 1997, the Tulare Redevelopment Agency participated with theAssociations of Bay Area Governments in issuing $3,255,000 in Tax

from 4.00% to 6.00%. Term bonds of $385,000 are due December 1, 2017 atinterest rates of 5.25% and 6.125%. Term bonds totaling $255,000 are due December 1, 2025 at an interest rate of 5.35% and 6.25%. Tax Allocation Bondsmaturing on or after December 15, 2008 are subject to redemption, in whole, or inpart by lot, at the option of the Agency prior to their stated maturities on any dateon or after December 15, 2007 at a redemption price equal to the principalamount thereof plus a premium ranging from 0% to 2%. 1,530,000$

Notes Payable:

On November 9, 2007, the Agency received a $387,000 "Section 108 Loan" fromU.S. Department of Housing and Urban Development for the economic development, housing rehabilitation, public facilities rehab, construction or installation for the benefit of low- to moderate-income persons, or to aid in the prevention of slums. The loan is payable in amounts ranging from $30,000 to $49,000 per year on August 1 each year, commencing August 1, 2008 through August 1, 2017 and bears an annual interest rate of 0.3%. 357,000$

On October 4, 2001, the Tulare Redevelopment Agency received a $750,000"HELP LOAN" from the California Housing Finance Agency for acquisition,relocation and demolition costs related to an eighty unit affordable elderlyhousing project. The loan is due in annual principal installments of $175,000commencing June 21, 2006 through June 2010 and bears an annual interestrate of 3%. 364,598$

On September 29, 2005, the Tulare Redevelopment Agency received a $1,650,000 "HELP LOAN" from the California Housing Finance Agency for acquisition, relocation and demolition costs related to an eighty unit affordableelderly housing project. The loan is due in full on March 28, 2015 and bears

an annual interest rate of 3%. 1,650,000$

On March 27, 2009, the Agency received a $500,000 "Help Loan" from the California Housing Finance Agency for the acquisition and construction of 22 affordable homes in the Gail Estates subdivision, City of Tulare. Loan payments are deferred for a period of 10 years. Interest is to be charged at a rate of 3.5% on funds disbursed. 500,000$

Advance from General Fund:

During the period from inception to June 30, 2006, the City advanced the Tulare Redevelopment Agency funds for operations. These advances are payable upon demand, with interest accruing at 8% per annum on the unpaid balance. The Agency expects to repay these advances from future tax increment funds when such funds become available; therefore, no retirement schedule has beenprepared for repayment of these advances. 66,311,763$

Allocation Bonds. Serial bonds totaling $2,615,000 are payable in amountsranging from $125,000 to $240,000 per year on December 1 each year, commencing December 1, 1998 through December 1, 2012 and bear interest rates

52


The annual requirements to amortize long-term debt, other than lease payable, primary government advance, and compensated absences, including interest of $299,528,138 are as follows:


2002 2008

Lease Lease 2008 Lease 2001 Sewer 2003 Sewer 2006 Sewer 2006 Sewer 2009 Sewer

Year Ending Revenue Revenue Revenue Revenue Revenue Revenue Revenue Revenue

June 30, Bonds Bonds Bonds - Premium Bonds Bonds Bonds Bonds - Premium Bonds

2010 765,235$ 2,326,725$ 56,948$ 1,229,400$ 2,985,138$ 3,927,225$ 18,587$ 4,193,711$

2011 806,140 2,327,700 56,948 1,229,825 2,981,575 3,934,825 18,587 4,792,813

2012 854,240 2,327,325 56,948 1,229,350 2,977,675 3,941,625 18,587 4,792,813

2013 909,040 2,324,125 56,948 1,227,975 2,981,038 3,947,625 18,587 4,792,813

2014 - 2,324,925 56,948 1,225,700 2,978,088 3,952,825 18,587 4,792,813

2015-2019 - 11,624,675 284,742 6,151,013 14,933,550 20,094,525 92,935 23,964,062

2020-2024 - 11,624,222 284,742 6,225,907 10,241,805 24,741,700 92,935 23,964,062

2025-2029 - 10,722,250 284,742 6,320,756 7,273,189 27,562,563 92,935 23,964,062

2030-2034 - 9,368,701 284,742 3,857,081 7,347,044 27,675,250 92,935 25,421,033

2035-2039 - 7,489,581 218,301 - - 28,118,750 92,935 33,544,718

2040-2044 - - - - - 16,494,375 46,481 42,458,468

2045 - - - - - - - 11,053,312

3,334,655 62,460,229 1,642,009 28,697,007 54,699,102 164,391,288 604,091 207,734,680

Less Interest 254,655 29,785,229 - 11,237,007 18,894,102 85,491,288 - 152,959,680

Total 3,080,000$ 32,675,000$ 1,642,009$ 17,460,000$ 35,805,000$ 78,900,000$ 604,091$ 54,775,000$


Primary Government

Tax Section 2002 2006 2007

Year Ending Allocation 108 Help Help Help

June 30, Bonds Loan Loan Loan Loan

2010 283,996$ 32,112$ 185,938$ 49,500$ 17,500$

2011 282,889 34,119 195,286 49,500 17,500

2012 285,984 35,122 - 49,500 17,500

2013 283,301 37,129 - 49,500 17,500

2014 284,759 39,136 - 49,500 17,500

2015-2019 256,703 180,629 - 1,699,500 587,500

2020-2024 203,472 - - - -

2025-2029 65,200 - - - -

2030-2034 - - - - -

2035-2039 - - - - -

2040-2044 - - - - -

2045 - - - - -

1,946,304 358,247 381,224 1,947,000 675,000

Less Interest 416,304 1,247 16,626 297,000 175,000

Total 1,530,000$ 357,000$ 364,598$ 1,650,000$ 500,000$

Component Unit

53

NOTE 7 – PENSION PLAN

Plan Description:

The City's defined benefit pension plans, the Miscellaneous and the Safety Plans of the City of Tulare, provide retirement and disability benefits, annual cost-of-living adjustments, and death benefits to plan members and beneficiaries. The Miscellaneous and the Safety Plans of the City of Tulare are part of the Public Agency portion of the California Public Employees' Retirement System (CalPERS), an agent multiple-employer plan administered by CalPERS, which acts as a common investment and administrative agent for participating public employers within the State of California. A menu of benefit provisions as well as other requirements are established by State Statues within the Public Employees' Retirement Law. The City of Tulare selects optional benefit provisions from the benefit menu by contract with CalPERS and adopts those benefits through local ordinance. CalPERS issues a separate comprehensive annual financial report. Copies of the CalPERS annual financial report may be obtained from the CalPERS Executive Office, 400 P Street, Sacramento, CA 95814.

Funding Policy:

The City makes the contributions required of City employees on their behalf and for their account. The present required contribution rates of annual covered salaries are as follows:

Category Members Rates as a Percentage of Wages Local miscellaneous members 8% Local safety members with benefits Under article 21252.02 8% Modified (July 1, 2001 - December 31, 2001, Bi-weekly contributions = 8% X Earnings - $109.84) 9% (January 1, 2002 - June 30, 2009)

The City is required to contribute the actuarially determined remaining amounts necessary to fund the benefits for its members. The actuarial methods and assumptions used are those adopted by the CalPERS Board of Administration. The required employer contribution rate for the fiscal year ended June 30, 2009 was 13.893% for miscellaneous employees. The required employer contribution rate for safety (police and fire) employees was 28.414% for the period July 1, 2008 through June 30, 2009. The contribution requirements of plan members are established by State statute and the employer contribution rate is established and may be amended by CalPERS.

CalPERS determines contribution requirements using the Entry Age Actuarial Cost Method. Under this method, the City’s total normal benefit cost for each employee from date of hire to date of retirement is expressed as a level percentage of the related total payroll cost. Normal benefit cost under this method is the level amount the employer must pay annually to find an employee’s projected retirement benefit. This level percentage of payroll method is used to compute contribution requirements and also used to compute the actuarial accrued liability. The City does not have a net pension obligation since it pays these actuarially required contributions with each payroll.

CalPERS uses the market related value method of valuing the Plan’s assets. An investment rate of return of 7.75% is assumed, including inflation at 3.0% and overall payroll growth at 3.25%. Annual salary increases are assumed to vary by category, entry age, and duration of service. Changes in liability due to Plan amendments, changes in actuarial assumptions, or changes in actuarial method are amortized as a level percentage of payroll on a closed basis over twenty years. Investment gains and losses are accumulated as they are realized and ten percent of the net balance is amortized annually.

54

NOTE 7 – PENSION PLAN (Continued)

Annual Pension Cost:

For the fiscal year ended June 30, 2009, the City's annual pension cost of $5,221,422 for PERS was equal to the City's required and actual contributions. The required contribution for the fiscal year ended June 30, 2009 was determined as part of the June 30, 2001 actuarial valuation using the entry age normal actuarial cost method with the contributions determined as a percent of pay. The actuarial assumptions included (a) 8.25% investment rate of return (net of administrative expenses), (b) projected annual salary increases that vary by duration of service ranging from 3.75% to 14.20% for miscellaneous members (from 3.75% to 11.59% for safety members), and (c) 2% per year cost-of-living adjustments. Both (a) and (b) included an inflation component of 3.5%. The actuarial values of the Miscellaneous and the Safety Plans of the City of Tulare's assets were determined using a technique that smoothes the effects of short-term volatility in the market value of investments over a two-to five year period, depending on the size of investment gains and/or losses. The Miscellaneous and the Safety Plans of the City of Tulare's unfunded actuarial accrued liabilities (or excess assets) are being amortized as a level percentage of projected payroll on a closed basis. The remaining amortization period at June 30, 2009 was 18 years for miscellaneous and 7 years for safety.

Fiscal Annual Pension Cost Percentage of Net Pension

Year (APC) APC Contributed Obligation

6/30/07 4,456$ 100% -

6/30/08 4,805$ 100% -

6/30/09 5,221$ 100% -

Three-Year Trend Information for PERS (dollar amounts in thousands)

(F)

Unfunded

(C) Actuarial

(A) Unfunded Liability as

Entry Age (B) Liability (D) Percentage

Actuarial Actuarial Actuarial (Excess Funded (E) of Covered

Valuation Accrued Asset Assets) Ratio Covered Payroll

Date Liability Value (A)-(B) (B)/(A) Payroll (A)-(B)/(E)

6/30/06

Misc. 51,216$ 45,508$ 5,708$ 88.9% 11,489$ 49.7%

Safety 43,462 36,465 6,997 83.9% 4,494 155.7%

Total 94,678$ 81,973$ 12,705$ 86.6% 15,983$ 79.5%

6/30/07

Misc. 59,522$ 52,404$ 7,118$ 88.0% 12,070$ 59.0%

Safety 50,510 43,186 7,324 85.5% 5,254 139.4%

Total 110,032$ 95,590$ 14,442$ 86.9% 17,324$ 83.4%

6/30/08

Misc. 65,496$ 57,077$ 8,419$ 87.1% 13,130$ 64.1%

Safety 55,022 47,214 7,808 85.8% 5,781 135.1%

Total 120,518$ 104,291$ 16,227$ 86.5% 18,911$ 85.8%

Three-Year Funding Status (dollar amounts in thousands)

CalPERS issues a separate audited comprehensive annual financial report that includes financial statements and required supplementary information. Copies of the CalPERS annual report may be obtained from the CalPERS Executive Office, 400 P Street, Sacramento, California 95814

55

NOTE 8 – RISK MANAGEMENT

The City is a member of the Central San Joaquin Valley Risk Management Authority (CSJVRMA). CSJVRMA is a consortium of fifty-four (54) cities in San Joaquin Valley, California established under the provisions of California Government Code Section 6500, et seq. CSJVRMA provides risk coverage for its members through the pooling of risks and purchased insurance. This coverage extends to workers' compensation and general liability. CSJVRMA is governed by a Board consisting of one board member appointed by each member agency meets three to four times a year. The Board has contracted with a management group to supervise and conduct CSJVRMA affairs.

In the event of termination and after all claims have been settled, any excess or deficit will be divided among the agencies in accordance with an approved formula.

General Liability Insurance: Annual deposits are paid by member cities and are adjusted retrospectively to cover costs. Each member city self-insures through the CSJVRMA for the first $100,000 of each loss. However, this self-insurance retention is funded through annual contributions; therefore, the City effectively has no exposure except for specific limits as described herein. Participating cities then share in the next $100,000 to $1,000,000 per loss occurrence. Specific coverage includes comprehensive and general automotive liability, personal injury, errors and omissions and certain other coverage.

Separate deposits are collected from the member cities to cover claims between $1,000,000 and $15,000,000. These deposits are also subject to retrospective adjustment.

Workers' Compensation: The workers' compensation program includes pooling of retained losses plus excess insurance. Annual deposits are paid by member cities and are adjusted retrospectively on an annual basis to cover costs and reflect claims experience of both the individual member and the pool. The annual retrospective computation of the deposit is based on the member's own losses up to its retention level plus a pro rata share of general/administrative expenses and losses between $100,000 and $500,000. The City of Tulare has a retention level of $100,000, and all claims up to that level are paid by the City. However, this self-insured retention is funded through annual contributions; therefore, the City effectively has no exposure except for specific limits described herein. Benefits from $100,000 to $500,000 are covered by the pool. Excess insurance covers claims from $500,000 up to the statutory benefits schedule under California Workers' Compensation Law.

There have been no significant changes in insurance coverage as compared to last year, and settlements have not exceeded coverage in each of the past three fiscal years.

NOTE 9 – INTERFUND TRANSACTIONS

Interfund transactions are reported as either loans, services provided, reimbursements, or transfers. Loans are reported as interfund receivables and payables, as appropriate, and are subject to elimination upon consolidation. Services provided, deemed to be at market or near market rates, are treated as revenues and expenditures/expenses. Reimbursements occur when one fund incurs a cost, charges the appropriate benefiting fund, and reduces its related cost as a reimbursement. All other interfund transactions are treated as transfers. Transfers among governmental or proprietary funds are netted as part of the reconciliation to the government-wide financial statements.

Interfund due from/to other funds at June 30, 2009 were as follows:

Due From Due To Purpose Other Funds Other Funds

General Fund General Operations 3,905,852$ 32,548$ Major Governmental Fund -

Financing Authority Fund General Operations - 928,571 Nonmajor Governmental Funds General Operations - 143,068 Enterprise Funds - Solid Waste General Operations - 2,786,860 Internal Service Funds General Operations 376,190 376,190 Fiduciary Funds - Agency Fund General Operations - 14,805

4,282,042$ 4,282,042$

56

NOTE 9 – INTERFUND TRANSACTIONS (Continued)

Interfund transfers consist of operating transfers from funds receiving resources to funds through which the resources are to be expended. Interfund transfers for the 2008-09 fiscal year are as follows:

Transfers Transfers

Purpose In Out

General Fund

Nonmajor Governmental Funds To purchase equipment -$ 153,775$

Nonmajor Governmental Funds To pay unemployment claims - 11,910

Nonmajor Governmental Funds General fund contribution - 412,818

Financing Authority Fund For lease revenue bond payment - 2,643,129

General Fund CIP To fund construction in progress activity 12,242,930 6,728,541

Nonmajor Governmental Funds To fund construction in progress activity - 382,531

Financing Authority Fund To fund construction in progress activity 4,460,026 -

Nonmajor Governmental Funds For traffic safety activity 202,802 -

Nonmajor Governmental Funds To reimburse General Fund 83,947 -

Total General Fund 16,989,705 10,332,704

Financing Authority Fund

Nonmajor Governmental Funds To fund construction in progress activity - 7,053,214

General Fund For lease revenue bond payment 2,643,129 -

Total Internal Service Funds 2,643,129 7,053,214

Nonmajor Capital Project Funds

General Fund To fund construction in progress activity 384,630 -

Financing Authority Fund To fund construction in progress activity 2,182,814 -

Total Capital Project Funds 2,567,444 -

Nonmajor Special Revenue Funds

General Fund To fund construction in progress activity - 1,903,355

General Fund For Traffic Safety activity - 202,802

General Fund General Fund contribution 30,766 43,144

General Fund To reimburse Senior Services 339,148 -

Nonmajor Governmental Funds To purchase equipment - 46,528

Total Special Revenue Funds 369,914 2,195,829

Enterprise Funds

Sewer/Wastewater Fund

General Fund To fund construction in progress activity - 3,460,125

Nonmajor Governmental Funds To fund construction in progress activity - 255,773

General Fund To reimburse General Fund 410,374 -

Total Enterprise Funds 410,374 3,715,898

Internal Service Funds

Nonmajor Governmental Funds To pay for unemployment claims 11,910 -

General Fund To purchase equipment 153,775 -

Nonmajor Governmental Funds To purchase equipment 302,300 -

General Fund To fund construction in progress activity - 150,907

General Fund To transfer over building and improvement 6,132,227 -

Total Internal Service Funds 6,600,212 150,907

Primary Government

General Fund To transfer over building and improvement to

proprietary funds - 6,132,226

Totals 29,580,778$ 29,580,778$

57

NOTE 9 – INTERFUND TRANSACTIONS (Continued)

Interfund advances to/from at June 30, 2009 were as follows:

Advances From Advances To

Purpose Other Funds Other Funds

General Fund For General Operations - Airport -$ 686,369$

For General Operations - Transit - 630,000

To Perform Street Repairs 18,099 -

Water Fund To Construct LNG Fuel and Corporate

Maintenance Facility - 3,422,086

Solid Waste Fund To Construct Corporation Maintenance Facility 3,000,765 -

Sewer Fund For General Operations 254,804 -

Aviation Enterprise Funds For General Operations 686,369 -

Transit Enterprise Fund For General Operations 630,000 -

Internal Service Funds To Perform Street Repairs - 18,099

Internal Service Funds To Construct Corporation Maintenance Facility 166,517 -

4,756,554$ 4,756,554$

A loan from the Fleet Maintenance Fund to the General Fund in June 2000

to allow for additional street repairs and maintenance: $136,000 originalloan in 10 annual payments of $19,366 including interest at 7.00%. 18,099$

A loan from the Water Fund to the Solid Waste Fund in June 2009

for the construction of a Corporation Maintenance Facility: $3,000,765 originalloan in 15 annual payments of $200,051 plus interest of 7.00%. 3,000,765$

A loan from the Water Fund to the Sewer Fund in June 2009 for the construction

of a Corporation Maintenance Facility: $254,804 original loan in 15 annual payments of $16,987 plus interest of 3.0%. 254,804$

On June 30, 2009, the City's General Fund advanced $686,369 to the AviationFund for operations. The advance is due within one year at an interest rate of 0%. 686,369$

A loan from the Water Fund to the Fleet Maintenance Fund in June 2009

for the construction of a new Corporation Maintenance Facility: $150,907 originalloan; 15 annual installment payments of $16,703 including interest of 3.00%. 166,517$

A loan from the City's General Fund to the Transit Enterprise Fund in January 2007

to fund the general operation needs of the transit services: $900,000 original

loan; 10 annual installment payments of $90,000 including interest at the Citypooled investments interest rate. 630,000$

NOTE 10 – OTHER POST-EMPLOYMENT BENEFITS

A. Plan Description

In addition to the employee retirement benefits described in Note 7, the City provides Post-Employment Benefits Plan to cover eligible retirees’ health care insurance and life insurance costs in accordance with a resolution approved by the City Council. The benefits are provided in the form of:

An explicit subsidy where the City contributes towards health premiums of those active employees and retirees hired before June 23, 1984.

An explicit subsidy for postemployment life insurance benefits.

58

NOTE 10 – OTHER POST-EMPLOYMENT BENEFITS (Continued)

A. Plan Description (Continued)

For employees hired before June 24, 1984, the City operates under an agreement to continue to provide health care insurance benefits to all employees who retire after the age of 50 and who have 10 years of service to the City. The retirees are required to pay the employee insurance premium being charged at the time of their retirement and the City pays the excess of the cost over the amount of the premium. The employees' premium rate is frozen for them; they will never have to pay a larger amount regardless of changes in the City's cost to provide the insurance. In June, 1984, in the City's annual memoranda of understanding with employee bargaining units, this agreement was amended for those hired after June 23, 1984: Employees hired after June 23, 1984 must be 55 years old and work 10 years to qualify for the benefits. In addition, for those employees who are hired after June 23, 1984, any increases in premiums after retirement must be borne by the retirees (their rates are not frozen); the City still pays the excess of the cost over the amount of the employees cost of the premium. The City's obligation under the agreements continues until the death of the employee unless the employee chooses to discontinue the insurance.

The cost of the retiree health care insurance benefits is recognized as an expenditure as insurance premiums are paid on a monthly basis in advance. For the fiscal year ended June 30, 2009, those costs approximated $443,628. Sixty-three retired employees were affected by the provisions of these benefits at the end of the 2008-09 fiscal year.

B. Funding Policy

As required by GASB 45, an actuary will determine the City’s Annual Required Contributions (ARC) at least once every two fiscal years. The ARC is calculated in accordance with certain parameters, and includes (1) the Normal Cost for one year, and (2) a component for amortization of the total unfunded actuarial accrued liability (UAAL) over a period not to exceed 30 years.

The City has not established a separate irrevocable trust for its postretirement benefits plan as of June 30, 2009 and plans to use the pay-as-you-go method to fund the current cost.

C. Annual OPEB Cost and Net OPEB Obligation/(Asset)

The following table shows the City’s postemployment benefit plan assets/liabilities at June 30, 2009:

Item June 30, 2009

Annual Required Contributions 255,000$ Interest on Net OPEB Obligation/(Asset) - Adjustment to Annual Required Contributions -

Annual OPEB Cost (Expense) 255,000 Contributions Made -

Increase in Net OPEB Obligation/(Asset) 255,000

Net OPEB Obligation/(Asset) - Beginning of Year -

Net OPEB Obligation/(Asset) - End of Year 255,000$

The City’s Annual OPEB Cost, the percentage of Annual OPEB Cost contributed to the plan, and the Net OPEB Obligation/(Asset) for the fiscal year ended June 30, 2009 are as follows:

Actual Annual Net OPEB

Fiscal Annual Annual Required Percentage Obligation/

Year OPEB Cost Contribution Contribution Contribution (Asset)

6/30/09 255,000$ -$ 255,000$ 0.00% 255,000$

59

NOTE 10 – OTHER POST-EMPLOYMENT BENEFITS (Continued)

D. Funded Status and Funding Progress

The funded status of the plan as of June 30, 2009, the end of the first year of GASB 45 applicability, was as follows:

(F)

(C) UAAL as a

(A) (B) Unfunded (D) Percentage

Actuarial Actuarial Actuarial AAL Funded (E) of Covered

Valuation Asset Accrued (UAAL) Ratio Covered Payroll

Date Value Liability (AAL) (B)-(A) (A)/(B) Payroll (C)/(E)

7/1/2007 -$ 5,600,000$ 5,600,000$ 0.0% 23,602,000$ 23.7%

Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the Annual Required Contributions of the City are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents multiyear trend information that shows whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits.

E. Actuarial Methods and Assumptions

GASB 45 allows the use of one of several actuarial cost methods. These cost methods allocate the OPEB costs differently. The method used in this valuation is the Unit Credit. This method is the only method allowed under the Financial Accounting Standards Board’s corresponding statement, Statement of Financial Accounting Standards No. 106.

The valuation results are developed assuming a discount rate of 5.00%. Under GASB 45, the discount rate to be used for the valuation is determined based on the long term investment yield on the investments used to finance the payment of benefits. For this valuation it is assumed that postemployment benefits are paid from general assets which generally consist of short-term investments. If the City is considering prefunding or transferring assets to a trust, or equivalent arrangement, in which plan assets are established and dedicated to providing benefits to retirees and beneficiaries in accordance with the terms of the plan, the determination of the discount rate would be based on the nature and mix of current and expected investments. The City should consult with its auditors in selecting an appropriate discount rate. Alternative valuation results are provided in Section 5 assuming discount rates of 6.00% and 8.00% in the event the City wishes to determine the impact of a change in the discount rate on its annual OPEB expense.

Other critical assumptions used in the actuarial valuation are the health care cost trend rate and participation assumptions. The health care cost trend assumption is used to project the cost of health care to future years. The valuation uses a health care cost trend rate assumption of 11.00% in the year July 1, 2007 to June 30, 2008 grading down by 0.5% each year until an ultimate health care cost trend rate is reached in 2018 of 6.00%.

The participation assumption is the assumed percentage of future retirees that participate and enroll in the health plan. In absence of any recent postemployment plan participant enrollment data, the participation assumption used in this valuation is 95% for those retiring before age 65 and 80% for those retiring at 65 or older, and is based on the subsidies and participant’s share of the cost of postemployment health plan. The City should monitor the postemployment plan participant enrollment in future years in case this assumption needs to be revised.

The City’s unfunded actuarial accrued liability is being amortized as a level percentage of payroll on an open basis over 20 years. The remaining amortization period as of June 30, 2009 was 20 years.

60

NOTE 11 – EXCESS OF EXPENDITURES OVER APPROPRIATIONS

As of June 30, 2009, expenditures exceeded appropriations in individual funds as follows:

ExcessAppropriations Category Expenditures

General FundCommunity Development 34,826$ Interest and Fiscal Charges 388,532

NOTE 12 – SUBSEQUENT EVENT

To assist the Redevelopment Agency in carrying out its redevelopment activities, the City has, from time to time, advanced funds to the Agency in accordance with cooperation agreements entered into from time to time with respect to reach of the individual redevelopment project. These loaned funds carried an eight (8%) percent interest rate that has compounded the Agency’s debt to an amount in excess of sixty-six ($66,000,000) million dollars. Several of the projects undertaken and loan funds provided were done for the benefit of the City.

In light of recent approvals by the Agency and City of the amendments to and merger of the individual redevelopment plans, approval and adoption of the single Amended Plan covering all of the Merged Project Areas, and other recent circumstances that have occurred affecting the financing of redevelopment projects throughout the State, it has become beneficial for the Agency and City to enter into a formal Repayment Agreement acknowledging the amounts of advances currently outstanding, establish a formal repayment plan, repayment terms and adjustment of interest rate.

On October 20, 2009, City Council approved above Loan Repayment Agreement between the Tulare Redevelopment Agency and the City of Tulare as follows:

Interest Rate: 3% per annum Repayment Method: Agency pays interest only until fiscal year 2024/25; Principal and

interest final payment in fiscal year 2038/39. Total Payment: $21,500,000 Accrued Interest Forgiven: Approximately $44,000,000

As a result, $44,258,915 advances payable and receivable was written off to reflect the City’s forgiveness of the Agency’s debt.

NOTE 13 – PRIOR PERIOD ADJUSTMENTS

Beginning net assets in the Component Unit – Redevelopment Agency and in Aviation Enterprise Fund were restated as follows:

Adjustment for Adjustment forBeginning, Overstatement Understatement Beginning,

as previously of Land of Section 108 asActivity reported Purchased Loan restated

Component Unit:

Redevelopment Agency (47,829,262)$ -$ (387,000)$ (48,216,262)$Aviation Enterprise Fund 1,573,831 (198,170) - 1,375,661

Net Assets

61

REQUIRED SUPPLEMENTARY INFORMATION

62

CITY OF TULARE SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN

FUND BALANCES – BUDGET AND ACTUAL (GAAP BASIS) GENERAL FUND


Original Final Variance with Budget Budget Actual Final Budget

RevenuesTaxes 27,999,850$ 28,029,850$ 28,934,927$ 905,077$ Intergovernmental 1,035,000 1,210,160 170,892 (1,039,268) Licenses and Permits 734,050 734,050 640,257 (93,793) Fines and Forfeitures 40,000 40,000 (3,542) (43,542) Charges for Services 3,791,640 3,966,420 4,102,455 136,035 Interest and Rentals 846,530 846,530 2,206,834 1,360,304Grants 382,080 875,430 1,001,690 126,260 Assessments 61,000 61,000 84,430 23,430 Other 4,253,560 8,075,140 8,583,687 508,547

Total Revenues 39,143,710 43,838,580 45,721,630 1,883,050

Expenditures Current

General Government 4,013,160 4,121,650 4,194,242 (72,592) Public Safety 17,092,140 17,282,690 16,834,805 447,885 Public Works 2,284,390 2,471,810 2,398,132 73,678 Community Development 4,669,310 5,182,010 5,216,836 (34,826) Community Services 3,234,780 3,233,080 2,829,184 403,896 Library and Cultural 847,340 847,340 794,986 52,354

Capital Outlay 7,880,900 18,841,620 18,496,463 345,157 Debt Service

Principal 1,217,940 1,217,940 929,942 287,998 Interest and Fiscal Charges 165,740 165,740 554,272 (388,532)


Excess (Deficiency) of Revenues Over Expenditures (2,261,990) (9,525,300) (6,527,232) 2,998,068

Other Financing Sources (Uses)Transfers In 8,121,500 10,540,960 16,989,705 6,448,745Transfers Out (5,144,490) (8,158,820) (10,332,704) (2,173,884) Proceeds of Long-Term Debt - 5,415,000 - (5,415,000)

Total Other Financing Sources (Uses) 2,977,010 7,797,140 6,657,001 (1,140,139)

Net Change in Total Fund Balances 715,020 (1,728,160) 129,769 1,857,929

Fund Balances, July 1 - 35,717,063 35,717,063 -

Fund Balances, June 30 715,020$ 33,988,903$ 35,846,832$ 1,857,929$

63

CITY OF TULARE SCHEDULE OF EXPENDITURES BY DEPARTMENT –

BUDGETARY LEVEL OF CONTROL – BUDGET AND ACTUAL (GAAP BASIS) GENERAL FUND


Original Final Variance with Budget Budget Actual Final Budget

General GovernmentCity Council 76,610$ 76,610$ 62,136$ 14,474$ City Manager 485,610 484,010 409,731 74,279 Finance 1,027,150 1,141,990 1,031,614 110,376City Clerk 213,210 236,170 226,725 9,445 Personnel 388,060 384,860 300,814 84,046 Non-departmental 1,281,380 1,337,380 1,633,142 (295,762)Animal Control 541,140 589,310 530,080 59,230

Total General Government 4,013,160 4,250,330 4,194,242 56,088

Public SafetyPolice 9,584,430 9,501,880 9,137,077 364,803Fire 7,507,710 7,780,810 7,697,728 83,082

Total Public Safety 17,092,140 17,282,690 16,834,805 447,885

Public WorksStreets 2,009,960 2,167,680 2,088,827 78,853 Storm Drains 274,430 304,130 309,305 (5,175)

Total Public Works 2,284,390 2,471,810 2,398,132 73,678

Community DevelopmentPlanning 498,960 866,390 1,110,584 (244,194)Building Services 1,234,750 1,259,750 1,170,230 89,520 Engineering Administration 2,083,240 2,122,510 2,055,301 67,209 Building Inspection 852,360 852,360 769,496 82,864 Parking and Business Improvement - 61,000 84,430 (23,430)Dangerous Building Abatement - 20,000 26,795 (6,795)

Total Community Development 4,669,310 5,182,010 5,216,836 (34,826)

Community ServicesParks 2,097,610 2,095,910 1,894,613 201,297Community Services 1,131,670 1,131,670 925,460 206,210Cycle Park 5,500 5,500 9,111 (3,611)

Total Community Services 3,234,780 3,233,080 2,829,184 403,896

Library and Cultural 847,340 847,340 794,986 52,354

Capital Outlay 7,880,900 18,841,620 18,496,463 345,157

Debt ServicePrincipal 1,217,940 1,217,940 929,942 287,998Interest 165,740 165,740 554,272 (388,532)

Total Debt Service 1,383,680 1,383,680 1,484,214 (100,534)

Transfers Out 46,550,190 8,158,820 10,332,704 (2,173,884)

Total General Fund Expenditures 87,955,890$ 61,651,380$ 62,581,566$ (930,186)$

64

CITY OF TULARE REQUIRED SUPPLEMENTAL INFORMATION

FOR PENSION PLAN WITH CALPERS (Dollar Amount in Thousands)

(F)

Unfunded

(C) Actuarial

(A) Unfunded Liability as

Entry Age (B) Liability (D) Percentage

Actuarial Actuarial Actuarial (Excess Funded (E) of Covered

Valuation Accrued Asset Assets) Ratio Covered Payroll

Date Liability Value (A)-(B) (B)/(A) Payroll (A)-(B)/(E)

Retirement Program

6/30/03

Misc. 37,613$ 36,701$ 912$ 97.6% 9,840$ 9.3%

Safety 31,919 26,748 5,171 83.8% 3,554 145.5%

Total 69,532$ 63,449$ 6,083$ 91.3% 13,394$ 45.4%

6/30/04

Misc. 40,858$ 38,848$ 2,010$ 95.1% 9,740$ 20.6%

Safety 34,673 28,501 6,172 82.2% 3,700 166.8%

Total 75,531$ 67,349$ 8,182$ 89.2% 13,440$ 60.9%

6/30/05

Misc. 46,886$ 41,615$ 5,271$ 88.8% 10,141$ 52.0%

Safety 39,788 33,104 6,684 83.2% 4,141 161.4%

Total 86,674$ 74,719$ 11,955$ 86.2% 14,282$ 83.7%

6/30/06

Misc. 51,216$ 45,508$ 5,708$ 88.9% 11,489$ 49.7%

Safety 43,462 36,465 6,997 83.9% 4,494 155.7%

Total 94,678$ 81,973$ 12,705$ 86.6% 15,983$ 79.5%

6/30/07

Misc. 59,522$ 52,404$ 7,118$ 88.0% 12,070$ 59.0%

Safety 50,510 43,186 7,324 85.5% 5,254 139.4%

Total 110,032$ 95,590$ 14,442$ 86.9% 17,324$ 83.4%

6/30/08

Misc. 65,496$ 57,077$ 8,419$ 87.1% 13,130$ 64.1%

Safety 55,022 47,214 7,808 85.8% 5,781 135.1%

Total 120,518$ 104,291$ 16,227$ 86.5% 18,911$ 85.8%

65

CITY OF TULARE REQUIRED SUPPLEMENTAL INFORMATION

FOR OTHER POSTEMPLOYMENT BENEFIT PLAN

(F)

(C) UAAL as a

(A) (B) Unfunded (D) Percentage

Actuarial Actuarial Actuarial AAL Funded (E) of Covered

Valuation Asset Accrued (UAAL) Ratio Covered Payroll

Date Value Liability (AAL) (B)-(A) (A)/(B) Payroll (C)/(E)

7/1/2007 -$ 5,600,000$ 5,600,000$ 0.0% 23,602,000$ 23.7%

66


67

OTHER SUPPLEMENTARY INFORMATION

68

CITY OF TULARE COMBINING BALANCE SHEET

NONMAJOR GOVERNMENTAL FUNDS JUNE 30, 2009

Total

Special Capital Nonmajor

Revenue Projects Governmental

Funds Funds Funds

Assets

Cash and Investments 5,973,758$ 87,484$ 6,061,242$

Receivables

Accounts 2,240 - 2,240

Interest 26,570 285 26,855

Taxes 195,250 - 195,250

Intergovernmental 136,602 - 136,602

Total Assets 6,334,420$ 87,769$ 6,422,189$


Liabilities

Accounts Payable and Accrued Liabilities 50,379$ 533,740$ 584,119$

Due to Other Funds 133,783 9,285 143,068

Deferred Revenue 80,544 - 80,544

Total Liabilities 264,706 543,025 807,731

Fund Balances

Special Revenue Funds 6,069,714 - 6,069,714

Capital Projects Funds - (455,256) (455,256)

Total Fund Balances 6,069,714 (455,256) 5,614,458

Total Liabilities and Fund Balances 6,334,420$ 87,769$ 6,422,189$

69

CITY OF TULARE COMBINING STATEMENT OF REVENUES, EXPENDITURES,

AND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2009

Total

Special Capital Nonmajor

Revenue Projects Governmental

Funds Funds Funds

Revenues

Taxes 2,777,865$ -$ 2,777,865$

Intergovernmental 146,232 - 146,232

Fines and Forfeitures 236,850 - 236,850

Interest and Rentals 287,250 3,080 290,330

Grants 231,244 - 231,244

Meals 57,093 - 57,093

Assessments 397,097 - 397,097

Other 37,049 - 37,049

Total Revenues 4,170,680 3,080 4,173,760

Expenditures

Current

Public Safety 99,947 - 99,947

Community Development - 2,728,349 2,728,349

Community Services 1,205,522 - 1,205,522

Library and Cultural 60,586 - 60,586

Capital Outlay 28,024 - 28,024

Total Expenditures 1,394,079 2,728,349 4,122,428

Excess (Deficiency) of

Revenues Over Expenditures 2,776,601 (2,725,269) 51,332

Other Financing Sources (Uses)

Transfers In 369,914 2,567,444 2,937,358

Transfers Out (2,195,829) - (2,195,829)

Total Other Financing

Sources (Uses) (1,825,915) 2,567,444 741,529

Net Change in Total Fund Balances 950,686 (157,825) 792,861

Fund Balances - Beginning 5,119,028 (297,431) 4,821,597

Fund Balances - Ending 6,069,714$ (455,256)$ 5,614,458$

70


71

SPECIAL REVENUE FUNDS

Special Revenue Funds are used to account for the proceeds of specific revenue sources that are legally restricted to expenditures for specific purposes.

The Senior Services Fund accounts for receipts of funds from various sources and expenditures to provide meals to senior citizens.

The Gas Tax Fund accounts for receipts and expenditures of money apportioned under Streets and Highway Code Sections 2105, 2106, 2107 and 2107.5 of the State of California.

The Traffic Safety Fund accounts for vehicle code fund revenues and expenditures for traffic safety purposes.

The COPS – State Grant Fund accounts for the City’s allocation of the State of California Citizens Option for Public Safety (COPS) program established by AB 3229.

The Landscape and Lighting Fund accounts for revenues from assessments collected under the 1972 Landscape and Lighting Act and expenditures for maintenance of landscaping in the special assessment districts.

The OTS Grant Fund accounts for federal revenues for the comprehensive traffic safety program.

The Auto Theft Deterrence Fund accounts for state revenues for the suppression of auto thefts.

The Police Forfeiture Fund accounts for state and federal revenues for narcotic suppression activities.

The Vehicle Abatement Fund accounts for state and federal revenues for the abatement of abandoned vehicles.

The Library Adult Literacy Fund accounts for state funds provided to improve the overall adult literacy rate in the community and to allow for better access to the City’s library services.

The Measure R Fund accounts for the City’s share of the County wide ½ cent sales tax for various street projects.

72


NONMAJOR SPECIAL REVENUE FUNDS JUNE 30, 2009

Senior Traffic COPS -

Services Gas Tax Safety State Grant

Assets

Cash and Investments 200$ 4,452,770$ -$ 38,028$

Receivables

Accounts 1,940 - - -

Interest - 18,982 661 211

Taxes - 195,250 - -

Intergovernmental 25,695 - - 42,305

Total Assets 27,835$ 4,667,002$ 661$ 80,544$


Liabilities


Accrued Liabilities 17,781$ -$ -$ -$

Due to Other Funds 10,054 - - -

Deferred Revenue - - - 80,544

Total Liabilities 27,835 - - 80,544

Fund Balances

Unreserved

Undesignated - 4,667,002 661 -

Total Liabilities and

Fund Balances 27,835$ 4,667,002$ 661$ 80,544$

73

Landscape Auto

and OTS Theft Police

Lighting Grant Deterrence Forfeiture

Assets

Cash and Investments -$ 1,690$ 38,996$ 133,322$

Receivables

Accounts - 300 - -

Interest - 146 140 439

Taxes - - - -

Intergovernmental 625 - - -

Total Assets 625$ 2,136$ 39,136$ 133,761$


Liabilities


Accrued Liabilities 15,931$ 2,136$ -$ 11,642$

Due to Other Funds 123,729 - - -

Deferred Revenue - - - -

Total Liabilities 139,660 2,136 - 11,642

Fund Balances

Unreserved

Undesignated (139,035) - 39,136 122,119


Fund Balances 625$ 2,136$ 39,136$ 133,761$

(Continued)

74

CITY OF TULARE COMBINING BALANCE SHEET (Continued)

NONMAJOR SPECIAL REVENUE FUNDS JUNE 30, 2009

Library

Adult

Vehicle Literacy

Abatement Grant Measure R Total

Assets

Cash and Investments 124,627$ 2,293$ 1,181,832$ 5,973,758$

Receivables

Accounts - - - 2,240

Interest 406 - 5,585 26,570

Taxes - - - 195,250

Intergovernmental 9,841 - 58,136 136,602

Total Assets 134,874$ 2,293$ 1,245,553$ 6,334,420$


Liabilities


Accrued Liabilities 596$ 2,293$ -$ 50,379$

Due to Other Funds - - - 133,783

Deferred Revenue - - - 80,544

Total Liabilities 596 2,293 - 264,706

Fund Balances

Unreserved

Undesignated 134,278 - 1,245,553 6,069,714


Fund Balances 134,874$ 2,293$ 1,245,553$ 6,334,420$

75


76

CITY OF TULARE COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND

CHANGES IN FUND BALANCES NONMAJOR SPECIAL REVENUE FUNDS FOR THE YEAR ENDED JUNE 30, 2009

Senior Gas Traffic COPS -

Services Tax Safety State Grant

Revenues

Taxes -$ 1,864,961$ -$ -$

Intergovernmental 146,232 - - -

Fines and Forfeitures - - 202,108 -

Interest and Rentals - 175,723 869 2,056

Grants 15,286 - - 92,736

Meals 57,093 - - -

Assessments - - - -

Other 32,674 - - -

Total Revenues 251,285 2,040,684 202,977 94,792

Expenditures

Current

Public Safety - - - 68,161

Community Services 576,036 - - -

Library and Cultural - - - -

Capital Outlay - - - -

Total Expenditures 576,036 - - 68,161


Revenues Over Expenditures (324,751) 2,040,684 202,977 26,631


Transfers In 339,148 - - -

Transfers Out (14,397) (1,371,556) (202,802) (26,631)


Sources (Uses) 324,751 (1,371,556) (202,802) (26,631)

Net Change in Fund Balances - 669,128 175 -

Fund Balances - Beginning - 3,997,874 486 -

Fund Balances - Ending -$ 4,667,002$ 661$ -$

77

Landscape Auto

And OTS Theft Police

Lighting Grant Deterrence Forfeiture

Revenues

Taxes -$ -$ -$ -$

Intergovernmental - - - -

Fines and Forfeitures - 85,142 - -

Interest and Rentals (333) 609 309 3,296

Grants - - 48,000 8,030

Meals - - - -

Assessments 397,097 - - -

Other - - - 4,375

Total Revenues 396,764 85,751 48,309 15,701

Expenditures

Current

Public Safety - - - 6,297

Community Services 586,879 42,607 - -

Library and Cultural - - - -

Capital Outlay - - - 28,024

Total Expenditures 586,879 42,607 - 34,321


Revenues Over Expenditures (190,115) 43,144 48,309 (18,620)


Transfers In - - - -

Transfers Out - (43,144) (4,000) (1,500)


Sources (Uses) - (43,144) (4,000) (1,500)

Net Change in Fund Balances (190,115) - 44,309 (20,120)

Fund Balances - Beginning 51,080 - (5,173) 142,239

Fund Balances - Ending (139,035)$ -$ 39,136$ 122,119$

(Continued)

78

CITY OF TULARE COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND

CHANGES IN FUND BALANCES (Continued) NONMAJOR SPECIAL REVENUE FUNDS FOR THE YEAR ENDED JUNE 30, 2009

Library

Adult

Vehicle Literacy

Abatement Grant Measure R Total

Revenues

Taxes -$ -$ 912,904$ 2,777,865$

Intergovernmental - - - 146,232

Fines and Forfeitures - - - 287,250

Interest and Rentals 3,722 15 50,584 236,850

Grants 37,387 29,805 - 231,244

Meals - - - 57,093

Assessments - - - 397,097

Other - - - 37,049

Total Revenues 41,109 29,820 963,488 4,170,680

Expenditures

Current

Public Safety 25,489 - - 99,947

Community Services - - - 1,205,522

Library and Cultural - 60,586 - 60,586

Capital Outlay - - - 28,024

Total Expenditures 25,489 60,586 - 1,394,079


Revenues Over Expenditures 15,620 (30,766) 963,488 2,776,601


Transfers In - 30,766 - 369,914

Transfers Out - - (531,799) (2,195,829)


Sources (Uses) - 30,766 (531,799) (1,825,915)

Net Change in Fund Balances 15,620 - 431,689 950,686

Fund Balances - Beginning 118,658 - 813,864 5,119,028

Fund Balances - Ending 134,278$ -$ 1,245,553$ 6,069,714$

79

CITY OF TULARE SENIOR SERVICES FUND

SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES – BUDGET AND ACTUAL


Final Budget Actual

Variance with Final Budget

Revenues

Intergovernmental 146,240$ 146,232$ (8)$

Grants 12,970 15,286 2,316

Meals 76,790 57,093 (19,697)

Other 35,970 32,674 (3,296)

Total Revenues 271,970 251,285 (20,685)

Expenditures

Current

Community Services 605,030 576,036 28,994

Capital Outlay 1,250 - 1,250

Total Expenditures 606,280 576,036 30,244


Revenues Over Expenditures (334,310) (324,751) 9,559


Transfers In 348,710 339,148 (9,562)

Transfers Out (14,400) (14,397) 3

Net Change in Fund Balances - - -

Fund Balances, July 1 - - -

Fund Balances, June 30 -$ -$ -$

80

CITY OF TULARE GAS TAX FUND



Final Budget Actual

Variance with

Final Budget

Revenues

Taxes 1,030,000$ 1,864,961$ 834,961$

Interest and Rentals 1,000 175,723 174,723

Total Revenues 1,031,000 2,040,684 1,009,684


Transfers Out (2,854,000) (1,371,556) 1,482,444

Net Change in Fund Balances (1,823,000) 669,128 2,492,128

Fund Balances, July 1 3,997,874 3,997,874 -

Fund Balances, June 30 2,174,874$ 4,667,002$ 2,492,128$

81

CITY OF TULARE TRAFFIC SAFETY FUND



Final Budget Actual


Revenues

Fines and Forfeitures 93,500$ 202,108$ 108,608$

Interest and Rentals - 869 869

Total Revenues 93,500 202,977 109,477


Transfers Out (93,500) (202,802) (109,302)

Net Change in Fund Balances - 175 175

Fund Balances, July 1 486 486 -

Fund Balances, June 30 486$ 661$ 175$

82

CITY OF TULARE COPS – STATE GRANT FUND



Final Budget Actual


Revenues

Interest and Rentals -$ 2,056$ 2,056$

Grants 123,830 92,736 (31,094)

Total Revenues 123,830 94,792 (29,038)

Expenditures

Current Public Safety 97,180 68,161 29,019


Net Change in Fund Balances 26,650 26,631 (19)


Transfers Out (26,650) (26,631) 19


Revenues and Other

Sources Over Expenditures

and Other Uses - - -



83

CITY OF TULARE LANDSCAPE AND LIGHTING FUND



Final Budget Actual


Revenues

Interest and Rentals -$ (333)$ (333)$

Assessments 572,070 397,097 (174,973)

Total Revenues 572,070 396,764 (175,306)

Expenditures


Net Change in Fund Balances (98,100) (190,115) (92,015)

Fund Balances, July 1 51,080 51,080 -

Fund Balances, June 30 (47,020)$ (139,035)$ (92,015)$

84

CITY OF TULARE OTS GRANT FUND



Final Budget Actual


Revenues

Fines and Forfeitures 52,000$ 85,142$ 33,142$

Interest and Rentals 500 609 109

Total Revenues 52,500 85,751 33,251

Expenditures

Current


Excess (Deficiency) of Revenue

Over Expenditures (2,220) 43,144 45,364


Transfers Out - (43,144) (43,144)

Net Change in Fund Balances (2,220) - 2,220


Fund Balances, June 30 (2,220)$ -$ 2,220$

85

CITY OF TULARE AUTO THEFT DETERRENCE FUND



Final Budget Actual


Revenues

Interest and Rentals 400$ 309$ (91)$

Grants 48,000 48,000 -

Total Revenues 48,400 48,309 (91)

Expenditures

Current

Community Services - - -

Total Expenditures - - -

Excess (Deficiency) of Revenues

Over Expenditures 48,400 48,309 (91)


Transfers Out (31,400) (4,000) 27,400

Net Change in Fund Balances 17,000 44,309 27,309

Fund Balances, July 1 (5,173) (5,173) -

Fund Balances, June 30 11,827$ 39,136$ 27,309$

86

CITY OF TULARE POLICE FORFEITURE FUND



Final Budget Actual


Revenues

Interest and Rentals 100$ 3,296$ 3,196$

Grants - 8,030 8,030

Other 6,080 4,375 (1,705)

Total Revenues 6,180 15,701 9,521

Expenditures

Current

Public Safety 24,500 6,297 18,203

Capital Outlay 48,380 28,024 20,356





Transfers Out (49,500) (1,500) 48,000

Net Change in Fund Balances (116,200) (20,120) 96,080


Fund Balances, June 30 26,039$ 122,119$ 96,080$

87

CITY OF TULARE VEHICLE ABATEMENT FUND



Final Budget Actual

Variance with

Final Budget

Revenues

Interest and Rentals 1,500$ 3,722$ 2,222$

Grants 52,000 37,387 (14,613)

Total Revenues 53,500 41,109 (12,391)

Expenditures

Current

Public Safety 36,180 25,489 10,691

Net Change in Fund Balances 17,320 15,620 (1,700)


Fund Balances, June 30 135,978$ 134,278$ (1,700)$

88

CITY OF TULARE LIBRARY ADULT LITERACY FUND



Final Budget Actual


Revenues

Interest and Rentals -$ 15$ 15$

Grants 33,500 29,805 (3,695)

Total Revenues 33,500 29,820 (3,680)

Expenditures

Current

Library and Cultural 66,820 60,586 6,234




Transfers In 33,320 30,766 (2,554)

Net Change in Fund Balances - - -



89

CITY OF TULARE MEASURE R FUND



Final Budget Actual

Variance with

Final Budget

Revenues

Taxes 3,591,000$ 912,904$ (2,678,096)$

Interest and Rentals - 50,584 50,584

Total Revenues 3,591,000 963,488 (2,627,512)


Transfers Out (3,591,000) (531,799) 3,059,201

Net Change in Fund Balances - 431,689 431,689

Fund Balances, July 1 - 813,864 813,864

Fund Balances, June 30 -$ 1,245,553$ 1,245,553$

90


91

CAPITAL PROJECTS FUNDS

Capital Projects funds are used to account for financial resources to be used for the acquisition or construction of major capital facilities other than those financed by proprietary funds.

The Library Expansion Fund accounts for capital projects expenditures for the construction of the expansion of the Tulare Public Library.

The Fire Station #2 Fund accounts for the capital projects expenditures for the construction of Tulare Fire Station #2.



92


NONMAJOR CAPITAL PROJECTS FUNDS JUNE 30, 2009

Library Fire Fire Fire

Expansion Station #2 Station #3 Station #4 Total

Assets

Cash and Investments -$ 80,485$ 6,999$ -$ 87,484$

Interest Receivables - 262 23 - 285

Total Assets -$ 80,747$ 7,022$ -$ 87,769$



Accrued Liabilities 533,740$ -$ -$ -$ 533,740$

Due to Other Funds 9,285 - - - 9,285

Total Liabilities 543,025 - - - 543,025

Fund Balances

Unreserved - Undesignated (543,025) 80,747 7,022 - (455,256)

Total Liabilities and Fund Balances -$ 80,747$ 7,022$ -$ 87,769$

93

CITY OF TULARE COMBINING STATEMENT OF REVENUES, EXPENDITURES,

AND CHANGES IN FUND BALANCES NONMAJOR CAPITAL PROJECTS FUNDS


Library Fire Fire Fire

Expansion Station #2 Station #3 Station #4 Total

Revenues

Interest and Rentals 406$ 2,460$ 214$ -$ 3,080$

Total Revenues 406 2,460 214 - 3,080

Expenditures

Current

Community Development 2,726,249 - - 2,100 2,728,349


Over Expenditures (2,725,843) 2,460 214 (2,100) (2,725,269)

Other Financing Sources

Transfers In 2,565,344 - - 2,100 2,567,444

Net Change in Fund Balances (160,499) 2,460 214 - (157,825)

Fund Balances - Beginning (382,526) 78,287 6,808 - (297,431)

Fund Balances - Ending (543,025)$ 80,747$ 7,022$ -$ (455,256)$

94


95

INTERNAL SERVICE FUNDS

Internal Service funds are used to account for the financing of goods or services provided by one department of the City to another on a cost-reimbursement basis.

The Fleet Maintenance Fund accounts for the costs of maintaining and replacing City vehicles and equipment. Costs are funded by charges to using departments based upon actual usage and rental rates.

The Employee Welfare Fund accounts for the cost of the City's health insurance program. Costs are funded by charges to departments based upon the number of employees and by employee contributions for department coverage.

The Workers' Compensation Fund accounts for the cost of the City's self-insured workers' compensation program. Costs are funded by charges to departments based upon standard workers' compensation rates.

The General Insurance Fund accounts for the cost of the City's self-insured liability and fire insurance program. Costs are funded by charges to departments based upon a combination of number of employees and square footage of buildings factors.

The Unemployment Insurance Fund accounts for the cost of unemployment claims paid and is funded by the General Fund.

The Purchasing Fund accounts for the cost of purchases of inventory items and the department charges for issuance of those items.

96


ALL INTERNAL SERVICE FUNDS JUNE 30, 2009

Fleet Employee Workers'Assets Maintenance Welfare CompensationCurrent Assets Cash and Investments 4,962,557$ 2,989,179$ 2,410,159$ Cash and Investments with Fiscal Agent - (1,044) 660,722 Accounts Receivable 41,843 202,019 7,855 Other Receivables 121,735 - - Inventories - - - Advances to Other Fund 18,099 - - Due from Other Funds - - -

Total Current Assets 5,144,234 3,190,154 3,078,736

Noncurrent Assets Capital Assets

Nondepreciable: Land 75,000 - - Depreciable: Buildings 6,187,770 - - Improvements Other than Buildings 1,596,932 - - Machinery and Equipment 15,471,865 - - Accumulated Depreciation (9,219,501) - -

Total Noncurrent Assets 14,112,066 - -

Total Assets 19,256,300$ 3,190,154$ 3,078,736$

Liabilities

Current Liabilities Accounts Payable and Accrued Liabilities 77,709$ 399,149$ 1,601$ Due to Other Funds - - - Advances from Other Funds -- Current 14,590 - - Compensated Absences Payable -- Current 2,003 297 297 Capital Leases Payable -- Current 99,445 - -

Total Current Liabilities 193,747 399,446 1,898

Noncurrent Liabilities Advances from Other Funds 151,927 - - Capital Leases Payable 213,924 - - Compensated Absences Payable 31,482 4,917 4,924

Total Noncurrent Liabilities 397,333 4,917 4,924

Total Liabilities 591,080 404,363 6,822

Net Assets

Invested in Capital Assets, Net of Related Debt 13,798,697 - - Unrestricted 4,866,523 2,785,791 3,071,914

Total Net Assets 18,665,220$ 2,785,791$ 3,071,914$

97

General UnemploymentInsurance Insurance Purchasing Total

5,144$ -$ -$ 10,367,039$820,622 - - 1,480,300

1,243 5 134,478 387,443 - - - 121,735 - - 208,444 208,444 - - - 18,099

376,190 - - 376,190

1,203,199 5 342,922 12,959,250

- - - 75,000

- - - 6,187,770- - - 1,596,932- - 13,419 15,485,284- - (13,419) (9,232,920)

- - - 14,112,066

1,203,199$ 5$ 342,922$ 27,071,316$

1,601$ -$ 12,791$ 492,851$ - 5 376,185 376,190 - - - 14,590

297 - 1,069 3,963 - - - 99,445

1,898 5 390,045 987,039

- - - 151,927 - - - 213,924

4,917 - 14,273 60,513

4,917 - 14,273 426,364

6,815 5 404,318 1,413,403

- - - 13,798,6971,196,384 - (61,396) 11,859,216

1,196,384$ -$ (61,396)$ 25,657,913$

98

CITY OF TULARE COMBINING STATEMENT OF REVENUES, EXPENSES,

AND CHANGES IN NET ASSETS ALL INTERNAL SERVICE FUNDS


Fleet Employee Workers'

Maintenance Welfare Compensation

Operating Revenues

Departmental Charges 2,692,007$ 2,552,280$ 1,557,459$

Employee Contributions - 1,083,904 -

Total Operating Revenues 2,692,007 3,636,184 1,557,459

Operating Expenses

General Administration 116 3,913 1,343

Personal Services 537,870 118,093 60,958

Contractual Services 195,455 - 930

Equipment Usage and Operation 736,416 - -

Insurance 110,192 3,364,929 537,511

Depreciation 1,578,971 - -

Total Operating Expenses 3,159,020 3,486,935 600,742

Operating Income (Loss) (467,013) 149,249 956,717

Nonoperating Revenues (Expenses)

Interest Income (Expense) 172,647 86,659 63,032

Grants 27,500 - -

Other Income 87,985 46,263 -

Gain on Sale of Assets - - -

Total Nonoperating Revenues 288,132 132,922 63,032

Income (Loss) Before

Transfers (178,881) 282,171 1,019,749

Transfers In 6,588,302 - -

Operating Transfers Out (150,907) - -

Change in Net Assets 6,258,514 282,171 1,019,749

Net Assets (Deficit), Beginning 12,406,706 2,503,620 2,052,165

Net Assets (Deficit), Ending 18,665,220$ 2,785,791$ 3,071,914$

99

General Unemployment

Insurance Insurance Purchasing Totals

527,850$ -$ 1,129,383$ 8,458,979$

- - - 1,083,904

527,850 - 1,129,383 9,542,883

1,331 - 4,186 10,889

61,043 - 71,131 849,095

- - - 196,385

- - 1,184,557 1,920,973

381,081 11,910 - 4,405,623

- - - 1,578,971

443,455 11,910 1,259,874 8,961,936

84,395 (11,910) (130,491) 580,947

10,474 - - 332,812

- - - 27,500

- - 136,492 270,740

- - - -

10,474 - 136,492 631,052

94,869 (11,910) 6,001 1,211,999

- 11,910 - 6,600,212

- - - (150,907)

94,869 - 6,001 7,661,304

1,101,515 - (67,397) 17,996,609

1,196,384$ -$ (61,396)$ 25,657,913$

100

CITY OF TULARE COMBINING STATEMENT OF CASH FLOWS

ALL INTERNAL SERVICE FUNDS FOR THE YEAR ENDED JUNE 30, 2009



Cash Flows from Operating Activities:

Cash received from interfund services provided 3,640,060$ 3,515,731$ 1,561,518$

Cash paid for salaries and benefits (531,070) (120,724) (61,019)

Cash paid for services and supplies (1,045,484) (3,285,303) (538,203)

Net Cash Provided by (Used for) Operating Activities 2,063,506 109,704 962,296

Cash Flows from Non-Capital Financing Activities:Grants 27,500 - - Operating transfers from other funds 6,588,302 - -

Operating transfers to other funds (150,907) - -

Net Cash Provided by (Used for) Non-Capital

Financing Activities 6,464,895 - -

Cash Flows from Capital and Related Financing Activities:

Payments made on capital leases (66,654) - -

Acquisition of fixed assets (7,299,953) - -

Net Cash Provided by (Used for) Capital

and Related Financing Activities (7,366,607) - -

Cash Flows from Investing Activities:

Interest Income 172,647 86,659 63,032

Net Cash Provided by Investing Activities 172,647 86,659 63,032

Net Increase (Decrease) in Cash and Cash Equivalents 1,334,441 196,363 1,025,328

Cash and Cash Equivalents, July 1 3,628,116 2,791,772 2,045,553

Cash and Cash Equivalents, June 30 4,962,557$ 2,988,135$ 3,070,881$

101


Insurance Insurance Purchasing Total

371,804$ -$ 1,188,195$ 10,277,308$

(61,094) - (74,151) (848,058)

(380,858) (34,398) (1,114,044) (6,398,290)

(70,148) (34,398) - 3,030,960

- - - 27,500 - 11,910 - 6,600,212

- - - (150,907)

- 11,910 - 6,476,805

- - - (66,654)

- - - (7,299,953)

- - - (7,366,607)

10,474 - - 332,812

10,474 - - 332,812

(59,674) (22,488) - 2,473,970

885,440 22,488 - 9,373,369

825,766$ -$ -$ 11,847,339$

(Continued)

102

CITY OF TULARE COMBINING STATEMENT OF CASH FLOWS

ALL INTERNAL SERVICE FUNDS (Continued) FOR THE YEAR ENDED JUNE 30, 2009



Operating Income (Loss) (467,013)$ 149,249$ 956,717$

Other Income 87,985 46,263 -

Adjustments to Reconcile Operating Income (Loss) to

Net Cash Provided by (Used for) Operating Activities:

Depreciation 1,578,971 - -

Changes in assets and liabilities:

(Increase) Decrease in accounts receivable 292 (166,716) 4,059

(Increase) Decrease in inventory - - -

(Increase) Decrease in advances to other funds 859,776 - -

(Increase) Decrease in due from other funds - - -

Increase (Decrease) in accounts payable

and accrued liabilities (139,738) 79,626 238 Increase in due to other funds 150,907 - -

Increase in advance from other funds (14,590) - -

Increase (Decrease) in compensated absences payable 6,916 1,282 1,282

Net Cash Provided by (Used for) Operating Activities 2,063,506 109,704 962,296

Reconciliation of cash and cash equivalents per

statement of cash flows to the balance sheet:

Cash and investments 4,962,557 2,989,179 2,410,159

Cash and investments with fiscal agents - (1,044) 660,722

Cash and Cash Equivalents per Statement of Cash Flows 4,962,557$ 2,988,135$ 3,070,881$

103


Insurance Insurance Purchasing Total

84,395$ (11,910)$ (130,491)$ 580,947$

- - 136,492 270,740

- - - 1,578,971

2,046 (5) (77,680) (238,004)

- - 24,752 24,752

- - - 859,776

(158,092) - - (158,092)

223 (22,488) (112,326) (194,465)- 5 158,087 308,999

- - - (14,590)

1,280 - 1,166 11,926

(70,148) (34,398) - 3,030,960

5,234 - - 10,367,129

820,532 - - 1,480,210

825,766$ -$ -$ 11,847,339$

104


105

FIDUCIARY FUNDS

Trust and Agency funds are used to account for assets held by the City in a trustee capacity or as an agent for individuals, private organizations, other governments and/or other funds.

The Agency Funds account for receipts and disbursements of the Youth Service Bureau and Development Impact Fees.

106

CITY OF TULARE AGENCY FUNDS

COMBINING STATEMENT OF CHANGES IN ASSETS AND LIABILITIES FIDUCIARY FUNDS


Balance Balance

June 30, 2008 Additions Deletions June 30, 2009

AGENCY FUND

Assets

Cash and Investments 1,713,763$ 6,259,043$ 6,145,335$ 1,827,471$

Due from Other Governments 505,406 509,827 505,406 509,827

Accounts Receivable 2,141 55,212 2,122 55,231

Prepaid Expense 25,749 - 46 25,703

Total Assets 2,247,059$ 6,824,082$ 6,652,909$ 2,418,232$

Liabilities

Accounts Payable 442,743$ 5,760,400$ 5,744,012$ 459,131$

Deposits Payable 1,804,316 8,401,511 8,246,726 1,959,101

Total Liabilities 2,247,059$ 14,161,911$ 13,990,738$ 2,418,232$

AGENCY FUND - DEVELOPMENT IMPACT FEES

Assets



Total Assets 5,302,969$ 4,574,606$ 7,051,862$ 2,825,713$

Liabilities

Accounts Payable -$ -$ -$ -$

Due to Other Funds 41,875 14,805 41,875 14,805



TOTAL - ALL AGENCY FUNDS

Assets


Due from Other Governments 505,406 509,827 505,406 509,827


Prepaid Expense 25,749 - 46 25,703

Total Assets 7,550,028$ 11,398,688$ 13,704,771$ 5,243,945$

Liabilities

Accounts Payable 442,743$ 5,760,400$ 5,744,012$ 459,131$

Due to Other Funds 41,875 14,805 41,875 14,805



107

CITY OF TULARE MEASURE I SALES TAX REVENUE AND RELATED

EXPENDITURES – BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2009

Final Variance with

Budget Actual Final Budget

Revenues

Measure I Sales Tax 4,250,790$ 3,971,964$ (278,826)$

Expenditures

Measure I - Police 2,695,920 2,626,153 69,767

Measure I - Fire 1,004,100 958,191 45,909

Measure I - Streets - 531,163 (531,163)

Total Expenditures 3,700,020 4,115,507 (415,487)


Over Expenditures 550,770$ (143,543)$ (694,313)$

108


109

STATISTICAL SECTION

110


111

CITY OF TULARE STATISTICAL SECTION


The statistical section of the City’s comprehensive annual financial report presents detailed information as a context for understanding what the information presented in the financial statements, note disclosures and required supplementary information say about the City’s overall financial health.

Contents Pages

Financial Trends

These schedules contain trend information to help the reader understand how the City’s financial performance and well being have changed over time. 112 – 121

Revenue Capacity

These schedules contain information to help the reader assess the factors affecting the City’s ability to generate its propertyand sales tax revenues. 122 – 129

Debt Capacity

These schedules present information to help the reader assess the affordability of the City’s current level of outstanding debt and the City’s ability to issue additional debt in the future. 130 – 137

Demographic 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. 138 – 140

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. 141 – 145

112

CITY OF TULARE NET ASSETS BY COMPONENTLAST SEVEN FISCAL YEARS

2003 2004 2005 2006


16,109,623$ 23,156,238$ 26,833,821$ 33,166,653$

Restricted - - - -

Unrestricted 57,566,620 58,442,530 65,408,770 71,510,372

73,676,243$ 81,598,768$ 92,242,591$ 104,677,025$

Business-type Activities:

37,363,825$ 37,076,953$ 41,321,330$ 57,986,627$

Restricted 11,328,132 19,520,605 15,561,699 15,721,361

Unrestricted 1,022,532 (27,505,575) (3,362,494) (14,315,941)

49,714,489$ 29,091,983$ 53,520,535$ 59,392,047$

Primary Government:

53,473,448$ 60,233,191$ 68,155,151$ 91,153,280$

Restricted 11,328,132 19,520,605 15,561,699 15,721,361

Unrestricted 58,589,152 30,936,955 62,046,276 57,194,431

123,390,732$ 110,690,751$ 145,763,126$ 164,069,072$

Invested in capital assets,

Total primary government net

assets


Total governmental activities net

assets


net of related debt

Total business-type activities net

assets

net of related debt

net of related debt

Fiscal Year

The City of Tulare implemented GASB 34 for the fiscal year ended June 30, 2003. Information prior to the implementation is not available.

Source: Comprehensive Annual Financial Report (CAFR) Statement of Net Assets

113

2007 2008 2009

110,129,292$ 129,555,443$ 142,261,018$

- 23,652,940 19,215,692

84,457,595 66,208,918 74,474,840

194,586,887$ 219,417,301$ 235,951,550$

52,468,556$ 107,113,034$ 86,649,558$

85,998,650 44,617,222 51,229,220

(74,574,833) (74,352,100) (52,851,820)

63,892,373$ 77,378,156$ 85,026,958$

162,597,848$ 236,668,477$ 228,910,576$

85,998,650 68,270,162 70,444,912

9,882,762 (8,143,182) 21,623,020

258,479,260$ 296,795,457$ 320,978,508$

Fiscal Year

114

CITY OF TULARE CHANGES IN NET ASSETS

LAST SEVEN FISCAL YEARS

2003 2004 2005 2006

Expenses:


General Government 2,424,987$ 2,531,464$ 2,544,937$ 1,933,465$Intergovernmental 4,865 3,895 3,896 3,895 Public Safety 8,801,828 9,880,586 11,663,036 13,372,193Public Works 1,702,820 1,700,067 1,924,049 2,100,496Community Development 2,430,050 2,141,787 2,545,200 3,442,573Community Services 2,379,148 2,628,050 2,889,063 3,025,032Library and Cultural 368,665 729,689 1,376,479 1,541,423Interest on Long-Term Debt 864,316 473,145 451,701 508,483

Total Governmental Activities Expenses 18,976,679 20,088,683 23,398,361 25,927,560

Business-Type Activities:Aviation 145,065 143,876 189,335 158,865Transit 1,721,926 1,985,561 2,325,655 2,229,068Water 3,160,648 3,202,719 3,255,991 3,760,697Solid Waste 4,372,942 4,877,029 5,426,552 5,696,194Sewer 8,945,527 9,555,978 8,005,084 9,953,994

Total Business-Type Activities Expenses 18,346,108 19,765,163 19,202,617 21,798,818

Total Primary Government Expenses 37,322,787 39,853,846 42,600,978 47,726,378

Program Revenues:

Governmental Activities:Charges for Services:

General Government 328,727 387,935 399,798 355,884Intergovernmental 1,254,088 1,110,950 1,238,362 1,355,515Public Safety 1,193,162 1,571,951 2,004,347 2,587,645Public Works 230,832 262,855 302,259 386,629Community Development 329,414 502,226 1,487,515 2,331,095Community Services 322,514 417,398 453,858 556,804Library and Cultural 49,976 37,783 216,238 283,722Interest on Long-Term Debt - - - -

Operating Grants and Contributions 272,033 434,962 333,406 52,689Capital Grants and Contributions 5,421,020 2,380 1,243 -

Total Governmental Activities Program Revenues 9,401,766 4,728,440 6,437,026 7,909,983

Business-Type Activities:Charges for Services:

Aviation 58,083 58,340 61,467 63,857Transit 1,364,105 1,235,506 1,576,025 1,621,973Water 3,560,124 4,079,814 4,426,660 5,083,108Solid Waste 4,314,573 4,490,528 4,752,226 5,471,596Sewer 8,122,866 7,617,101 10,139,732 11,727,127

Operating Grants and Contributions - - - - Capital Grants and Contributions 1,377,552 1,638,883 1,221,308 2,922,213

Total Business-Type Activities Program Revenues 18,797,303 19,120,172 22,177,418 26,889,874

Total Primary Government Program Revenues 28,199,069 23,848,612 28,614,444 34,799,857

Fiscal Year

(Continued)

115

2007 2008 2009

4,405,718$ 2,855,538$ 4,372,097$ 3,895 28,228 3,904

15,345,247 17,234,653 17,919,518 2,499,561 2,816,141 2,655,054 5,469,002 7,791,822 5,367,023 3,534,104 4,075,367 4,161,627 3,513,601 3,331,468 4,082,194

99,986 668,323 2,649,504

34,871,114 38,801,540 41,210,921

164,682 149,838 135,527 2,291,825 2,373,838 2,569,527 4,446,988 5,774,160 5,360,552 6,276,096 6,828,700 6,392,221

10,850,918 12,797,031 13,920,042

24,030,509 27,923,567 28,377,869

58,901,623 66,725,107 69,588,790

525,607 307,426 465,136 1,649,615 180,370 176,350 2,022,999 2,079,850 2,139,721

298,200 301,977 282,465 2,617,517 2,428,421 1,692,768

421,623 436,384 442,745 419,176 363,663 434,294

- - - 203,221 153,895 153,891 124,714 931,941 150,871

8,282,672 7,183,927 5,938,241

99,294 103,064 111,999 1,864,717 1,507,696 2,131,920 5,214,527 6,383,693 4,673,549 5,743,916 6,513,112 5,946,594

12,303,626 18,812,643 16,887,266 - - -

1,887,471 7,543,285 4,604,955

27,113,551 40,863,493 34,356,283

35,396,223 48,047,420 40,294,524

Fiscal Year

(Continued)

116

CITY OF TULARE CHANGES IN NET ASSETS (Continued)

LAST SEVEN FISCAL YEARS

2003 2004 2005 2006

Net Revenues (Expenses):Governmental Activities (9,574,913) (15,360,243) (16,961,335) (18,017,577)Business-Type Activities 451,195 (644,991) 2,974,801 5,091,056

Total Net Revenues (Expenses) (9,123,718) (16,005,234) (13,986,534) (12,926,521)

Governmental Activities:Taxes:

Sales Tax 5,576,754 5,725,592 6,209,806 7,220,399Property Tax 2,208,405 2,355,252 2,170,347 2,553,998Utility Tax 4,046,692 4,156,796 4,405,682 4,891,749Motel/Hotel and Franchise Tax 1,634,225 1,876,881 2,059,010 2,327,371

2,609,779 2,116,429 3,638,093 3,561,218Investment Income 1,121,689 3,739,334 4,280,463 4,610,583Other General Revenues 2,284,471 3,235,016 4,784,368 4,340,440

- - - 883,803- - - 56,456

Transfers (497,177) 77,468 57,389 5,994

Total Governmental Activities 18,984,838 23,282,768 27,605,158 30,452,011

Business-Type Activities:Investment Income 813,520 642,787 968,326 786,450Transfers 497,177 (77,468) (57,389) (5,994)

Total Business-Type Activities 1,310,697 565,319 910,937 780,456

Total Primary Government 20,295,535 23,848,087 28,516,095 31,232,467

Changes in Net Assets

Governmental Activities 9,409,925 7,922,525 10,643,823 12,434,434Business-Type Activities 1,761,892 (79,672) 3,885,738 5,871,512

Total Primary Government 11,171,817$ 7,842,853$ 14,529,561$ 18,305,946$

General Revenues and Other Changes in Net

Assets:

Fiscal Year

(intergovernmental, unrestricted)

Grants and Contributions Not

Gain on Sale of Capital Assets Restricted to Specific Programs

Motor Vehicle-in-Lieu Tax


Source: Comprehensive Annual Financial Report (CAFR) Statement of Net Assets

117

2007 2008 2009

(26,588,442) (31,617,613) (35,272,680) 3,083,042 12,939,926 5,978,414

(23,505,400) (18,677,687) (29,294,266)

11,859,889 16,163,788 14,466,030 3,577,111 4,279,124 4,583,226 5,370,352 5,348,107 5,295,978 2,515,731 2,524,436 2,548,329

4,042,805 4,580,676 4,819,229 5,644,508 6,504,081 6,709,281 8,458,768 15,202,114 9,123,660

349,443 1,285,206 955,672 76,882 30,055 -

289,624 530,440 3,305,524

42,185,113 56,448,027 51,806,929

1,706,908 1,076,297 4,777,743 (289,624) (530,440) (3,305,524)

1,417,284 545,857 1,472,219

43,602,397 56,993,884 53,279,148

15,596,671 24,830,414 16,534,249 4,500,326 13,485,783 7,450,633

20,096,997$ 38,316,197$ 23,984,882$

Fiscal Year

118

CITY OF TULARE FUND BALANCES OF GOVERNMENTAL FUNDS

LAST SEVEN FISCAL YEARS (modified accrual basis of accounting)

2003 2004 2005 2006

General Fund:

Reserved 17,279,622$ 17,558,776$ 17,684,766$ 18,275,950$

Unreserved 9,456,203 8,049,768 10,802,682 12,539,095

Total General Fund 26,735,825$ 25,608,544$ 28,487,448$ 30,815,045$

All Other Governmental Funds:

Reserved, Reported in:

Debt Service Funds 759,656$ 1,014,485$ 1,043,538$ 1,051,951$

Unreserved, Reported in:

Special Revenue Funds 260,926 179,177 1,814,801 3,330,476

Capital Projects Funds 2,440,070 1,586,815 141,760 (19,520)

Total All Other Governmental Funds 3,460,652$ 2,780,477$ 3,000,099$ 4,362,907$

Fiscal Year


Source: Comprehensive Annual Financial Report (CAFR) Balance Sheet – Governmental Funds

119

2007 2008 2009

22,001,145$ 25,285,362$ 26,437,732$

15,676,717 10,431,701 9,409,100

37,677,862$ 35,717,063$ 35,846,832$

1,112,693$ 23,427,969$ 16,374,755$

4,313,146 5,119,028 6,069,714

(224,289) (297,431) (455,256)

5,201,550$ 28,249,566$ 21,989,213$

Fiscal Year

120

CITY OF TULARE CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS

LAST SEVEN FISCAL YEARS (modified accrual basis of accounting)

2003 2004 2005 2006

Revenues:

Taxes 16,075,855$ 16,230,950$ 18,482,938$ 20,554,735$

Intergovernmental 1,253,429 1,110,321 1,308,261 2,795,298

Licenses and Permits 366,063 466,566 958,444 1,505,099

Fines and Forfeitures 130,570 129,994 172,139 126,287

Charges for Services 2,455,284 3,180,777 3,604,812 4,678,772

Interest and Rentals 963,817 829,613 855,938 890,924

Grants 4,496,881 1,042,574 2,015,872 924,397

Meals 77,013 75,032 68,119 70,776

Assessments 102,616 109,687 129,232 192,338

Other 2,482,463 1,423,001 2,580,549 3,644,967

Total Revenues 28,403,991 24,598,515 30,176,304 35,383,593

Expenditures:

Current:

General Government 2,531,117 2,160,093 2,251,173 2,550,663

Intergovernmental 4,865 3,895 3,896 3,895

Public Safety 8,963,928 9,856,627 11,482,782 13,154,240

Public Works 1,782,364 1,688,288 1,849,499 2,012,500

Community Development 2,617,712 3,320,630 3,836,553 3,231,634

Community Services 2,425,368 2,620,962 2,838,583 2,975,889

Library and Cultural 662,897 649,204 662,982 694,063

Capital Outlay 7,329,835 5,001,038 2,687,696 6,099,406

Debt Service:

Principal 203,882 589,802 642,795 662,245

Interest and Fiscal Charges 812,127 502,247 482,525 530,781


1,069,896 (1,794,271) 3,437,820 3,468,277

Other Financing Sources (Uses):

Transfers In 6,884,105 4,595,118 2,207,877 4,160,480

Transfers Out (7,556,898) (4,608,303) (2,547,171) (3,938,352)

Issuance of Bonds 6,020,000 - - -

5,347,207 (13,185) (339,294) 222,128

Net Change in Fund Balances 6,417,103$ (1,807,456)$ 3,098,526$ 3,690,405$

5.08% 5.11% 4.68% 4.63%

Fiscal Year

Over (Under) Expenditures

of Non-Capital Expenditures

Total Other Financing Sources (Uses)


Debt Service as a Percentage

121

2007 2008 2009

27,365,888$ 32,896,131$ 31,712,792$

2,738,351 177,349 317,124

1,652,910 1,218,021 640,257

192,294 233,436 233,308

4,148,235 4,098,683 4,102,455

1,686,320 1,962,211 2,893,221

677,378 2,044,042 1,232,934

67,150 65,411 57,093

312,148 370,602 481,527

7,464,240 14,837,908 8,620,736

46,304,914 57,903,794 50,291,447

4,238,567 3,798,782 4,194,242

3,896 1,628,184 3,904

14,319,066 16,532,003 16,934,752

2,251,300 2,606,821 2,398,132

3,927,092 6,027,437 7,945,185

3,384,773 3,987,118 4,034,706

763,357 859,849 855,572

8,231,702 28,645,304 18,524,487

1,164,169 6,432,137 1,914,942

558,445 1,073,901 2,604,554

38,842,367 71,591,536 59,410,476

7,462,547 (13,687,742) (9,119,029)

6,428,333 20,856,930 22,570,192

(6,189,421) (20,840,420) (19,581,747)

- 34,758,449 -

238,912 34,774,959 2,988,445

7,701,459$ 21,087,217$ (6,130,584)$

5.63% 17.48% 11.05%

Fiscal Year

122

CITY OF TULARE ASSESSED VALUE AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY

LAST TEN FISCAL YEARS

Secured Unsecured

2000 1,318,110,351$ 61,653,584$ 1,379,763,935$ 0.15%

2001 1,385,519,972 63,812,222 1,449,332,194 0.13%

2002 1,431,235,607 63,927,877 1,495,163,484 0.25%

2003 1,484,343,994 65,990,013 1,550,334,007 0.29%

2004 1,562,323,196 67,852,847 1,630,176,043 0.30%

2005 1,666,885,107 68,073,906 1,734,959,013 0.35%

2006 1,891,681,055 73,181,208 1,964,862,263 0.30%

2007 2,281,534,333 79,440,106 2,360,974,439 0.30%

2008 2,751,300,875 99,377,099 2,850,677,974 0.30%

2009 2,960,375,724 109,793,770 3,070,169,494 0.30%

City

Total Direct

Tax Rate

Fiscal Year Ended

June 30

Total Assessed

Value (1)

(1) Assessed valuations are net of exemptions.

Source: County of Tulare, Office of the Auditor-Controller

NOTE:

In 1978 the voters of the State of California passed Proposition 13 which limited property taxes to a total maximum rate of 1% based upon the assessed value of the property being taxed. Each year, the assessed value of property may be increased by an "inflation factor” (limited to a maximum increase of 2%). With few exceptions, property is only reassessed at the time that it is sold to a new owner. At that point, the new assessed value is reassessed at the purchase price of the property sold. The assessed valuation data shown above represents the only data currently available with respect to the actual value of taxable property and is subject to the limitations described above.

123

CITY OF TULARE DIRECT AND OVERLAPPING PROPERTY TAX RATES

(Rate per $100 of assessed value) CURRENT YEAR AND ELEVEN YEARS AGO

2009 1998

City Direct Rates:

City Basic Rate 0.141 0.141

Total Average City Direct Rate 0.141 0.141

Overlapping Rates:

County of Tulare 0.164 0.167

Buena Vista Elementary School District 0.000 0.154

Liberty Elementary School District 0.000 0.123

Oak Valley Union Elementary School District 0.000 0.122

Palo Verde Union Elementary School District 0.000 0.166

Tulare City Elementary School District 0.165 0.150

Tulare Joint Union High School District 0.169 0.048

College of Sequoias 0.047 0.022

County Schools Service Fund 0.022 0.022

Kaweah Delta Water District 0.022 0.002

Tulare Cemetery District 0.002 0.002

Tulare County Flood Control District 0.002 0.228

Tulare Hospital District 0.064 0.025

Tulare Irrigation District 0.000 0.021

Tulare Memorial District 0.010 0.010

Tulare Mosquito District 0.017 0.018

Education Revenue Augmentation 1993/94 0.235 0.235

Total Average Direct Rate 1.060 1.656

NOTE:

In 1978, California voters passed Proposition 13 which sets the property tax rate at 1% fixed amount. This 1.00% is shared by all taxing agencies for which the subject property resides within. As a result, the tax rates have been frozen since 1979. The above rates are an average of the total of all tax rate areas within the City of Tulare.

Source: County of Tulare, Office of the Auditor-Controller

124

CITY OF TULARE HISTORICAL SALES AND USE TAX RATES

Effective End State Local City County Combined

Date Date Jurisdiction Transportation Fund Rate Rate Rate

8/1/1933 6/30/1935 (2) 2.50% 2.50%

7/1/1935 6/30/1943 3.00% 3.00%

7/1/1943 6/30/1949 2.50% 2.50%

7/1/1949 12/31/1961 3.00% 1.00% 4.00%

1/1/1962 7/31/1967 4.00% 1.00% 5.00%

8/1/1967 6/30/1972 3.75% 0.25% 1.00% 5.00%

7/1/1972 6/30/1973 4.75% 0.25% 1.00% 6.00%

7/1/1973 9/30/1973 3.75% 0.25% 1.00% 5.00%

10/1/1973 3/31/1974 0.05% 0.25% 1.00% 1.30%

4/1/1974 11/30/1989 5.00% 0.25% 1.00% 6.25%

12/1/1989 12/31/1990 4.75% 0.25% 1.00% 6.00%

1/1/1991 7/14/1991 6.00% 0.25% 1.00% 7.25%

7/15/1991 12/31/2000 5.75% 0.25% 1.00% 7.00%

1/1/2001 12/31/2001 6.00% 0.25% 1.00% 7.25%

1/1/2002 6/30/2004 6.25% 0.25% 0.75% (3) 7.25%

7/1/2004 3/31/2007 (3) 6.25% 0.25% 0.75% 7.25%

4/1/2006 7.25% 0.25% 1.25% (4) 8.75%

4/1/2007 7.25% 0.25% 1.25% 0.50% (5) 9.25%

State Mandated Purposes

Source: State Board of Equalization, State of California

Notes:1. The Bradley-Burns Uniform Local Sales and Use Tax Law was enacted in 1955. The law

authorizes cities and counties to impose a sales and use tax. Effective January 1, 1962, all cities and counties have adopted ordinances for the State Board of Equalization to collect the local tax.

2. Sales tax only. The use tax was enacted effective July 1, 1955. 3. In March 2004, a State ballot measure was passed issuing deficit reduction bonds for State

purposes. Funding was provided effective July 1, 2004 by repealing 25% of the local 1% sales tax and then adopting a new ¼-cent sales tax dedicated to repayment of the deficit reduction bonds. Cities and counties would then be "made whole" by the State from increased property allocations via reduced contributions to ERAF. This "triple flip" is theoretically revenue-neutral, and as such, the effective rate for revenue purposes remains at 1%.

4. In November 2005, voters in the City of Tulare approved a local sales tax measure increasing the City rate by ½% which became effective April 1, 2006. The sales tax measure does not have a sunset period.

5. In November 2006 voters in the County of Tulare approved a county wide sales tax measure giving the County a ½% rate increase which became effective April 1, 2007. The sales tax measure has a sunset period of 30 years. The revenue is earmarked for transportation projects (i.e. streets, transit, etc.). The allocation is as follows: 50% - regional projects, 35% - goes to the cities for their street program, 14% - transportation enhancement programs, and 1% - administration.

125

CITY OF TULARE PRINCIPAL PROPERTY TAX PAYERS

CURRENT YEAR AND TEN YEARS AGO

Taxpayer

Taxable

Assessed Value

Percent of

Total City

Taxable

Assessed

Value

Taxable

Assessed Value

Percent of

Total City

Taxable

Assessed

Value

Saputo Cheese, USA, Inc. (formerly Stella

Cheese Company, Inc.) 251,666,653$ 8.20% 22,725,160$ 1.67%

Land O' Lakes, Inc. (formerly Dairyman's

Cooperative Creamery Assoc.) 95,058,925 3.10% 111,992,624 8.24%

Oscar Mayer Foods Corporation (formerly

General Food Corporation) 89,636,104 2.92% 77,093,360 5.67%

Dreyers Grand Ice Cream Inc (formerly Haagen-

Dazs Ice Cream Company, Inc.) 46,128,588 1.50% 42,455,520 3.13%

U.S. Cold Storage of California 43,945,789 1.43% 13,704,904 1.01%

Golden Valley Dairy Products 8,876,950 0.65%

Pre/Tulare Outparcel, LLC (formerly Horizon

Outlet Centers, Ltp.) 27,025,650 0.88% 17,667,775 1.30%

Lowes HIW, Inc. 18,144,740 0.59%

Ennis Land Development, LLC 22,284,438 0.73%

Landsource Holding Company, LLC 18,951,000 0.62%

Target Corporation 23,127,150 0.75%

Wal-Mart Real Estate Business Trust 9,419,190 0.69%

Western Investment Real Estate 8,993,778 0.66%

J.I.T. Steel, Inc., a Delaware Corp. 8,479,999 0.62%

Total taxable assessed value of top fifteenlargest taxpayers 635,969,037$ 20.72% 321,409,260$ 23.66%

Total assessed value of all taxpayers 3,070,164,494$ 100.00% 1,358,569,735$ 100.00%

2009 1999

Source: Tulare County Auditor-Controller Office

126


127

CITY OF TULARE PROPERTY TAX LEVIES AND COLLECTIONS


Fiscal Year

Ended June 30

Taxes Levied

for the Fiscal

Year (1) Amount (2)

Percent

of Levy

Collections in

Subsequent

Years Amount

Percent of

Levy

2000 (4) 1,865,448$ 2,003,540$ 107.40% (3) 2,003,540$ 107.40%

2001 (5) 1,921,043 2,092,518 108.93% (3) 2,092,518 108.93%

2002 (6) 1,972,361 2,169,365 109.99% (3) 2,169,365 109.99%

2003 (7) 2,038,196 2,208,405 108.35% (3) 2,208,405 108.35%

2004 (8) 2,260,827 2,355,253 104.18% (3) 2,355,253 104.18%

2005 (9) 2,642,430 2,170,347 82.13% (3) 2,170,347 82.13%

2006 (10) 2,960,091 2,553,998 86.28% (3) 2,553,998 86.28%

2007 (11) 3,162,577 3,577,110 113.11% (3) 3,577,110 113.11%

2008 (12) 3,791,244 4,279,124 112.87% (3) 4,279,124 112.87%

2009 (13) 4,072,142 4,266,405 104.77% (3) 4,266,405 104.77%

Collected within the Fiscal

Year of Levy Total Collections to Date

Sources:(1) County of Tulare, Office of Auditor-Controller (2) City of Tulare Finance Department (3) The City entered into an agreement to participate in the Teeter Plan whereby the County pays all

taxes levied. The County accepts the responsibility for all collections and all risk of non-payment. (4) Reduced approximately $841,465 for the property tax shift to education. (5) Reduced approximately $880,955 for the property tax shift to education. (6) Reduced approximately $905,868 for the property tax shift to education. (7) Reduced approximately $939,592 for the property tax shift to education. (8) Reduced approximately $984,502 for the property tax shift to education. (9) Reduced approximately $1,458,821 for the property tax shift to education. (10) Reduced approximately $1,568,945 for the property tax shift to education. (11) Reduced approximately $1,385,911 for the property tax shift to education. (12) Reduced approximately $1,635,368 for the property tax shift to education. (13) Reduced approximately $1,774,310 for the property tax shift to education.

128

CITY OF TULARE SCHEDULE OF TAXABLE SALES BY CATEGORY

LAST TEN FISCAL YEARS (In Thousands)

Sales:

General Retail 1,229$ 28.10% 1,286$ 28.74% 1,363$ 29.64% 1,403$ 27.15%

Food Products 739 16.90% 730 16.31% 726 15.79% 1,257 24.33%

Transportation 1,268 28.99% 1,313 29.34% 1,354 29.45% 1,379 26.69%

Construction 659 15.07% 616 13.77% 650 14.14% 613 11.86%

Business to Business 446 10.20% 486 10.86% 460 10.00% 468 9.06%

Miscellaneous 33 0.75% 44 0.98% 45 0.98% 47 0.91%

Total 4,374$ 100.00% 4,475$ 100.00% 4,598$ 100.00% 5,167$ 100.00%

Fiscal Year

2000 2001 2002 2003

Source: MuniServices, LLC

129

1,506$ 28.44% 1,608$ 27.14% 1,798$ 27.49% 1,883$ 26.91% 2,066$ 28.61% 1,961$ 30.08%

942 17.79% 1,159 19.56% 1,047 16.01% 1,093 15.62% 1,185 16.41% 1,166 17.88%

1,481 27.97% 1,726 29.13% 1,874 28.65% 1,965 28.08% 2,022 28.00% 1,637 25.11%

766 14.47% 856 14.45% 1,169 17.87% 1,242 17.75% 1,158 16.04% 1,041 15.97%

551 10.41% 525 8.86% 593 9.07% 743 10.62% 731 10.12% 656 10.06%

49 0.93% 51 0.86% 59 0.90% 71 1.01% 59 0.82% 59 0.90%

5,295$ 100.00% 5,925$ 100.00% 6,540$ 100.00% 6,997$ 100.00% 7,221$ 100.00% 6,520$ 100.00%

2004 2005 2006 2007 2008 2009

Fiscal Year

130

CITY OF TULARE RATIOS OF OUTSTANDING DEBT BY TYPE


Fiscal Year

Ended June 30

Lease Revenue

Bonds (1)

Leases

Payable

Note

Payable

Advances from Other

Funds

General Obligation

Bond

Total Governmental

Activities

2000 6,560,000$ 413,780$ -$ 279,500$ -$ 7,253,280$ 2001 6,450,000 375,090 - 240,954 - 7,066,044

2002 6,335,000 366,846 - - - 6,701,846 2003 12,230,000 433,655 472,054 - - 13,135,709 2004 11,720,000 370,458 458,159 - - 12,548,617 2005 11,160,000 302,669 442,193 - - 11,904,862

2006 10,555,000 475,162 407,638 - - 11,437,800 2007 9,905,000 1,687,521 310,289 - - 11,902,810 2008 38,438,958 1,537,672 - - - 39,976,630

2009 37,397,009 1,400,851 - - - 38,797,860


Notes: Details regarding the City’s outstanding debt can be found in the notes to the financial statements.

(1) The City issued over $29 million of new revenue bonds in 2003 and 2004. The City issued $79 million of new revenue bonds in 2007.

(2) Ratio calculated using population for the prior calendar year.

131

Revenue Bonds

Payable (1)

Leases

Payable

Notes

Payable

Advances from Other

Funds

Total Business-

Type Activities

Total Primary

Government

Debt per

Capita (2)

Percentage of Gross Assessed

Valuation

19,985,000$ 1,041,283$ 662,986$ 390,699$ 22,079,968$ 29,333,248$ 702 2.13%19,395,000 941,728 7,700,000 258,918 28,295,646 35,361,690 794 2.44%

39,395,000 941,728 7,700,000 - 48,036,728 54,738,574 1,208 3.66%38,465,000 836,746 7,700,000 - 47,001,746 60,137,455 1,300 3.88%62,045,000 726,039 - - 62,771,039 75,319,656 1,577 4.62%60,375,000 609,296 - - 60,984,296 72,889,158 1,473 4.20%

58,665,000 486,188 - - 59,151,188 70,588,988 1,371 3.67%136,451,266 8,834,773 - - 145,286,039 157,188,849 2,810 6.77%134,632,678 8,628,016 - - 143,260,694 183,237,324 3,194 6.52%

187,544,091 8,334,263 - - 195,878,354 234,676,214 4,011 7.64%


132

CITY OF TULARE RATIO OF GENERAL BONDED DEBT OUTSTANDING

LAST TEN FISCAL YEARS (In Thousands, except Per Capita)

Fiscal Year

Ended June 30

General

Obligation

Bonds

Tax

Allocation

Bonds Total

Percent of

Assessed

Value (1) Per Capita

2000 -$ 3,000$ 3,000$ 0.22% 71.77

2001 - 2,865 2,865 0.20% 64.31

2002 - 2,725 2,725 0.16% 60.15

2003 - 2,575 2,575 0.14% 55.65

2004 - 2,420 2,420 0.12% 50.66

2005 - 2,260 2,260 0.11% 45.68

2006 - 2,090 2,090 0.00% 40.60

2007 - 1,910 1,910 0.00% 34.14

2008 - 1,725 1,725 0.00% 30.07

2009 - 1,530 1,530 0.00% 26.67

General bonded debt is debt payable with governmental fund resources and general obligation bonds recorded in enterprise funds (of which the City has none).

(1) Assessed value has been used because the actual value of taxable property is not readily available from the State of California.

133

CITY OF TULARE DIRECT AND OVERLAPPING DEBT

JUNE 30, 2009

City Assessed Valuation 3,618,288,634$

Redevelopment Agency Incremental Valuation 548,119,140

Total Assessed Valuation 3,070,169,494$

Percentage

Applicable (1)

Outstanding Debt

6/30/09

Estimated

Share of Overlapping

Debt

Overlapping Tax and Assessment Debt:College of Sequoias Tulare School Facilities

Improvement District 48.982% 19,998,219$ 9,795,528$Tulare Union High School District 61.342% 43,900,812 26,929,636

Liberty School District 6.995% 1,075,000 75,196Tulare Local Health Care District 59.897% 15,000,000 8,984,550

Total overlapping tax and assessment debt 79,974,031 45,784,910

Direct and Overlapping General Fund Debt:Tulare County General Fund Obligations 12.504% 78,310,000 9,791,882

Tulare County Pension Obligations 12.504% 16,955,000 2,120,053College of Sequoias Certificates of Participation 13.254% 7,030,580 931,833

61.342% 1,165,252 714,78992.474% 3,940,067 3,643,538

City of Tulare General Fund Obligations 100.000% 35,755,000 35,755,000

Total direct and overlapping general fund debt 143,155,899 52,957,095

Combined Total Debt 223,129,930$ 98,742,005$ (2)

Tulare School District Certificates of ParticipationTulare Union High School District Certificates of Participation

Notes: (1) For debt repaid with property taxes, the percentage of overlapping debt applicable is estimated

using taxable assessed property values. Applicable percentages were estimated by determining the portion of another governmental unit's taxable assessed value that is within the City’s boundaries and dividing it by each unit’s total taxable assessed value.

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

Overlapping governments are those that coincide, at least in part, with the geographic boundaries of the City. This schedule estimates the portion of the outstanding debt of those overlapping governments that is borne by the residents and businesses of the City. This process recognizes that, when considering the City's ability to issue and repay long-term debt, the entire debt burden borne by the residents and businesses should be taken into account. However, this does not imply that every taxpayer is a resident, and therefore responsible for repaying the debt, of each overlapping government.

Source: California Municipal Statistics, Inc.

134

CITY OF TULARE LEGAL DEBT MARGIN INFORMATION


2000 2001 2002 2003

Assessed Valuation 1,423,787,201$ 1,492,736,960$ 1,538,227,789$ 1,592,761,298$

Conversion Percentage 25% 25% 25% 25%

Adjusted Assessed Valuation 355,946,800 373,184,240 384,556,947 398,190,325

Debt Limit Percentage 15% 15% 15% 15%

Debt Limit 53,392,020 55,977,636 57,683,542 59,728,549

Total Net Debt Applicable to Limit:

General Obligation Bonds - - - -

Legal Debt Margin 53,392,020$ 55,977,636$ 57,683,542$ 59,728,549$

Total Debt Applicable to the Limit

as a percentage of Debt Limit 0.00% 0.00% 0.00% 0.00%

Fiscal Year

The Government Code of the State of California provides for a legal debt limit of 15% of gross assessed valuation. However, this provision was enacted when assessed valuation was based on 15% 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 for that parcel). The computations shown above reflect a conversion of assessed valuation data for each fiscal year from the current full valuation perspective to the 25% level that was in effect at the time that the legal debt margin was enacted by the State of California for local governments located within the state.

Source: City of Tulare Finance Department County of Tulare, Office of the Auditor-Controller

135

2004 2005 2006 2007 2008 2009

1,671,724,504$ 1,755,719,923$ 1,884,513,873$ 2,360,974,439$ 2,850,677,974$ 3,070,169,494$

25% 25% 25% 25% 25% 25%

417,931,126 438,929,981 471,128,468 590,243,610 712,669,495 767,542,373

15% 15% 15% 15% 15% 15%

62,689,669 65,839,497 70,669,270 88,536,541 106,900,424 115,131,356

-

- - - - - -

62,689,669$ 65,839,497$ 70,669,270$ 88,536,541$ 106,900,424$ 115,131,356$

0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

Fiscal Year

136

CITY OF TULARE PLEDGED-REVENUE COVERAGE

LAST TEN FISCAL YEARS (In Thousands)

Principal Interest Coverage

2000 5,940$ 1,890$ 4,050$ 535$ 1,162$ 2.39

2001 6,434 2,312 4,122 281 1,404 2.45

2002 6,946 3,818 3,128 849 1,567 1.29

2003 8,688 4,536 4,152 1,170 1,746 1.42

2004 8,152 4,861 3,291 702 1,709 1.36

2005 10,887 5,643 5,244 3,388 888 1.23

2006 12,240 5,810 6,430 1,710 2,659 1.47

2007 13,378 8,359 5,019 1,755 2,492 1.18

2008 18,813 10,320 8,493 1,819 2,477 1.98

2009 16,887 11,400 5,487 985 2,504 1.57

Debt ServiceFiscal Year

Ended June 30

Sewer

Revenue

Less

Operating

Expenses

Net

Available

Revenue

Sewer Revenue Bonds

Note: Details regarding the City’s outstanding debt can be found in the notes to the financial statements. Operating expenses do not include interest or depreciation expenses.

137

Principal Interest Coverage

1,566$ 130$ 156$ 5.48

1,741 135 163 5.84

2,056 140 151 7.07

3,220 150 138 11.18

3,692 155 131 12.91

3,735 160 123 13.20

4,395 170 116 15.37

5,156 180 108 17.90

5,529 185 99 19.47

5,968 195 88 21.09

Tax

Increment

Debt Service

Tax Allocation Bonds

138

CITY OF TULARE DEMOGRAPHIC AND ECONOMIC STATISTICS

LAST TEN CALENDAR YEARS

Population

Assessed

Valuation (in

thousands)

City

Unemployment

Rate

County

Unemployment

Rate

Total

Personal

Income(1) (2) (3) (3) (4)

2000 41,800 1,379,764 33.01 13.10% 15.10% (a)

2001 44,550 1,449,333 32.53 11.00% 14.30% (a)

2002 45,300 1,495,163 33.01 11.30% 14.00% (a)

2003 46,270 1,550,334 33.51 11.20% 13.10% (a)

2004 47,770 1,630,176 34.13 10.80% 12.60% (a)

2005 49,477 1,734,959 35.07 7.50% 9.00% (a)

2006 51,477 1,925,138 37.40 6.60% 7.90% (a)

2007 55,935 2,321,221 41.50 7.30% 8.60% (a)

2008 57,375 2,807,554 48.93 8.30% 9.80% (a)

2009 58,506 3,070,169 52.48 12.50% 14.70% (a)

Calendar Year

Per Capita

Assessed

Valuation

(a) Information unavailable

Sources:(1) State Department of Finance (2) Tulare County Auditor-Controller (3) State of California Employment Development Department (data shown is for the County)

139

CITY OF TULARE PRINCIPAL EMPLOYERS

CURRENT YEAR AND TEN YEARS AGO

Employer

Number of

Employees

Percent of

Total

Employment

Number of

Employees

Percent of

Total

Employment

Land O'Lakes (formerly Dairyman's

Cooperative Creamery) 600 2.76% 650 (1)

Nestle Ice Cream Co. (Haagen Dazs) 300 1.38% 300 (1)

Wal-Mart 280 1.29% (1)

Southern Ca Edison Company 200 0.92% 250 (1)

Gruman-Olsen Ind., Inc. 200 (1)

PSI Tronix 80 (1)

Golden Valley Dairy Products 215 0.99% (1)

Cheese & Protein International 170 0.78% (1)

Morris Levin & Son 170 0.78% (1)

Kings County Truck Lines 160 (1)

Saputo Cheese USA, Inc. (formerly

Stella Cheese Plant) 150 0.69% 120 (1)

Kraft USA Tulare 130 0.60% 130 (1)

J.D. Heiskell Company 125 0.58% 125 (1)

2009 1999

“Total Employment” as used above represents the total employment of all employers located within city limits.

(1) Information on “Total Employment” for 1999 unavailable.

Source: State of California Employment Development Department Tulare County Economic Development Corporation Tulare Chamber of Commerce

140


141

CITY OF TULARE FULL-TIME AND PART-TIME CITY EMPLOYEES

BY FUNCTION LAST TEN FISCAL YEARS

Function 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

General Government 34 33 34 35 35 34 34 35 40 40

Public Safety 108 107 114 116 119 119 137 147 161 166

Public Works 62 61 63 65 68 68 71 73 79 79

Community

Development 21 21 22 12 20 19 19 23 24 24

Community Services 54 55 55 55 55 55 33 34 39 39

Library and Cultural 7 8 10 10 10 9 9 10 11 11

Total 286 285 298 293 307 304 303 322 354 359

Full-time and Part-time Employees as of June 30

142

CITY OF TULARE OPERATING INDICATORS


2000 2001 2002 2003 2004

Police:

Arrests 2,775 2,661 2,436 2,532 2,488

Parking Citations Issued 2,440 2,122 2,914 3,366 2,539

(1) Fire:

Number of Emergency Calls 3,243 3,244 3,432 3,758 3,765

Inspections 746 719 586 891 1,078

Parks and Recreation:

Number of Recreation Classes 93 92 82 87 93

Number of Facility Rentals 1,063 961 1,113 931 911

Water:

New Connections (1) (1) (1) 333 327

Average Daily Consumption 16 14 20 14 11

(millions of gallons)

Sewer:

New Connections 109 298 192 329 478

Fiscal Year

(1) Information unavailable.

Source: Various City of Tulare Departments as appropriate

143

2005 2006 2007 2008 2009

2,265 2,792 3,113 3,363 3,405

1,680 2,023 3,149 3,436 (1)

3,871 4,544 5,116 5,170 5,282

1,194 1,333 705 1,320 1,127

95 101 113 140 137

1,102 1,036 1,388 2,143 2,137

288 471 782 268 250

8 11 14 17 17

974 453 759 358 263

Fiscal Year

144

CITY OF TULARE CAPITAL ASSET STATISTICS


2000 2001 2002 2003 2004

Police:

Stations 1 1 1 1 1

Fire:

Fire Stations 2 2 2 2 3

Public Works:

Streets (miles) 155.74 155.83 155.83 161.69 170.00

Traffic Signals 36 36 36 36 37

Parks and Recreation:

Parks 15 16 16 16 15

Park Acreage 152.15 174.15 174.15 193.85 189.15

Water:

Water Mains (miles) 174.58 175.25 175.25 178.29 181.52

Average Daily Consumption 16.00 14.20 19.90 14.08 11.07

(millions of gallons)

Sewer:

Sanitary Sewers (miles) 167.50 168.09 168.09 171.19 173.85

Average Daily Wastewater Flow 7.85 8.08 9.02 10.01 10.32

(millions of gallon)

Fiscal Year

Source: Various City of Tulare Departments as appropriate

145

2005 2006 2007 2008 2009

1 1 1 1 1

3 3 3 3 3

158.70 170.00 184.60 187.52 192.67

39 40 41 41 41

15 15 16 17 17

189.15 189.15 206.15 207.81 207.81

183.20 184.20 192.90 208.51 214.32

8.48 10.86 13.58 16.72 16.48

175.30 176.90 184.60 197.64 203.78

10.81 11.22 11.30 11.36 11.18

Fiscal Year

146



D‐1

APPENDIX D

FORM OF CONTINUING DISCLOSURE CERTIFICATE

This Continuing Disclosure Certificate (the "Disclosure Certificate") is executed and delivered by City of Tulare (the "City") in connection with the issuance of $19,425,000 City of Tulare Sewer Revenue Bonds, Series 2010 (the "Bonds"). The Bonds are being issued pursuant to the Master Indenture, dated as of December 1, 2003 (the "Master Indenture"), by and between City and U.S. Bank National Association, as trustee (the "Trustee") and the Fourth Supplemental Indenture, dated as of December 1, 2010 (the "Fourth Supplemental Indenture" and, collectively with the Master Indenture, the "Indenture"), by and between City and the Trustee. The City covenants and agrees as follows:

SECTION 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the City for the benefit of the Holders and Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying with S.E.C. Rule 15c2‐12(b)(5).

SECTION 2. Definitions. In addition to the definitions set forth in the Indenture, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized terms shall have the following meanings:

"Annual Report" shall mean any Annual Report provided by the City pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate.

"Beneficial Owner" shall mean any person which (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Bonds for federal income tax purposes.

"Dissemination Agent" shall mean the City, or any successor Dissemination Agent designated in writing by the City and which has filed with the Trustee a written acceptance of such designation.

"Listed Events" shall mean any of the events listed in Section 5(a) of this Disclosure Certificate.

"MSRB" shall mean the Municipal Securities Rulemaking Board.

"Official Statement" shall mean the Official Statement relating to the Bonds, dated December 14, 2010.

"Participating Underwriter" shall mean the original purchaser of the Bonds required to comply with the Rule in connection with offering of the Bonds.

D‐2

"Rule" shall mean Rule 15c2‐12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time.

"State" shall mean the State of California.

SECTION 3. Provision of Annual Reports.

(a) The City shall, or shall cause the Dissemination Agent to, not later than 210 days after the end of the City's fiscal year (presently such fiscal year ends June 30), commencing with the report for the fiscal year ending June 30, 2010, provide to the MSRB an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Certificate. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross‐reference other information as provided in Section 4 of this Disclosure Certificate; provided that the audited financial statements of the City may be submitted separately from the balance of the Annual Report and later than the date required above for the filing of the Annual Report if they are not 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 Listed Event under Section 5(c).

(b) Not later than fifteen (15) Business Days prior to said date, the City shall provide the Annual Report to the Dissemination Agent (if other than the City). If the City is unable to provide to the MSRB an Annual Report by the date required in subsection (a), the City shall send a notice to the MSRB in substantially the form attached as Exhibit A.

(c) The Dissemination Agent shall (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 Certificate, stating the date it was provided to the MSRB.

SECTION 4. Content of Annual Reports. The City's Annual Report shall contain or include by reference the:

1. The audited financial statements of the City for the prior fiscal year, 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 time the Annual Report is required to be filed pursuant to Section 3(a), 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.

2. A table showing the number of accounts for the City’s sewer system by user group for the last fiscal year presented in a similar format as the table titled "Sewer Accounts & Service Charge Revenues by Customer Class" in the Official Statement.

D‐3

3. The number of accounts and new connections for the City’s sewer system for the last fiscal year.

4. A table of the top ten customers of the City’s sewer system showing their annual flow, percentage of total flow, amount of sewer service charges collected and percentage of gross revenues represented by such charges presented in a similar format as the table titles "10 Largest Customers, by Service Charge Revenue" in the Official Statement.

5. The average daily flow of the City’s sewer system in the last fiscal year.

6. A table showing the rates of the City’s sewer system as of June 30 of the last fiscal year presented in a similar format as the table titled "Adopted Sewer Rates" in the Official Statement.

7. A table showing System Net Revenues of the City’s sewer system and debt service coverage on the Bonds and any Parity Debt for the last fiscal year presented in a similar format as the table titled "Historical Revenues, Expenses, and Debt Service Coverage" in the Official Statement.

8. A table showing balances in the funds held for the benefit of the City’s sewer system as of June 30 of the last fiscal year.

9. Principal amount of Bonds and Parity Bonds outstanding and balance in Reserve Account as of June 30 of the last fiscal year, to the extent not included in the audited financial statements described in (1) above.

10. A description of any ongoing non‐compliance with wastewater discharge permits, any pending remedial regulatory action and the City's plan of compliance, if any.

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 have been submitted to each of the MSRB or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the MSRB. The City shall clearly identify each such other document so included by reference.

SECTION 5. Reporting of Significant Events.

(a) Pursuant to the provisions of this Section 5, the City shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Indenture or its obligations in relation to the Bonds:

(1) Principal and interest payment delinquencies;

(2) Nonpayment related defaults, if material;

D‐4

(3) Unscheduled draws on debt service reserves reflecting financial difficulties;

(4) Unscheduled draws on credit enhancements reflecting financial difficulties;

(5) Substitution of credit or liquidity providers, or their failure to perform;

(6) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701‐TEB) or other material notices of determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds;

(7) Modifications to the rights of Bondholders, if material;

(8) Bond calls, if material, and tender offers;

(9) Defeasances;

(10) Release, substitution, or sale of property securing repayment of the Bonds, if material;

(11) Rating changes;

(12) bankruptcy, insolvency, receivership or similar event of the City;

(13) the consummation of a merger, consolidation, or acquisition involving the City or the sale of all or substantially all of the assets of the City, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and

(14) appointment of a successor or additional trustee or the change of name of a trustee, if material.

(c) If a Listed Event occurs, the City shall provide, in a timely manner and in no event in excess of ten (10) Business Days after the occurrence of such Listed Event, notice of such Listed Event with the MSRB.

SECTION 6. Termination of Reporting Obligation. The City's obligations under this Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Installment Payments. If such termination occurs prior to the final maturity of

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the Bonds, the City shall give notice of such termination in the same manner as for a Listed Event under Section 5(c).

SECTION 7. Dissemination Agent. The City shall serve as the Dissemination Agent hereunder. The City may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any such Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by the City pursuant to this Disclosure Certificate.

SECTION 8. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the City from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the City chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the City shall have no obligation under this Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event.

The City acknowledges and understands that other state and federal laws, including but not limited to the Securities Act of 1933 and Rule 10b‐5 promulgated under the Securities Exchange Act of 1934, may apply to the City, and that under some circumstances compliance with this Disclosure Certificate, without additional disclosures or other action, may not fully discharge all duties and obligations of the City under such laws.

SECTION 9. Default. In the event of a failure of the City to comply with any provision of this Disclosure Certificate, the sole legal remedy of any Holder or Beneficial Owner of the Bonds or the Participating Underwriter shall be an action to compel performance. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Indenture.

No Bondholder or Beneficial Owner may institute such action, suit or proceeding to compel performance unless they shall have first delivered to the City satisfactory written evidence of their status as such, and a written notice of and request to cure such failure, and the City shall have refused to comply therewith within a reasonable time.

SECTION 10. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and the City agrees, to the extent permitted by law, to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys' fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent's negligence or willful misconduct. The obligations of the City under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds.

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SECTION 11. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the City may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that, in the opinion of nationally recognized bond counsel, such amendment or waiver is permitted by the Rule. In the event of any amendment or waiver of a provision of this Disclosure Certificate, the City shall describe such amendment in the same manner as for a Listed Event under Section 5(c). The City shall obtain the consent of the Dissemination Agent for any amendment of the Disclosure Certificate that affects the duties or obligations of the Dissemination Agent.

SECTION 12. Transmission of Notices, Documents and Information.

(a) Unless otherwise required by the MSRB, all notices, documents and information provided to the MSRB shall be provided to the MSRB’s Electronic Municipal Markets Access (EMMA) system, the current Internet Web address of which is www.emma.msrb.org.

(b) All notices, documents and information provided to the MSRB shall be provided in an electronic format as prescribed by the MSRB and shall be accompanied by identifying information as prescribed by the MSRB.

SECTION 12. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit

of the City, the Dissemination Agent, the Participating Underwriter and Holders and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity.

Dated as of December 23, 2010

CITY OF TULARE

By Authorized Officer

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EXHIBIT A

NOTICE TO MSRB OF FAILURE TO FILE ANNUAL REPORT

Name of Obligated Party: City of Tulare Name of Bond Issue: City of Tulare

Sewer Revenue Bonds, Series 2010

Date of Issuance: December 23, 2010

NOTICE IS HEREBY GIVEN that an Annual Report with respect to the above‐named Bonds was not released by the City by the date required in the Continuing Disclosure Certificate. [The City anticipates that the Annual Report will be filed by _____________.]

Dated:_______________

CITY OF TULARE

By [form only; no signature required]


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APPENDIX E

FORM OF BOND COUNSEL OPINION

December __, 2010

City of Tulare Tulare, California Re: City of Tulare, California Sewer Revenue Bonds, Series 2010

Ladies and Gentlemen:

We have acted as bond counsel in connection with the issuance by the City of Tulare (the “City”) of its Sewer Revenue Bonds, Series 2010 (the "Bonds"). The Bonds are being issued pursuant to the Charter of the City (the "Charter"), Ordinance No. 1030 adopted by the City Council on February 1, 1972, as amended (the "1972 Ordinance"), Ordinance number 10‐20 and adopted by the City on November 16, 2010 (the "Bond Ordinance"), a Master Indenture, dated as of December 1, 2003 (the “Master Indenture”), by and between the City and U.S. Bank National Association, as trustee (the “Trustee”), a Fourth Supplemental Indenture, dated as of December 1, 2010 (the "Fourth Supplemental Indenture" and, collectively with the Master Indenture and any other supplemental indentures, the "Indenture"), by and between the City and the Trustee. Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Indenture.

In our capacity as bond counsel, we have reviewed the Charter, the 1972 Ordinance, the Bond Ordinance, the Indenture, certifications and resolutions of the City, the Trustee and others, opinions of counsel to the City, and such other documents, opinions and instruments as we deemed necessary to render the opinions set forth herein.

Certain requirements and procedures contained or referred to in the Indenture and other relevant documents may be changed and certain actions may be taken or omitted under the circumstances and subject to the terms and conditions set forth in such documents, upon the advice or with the approving opinion of nationally recognized bond counsel. No opinion is expressed herein as to any Bond or the interest thereon if any such change occurs or actions is taken or omitted upon the advice or approval of counsel other than ourselves.

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. In addition, we call attention to the fact that the rights and obligations under the Bonds and the Indenture are subject to bankruptcy, insolvency, reorganization, arrangement, moratorium and

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other similar laws affecting creditors’ rights, to the application of equitable principles, to the exercise of judicial discretion in appropriate cases and to the limitations on legal remedies against public agencies in the State of California.

Based on and subject to the foregoing, and in reliance thereon, as of the date hereof, we are of the following opinions:

1. The Bonds constitute the valid and binding special limited obligations of the City.

2. The Indenture has been duly authorized, executed and delivered by, and constitutes the valid and binding obligation of, the City. The Indenture creates a valid pledge, to secure the payment of the principal of and interest on the Bonds and any Parity Debt, of the System Net Revenues and Refundable Credits (to the extent received by the City) and certain other amounts held by the Trustee under the Indenture, as set forth in the Indenture and subject to the provisions of the Indenture permitting the application thereof for the purposes and on the terms and conditions set forth therein.

3. The Bonds are special limited obligations of the City and are payable exclusively from and are secured by a pledge of System Net Revenues and Refundable Credits (to the extent received by the City) and certain amounts held under the Indenture.

4. Interest on the Bonds is included in gross income for Federal income tax purposes. This opinion is not intended or provided by bond counsel to be used and cannot be used by an owner of the Bonds for the purpose of avoiding penalties that may be imposed on the owner of such Bonds. The opinion set forth in this paragraph is provided to support the promotion or marketing of the Bonds. Each owner of any Bonds should seek advice based on its particular circumstances from an independent tax advisor.

5. Under existing statutes, interest on the Bonds is exempt from State of California personal income taxes.

Except as stated in paragraphs 4 and 5 above, we express no opinion as to any Federal, state or local tax consequences arising with respect to the Bonds or the ownership or disposition thereof. Furthermore, we express no opinion as to the effect of any action hereafter taken or not taken in reliance upon an opinion of counsel other than ourselves on the Federal income tax treatment of interest on the Bonds, or under State, local and foreign tax law.

This opinion is issued as of the date hereof, and we assume no obligation to update, revise or supplement this opinion to reflect any action hereafter taken or not taken, or any facts or circumstances, or any changes in law or in interpretations thereof, that may hereafter arise or occur, or for any other reason.

Respectfully submitted,

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APPENDIX F

DTC AND THE BOOK‐ENTRY ONLY SYSTEM The following description of the Depository Trust Company (“DTC”), the procedures and record keeping with respect to beneficial ownership interests in the Bonds, payment of principal, interest and other payments on the Bonds to DTC Participants or Beneficial Owners, confirmation and transfer of beneficial ownership interest in the Bonds and other related transactions by and between DTC, the DTC Participants and the Beneficial Owners is based solely on information provided by DTC. Accordingly, no representations can be made concerning these matters and neither the DTC Participants nor the Beneficial Owners should rely on the foregoing information with respect to such matters, but should instead confirm the same with DTC or the DTC Participants, as the case may be. Neither the issuer of the Series 2010 Bonds (the “Issuer”) nor the trustee, fiscal agent or paying agent appointed with respect to the Series 2010 Bonds (the “Agent”) take any responsibility for the information contained in this Appendix. No assurances can be given that DTC, DTC Participants or Indirect Participants will distribute to the Beneficial Owners (a) payments of interest, principal or premium, if any, with respect to the Series 2010 Bonds, (b) certificates representing ownership interest in or other confirmation or ownership interest in the Series 2010 Bonds, or (c) redemption or other notices sent to DTC or Cede & Co., its nominee, as the registered owner of the Series 2010 Bonds, or that they will so do on a timely basis, or that DTC, DTC Participants or DTC Indirect Participants will act in the manner described in this Appendix. The current “Rules” applicable to DTC are on file with the Securities and Exchange Commission and the current “Procedures” of DTC to be followed in dealing with DTC Participants are on file with DTC. 1. The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the securities (the “Securities”). The Securities will be issued as fully‐registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully‐registered Security certificate will be issued for each issue of the Securities, each in the aggregate principal amount of such issue, and will be deposited with DTC. If, however, the aggregate principal amount of any issue exceeds $500 million, one certificate will be issued with respect to each $500 million of principal amount, and an additional certificate will be issued with respect to any remaining principal amount of such issue. 2. DTC, the world’s largest securities depository, is a limited‐purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non‐U.S. equity issues, corporate

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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 Standard & Poor’s highest rating: AAA. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com and www.dtc.org. The information contained on this Internet site is not incorporated herein by reference.

3. Purchases of Securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the Securities on DTC’s records. The ownership interest of each actual purchaser of each Security (“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 Securities 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 Securities, except in the event that use of the book‐entry system for the Securities is discontinued.

4. To facilitate subsequent transfers, all Securities deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Securities with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Securities; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Securities are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.

5. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Securities may wish to take certain steps to augment the transmission to them of notices of significant

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events with respect to the Securities, such as redemptions, tenders, defaults, and proposed amendments to the Security documents. For example, Beneficial Owners of Securities may wish to ascertain that the nominee holding the Securities for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them. 6. Redemption notices shall be sent to DTC. If less than all of the Securities within an issue are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. 7. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Securities unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy). 8. Redemption proceeds, distributions, and dividend payments on the Securities will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from Issuer or Agent, on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, Agent, or Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of Issuer or Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. 9. DTC may discontinue providing its services as depository with respect to the Securities at any time by giving reasonable notice to Issuer or Agent. Under such circumstances, in the event that a successor depository is not obtained, Security certificates are required to be printed and delivered. 10. Issuer may decide to discontinue use of the system of book‐entry‐only transfers through DTC (or a successor securities depository). In that event, Security certificates will be printed and delivered to DTC. 11. The information in this section concerning DTC and DTC’s book‐entry system has been obtained from sources that Issuer believes to be reliable, but Issuer takes no responsibility for the accuracy thereof.
