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2004-09-22 IFC Regular Meeting Agenda Packet
CITY OF PALM DESERT INVESTMENT & FINANCE COMMITTEE AGENDA September 22, 2004, 10:30 a.m. North Wing Conference Room I. CALL TO ORDER II. ROLL CALL III. ORAL COMMUNICATIONS A. Any person wishing to discuss any item not on the agenda may address the Investment and Finance Committee at this point by giving his/her name and address for the record. Remarks shall be limited to a maximum of five minutes, unless the Investment and Finance Committee authorizes additional time. B. This is the time and place for any person who wishes to comment on agenda items. It should be noted that at the Investment and Finance Committee's discretion, these comments may be deferred until such time on the agenda as the item is discussed. Remarks shall be limited to a maximum of five minutes, unless the Investment and Finance Committee authorizes additional time. IV. COMMITTEE MEMBER REPORTS V. CONSENT CALENDAR ALL MATTERS LISTED ON THE CONSENT CALENDAR ARE CONSIDERED TO BE ROUTINE AND WILL BE ENACTED BY ONE ROLL CALL VOTE. THERE WILL BE NO SEPARATE DISCUSSION OF THESE ITEMS UNLESS MEMBERS OF THE INVESTMENT & FINANCE COMMITTEE OR AUDIENCE REQUEST ITEMS BE REMOVED FROM THE CONSENT CALENDAR FOR SEPARATE DISCUSSION AND ACTION UNDER SECTION V. CONSENT ITEMS HELD OVER, OF THE AGENDA. A. Approval of Minutes Rec: Approve minutes of the regular meeting of July 28, 2004, as submitted. Action: 092204 wad 1 INVESTMENT & FINANCE COMMITTEE AGENDA September 22, 2004 VI. CONSENT ITEMS HELD OVER None. VII. NEW BUSINESS A. 1. City and Redevelopment Aaencv Investment Schedules and Summary of Cash Reports for July and August 2004 Rec: Review and submit for the next City Council agenda. Review the presentation on the investment graphs. Review the investment activity for July and August 2004. Action: 2. Review of Statement of Investment Policy 2005 Rec: Informational item for the Committee to review. No action required. 3. Renewal of Bankina and Custodial Relationship with Union Bank Rec: Report and submit to City Council Action: 4. Renewal of Corporate Trust Relationship with Bank of New York Rec: Report and submit to City Council Action: 5. Relistina of Zions Bank as a Broker -Dealer Rec: Report and submit to City Council Action: 092204.wpd 2 INVESTMENT & FINANCE COMMITTEE AGENDA September 22, 2004 6. Appointment of Paul Gibson to C.A.M.P. Board of Directors Rec: Informational item for the Committee to review. No action required. B. State of California Local Agency Investment Fund Balance for the month of August 2004 Rec: Informational item for the Committee to review. No action required C. California Asset Management Program (CAMP) August 2004 Statements Rec: Informational item for the Committee to review. No action required D. City and Redevelopment Agency Monthly Financial Report for City Council for July and August 2004 Rec: Report and submit to City Council Action: E. Parkview Professional Office Buildings - Financial Report for July and August 2004 (Reports will be distributed at the meeting) Rec: Review and file report Action: F. Palm Desert Golf Course Facilities Corporation Financial Information for July and August 2004 (Reports will be distributed at the meeting) Rec: Review and file report Action: VIII. CONTINUED BUSINESS None. 092204 wpd 3 INVESTMENT & FINANCE COMMITTEE AGENDA September 22, 2004 IX. OLD BUSINESS A. Status of Public and Private Partnerships Background Checks Rec: Status report on background checks Action: B. 1. Bond Issuance by Palm Desert Financing Authority Rec: Status report on issuing new bonds Action: 2. Reauest for qualifications for Bond Underwritina Services Rec: Report and submit to City Council Action: X. NEXT MEETING - Wednesday, October 27, 2004 at 10:30 a.m. Xl. ADJOURNMENT I hereby certify under penalty of perjury under the laws of the State of California, that the foregoing agenda for the Investment and Finance Committee was posted on the City Hall bulletin board not less than 72 hours prior to the meeting. Dated this 15th day of September, 2004. Diana Leal, Recording Secretary 4 092209 wpd CITY OF PALM DESERT INVESTMENT & FINANCE COMMITTEE Minutes July 28, 2004, 10:30 a.m. North Wing Conference Room I. CALL TO ORDER A regular meeting was called to order by Chairman Gibson on Wednesday, July 28, 2004 at 10:32 a.m. II. ROLL CALL Present: Paul S. Gibson, Finance Director Thomas Jeffrey, Deputy City Treasurer Everett Wood Bill Veazie Russ Campbell Thomas Wormley Bob Hargreaves, City Attorney Also Present: Steve Aryan, Asst. to the City Manager Justin McCarthy, ACM/Director of Redevelopment Jose Luis Espinoza, Assistant Finance Director Dennis Coleman, RDA Finance Manager Rodney Young, General Manager Desert Willow Diana Leal, Recording Secretary Guests: None III. ORAL COMMUNICATIONS - None. IV. COMMITTEE MEMBER REPORTS None. V. CONSENT CALENDAR Absent: Bob Spiegel, Mayor Buford Crites, Mayor Pro -Temp Carlos Ortega, City Manager A. Aooroval of Minutes Motion was made by Mr. Campbell and seconded by Mr. Veazie to approve the Minutes of the June 23, 2004 meeting as submitted. 1 72804 wptl INVESTMENT & FINANCE COMMITTEE MINUTES July 28, 2004 VI. CONSENT ITEMS HELD OVER None. VII. NEW BUSINESS A. 1. City and Redevelopment Aaencv Investment Schedules and Summary of Cash Reports for June 2004 Mr. Jeffrey reported that the City had received the May and June 2004 trust statements from the Bank of New York. For the month ended May 31, 2004, Mr. Jeffrey reported that the book value of the City Portfolio was approximately $125.9 million. The City earned approximately $159,000 in interest during that month. Portfolio yield -to -maturity was approximately 1.53%. For the month ended May 31, 2004, Mr. Jeffrey reported that the book value of the RDA Portfolio was approximately $179.6 million. The RDA earned approximately $161,000 in interest during that month. Portfolio yield -to -maturity was approximately 1.17%. For the month ended June 30, 2004, Mr. Jeffrey reported that the book value of the City Portfolio was approximately $142.4 million. The City earned approximately $174,000 in interest during that month. Portfolio yield -to -maturity was approximately 1.58%. For the month ended June 30, 2004, Mr. Jeffrey reported that the book value of the RDA Portfolio was approximately $184.9 million. The RDA earned approximately $183,000 in interest during that month. Portfolio yield -to -maturity was approximately 1.37%. 2. Securities Purchased July 2004 Mr. Jeffrey distributed a report on the securities that the City had purchased in June 2004. There being no questions, discussion ensued to the next agenda item. 3. Quarterly Account Statements on Deferred Compensation Plans Mr. Jeffrey provided the Committee with the 2Q2004 ICMA and Nationwide Deferred Compensation reports for employee accounts. These reports were an informational item for the Committee. 2 72804 wpd INVESTMENT & FINANCE COMMITTEE MINUTES July 28, 2004 B. State of California Local Agency Investment Fund Balance for the month of June 2004 The City continues to be maxed out in the LAIF accounts. C. California Asset Manaaement Program (CAMP) June 2004 Statements Mr. Gibson said that staff is monitoring the CAMP accounts. D. City and Redevelopment Agency Monthly Financial Report for City Council for June 2004 Mr. Gibson said sales tax will end up approximately $14.8 million once the accruals are included. The Transient Occupancy Tax is expected to be $7.6 million. Mr. Campbell asked if the new fee increase for licenses have gone into effect. Mr. Gibson said that the Council has reviewed and approved the fees. Staff is in the process of inputting the new fees into the system. Current tables need to be replaced with the new tables. Because the tables are connected to the permits, past permits will be changed to reflect the new fees. This would create a problem. He expects that the changes will be entered into the system by the software provider by mid September. E. Parkview Professional Office Buildinas - Financial Report for June 2004 Mr. Gibson said that Supervisor Wilson has signed the lease and the improvements, with the exception of the carpeting, have been completed. The County is expected to move in by mid August. The Fire Marshall has moved downstairs. He said that there are tenants that have requested to have their spaces expanded. F. Palm Desert Golf Course Facilities Corporation Financial Information for June 2004 Mr. Young said that the budget numbers have been improving. Their cash at the end of June was $960,000 which is $306,000 better than last year at the end of June. The cost of goods for food and beverage was at 31.5% down. In the summer time, the cost to goods are discounted. The winter time brings about high dollar deals. The sales for food and beverage had a net income of $183,000 versus $156,000 last year. The work comp rate dropped. He has been working on a 4 year tracking that indicates that 1999 was a bad year for incidents that cost hundreds of thousands of dollars. 3 72804 wpd INVESTMENT & FINANCE COMMITTEE MINUTES July 28, 2004 Mr. Young said that the highlight for merchandise is $85,000 better which is a 10% improvement. Merchandise sales for June are $45,000 ahead of prior year for cost of goods. Mr. Gibson asked if Palm Desert Greens residents have shown up. Mr. Young said that he picked up the resident forms from the Coachella Valley Park and Recreation office and there were quite a bit of forms, however, he is not certain how many were from Palm Desert Greens. Mr. Wood asked about the normal cash flow or minimum amount for the cash account for Desert Willow. Mr. Gibson said that they require that Kemper guarantee an amount of $500,000 in the account at all times. If the account goes below that amount, Kemper must place the difference from their own money. The excess pays the payroll, etc. Staff verifies that the amount is in the account at mid month and at the end of the month. Mr. Wood asked who takes care of the accountability of the monies received from IROC. Mr. Gibson said that IROC will not be building out completely. The fees have dropped $300,000 from the prior year. Odds are slim that the City will receive additional revenue above that amount. The $300,000 will be used for capital improvements on the facility. Mr. Young said that the revenue trend has been positive. Mr. Gibson said that they are waiting for a hotel to be built. Mr. McCarthy said that his staff is working with Price Waterhouse Cooper hospitality division and they have gone through an evaluation of the site. They have provided a recommendation of a mix of hotel, time share with possibly whole ownership or membership ownership of single family residences. They have prepared a draft for a request for qualifications which will go out to interested developers within the next week or so. Responses will be reviewed and one or two developers will be identified to enter into negotiations. Mr. McCarthy's intent is to try to have a developer identified prior to the end of the year. VIII. CONTINUED BUSINESS - None. IX. OLD BUSINESS A. Status of Public and Private Partnerships Backaround Checks There being no business issues to report, discussion ensued to the next agenda item. 4 72a04 wpd INVESTMENT & FINANCE COMMITTEE MINUTES July 28, 2004 B. Bond Issuance by Palm Desert Financing Authority Mr. Coleman said that there is nothing on the horizon in terms of issuance for the assessment districts. Staff has begun the work on the draft for the request for qualifications on the investment banking services. This item will be brought to the Committee in September. The financial advisor, Ken Dieker, is preparing a draft. A discussion will be held with the Committee at that point. Mr. Coleman said that one of the Council members asked staff to look at the City's bonding capacity as part of the budget. This will be completed and reported to the Council on an informal basis before the next Investment and Finance Committee meeting. Staff will discuss the bonding capacity the Redevelopment Agency has and issues such as: potential loss of revenue and when the RDA will repay the City. At this time RDA owes the City $32,785,000. This has to be taken into account when going out to structure a bond. This year RDA will repay the City $900,000 in interest based on LAIF rates. A report of the bonding capacity will be brought to the Committee in September. C. Reimbursement Policy for Staff Costs Associated with Land -Based Financing Districts Mr. Coleman said that the City Council asked staff to work on a policy for reimbursing staff costs associated with the formation of districts. He has a draft of a policy that will be taken to Council. Mr. Coleman said that he called some cities and found that Stockton has a policy. Their policy charges higher when the bond amount is lower and the fee structure reduces as more bonds are issued. He wrote a draft policy. He said that the overall thing is to make the City's revenue mutual or whole. The policy states that on the first $5 million there is a 75 basis point charge. The next $5 million will have a 50 basis point charge. All bonds issued over $10 million will have a 25 basis point charge. He said that in the past approximately $50,000 was charged for the formation of the district and issuing of the bonds. A $50,000 floor was not included and he would like to have this considered as he would like to have it modified. The policy does not include a cap as well. The bond for Big Horn in 1998 was about $34,760,000. If this were the case, we could charge $125,000 which at that time only $50,000 was charged. In discussing the policy, which he has not run by the RDA Attorney, Bill Strausz, staff is researching whether or not there is a connection when staff does this type of work with Prop. 218. The other connection is with the IRS standpoint. Mr. Strausz is not certain that there is a Prop. 218 connection, however, from the IRS standpoint, he says there has to be a reasonableness in the amount charged. 5 72804 wpd INVESTMENT & FINANCE COMMITTEE MINUTES July 28, 2004 Mr. Gibson said that when this issue was brought up by Council, their concern was to make sure that staffs time spent on issuing these bonds was recovered from the developers. Mr. Coleman said that bond issues that are refinanced will include an estimate of staff time. Mr. Gibson said that to issue a bond, it takes approximately one year to collect tax levy for administrative costs. The minimal amount of $26,000 would not be sufficient for staff time. Payments are processed and money is drawn down. On future years it is not a problem, however, the first year is typically the problem. Mr. McCarthy said that one of the challenges of identifying the costs up front is that the some of the bond issues change and regrouping is necessary. Maybe one way to approach it would be to charge a deposit and provide a final accounting. If money is left over, it can be refunded. Mr. Gibson said that the only issue would be if it takes a year to charge the administrative costs, whether it would be too long for RDA Counsel's arbitrage rules and regulations. Mr. Coleman asked if when forming a district can the developer be asked to sign a waiver not to challenge the amount charged. Mr. Hargreaves said that as long as the estimate is reasonable and the IRS requirements are complied with the City would be fine. Mr. Coleman said that the City reserves the right to form districts based on credit worthiness and ability to resell bonds. X. NEXT MEETING - Wednesday, September 22.2004 at 10:30 a.m. XI. ADJOURNMENT There being no further business, the meeting was adjourned by Mr. Campbell at 11:15 a.m. Respectfully submitted, 6 Diana Leal, Recording Secretary 72804 wpd 1 CITY OF PALM DESERT OFFICE OF THE CITY TREASURER STAFF REPORT REQUEST: Renew Union Bank's banking and custodial relationship with the City of Palm Desert for another five years. APPLICANT: N/A CASE NOS. N/A DATE: 22 September 2004 CONTENTS: Exhibit "A": City of La Quinta Pro -Forma Pricing Matrix for Union Bank and for Wells Fargo Bank (December 2003) Recommendation: By Minute Motion: That the Investment and Finance Committee recommend that the City Council renew Union Bank of Califomia's banking and custodial relationship with the City of Palm Desert for another five years. Background: Union Bank of California ("Union"), the fourth largest commercial bank in California, has been providing banking and custodial services to the City of Palm Desert ("City") since 1997. Union is headquartered in San Francisco, and is listed on the New York Stock Exchange. It has a net capital position of approximately $3.7 billion; state-of-the-art electronic banking capabilities; and a favorable three-year trend in nonperforming assets. Union is also Riverside County's official bank. Union has a main branch in South Palm Desert that is located on the corner of El Paseo and San Luis Rey. Jerry Rogers, the Union Bank vice president in charge of the City's account, is the former Finance Director for the City of Riverside. Consequently, Mr. Rogers is keenly aware of the City's banking needs, and has been an effective advocate for the City within the bank. Staff Report Renewal of UBOC Banking/Custodial Relationships 22 September 2004 Page 2 of 2 The City conducts of all its banking transactions on the Internet. On a daily basis, the City Treasurer's Office uses Union Bank's Internet website to print out the City's main checking account statement; scan deposited checks for fraud; and send bank wires to third parties. Union Bank's technology has been extremely reliable. The City's custodial relationship with Union Bank has also been positive. Union, as a custodian, clears most of the City's securities trades. Over the past seven years, none of these trades have failed (in addition to voiding a transaction, a trade fail may entail financial penalties for the City). By awarding the banking and custodial relationships to the same institution, the City has eliminated transfer costs between institutions, and minimized the likelihood of trade fails. Bank of America and Wells Fargo Bank are often cited as alternatives to Union Bank. The City's recent history with Bank of America, however, suggests that it would not be the most efficient provider of banking and custodial services. Bank of America is also an out-of-state bank that is headquartered in North Carolina. Between Wells Fargo and Union Bank, Union emerges as the lowest -cost provider of banking services to the City. Attached is an analysis that the City of La Quinta Finance Department did in December 2003, which compared Requests for Proposals ("RFP") for banking services that Wells Fargo Bank and Union Bank had submitted (see Exhibit "A"). La Quinta ultimately awarded the RFP to Wells Fargo because it submitted the lowest bid, based upon La Quinta's need for armored car and sweep account services. Palm Desert, however, does not need either service. Consequently, for Palm Desert, Union Bank would be the lowest bid, after backing out armored car and sweep account costs. Historically, Wells Fargo has also not been known for accommodating local agencies. In summary, Palm Desert needs a large, full -service bank with a strong capital position that is capable of providing sophisticated electronic banking and custodial services. The City's relationship with Union Bank has been completely satisfactory. If the City were to submit an RFP for banking services at this time, then it would needlessly duplicate La Quinta's recent efforts. Accordingly, the City's Treasurer's Office is recommending that Union Bank's banking and custodial relationship with the City be renewed for another five years. Submitted By: rTherrua, ., Thomas W. Jeffre City Treasurer Paul S. Gibson, C.C.M.T., City Treasurer EXHIBIT "A" 0 0 u. CC U ow O m OW a' to_ Q Q U t mg 0. H a8 RFP shows $23.75, math error PAGE 1 OF 2 u_e 3 Q m N N ry -v aN LLr Q 3 K H Ms— o o 00000 OO O I�Om rN 1D 1f1,Y rOm1�000N Ohr10000 go 00 �r0000 N 0000oo 000 q O 3 0 0 n quid N O r O i 0 Lei 1 1[ l e- N G aO CQ' 1 O 1 O Y I 1 f I O O O O m t p m O y a C 1 I (I 010 100 Vlw HHN f9096699 WM MNM NMM WVl19Ntl1V10 19fAMVl NNe00 NM MS,�,M 0MM LL u• _ 9 43 w O " 8888 q0N o M w w U w w w m s DS r m 0 m m m 10 m m 0 0 0 0 0 n N O m m m m O O O O 0o r O N M 0 N m m O m N N M M M r M M rM M M M rM o004.9)6..000 0009000 N- OOi 00000 N 000 y00 000 o r o rrr ss M H OM W N W N OM N W W M W 0 w w MMM6M M M MOO 0000o000000000000Nr 00000 000c00000 0 0000 000 S0ro0000 0000 O m O 0 0 0 0 0 0 0 0 0 N c r 0N 0 0 0 O N N 0 0 0 O N O r O O O N N 0' N O N 0000 O 0 N N N 0 0 N N U U N 0 0 0 0 0 0000 O O 0 0 0 O O O 0 O 0 0000 000 00000000000 0 0 0' N 0 0 '!' 0 h 000 goo 0 000 000 OOOOOO OOOQ a[I 00 000 O N 000 00 O r co N ONO OOO000O000r r 0, 666666 Odd O O 1n NN 4J c6 • O Z . 21 O a r [7 �- N w a' w < n N E r 'o F c E a .5 nyE o X 1 gm. i LL X 8 0 3 w o W E d • E o f = m rn oO m m K q S E .q 4' _ r a " K O - E n E o` E .0 Z o g U L� E o o U m '° �▪ lN SLai ,y CO V m tail a m c U. 19 0 M a ' 9 r v v 2 o$ c w z m D q u u€ LL 2 v 'pit-¢p t cE QQ 3 v mEd o n E N N m m m. 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M MYVf 00 NN 19 Y1N W NN W yy OV w,w w 19 w '0 w m3 �0 D W DI. 2 2 2 m v E to co 3 3 3 3 3 22222 00000 00000 10 0000 O O o O O O t•, 00000 o O O O O co 69V3M IA IA 69 w www 0 O N 101 LL 00000 00000 P. o 0 0 0 O O Y) O C) O O 0 1 p N O O coO O O n o D N 0 N A (9 VPVi H VI IA W N P. to w a V w wm - 00 0000 0 0 0000 0 00000000 0 0 0 0 0 0 0 0 00 0 0 0 0 0 0 0 0 0 O O O O CO `�d O O O 0 0 0 O O O O O E-t n.. 0000 O 0000 (0000000 o N.-00 00000 rei co O b O LL co co t 3 j U CD V E E 0 5 0 o 0 O O0 0 0 O O O 0 0 O O O O O O O 0 S 0 S N S W O O O O O O N 0 0 N O 0 O 0 N O N O O O O O 0 0 0 �. IC O o O O N O 0. O O O O p O O O N N M Y O N O - O N W W U U U U co co co co CO N co co • co 0 O C Z Z Z C Z Z Z C Z Z Z Z Z Z 0 S co N — N 0 O N CITY OF PALM DESERT OFFICE OF THE CITY TREASURER STAFF REPORT REQUEST: Renew the corporate trust agreement between the Bank of New York and the City of Palm Desert for another five years. APPLICANT: N/A CASE NOS. N/A DATE: 22 September 2004 CONTENTS: N/IA Recommendation: By Minute Motion: That the Investment and Finance Committee recommend that the City Council renew the corporate trust agreement between the Bank of New York and the City of Palm Desert for another five years. Background: The Bank of New York ("BONY") is the corporate trustee for the City of Palm Desert ("City"). BONY is currently ranked as the number one provider of corporate trust services in the United States. The City originally contracted with BONY in 2000, and the end of that contract term is approaching. BONY provides the City with the following services: (1) payment of debt service; (2) early redemption of municipal bonds; (3) custodianship of project funds; (4) investment of bond proceeds; and (5) clearance of trust securities trades. The City's relationship with BONY has, on the whole, been satisfactory. Although there has been a significant turnover of account officers, BONY has continued to provide adequate service, and has been responsive to the City's needs. In the area of technology, it was hoped that BONY would be able to finish a seven-year technological project that the City had undertaken — the automatic transfer of trust data from the trustee's mainframe Staff Report Renewal of BONY Corporate Trust Agreement 22 September 2004 Page 2 of 2 computer into the City's SymPro investment program. This would eliminate two days of data entry that Staff has to do each month for 233 trust accounts. Unfortunately, due to complications caused by the Bloomberg Trading System, and by frequent system upgrades to BONY's trust system, this project has been delayed. No other trustee has been able to offer this service. Finally, the City has a competitive fee arrangement with BONY that enables the City to achieve an estimated $60,000 per year in savings. In summary, the field of corporate trustees is shrinking due to mergers and acquisitions. A transfer of trust services entails a significant amount of staff time and cost. Since BONY has provided satisfactory service during the term of its first contract, and has provided the City with a highly competitive fee arrangement, Staff recommends that the City renew its corporate trust agreement with BONY for another five years, from date of expiration. Submitted By: Thomas W. Jeffrey, Approved By: yty Treasurer azie/Zzi.1 Paul S. Gibson, C.C.M.T., City Treasurer City of Palm Desert City and Redevelopment Agency Portfolios COMPLIANCE ANALYSIS AND INVESTMENT REPORT July 2004 Paul S. Gibson, C.C.M.T., Treasurer Thomas W. Jeffrey, J.D., M.B.A., Deputy City Treasurer Treasurer's Commentary The Federal Open Market Committee (FOMC) raised the Federal Funds Rate by 25 basis points to 1.50% at the 10 August meeting. This was the second consecutive rate increase this year. Although the FOMC noted that rising energy prices had slowed down economic growth, it believed that the economy would pick up again going forward. The next FOMC meeting is scheduled for 10 September. The consensus among economic forecasters is that the FOMC will raise the Federal Funds Rate to 2.25% by year-end, and to 4.00% by the end of 2005. The economy is seen as emerging from a soft second quarter, and being tossed about by rising oil prices, a heightened terrorist threat, and a close presidential election. In terms of job growth, net payroll growth in July was only 32,000 jobs, not the 200,000 jobs that was expected. Outsourcing and "churning" (firing workers and hiring less costly replacements) were largely responsible. The greatest threat to the economy is rising oil prices, which have preceded every economic slowdown since 1973. One of the factors that will continue to prop up oil prices will be increased demand from China, which is industrializing. Historically, the FOMC has raised interest rates during periods of rising oil prices. The RDA Portfolio balance declined by $9.6 million in July due largely to the elimination of Riverside County trust accounts from the RDA books (e.g., Blythe Courthouse). RDA does not own or have any control over these monies. paubs.. Qt4jon4 C.C. T. Treasurer PORTFOLIO STATISTICS Dollars in Thousands JUL-04 JUN-04 MAY-04 APR-04 MAR-04 FEB-04 CITY Month -End Book Value*** $ 141,451 $ 142,417 $ 125,903 $ 130,340 $ 126,691 $ 124,938 Month -End Market Value*** $ 141,666 $ 142,542 $ 126,048 $ 130,530 $ 127,019 $ 125,243 Paper Gain (Loss) $ 215 $ 125 $ 145 $ 190 $ 328 $ 305 Prior Year Book Variance $ (34,386) $ (35,770) $ (55,318) $ (26,045) $ (28,114) $ (39,878) Interest Earnings $ 187 $ 174 $ 159 $ 156 $ 161 $ 143 Yield -To -Maturity 1.68% 1.58% 1.53% 1.54% 1.56% 1.58% Weighted Maturity (Days) 128 133 120 119 119 111 Effective Duration 0.22 0.23 0.18 0.20 0.22 0.21 RDA Month -End Book Value*** $ 175,310 $ 184,909 $ 179,643 $ 152,696 $ 163,515 $ 164,571 Month -End Market Value*** $ 177,511 $ 187,083 $ 181,819 $ 154,863 $ 165,671 $ 166,715 Paper Gain (Loss) $ 2,201 $ 2,174 $ 2,176 $ 2,167 $ 2,156 $ 2,144 Prior Year Book Variance $ 74,759 $ 85,643 $ 77,086 $ 49,309 $ 58,734 $ 60,901 Interest Earnings $ 229 $ 183 $ 161 $ 156 $ 174 $ 154 Yield -To -Maturity 1.53% 1.37% 1.17% 1.22% 1.20% 1.20% Weighted Maturity (Days) 134 128 81 96 91 93 Effective Duration 0.13 0.15 0.02 0.03 0.04 0.06 *** Omits SLGSs. City of Palm Desert -- Portfolio Characteristics 31 July 2004 Dollars in Thousands Aaeina Interval Market Value <1M $ 69,553 < 2M 6,532 < 3M 2,002 < 6M 1,983 < 1YR 9,014 < 2YR - < 3YR <4YR < 5YR > 5YR - Total: $ 89,084 Ratin s * Market Value Aaa $ 30,108 Unrated ** 72,785 Aa 7,085 A 8,394 P1 11,030 Total: $ 129,402 General Fund Ageing 0 0 0 a 100 78 80 - 60 - 40 - 20 - 7 2 2 0 .- <1M <2M <3M <6M 10 <1YR (Credit Quality' Sector Market Value ! (Asset Allocation( Money Market Funds $ 20,653 LAIF 40,000 RDA Loan 32,785 MTNs 17,931 ( I RDA Loan U.S. Treasury �\ / 29°y° Federal Agency 7,003 Money Market Funds. Commercial Paper 11,030 19% Total: $ 129,402 MTNs 16% Month City Yield LAIF Yield Variance / (Performances Aug03 1.43 1.63 -0.20 Sep 1.62 1.64 -0.01 1.9 Oct 1.61 1.60 0.01 Nov 1.61 1.57 0.03 Dec 1.58 1.55 0.03 Jan04 1.58 1.53 0.05 v Feb 1.58 1.44 0.14 Y itiEtilfilit Mar1.561.470.09 Apr 1.54 1.45 0.09 1.4 May 1.53 1.43 0.11 Aug03Sep Oc Jun 1.58 1.47 0.11 Jul 1.68 1.60 0.07 A 8% Unrated ** 65% LAIF 36% 0 < 2YR • Nov Dec Jan04Feb Ma Apr May Jun Jul ®LAIF Yield DCity Yield * Moody's Credit Ratings LAIF, and City Loan to RDA Page 2 of 8 i IPar Value I Issuer Medium -Term Notes 2,406,000 2,355,000 3,000,000 2,500,000 2,425,000 2,360,000 1,270,000 1,000,000 17,316,000 ABBOTT LABS CHEVRON -TEXACO FORD FORD GENERAL ELECTRIC NORTHERN TRUST PITNEY BOW ES WACHOVIA Subtotal Commercial Paper -- Discount 2,510,000 3,025,000 3,031,000 2,517,000 11,083,000 CITIGROUP GENERAL ELECTRIC GENERAL ELECTRIC GENERAL ELECTRIC Subtotal Federal Agencies -- Discount $ 1,015,000 3,035,000 3,045,000 7,095,000 LGIP $ 40,000,000 $ 40,000,000 LGIP $ 11,309,334 $ 11,309,334 FED. NATIONAL MTG ASSOC FED. NATIONAL MTG ASSOC FED. NATIONAL MTG ASSOC Subtotal L.A.I.F. Subtotal C.A.M.P. Subtotal Pooled Funds -- AIM $ 9,343,441 PRIME PORTFOLIO $ 9,343,441 Subtotal City Loan to RDA $ 32,785,480 CITY OF PALM DESERT $ 32,785,480 Subtotal City of Palm Desert Portfolio Holdings 31 July 2004 Market Ratings Coupon M Maturity I Cost I YTM I Price I Value I Moody's 6.80 5/15/05 6.63 10/1/04 7.20 6/15/07 7.20 6/15/07 4.25 1/28/05 6.65 11/9/04 5.95 2/1/05 7.70 2/15/05 1.05 8/12/04 1.55 12115/04 1.64 1/14/05 1.06 9/15/04 1.92 1.71 1.79 5/2/05 3/3/05 4/1/05 $ 2,494,229 $ 2,376,420 $ 3,109,805 $ 2,591,504 $ 2,459,784 $ 2,394,947 $ 1,299,088 $ 1,033,694 $ 17,759,472 $ 2,498,140 $ 2,999,603 $ 2,999,932 $ 2,499,880 $ 10,997,555 $ 997,021 $ 2,995,644 $ 2,999,427 $ 6,992,092 2.08 1.13 5.75 5.75 1.30 1.17 1.32 1.38 2.81 1.07 1.61 1.70 1.10 1.40 2.00 1.78 1.86 1.85 103.21 100.79 107.48 107.48 101.11 101.28 101.61 102.98 99.95 99.33 99.14 99.79 98.44 98.85 98.66 $ 2,483,175 $ 2,373,604 $ 3,224,346 $ 2,686,955 $ 2,451,949 $ 2,390,324 $ 1,290,403 $ 1,029,837 $ 17,930,592 $ 2,508,728 $ 3,004,739 $ 3,004,848 $ 2,511,758 $ 11,030,073 $ 999,166 $ 3,000,098 $ 3,004,197 $ 7,003,461 0.00 8/1/04 $ 40,000,000 1.60 100.00 $ 40,000,000 $ 40,000,000 1.60 $ 40,000,000 Al Aa2 A3 A3 Aaa Aa3 Aa3 Aa3 P-1 P-1 P-1 P-1 Aaa Aaa Aaa NR 0.00 8/1/04 $ 11,309,334 1.18 100.00 $ 11,309,334 NR $ 11,309,334 1.18 $ 11,309,334 0.00 8/1/04 $ 9,343,441 0.89 100.00 $ 9,343,441 $ 9,343,441 0.89 $ 9,343,441 0.00 8/1/34 $ 32,785,480 1.60 100.00 $ 32,785,480 $ 32,785,480 1.60 $ 32,785,480 Aaa NR NR = Not Rated Page 3 of 8 Par Value Total Investments $ 128,932,255 Cash $ 11,442,891 $ 435,247 $ 22,920 $ 362,659 $ 12,263,717 Issuer CITY MAIN CHKG DESERT WILLOW CHKG OFFICE COMPLEX TRUST RECREATIONAL FAC CHKG Subtotal Total Investments and Cash $ 141,195,972 City of Palm Desert Portfolio Holdings 31 July 2004 I Coupon I Maturity I Cost Market I YTM I Price I Value $ 129,187,374 1.68 $ 129,402,381 Ratings Moodys 0.00 8/1/04 $ 11,442,891 N/A 100.00 $ 11,442,891 NR 0.00 8/1/04 $ 435,247 N/A 100.00 $ 435,247 NR 0.00 8/1/04 $ 22,920 N/A 100.00 $ 22,920 NR 0.00 8/1/04 $ 362,659 N/A 100.00 $ 362,659 NR $ 12,263,717 $ 12,263,717 I $ 141,451,090 $ 141,666,097 NR = Not Rated Page 4 of 8 Palm Desert Redevelopment Agency -- Portfolio Characteristics 31 July 2004 Dollars in Thousands Ageing Interval Market Value 1M $ 87,542 4 2M 6,532 4 3M 2,002 4 6M 1,983 4 1 YR 9,014 42YR 4 3YR 4 4YR 45YR - > 5YR Total: $ 107,073 Quality* Market Value Aaa $ 105,935 Unrated ** 61,110 Aa A P1 8,022 Total: $ 175,067 i Sector Market Value U.S. Treasury $ 30,679 Money Market Funds 63,774 LAIF 61,110 Federal Agency 11,505 Commercial Paper 7,999 Corporate Bonds - Total: $ 175,067 Month RDA Yield LAIF Yield Variance Aug03 1.36 1.63 -0.27 Sep 1.28 1.64 -0.36 Oct 1.30 1.60 -0.30 Nov 1.29 1.57 -0.28 Dec 1.29 1.55 -0.25 Jan04 1.24 1.53 -0.29 Feb 1.20 1.44 -0.24 Mar 1.20 1.47 -0.28 Apr 1.22 1.45 -0.23 May 1.17 1.43 -0.26 Jun 1.37 1.47 -0.10 Jul 1.53 1.60 -0.08 * Moody's Credit Ratings ** LAIF (Portfolio Ageing w/o SLGSSI 100 90 - 82 80 - - e 70 - a 60- '50 - t 40- a 30- 20 - 10- <1M Credit Quality' 6 r, <2M Aaa 63% Asset Allocation I U.S. Treasury 20% Performance' 1.7 - v y1.4- 1.1 2 2 8 0 0 0 n <3M <6M <1YR <2YR <3YR <4YR Unrated ** 37% Money Market Funds 41% LAIF 39% 1 fl Aug03 Sep Oct Nov DecJan04 Feb Mar Apr May Jun Jul OLAIF Yield ORDA Yield Page 5 of 8 I Par Value I Issuer Commercial Paper -- Discount $ 3,021,000 $ 2,009,000 $ 3,039,000 I $ 8,069,000 Palm Desert Redevelopment Agency Portfolio Holdings 31 July 2004 GENERAL ELECTRIC GENERAL ELECTRIC GENERAL ELECTRIC Subtotal U.S. Treasury -- Coupon $ 23,107,000 UNITED STATES TREASURY $ 23,107,000 Subtotal U.S. Treasury -- Discount $ 7,143,000 UNITED STATES TREASURY $ 469,000 UNITED STATES TREASURY $ 7,612,000 Subtotal .Federal Agency -- Coupon $ 1,983,000 FED. HOME LOAN MTG 1$ 1,983,000 Federal Agency -- Discount 1$ 3,523,000 3,040,000 3,040,000 9,603,000 LGIPs 40,000,000 6,271,845 5,045,371 9,793,060 61,110,277 LGIP $ 29,552,996 $ 29,582,661 Subtotal FED. NATIONAL MTG ASSOC FED. NATIONAL MTG ASSOC FED. NATIONAL MTG ASSOC Subtotal L.A.I.F. L.A.I.F. (HOUSING) L.A.I.F. BOND PROCEEDS L.A.I.F. BOND PROCEEDS Subtotal C.A.M.P. Subtotal Pooled Funds -- AIM $ 34,161,583 PRIME PORTFOLIO I $ 34,161,583 Subtotal Market Ratings I Coupon I Maturity I Cost I YTM I Price I Value I Moodys 1.10 9/22/04 $ 2,999,215 1.14 99.76 $ 3,013,750 P-1 1.35 10/4/04 $ 1,999,733 1.38 99.71 $ 2,003,087 P-1 1.73 3/1/05 $ 2,999,569 1.80 98.90 $ 3,005,556 P-1 $ 7,998,518 1.45 $ 8,022,394 1.63 3/31/05 $ 23,071,115 1.86 99.84 $ 23,070,895 Aaa $ 23,071,115 1.86 $ 23,070,895 4.59 8/15/04 $ 4,989,671 5.54 99.96 $ 7,139,857 Aaa 1.26 9/30/04 $ 467,391 1.28 99.78 $ 467,974 Aaa $ 5,457,063 5.18 $ 7,607,831 1.88 1/15/05 $ 1,984,553 1.70 100.00 $ 1,983,000 Aaa $ 1,984,553 170 $ 1,983,000 1.10 1.75 1.71 9/3/04 3/4/05 3/1/05 $ 3,499,963 $ 2,999,509 $ 3,001,012 $ 9,500,484 1.14 1.82 1.78 1.56 99.87 98.85 98.86 $ 3,518,420 $ 3,005,040 $ 3,005,344 $ 9,528,804 Aaa Aaa Aaa 0.00 8/1/04 $ 40,000,000 1.60 100.00 $ 40,000,000 NR 0.00 8/1/04 $ 6,271,845 1.60 100.00 $ 6,271,845 NR 0.00 8/1/04 $ 5,045,371 1.60 100.00 $ 5,045,371 NR 0.00 8/1/04 $ 9,793,060 1.60 100.00 $ 9,793,060 NR $ 61,110,277 1.60 $ 61,110,277 0.00 8/1/04 $ 29,582,661 1.18 100.00 $ 29,582,661 NR 1 $ 29,582,661 1.18 $ 29,582,661 0.00 8/1/04 $ 34,161,583 0.89 100.00 $ 34,161,583 Aaa $ 34,161,583 0.89 $ 34,161,583 1 NR = Not Rated Page 6 of 8 Par Value Total Investments $ 175,228,521 Issuer Palm Desert Redevelopment Agency Portfolio Holdings 31 July 2004 Market I Ratings I Coupon I Maturity Cost YTM ! Price a Value Moodys� $ 172,866,252 $ 175,067,444 Total Cash $ 2,123,442 HOUSING AUTH CHKG 0.00 8/1/04 $ 2,123,442 N/R 100.00 $ 2,123,442 NR $ 319,922 HOUSING AUTH TRUST 0.00 8/1/04 $ 319,922 N/R 100.00 $ 319,922 NR $ 2,443,364 Subtotal $ 2,443,364 $ 2,443,364 Total Investments and Cash $ 177,671,884 $ 175,309,616 $ 177,510,808 NR = Not Rated Page 7 of 8 STATEMENT OF COMPLIANCE The investment portfolios of the City of Palm Desert ("City") and the Palm Desert Redevelopment Agency ("RDA") are governed by federal, state, and local law. The City Treasurer's "Statement of Investment Policy" is more restrictive than the California Government Code. The Palm Desert Investment Committee and the Palm Desert City Council review the Statement of Investment Policy annually. For the month ended 31 July 2004, the City and the RDA investment portfolios were in compliance with all applicable federal, state, and local laws and regulations. The City Treasury continued to pursue conservative and prudent investment strategies, based upon the stated objectives of safety, liquidity, and yield (in order of priority). Barring unforeseen events, the City Treasury should have sufficient cash to finance the operations of the City of Palm Desert and the Palm Desert Redevelopment Agency over the next six months. In addition, portions of either the City or the RDA portfolio could be liquidated in order to meet any significant, unexpected cash requirements. Bloomberg L.P. and Interactive Data Corporation provided the data and the analytical tools that were used to calculate the market value of all securities in the City and the RDA investment portfolios. State and Local Government Series securities are held in escrow accounts and are therefore not included in this report as assets. All balances are bank balances. Respectfully submitted on 25 August 2004, PauLS Qthni C.G.M. r City Treasurer CA Govt Code Investment Category 53601(a) 53601(b) 53601(c) 53601(d) I 53601(e) j 53601(f) 1 53601(g) 53601(h) 53601(i) 53601(i) 536010) 53601(k) 53601(1) 53601(m) 53601(k) 53601(n) SUMMARY OF AUTHORIZED INVESTMENTS I California Government Code Maximum Maximum Quality Maximum Maturity Limit S&P/Mdys Maturity 5 Years No Limit 5 Years No Limit 5 Years No Limit 5 Years No Limit 5 Years No Limit 180 Days 40% 270 Days 25% 5 Years 30% 1 Year No Limit 92 Days 20% 5 Years 30% 90 Days 20% 5 Years No Limit 90 Days 20% 5 Years 20% 5 Years 180 Days A-1+ or P-1 270 Days 5 Years 30 Days A AAA &Aaa AAA & Aaa or Advisor A (Issuer) & AA (Security) City Investment Policy Maximum Quality % of City % of RDA Limit S&P/Mdys Portfolio Portfolio Not Authorized (1) 5 Years I No Limit I I 0.0% 1 16.5% Not Authorized Not Authorized 30% 5.4% 1 . 6.7% 40% A-1 & Pt1 k ; 25% A-1+orP-1'.85,°(. Y_4f6% 30% AA- o r Aa3 - 20% AAA &Aaa Not Authorized 5 Years I 30% I A 1 13.8% 0.0% 90 Days I 20% (2) I AAA & Aaa I 7.2% 19.8% Not Authorized Not Authorized AAA & Aaa 90 Days 20% (2) or Advisor 8.8% 17.1% Not Authorized I No Limit I (1) The City loan to RDA, which is not a bond, has been approved by the Palm Desert City Council. (2) Maximum limit for mutual funds and local govemment investment pools, excluding bond proceeds. Palm Desert Bonds U.S. Treasuries CA State Debt CA Local Agency Debt Federal Agencies Bankers's Acceptances Commercial Paper Negotiable CDs Repos Reverse Repos Medium -Term Notes Mutual Funds Trust Indenture Debt Secured Bank Deposits Local Government Investment Pools Mortgage -Backed Securities LAIF No Limit 31.0% 35.4% 74.6% 100.0% Certified California Municipal Treasurer Page 8 of 8 City of Palm Desert City and Redevelopment Agency Portfolios COMPLIANCE ANALYSIS AND INVESTMENT REPORT August 2004 Paul S. Gibson, C.C.M.T., Treasurer Thomas W. Jeffrey, J.D., M.B.A., Deputy City Treasurer Treasurer's Commentary Oil prices are the large question mark, going into the third and fourth quarters. Prior recessions have been triggered by a combination of rising oil prices and aggressive interest rate hikes. It is thought, however, that the current rise in oil prices will abate due to increased production, and to conservation measures that the Chinese Government is taking. The Federal Open Market Committee (FOMC) remains bullish on economic growth, believing that a decline in oil prices will re -accelerate economic growth. Consequently, it is thought that the FOMC will continue its quarter -point hikes throughout the remainder of the year. A number of FOMC members are reportedly uncomfortable with the current Federal Funds rate, and want to move it back to a more neutral range. A major reason for continued U.S. economic weakness is a persistent and large negative trade balance, despite a significantly depreciated U.S. Dollar. This deficit has made it difficult for the U.S. to increase industrial output, and to sustain employment growth at a faster pace. Although a depreciated dollar should shrink the trade deficit by increasing exports and by promoting import substitution, the U.S. is getting only a mild boost because of aggressive price -cutting by U.S. competitors to maintain market share, and because electronic goods comprise a larger percentage of the trade balance. Electronic goods have lower inflation pass -through rates than raw materials. Although this limits the risk of higher overall inflation from a weaker ,dollar, it also reinforces the lack of improvement in the trade balance as foreign firms maintain their U.S. market share. Dollars in Thousands PPautS. Qaaorls C.C.M. r Treasurer PORTFOLIO STATISTICS AUG-04 JUL-04 JUN-04 MAY-04 APR-04 MAR-04 CITY Month -End Book Value*** $ 136,975 $ 141,451 $ 142,417 $ 125,903 $ 130,340 $ 126,691 Month -End Market Value*** $ 137,301 $ 141,666 $ 142,542 $ 126,048 $ 130,530 $ 127,019 Paper Gain (Loss) $ 326 $ 215 $ 125 $ 145 $ 190 $ 328 Prior Year Book Variance $ (48,234) $ (34,386) $ (35,770) $ (55,318) $ (26,045) $ (28,114) Interest Earnings $ 195 $ 187 $ 174 $ 159 $ 156 $ 161 Yield -To -Maturity 1.74% 1.68% 1.58% 1.53% 1.54% 1.56% Weighted Maturity (Days) 121 128 133 120 119 119 Effective Duration 0.19 0.22 0.23 0.18 0.20 0.22 RDA Month -End Book Value *** Month -End Market Value *** Paper Gain (Loss) Prior Year Book Variance Interest Earnings Yield -To -Maturity Weighted Maturity (Days) Effective Duration $ .161,119 $ 175,310 $ 184,909 $ 179,643 $ 152,696 $ 163,515 $ 161,209 $ 177,511 $ 187,083 $ 181,819 $ 154,863 $ 165,671 $ 90 $ 2,201 $ 2,174 $ 2,176 $ 2,167 $ 2,156 $ 37,804 $ 74,759 $ 85,643 $ 77,086 $ 49,309 $ 58,734 $ 223 $ 229 $ 183 $ 161 $ 156 $ 174 1.51% 1.53% 1.37% 1.17% 1.22% 1.20% 71 134 128 81 96 91 0.12 0.13 0.15 0.02 0.03 0.04 *** Omits SLGSs. City of Palm Desert -- Portfolio Characteristics 31 August 2004 Dollars in Thousands Aaeina Interval Market Value <1M $ 71,755 < 2M 2,374 < 3M 2,390 < 6M 10,782 < 1YR 9,487 < 2YR - < 3YR 5,910 < 4YR < 5YR > 5YR Total: $ 102,698 Its * Market Value Aaa $ 37,839 Unrated ** 72,785 Aa 7,058 A 8,445 P1 8,550 Total: $ 134,677 Sector Market Value Money Market Funds $ 21,877 LAIF 40,000 RDA Loan 32,785 MTNs 17,951 U.S. Treasury Federal Agency 13,514 Commercial Paper 8,550 Total: $ 134,677 Month Citv Yield LAIF Yield Variance Sep03 1.62 1.64 -0.01 Oct 1.61 1.60 0.01 Nov 1.61 1.57 0.03 Dec 1.58 1.55 0.03 Jan04 1.58 1.53 0.05 Feb 1.58 1.44 0.14 Mar 1.56 1.47 0.09 Apr 1.54 1.45 0.09 May 1.53 1.43 0.11 Jun 1.58 1.47 0.11 Jul 1.68 1.60 0.07 Aug 1.74 1.67 0.06 'General Fund Ageing 100 80 - c 60- 0 40- 0 a 70 20 - 10 9 2 2 In I1 0 <1M <2M <3M <6M <1YR <2YR 0 Credit Quality! Asset Allocation I Aaa 32% _ Aa 0% A 7% LAIF 36% Money Market Funds 19% Performance! 1.8 MTNs 16% Sep03 Oct Nov Dec Jan04 Feb Unrated ** 61% RDA Loan 29% al Ma Ap May Jun Jul Aug 1MLAIF Yield OCity Yield 1 Moody's Credit Ratings ** LAIF, and City Loan to RDA Page 2 of 8 P$ Par Value Medium -Term Notes $ 2,406,000 $ 2,355,000 3,000,000 2,500,000 2,425,000 2,360,000 1,270,000 1,000,000 17,316,000 Issuer ABBOTT LABS CHEVRON -TEXACO FORD FORD GENERAL ELECTRIC NORTHERN TRUST PITNEY BOWES WACHOVIA Subtotal Commercial Paper -- $ 3,025,000 $ 3,031,000 $ 2,517,000 8,573,000 Discount GENERAL ELECTRIC GENERAL ELECTRIC GENERAL ELECTRIC Subtotal Federal Agencies -- Discount .$ 1,015,000 FANNIE MAE $ 3,035,000 FANNIE MAE $ 3,045,000 $ 6,500,000 $ 13,595,000 LGIP $ 40,000,000 $ 40,000,000 LGIP $ 11,322,031 $ 11,322,031 FANNIE MAE FANNIE MAE Subtotal L..A.I.F. Subtotal C.A.M.P. Subtotal Pooled Funds --AIM $ 10,554,737 PRIME PORTFOLIO $ 10,554,737 Subtotal City Loan to RDA $ 32,785,480 CITY OF PALM DESERT $ 32,785,480 Subtotal City of Palm Desert Portfolio Holdings 31 August 2004 Market I Ratings I !Coupon! Maturity I Cost I YTM I Price I Value Moody's' S&P 6.80 5/15/05 $ 2,484,909 2.08 102.97 $ 2,477,531 Al AA 6.63 10/1/04 $ 2,365,710 1.13 100.38 $ 2,364,015 Aa2 AA 7.20 6/15/07 $ 3,106,619 5.75 108.50 $ 3,254,964 A3 BBB- 7.20 6/15/07 $ 2,588,850 5.75 108.50 $ 2,712,470 A3 BBB - 4.25 1/28/05 $ 2,453,888 1.30 100.95 $ 2,448,139 Aaa AAA 6.65 11/9/04 $ 2,384,249 1.17 100.89 $ 2,380,969 Aa3 AA- 5.95 2/1/05 $ 1,294,240 1.32 101.37 $ 1,287,371 Aa3 AA 7.70 2/15/05 $ 1,028,483 1.38 102.57 $ 1,025,655 Aa3 A $ 17,706,949 2.81 $ 17,951,113 1.55 12/15/04 $ 2,999,603 1.61 99.48 $ 3,009,146 P-1 A-1+ 1.64 1/14/05 $ 2,999,932 1.70 99.83 $ 3,025,905 P-1 A-1+ 1.06 9/15/04 $ 2,499,880 1.10 99.94 $ 2,515,406 P-1 A-1+ $ 8,499,415 1.49 $ 8,550,456 1.92 5/2/05 $ 997,021 2.00 98.66 $ 1,001,399 Aaa AAA 1.71 3/3/05 $ 2,995,644 1.78 99.04 $ 3,005,864 Aaa AAA 1.79 4/1/05 $ 2,999,427 1.86 98.86 $ 3,010,287 Aaa AAA 1.46 9/15/04 $ 6,490,774 1.48 99.94 $ 6,496,100 Aaa AAA $ 13,482,865 1.67 $ 13,513,650 0.00 9/1/04 $ 40,000,000 1.67 100.00 $ 40,000,000 U U $ 40,000,000 1.67 $ 40,000,000 0.00 9/1/04 $ 11,322,031 1.33 100.00 $ 11,322,031 U AAA $ 11,322,031 1.33 $ 11,322,031 0.00 9/1/04 $ 10,554,737 0.89 100.00 $ 10,554,737 Aaa AAA $ 10,554,737 0.89 $ 10,554,737 0.00 9/1/04 $ 32,785,480 1.67 100.00 $ 32,785,480 NIA N/A $ 32,785,480 1.67 $ 32,785,480 "U" = Unrated Page 3 of 8 City of Palm Desert Portfolio Holdings 31 August 2004 Market Ratings I Par Value I Issuer 'Coupon' Maturity I Cost YTM Price I Value Moody'sl S&P I Total Investments $ 134,146,246 $ 134,351,477 1.74 $ 134,677,467 Cash $ 1,919,080 CITY MAIN CHKG 0.00 9/1/04 $ 1,919,080 0.00 100.00 $ 1,919,080 N/A N/A $ 377,847 DESERT WILLOW CHKG 0.00 9/1/04 $ 377,847 0.00 100.00 $ 377,847 N/A N/A $ 22,920 OFFICE COMPLEX TRUST 0.00 9/1/04 $ 22,920 0.00 100.00 $ 22,920 N/A N/A $ 303,936 RECREATIONAL FAC CHKG 0.00 9/1/04 $ 303,936 0.00 100.00 $ 303,936 NIA N/A $ 2,623,782 Subtotal $ 2,623,782 0.00 $ 2,623,782 Total Investments and Cash $ 136,770,030 $ 136,975,259 $ 137,301,249 "U" = Unrated Page 4 of 8 Palm Desert Redevelopment Agency -- Portfolio Characteristics 31 August 2004 Dollars in Thousands Aaeina Interval Market Value < 1 M $ 78,727 < 2M 2,003 <3M - < 6M 1,983 < 1YR 9,016 < 2YR < 3YR < 4YR < 5YR > 5YR Total: $ 91,729 Quality* Market Value Aaa $ 89,223 Unrated ** 61,110 Aa A P1 8,034 Total: $ 158,367 Sector Market Value U.S. Treasury $ 23,554 Money Market Funds 54,141 LAIF 61,110 Federal Agency 11,528 Commercial Paper 8,034 Corporate Bonds - Total: $ 158,367 Month RDA Yield LAIF Yield Variance Sep03 1.28 1.64 -0.36 Oct 1.30 1.60 -0.30 Nov 1.29 1.57 -0.28 Dec 1.29 1.55 -0.25 Jan04 1.24 1.53 -0.29 Feb 1.20 1.44 -0.24 Mar 1.20 1.47 -0.28 Apr 1.22 1.45 -0.23 May 1.17 1.43 -0.26 Jun 1.37 1.47 -0.10 Jul 1.53 1.60 -0.08 Aug 1.51 1.67 -0.16 \ (Portfolio Ageing w/o SLGSsI Portfolio (°/ ) 100 90 - 86 80 - 70 - 60 - 50 - 40 - 30 - 20 - 10- 2 0. <1M <2M Credit Quality! Aaa 59% (Asset Allocation N U.S. Treasury 17% Performance 1.1 1 10 0 2 n 0 0 0 <3M <6M <1YR <2YR <3YR <4YR Unrated ** 41% Money Market Funds 39% LAIF 44% Sep03 Oct Nov Dec Jan04 Feb Mar Apr May Jun Jul Aug I O LAI F Yield O RDA Yield * Moody's Credit Ratings ** LAIF Page 5 of 8 I Par Value I Issuer Commercial Paper -- Discount 1$ 3,021,000 2,009,000 3,039,000 8,069,000 GENERAL ELECTRIC GENERAL ELECTRIC GENERAL ELECTRIC Subtotal Palm Desert Redevelopment Agency Portfolio Holdings 31 August 2004 I Coupon I Maturity I 1.10 1.35 1.73 9/22/04 10/4/04 3/1/05 Market Cost I YTM I Price I Value $ 2,999,215 $ 1,999,733 $ 2,999,569 $ 7,998,518 1.14 1.38 1.80 1.45 99.90 99.85 99.05 $ 3,018,083 $ 2,006,002 $ 3,010,270 $ 8,034,355 Ratings Moody's' S&P P-1 P-1 P-1 U.S. Treasury -- Coupon $ 23,107,000 UNITED STATES TREASURY 1.63 3/31/05 $ 23,075,711 1.86 99.91 $ 23,085,337 Aaa AAA $ 23,107,000 Subtotal $ 23,075,711 1.86 $ 23,085,337 U.S. Treasury -- Discount $ 469,000 UNITED STATES TREASURY $ 469,000 Subtotal Federal Agency -- Coupon - $ 1,983,000 FED. HOME LOAN MTG $ 1,983,000 Subtotal Federal Agency -- Discount $ 3,523,000 3,040,000 3,040,000 9,603,000 LGIPs $ 40,000,000 $ 6,271,845 $ 5,045,371 $ 9,793,060 $ 61,110,277 LGIP $ 20,913,894 $ 20,913,894 FED. NATIONAL MTG ASSOC FED. NATIONAL MTG ASSOC FED. NATIONAL MTG ASSOC Subtotal L.A.I.F. L.A.I.F. (HOUSING) L.A.I.F. BOND PROCEEDS L.A.I.F. BOND PROCEEDS Subtotal C.A.M.P. Subtotal Pooled Funds -- AIM $ 33,227,508 PRIME PORTFOLIO $ 33,227,508 Subtotal Total Investments $ 158,482,679 1.26 9/30/04 $ 467,391 1.28 99.88 $ 468,414 Aaa 467,391 1.28 $ 468,414 AAA 1.88 1/15/05 $ 1,984,269 1.70 100.03 $ 1,983,620 Aaa AAA $ 1,984,269 1.70 $ 1,983,620 1.10 1.75 1.71 9/3/04 3/4/05 3/1/05 0.00 9/1/04 0.00 9/1/04 0.00 9/1/04 0.00 9/1/04 $ 3,499,963 $ 2,999,509 $ 3,001,012 $ 9,500,484 $ 40,000,000 $ 6,271,845 $ 5,045,371 $ 9,793,060 $ 61,110,277 1.14 1.82 1.78 1.56 1.67 1.67 1.67 1.67 1.67 99.99 99.04 99.05 100.00 100.00 100.00 100.00 $ 3,522,648 $ 3,010,816 $ 3,011,120 $ 9,544,584 $ 40,000,000 $ 6,271,845 $ 5,045.371 $ 9,793,060 $ 61,110,277 Aaa Aaa Aaa U U U U AAA AAA AAA U U U U 1 0.00 9/1/04 $ 20,913,894 1.33 100.00 $ 20,913,894 U AAA $ 20,913,694 1.33 $ 20,913,894 0.00 9/1/04 $ 33,227,508 0.89 100.00 $ 33,227,508 Aaa AAA $ 33,227,508 0.89 $ 33,227,508 $ 158,278,053 1.51 $ 158,367,988 "U" = Unrated Page 6 of 8 Par Value I Issuer Palm Desert Redevelopment Agency Portfolio Holdings 31 August 2004 Market Ratings Coupon (Maturity Cost ` YTM I Price ` Value I Moody's I S&P Cash $ 2,520,932 HOUSING AUTH CHKG 0.00 9/1/04 $ 2,520,932 0.00 100.00 $ 2,520,932 N/A N/A $ 319,999 HOUSING AUTH TRUST 0.00 9/1/04 $ 319,999 0.00 100.00 $ 319,999 N/A N/A $ 2,840,930 Subtotal $ 2,840,930 0.00 $ 2,840,930 Total Investments and Cash $ 161,323,609 $ 161,118,983 $ 161,208,918 "U" = Unrated Page 7 of 8 STATEMENT OF COMPLIANCE The investment portfolios of the City of Palm Desert ("City") and the Palm Desert Redevelopment Agency ("RDA") are governed by federal, state, and local law. The City Treasurer's "Statement of Investment Policy" is more restrictive than the California Government Code. The Palm Desert Investment Committee and the Palm Desert City Council review the Statement of Investment Policy annually. For the month ended 31 August 2004, the City and the RDA investment portfolios were in compliance with all applicable federal, state, and local laws and regulations. The City Treasury continued to pursue conservative and prudent investment strategies, based upon the stated objectives of safety, liquidity, and yield (in order of priority). Barring unforeseen events, the City Treasury should have sufficient cash to finance the operations of the City of Palm Desert and the Palm Desert Redevelopment Agency over the next six months. In addition, portions of either the City or the RDA portfolio could be liquidated in order to meet any significant, unexpected cash requirements. Bloomberg L.P. and Interactive Data Corporation provided the data and the analytical tools that were used to calculate the market value of all securities in the City and the RDA investment portfolios. State and Local Government Series securities are held in escrow accounts and are therefore not included in this report as assets. All balances are bank balances. Respectfully submitted on 22 September 2004, patizs. 6Thloni c. cm r. x City Treasurer CA Govt Code 53601(a) 53601(b) 53601(c) 53601(d) 53601(e) 53601(f) 53601(g) 53601(h) 53601(i) 536010 53601(j) 53601(k) 53601(1) 53601(m) 53601(k) SUMMARY OF AUTHORIZED INVESTMENTS Califomia Government Code I City Investment Policy Maximum Maximum Investment Category Maturity Limit Quality Maximum Maximum Quality % of City % of RDA S&P/Mdys Maturity Limit S&P/Mdys Portfolio Portfolio A-1+ or P-1 A AAA & Aaa AAA & Aaa or Advisor 53601(n) A (Issuer) & AA (Security) LAIF No Limit I No Limit (1) The City loan to RDA, which is not a bond, has been approved by the Palm Desert City Council. (2) Maximum limit for mutual funds and local government investment pools, excluding bond proceeds. Palm Desert Bonds 5 Years No Limit U.S. Treasuries 5 Years No Limit CA State Debt 5 Years No Limit CA Local Agency Debt 5 Years No Limit Federal Agencies 5 Years No Limit Bankers's Acceptances 180 Days 40% Commercial Paper 270 Days 25% Negotiable CDs 5 Years 30% Repos 1 Year No Limit Reverse Repos 92 Days 20% Medium -Term Notes 5 Years 30% Mutual Funds 90 Days 20% Trust Indenture Debt Secured Bank Deposits 5 Years No Limit Local Government Investment Pools 90 Days 20% Mortgage -Backed 5 Years 20% Securities 5 Years 5 Years 180 Days 270 Days 5 Years 30 Days 5 Years 90 Days Not Authorized (1) No Limit I I 0.0% Not Authorized Not Authorized 30% 40% 25% 30% 20% A-1 & P-1 A-1+ or P-1 AA- or Aa3 AAA & Aaa Not Authorized 10.0% 6.3% 14.9% 30% A 13.2% 0.0% 20% (2) AAA & Aaa 7.9% 21.0% Not Authorized Not Authorized AAA & Aaa 90 Days 1 20% (2) 1 or Advisor 8.4% 13.2% Not Authorized 29.8% 75.6% 38.6% 100.0% Certified California Municipal Treasurer Page 8 of 8 { CITY OF PALM DESERT OFFICE OF THE CITY TREASURER STAFF REPORT REQUEST: Approval of Revisions to Palm Desert "Statement of Investment Policy 2005" APPLICANT: N/A CASE NOS. N/A DATE: 22 September 2004 CONTENTS: Palm Desert "Statement of Investment Policy 2005" Recommendation: By minute motion: That the Investment and Finance Committee recommend that the City Council adopt the revised Palm Desert "Statement of Investment Policy 2005", as amended. Background: State law requires the City to review and update its investment policy annually. This is the update for Calendar Year 2002. In the policy text, deletions are highlighted with striker; additions are highlighted with redlining. Significant policy changes are listed below: Page 5, Paragraph 3: The number of authorized brokers would be increased from four to five. Although the current level of investment activity justifies retaining only four brokers, five brokers are needed when the City does competitive offerings for municipal bonds so that it will be assured of a "Safe Harbor", pursuant to Internal Revenue Service regulations. The City recently encountered a situation where one broker refused to do a Staff Report Annual Investment Policy Review 22 September 2004 Page 2 of 2 Page 5, Paragraph 3: Pages 6 and 7: Page 18, No. 16.0: Submitted By: Thomas W. Jeffr Approved By: competitive offering, and another had no securities for the required date. That left the City with two competitive offers — well below the threshold of three. Clarifying language would be added which would specify that the City cannot transact business with a broker until all of the documentation required by both sides has been executed and delivered. City policy currently requires that if a broker applicant fails to submit all of the required documentation on time, then its application shall be deemed to be automatically rejected. The proposed change would also add "providing false or misleading information" as grounds f.or disqualifying a broker, and would prohibit the broker from submitting another application to the City for three years. New investment reporting criteria would be added in order to comply with GASB 40, which took effect on 15 June 2004. The relevant sections of GASB 40 deal with local agency disclosures of investment risk (credit ratings, issuer concentrations, etc). City Treasurer Paul S. Gibson, C.C.M.T., City Treasurer CCTV OF BALM DESERT STATEMENT OF (AWES VENT POUCY 2005 Certified by the Municipal Treasurers' Association of the United States and Canada on March 10, 2004 PREPARED BY THE CITY TREASURER'S OFFICE Thomas W. Jeffrey, J.D., M.B.A. Deputy City Treasurer REVIEWED AND APPROVED BY Paul S. Gibson, C.C.M.T. City Treasurer Adopted by the City Council on Palm Desert Treasury Policies and Procedures Revision No. 13 No. 2: "Statement of Investment Policy" Adopted: TABLE OF CONTENTS OVERVIEW PAGE 1.0 Policy 1 2.0 Scope 1 3.0 Prudence 2 4.0 Objectives 2 INVESTMENT AUTHORITY 5.0 Delegation of Authority 3 5.1 Investment Procedures 4 6.0 Ethics and Conflicts of Interest 4 INVESTMENTS 7.0 Authorized Financial Dealers and Institutions 4 8.0 Authorized and Suitable Investments 7 8.1 Prohibited Investments 13 9.0 Investment Pools/Mutual Funds 13 PORTFOLIO MANAGEMENT 10.0 Collateralization 14 11.0 Safekeeping and Custody 14 12.0 Diversification 15 13.0 Maximum Maturities 15 13.1 Portfolio Rebalancing 15 13.2 Credit Downgrading 16 13.3 Bond Proceeds 16 14.0 Internal Controls 17 PERFORMANCE MEASUREMENT 15.0 Performance Standards 17 15.1 Market Yield (Benchmark) 18 16.0 Reporting 18 LEGAL REQUIREMENTS 17.0 Investment Policy Adoption 18 18.0 Regulatory Submission 19 APPENDICES A: List of Authorized Financial Institutions 20 B: Glossary 21 Palm Desert Treasury Policies and Procedures Revision No. 13 No. 2: "Statement of Investment Policy" Adopted: 1.0 Policy It is the policy of the: ➢ City of Palm Desert; ➢ Palm Desert Redevelopment Agency; ➢ Palm Desert Housing Authority; ➢ Palm Desert Financing Authority; and the ➢ Palm Desert Recreational Facilities Corporation (hereafter referred to collectively as the "City") to predicate their investment policies, procedures, and practices upon the following three principles: 11) compliance with federal, state, and local laws governing the investment of public monies under the City Treasurer's control; (2) protection of the principal monies entrusted to the City; and (3) maximization of profit within the parameters of prudent risk management, as defined by this Statement of Investment Policy. For the purposes of this policy, "Investment Officers" shall be defined as the City Treasurer and the Deputy City Treasurer. 2.0 Scope This policy shall apply to all funds that are under the City Treasurer's control including, but not limited to, the general fund; special revenue funds; debt service funds; capital project funds; enterprise funds; and trust and agency .funds. These funds are accounted for in the City's Comprehensive Annual Financial Report. The City's Deferred Compensation Plan ("Plan") shall be excluded from the scope of this policy if the following three conditions exist: 2.0.1 A third -party administrator manages the Plan. 2.0.2 Individual plan participants have control over the selection of investments. 2.0.3 The City has no fiduciary responsibility to act as a "trustee" for the Plan. The only exception to the foregoing shall be that if the City retains the fiduciary responsibility to act as a trustee for the Plan, then the Plan shall be deemed to be within the scope of this policy. Page 1 of 26 Palm Desert Treasury Policies and Procedures Revision No. 13 No. 2: "Statement of Investment Policy" Adopted: Under all circumstances, the The City Treasurer shall provide the Investment and Finance Committee and the Palm Desert City Council ("City Council") with a quarterly report on the investment of Plan assets. 3.0 Prudence Pursuant to California Government Code Section 53600.3, Investment Officers, as trustees of public monies, shall adhere to the "prudent investor" standard when managing the City's investment portfolios. They shall invest "...with care, skill, prudence, and diligence under the circumstances then prevailing, including, but not limited to, the general economic conditions and the anticipated needs of the agency, that a prudent person acting in a like capacity and familiarity with those matters would use in the conduct of funds of a like character and with like aims, to safeguard the principal and maintain the liquidity needs of the agency." Investment Officers who follow the provisions of this policy and who exercise due diligence shall be relieved of personal responsibility for a security's credit risk or market price risk: provided, that they report substantial deviations from expectations to the City Manager and to the Investment and Finance Committee in a timely manner, and that they take appropriate action to control adverse developments. "Substantial deviations" shall be defined as either a decline of 10 percent or more in the market value of a security due to issuer default or a credit risk downgrade; or the sale of a security prior to maturity at 10 percent or more below its acquisition cost. 4.0 Objectives The City's investment objectives, in order of priority, shall be: 4.0.1 Safety. Safety of principal shall be the foremost objective. Investments shall be made with the aim of avoiding capital losses due to issuer default; broker default; or market value erosion. Principal shall be preserved by mitigating: Credit Risk, the risk of loss due to the failure of the issuer of the security, shall be mitigated by investing in only the highest quality securities; by diversifying investments; and by pre -qualifying broker - dealers and public depositories; and Page 2 of 26 Palm Desert Treasury Policies and Procedures Revision No. 13 No. 2: "Statement of Investment Policy" Adopted: Market Risk, the risk of Toss due to a decline in bond prices because of rising market interest rates, shall be mitigated by structuring the portfolios so that issues mature concurrently with the City's anticipated cash requirements, thereby eliminating the need to sell securities prematurely on the open market. It is recognized, however, that in a diversified portfolio, occasional measured losses are inevitable, and must be considered within the context of overall investment return. 4.0.2 Liquidity. An adequate percentage of the portfolios shall be maintained in liquid, short-term securities that can be converted to cash, if necessary, to meet disbursement requirements. Since all cash requirements cannot be anticipated, the portfolios should consist largely of securities with active secondary markets. These securities should have a relatively low sensitivity to market risk. Maximum overall portfolio maturities are referenced on page 15, section 13.0 of this policy. 4.0.3 Yield. Yield shall be considered only after the basic requirements of safety and liquidity have been met. Whenever possible and in a manner consistent with the objectives of safety and liquidity, a yield higher than the market rate of return shall be sought. 5.0 Delegation of Authority California Government Code Sections 53607 and 53608 authorize the legislative body of a local agency to invest, deposit, and provide for the safekeeping of the local agency's funds or to delegate those responsibilities to the treasurer of the local agency. City of Palm Desert Municipal Code Section 3.08.010 delegates the authority to invest, deposit, and provide for the safekeeping of City public monies to the City Treasurer. City of Palm Desert Municipal Code Section 2.16.010 authorizes the City Director of Finance to serve ex officio as City Treasurer. The City Treasurer shall be responsible for all investment transactions that are executed on behalf of the City. The City Treasurer and the Deputy City Treasurer shall have exclusive authority to buy and sell securities on behalf of the City. Page 3 of 26 Palm Desert Treasury Policies and Procedures Revision No. 13 No. 2: "Statement of Investment Policy" Adopted: The Deputy City Treasurer may execute investment transactions on behalf of the City only if the City Treasurer has previously authorized the transactions. If the City Treasurer is unavailable, then the Assistant Finance Director must authorize the investment transactions prior to execution. 5.1 Investment Procedures The City Treasurer shall establish written procedures for the operation of the City's investment program that are consistent with the provisions of this policy. The procedures shall include reference to: safekeeping, PSA repurchase agreements, banking service contracts, and collateral/depository agreements. Such procedures shall include explicit delegation of authority to persons responsible for investment transactions. No person may engage in an investment transaction except as provided under the terms of this policy and under the procedures that the City Treasurer establishes. 6.0 Ethics and Conflicts of Interest Investment Officers shall refrain from personal business activity that could conflict with the proper execution of the City's investment program or impair their ability to make impartial investment decisions. They shall disclose to the City Council any material financial interest in financial institutions that conduct business within the City's jurisdiction. They shall also disclose any personal investment positions that could be related to the performance of the City's investment portfolios. Investment Officers shall subordinate their personal investment transactions to those of the City, particularly with regard to the timing of securities purchases and sales, and shall avoid transactions that might impair public confidence. Investment Officers and their immediate relatives shall not accept or solicit any gifts, gratuities, honorariums, or favors from persons or entities who provide or who are seeking to provide financial services to the City. 7.0 Authorized Financial Dealers and Institutions The City Treasurer shall maintain an authorized list (see page 20) of all securities brokers that the Investment and Finance Committee and the City Council have authorized to transact securities business with the City. This list shall be provided to all members of the City Council and the Investment and Finance Committee. Page 4 of 26 Palm Desert Treasury Policies and Procedures Revision No. 13 No. 2: "Statement of Investment Policy" Adopted: Any broker that has made a political contribution within any consecutive four-year period following 1 January 1996 in an amount that exceeds the limits in Municipal Securities Rulemaking Board ("MSRB") Rule G-37, to any member of or candidate for the City Council, the Redevelopment Agency Board, the Housing Authority Commission, or the Investment and Finance Committee shall not be eligible to transact business with the City. Only primary government securities dealers ("primary dealers") that regularly report to the Federal Reserve Bank of New York shall be eligible for inclusion on the City's authorized list. The only exception to the foregoing requirement shall be that the Investment and Finance Committee and the City Council may, at their discretion, accept, review, and approve applications Requests for Information ("RFI")T from secondary brokers that: (1) have been in existence for more than five years; (2) have a net capital position in excess of $100 million; (3) are licensed as brokers by the State of California; and (4) are headquartered or have a branch office in California. The number of primary dealers and secondary brokers on the authorized list shall not exceed a combined total of feat five at any single time. The City shall accept and review new broker applications only when there is an immediate need to fill a vacancy on the authorized list. In all cases, the City shall only accept applications RFIs from and transact business with the institutional securities sales departments of primary dealers and secondary brokers. The City shall not transact business with an authorized securities firm until all of the documentation that both parties requires; has been executed and delivered. All brokers that wish to apply for inclusion on the authorized list must, at a minimum, provide the City Treasurer with a copy of the following documents, unless otherwise noted: 7.0.1 Completed "Broker Questionnaire and Certification" "Primary Dealer Request for Information" (signed original only). 7.0.2 The firm's most recent Annual Report and Securities and Exchange Commission ("SEC") Form 10-K or 20-F. 7.0.3 The firm's National Association of Securities Dealers ("NASD") Form BD — Uniform Application for Broker -Dealer Registration or, in the case Page 5 of 26 Palm Desert Treasury Policies and Procedures Revision No. 13 No. 2: "Statement of Investment Policy" Adopted: of an investment department within a commercial bank, SEC Form MSD. 7.0.4 The firm's current NASD Form BD Status Report. 7.0.5 NASD Form U-4 -- Uniform Application for Securities Industry Registration or Transfer for each employee would beading who might be trading with the City. 7.0.6 Current NASD Form U-4 Status Report on each employee with--whem the City wcuud be trading who might be trading with the City. 7.0.7 A resume from each a ployoo with whom th City uld be trading of the firm's employees who might be trading with the City: 7.0.8 The firm's delivery and wiring instructions. 7.0.9 A An executed corporate resolution that identifies employees who are authorized to trade, and who might be trading with the City. In addition to the above documents, secondary brokers must also submit: 7.0.10 The firm's most recent SEC Form X-17 A-5 or, in the case of an investment department within a commercial bank, SEC Consolidated Reports of Condition and Income for A Bank With Domestic and Foreign Offices - FFIEC 031. Investment Officers shall investigate all broker applicants in order to determine if they: (1) are adequately capitalized; (2) are subject to pending legal action (either the firm or the trader); (3) make markets in securities that are appropriate for the City's needs; (4) are licensed as a broker by the State of California Department of Corporations; and (5) are a member of the NASD. Broker applicants may be -requested shall be required to provide state or local government er-etherclient references from within California. The Investment and Finance Committee and the City Council shall review the submitted documents, along with the Investment Officers' recommendations, and decide if any new brokers should be added to the authorized list. If -a broker a plic n+ falis +e a ..I.,+o timer theeite pI'£aten stiaP bo dvcm 2,I t0 hav be ♦o at' ,11 y rejected If a broker's RFI is missing, incomplete, late (submitted after the specified deadline), or contains false or misleading information, or if the Page 6 of 26 Palm Desert Treasury Policies and Procedures Revision No. 13 No. 2: "Statement of Investment Policy" Adopted: broker has not submitted all of the documents that the City requires, then the City shall automatically reject that broker's RFI, and the broker shall not be eligible to submit another RFI to the City for three years. The City Treasurer shall provide all authorized brokers annually, in Marsh, September, with a copy of the City's current investment policy and a certification form. Each broker shall be required to complete and submit the certification form as proof that it has received the City's investment policy, read it, and intends to comply with it. Each broker shall also submit its annual financial statements to the City Treasurer for review and filing. The City Treasurer shall maintain an authorized list (see page 20) of all commercial banks, savings associations, and federal associations (as defined by California Financial Code Section 5102) and trust companies that the Investment and Finance Committee and the City Council have authorized as public depositories of City monies. This List shall be provided to all members of the City Council and the Investment and Finance Committee. The City shall only deposit public monies in financial institutions that have: 7.0.11 At least $5 billion in total assets. 7.0.12 A core capital -to -total assets ratio of at least five percent. 7.0.13 Favorable statistical ratings from a nationally recognized rating service, as determined by the City Treasurer. 7.0.14 A federal or a state charter. 7.0.15 A branch office within Riverside County. 7.0.16 A "satisfactory" overall rating in their most recent evaluation by the appropriate federal financial supervisory agency, in terms of meeting the credit needs of California communities, pursuant to federal law. Under no circumstances shall the City's deposits in a financial institution exceed the total shareholders's equity of that institution. 8.0 Authorized and Suitable Investments Page 7 of 26 Palm Desert Treasury Policies and Procedures Revision No. 13 No. 2: "Statement of Investment Policy" Adopted: The City Treasurer shall be authorized to invest in the following financial instruments pursuant to California Government Code Section 53600 et seq. The City's investment policy is more conservative than state law. Page 8 of 26 Palm Desert Treasury Policies and Procedures No. 2: "Statement of Investment Policy" No. Type of Investment 1. United States Treasury bills, notes, bonds, or certificates of indebtedness, or those for which the full faith and credit of the United States are pledged for the payment of principal and interest. 2. Federal Agency or United States government -sponsored enterprise ("GSE") obligations, participations, or other instruments, including those issued by or fully guaranteed as to principal and interest by Federal Agencies or by GSE. 3. Banker's Acceptances ("BA") issued by commercial banks. 4. Commercial Paper ("CP") issued by general corporations organized and operating in the United States with assets exceeding $500 million. % of Portfolio Authorized 100% 100% Revision No. 13 Adopted: Other Restrictions Maximum maturity: 5 years Maximum maturity: 5 years No more than 30% of the portfolio may be invested in any one issuer (excluding the proceeds of tax-exempt bonds). 40% Rated "A-1" or higher by S&P or "P-1" by Moody's. Maximum maturity: 180 days No more than 30% of the portfolio may be invested in any one BA issuer. 25% Rated "A-1 +" by S&P or "P-1" by Moody's. Maximum maturity: 270 days No more than 10% of the outstanding CP of any one issuer may be purchased. Page 8 of 26 Palm Desert Treasury Policies and Procedures Revision No. 13 No. 2: "Statement of Investment Policy" Adopted: No. Type of Investment 5. Negotiable Certificates of Deposit ("NCD") issued by a nationally- or state -chartered bank, a savings association, a federal association, or by a state -licensed branch of a foreign bank. 6. Time Certificates of Deposit ("TCD"► issued by qualified public depositories. 7. Repurchase Agreements ("RP") sold by authorized brokers. % of Portfolio Authorized Other Restrictions 30% Long-term debt rated "AA-" higher by S&P of by Moody's. Maximum maturity: 5 years 15% TCDs exceeding $100,000 must be collateralized. TCDs must be centralized at one location for each bank or S&L. Maximum maturity: 1 year If TCD is uncollateralized, then no more than $90,000 may be invested. Issuing public depository must meet qualifying criteria on page 7, section 1.7 of this SOIP. 20% Maximum maturity: 30 days Collateral must be United States Treasury, Federal Agency, or GSE obligations. Zero coupon and stripped coupon instruments are not acceptable as collateral. Page 9 of 26 Palm Desert Treasury Policies and Procedures Revision No. 13 No. 2: "Statement of Investment Policy" Adopted: No. Type of Investment 7. Repurchase Agreements (continued) 8. Medium -Term Notes issued by corporations organized and operating in the United States, or by depository institutions operating in the United States and licensed by the United States or by any state. % of Portfolio Authorized Other Restrictions 20% Collateral must be valued at 102% of cost and adjusted weekly. City must have first lien and security interest in all collateral. City's custodian must hold collateral. An authorized broker must file a Public Securities Association (PSA) Master Repurchase Agreement with the City Treasurer, and the City Attorney must review the agreement, prior to the transaction of RP business with that broker. 30% Rated "A" or higher by S&P or by Moody's. Maximum maturity: 5 Years No more than 15% of the portfolio may be invested in any one issuer. Page 10 of 26 Palm Desert Treasury Policies and Procedures Revision No. 13 No. 2: "Statement of Investment Policy" Adopted: No. Type of Investment 9, Money Market Mutual Funds ("MMF") that are registered with the SEC under the Investment Act of 1940. 10. State of California Local Agency Investment Fund ("LAI5") that is managed by the State Treasurer's Office. % of Portfolio Authorized 20% (excluding bond proceeds) See note 4 Other Restrictions Either rated "AAA" by S&P, "Aaa" by Moody's, or "AAA-V- 1 +" by Fitch (2 of 3), or retains an investment advisor registered or exempt from registration with SEC, with at least 5 years of experience managing a MMF with $500 million or more in assets. MMF must have dollar -weighted average maturity of 90 days or less. MMF must buy securities that mature in 13 months or less. No commission may be charged. $40 million limit per account with LAIF, except for bond trustee accounts (no limit). City Council and Redevelopment Agency approved participation in LAIF on 12/12/81 in Resolution No. 81-161. Page 11 of 26 Palm Desert Treasury Policies and Procedures Revision No. 13. No. 2: "Statement of Investment Policy" Adopted: No. Type of Investment 1 1 . Structured Notes in the form of callable securities or "STRIPS" issued by the United States Treasury or by Federal Agencies or government -sponsored enterprises ("GSE"). 12. Asset -Backed Commercial Paper ("ABCP") issued by special purpose corporations ("SPC"), trusts, or limited liability companies ("LLC") organized and operating in the United States with assets exceeding $500 million, that is supported by credit enhancement facilities (e.g., over- collateralization, letters of credit, surety bonds, etc.). 13. Local Government Investment Pools ("LGIPS") % of Portfolio Authorized Other Restrictions 20% Maximum maturity: 5 years 25% Rated "A1 +" by S&P or "P1" by Moody's. Restricted to programs sponsored by commercial banks or finance companies. Foreign banks limited to those of Canada, United Kingdom, Australia, France, Belgium, Netherlands, Switzerland, and Germany. Program must have credit facilities that provide at least 100% liquidity. Serialized ABCP programs are not eligible. Maximum maturity: 270 days Unsecured commercial paper holdings must be included when calculating the 25% maximum concentration limit. 20% Must meet above criteria for (excluding MMFs (except for LAIF). bond proceeds) Page 12 of 26 Palm Desert Treasury Policies and Procedures Revision No. 13 No. 2: "Statement of Investment Policy" Adopted: 8.1 Prohibited Investments Investment Officers shall not invest public monies in financial instruments that are not authorized under this policy. Prohibited investments shall include, but shall not be limited to, equity securities, bond mutual funds, reverse repurchase agreements, and derivative contracts (forwards, futures, and options). The purchase of derivative securities shall be prohibited, unless specifically authorized in this policy. Investment Officers shall not engage in securities lending, short selling, or other hedging strategies. LAIF and MMFs shall be exempt from the prohibitions on derivative contracts, derivative securities, reverse repurchase agreements, securities lending, short selling, and other hedging strategies. 9.0 Investment Pools/Mutual Funds A thorough investigation of the pool/fund is required prior to investing, and on a continual basis. There shall be a questionnaire developed which will answer the following general questions: 9.0.1 A description of eligible investment securities, and a written statement of investment policy and objectives. 9.0.2 A description of interest calculations and how it is distributed, and how gains and losses are treated. 9.0.3 A description of how the securities are safeguarded (including the settlement processes), and how often the securities are priced and the program audited. 9.0.4 A description of who may invest in the program, how often, what size deposit and withdrawal are allowed. 9.0.5 A schedule for receiving statements and portfolio listings. 9.0.6 A verification on whether or not reserves or retain earnings are utilized by the pool/fund. 9.0.7 A fee schedule, and when and how it is assessed. Page 13 of 26 Palm Desert Treasury Policies and Procedures Revision No. 13 No. 2: "Statement of Investment Policy" Adopted: 9.0.8 The eligibility of the pool/fund for bond proceeds and whether it will accept such proceeds. 10.0 Collateralization Investment Officers shall ensure that all demand deposits and all non- negotiable certificates of deposit that exceed $100,000 shall be fully collateralized with securities authorized under state law and under this SOW. Collateral may be waived for the first $100,000 since this will be insured by the Federal Deposit Insurance Corporation. Any amount on deposit over $100,000 plus accrued interest, however, shall be collateralized with United States Treasury or federal agency securities at a constant margin ratio of 110 percent or with mortgage -backed collateral at a constant margin ratio of 150 percent. Collateralized investments and demand deposits may require substitution of collateral. The City Treasurer must approve all requests from financial institutions for substitution of collateral that involve interchanging classes of security. An independent third party with which the City has a current custodial agreement shall always hold the collateral. The independent third party shall provide the City Treasurer with a safekeeping receipt that he shall retain. 11.0 Safekeeping and Custody Investment Officers shall conduct all security transactions on a delivery - versus -payment ("DVP") or on a receipt -versus -payment ("RVP") basis. A third -party bank trust department ("Custodian") that acts as an agent for the City under the terms of a custody agreement executed between both parties shall hold the securities. The City's Custodian shall be represented on the authorized list (see page 20). The only exception to the foregoing shall be securities purchases made with: 11.0.1 Local government investment pools. 11.0.1 Money market mutual funds. 11.0.2 Federal Reserve Banks ("Treasury Direct Program") since the purchased securities are not deliverable. Page 14 of 26 Palm Desert Treasury Policies and Procedures Revision No. 13 No. 2: "Statement of Investment Policy" Adopted: No securities broker or investment advisor shaft have access to City monies, accounts, or investments. Any transfer of monies to or through a securities broker must have the City Treasurer's prior written approval. If the City Treasurer is unavailable, then the Assistant Finance Director must authorize the transfer, in writing. The City shall require Broker Trade Confirmations for all trades. Investment Officers shall review these confirmations immediately upon receipt, for conformity with the terms of the City's Trade Sheets. 12.0 Diversification Investment Officers shall diversify the City's investment portfolios by security type and by issuer, except for bond reserve monies; bond escrow monies; and any other monies that the City Council or the Investment and Finance Committee designates. 13.0 Maximum Maturities Investment Officers shall not invest in securities with maturities exceeding five years. The Investment and Finance Committee and the City Council, however, may approve longer maturities for the investment of bond reserve, bond escrow, and other funds if the maturities of such investments are expected to coincide with the expected use of the funds. The weighted -average maturity of the City portfolio shall not exceed 540 days. 13.1 Portfolio Rebalancing If portfolio percentage constraints are violated due to a temporary imbalance in the portfolio, then Investment Officers shall hold the affected securities to maturity in order to avoid capital losses. If no capital losses would be realized upon sale, however, then Investment Officers shall consider rebalancing the portfolio after evaluating the expected length of time that it will be imbalanced. Portfolio percentage limits are in place in order to ensure diversification of the City investment portfolio; a small, temporary imbalance will not significantly impair that strategy. Page 15 of 26 Palm Desert Treasury Policies and Procedures Revision No. 13 No. 2: "Statement of Investment Policy" Adopted: 13.2 Credit Downgrading This policy sets forth minimum credit risk criteria for each type of security. This credit risk criteria applies to the initial purchase of a security; it does not automatically force the sale of a security if its credit risk ratings fall below policy limits. If a security is downgraded below the minimum credit risk criteria specified in this policy, then Investment Officers shall evaluate the downgrade on a case -by -case basis in order to determine the security should be held or sold. The City Treasurer shall inform the Investment and Finance Committee at its next monthly meeting of the credit downgrade and of the Investment Officers's decision to hold or sell the downgraded security. Investment Officers shall review the credit standing of all securities in the City's investment portfolios annually, at a minimum. 13.3 Bond Proceeds The City Treasurer shall segregate the gross proceeds of tax-exempt bonds from the City general pool and shall keep them in a separate pool. They shall be invested pursuant to the instructions in the respective bond indentures of trust. If the bond indenture authorizes investments that conflict with this policy, then such investments shall be made only with the Investment and Finance Committee's prior approval. All securities shall be held in third -party safekeeping with the bond trustee ("Trustee") and all DVP and RVP rules shall apply. The Trustee shall be represented on the authorized list (see page 20). Investment Officers shall use competitive offerings, whenever practical, for all investment transactions that involve the gross proceeds of tax-exempt bonds. The City shall obtain a minimum of three competitive offers. Any exceptions to this policy shall be documented and shall be reported to the Investment and Finance Committee at its next monthly meeting. The City is required under the "U.S. Tax Reform Act of 1986" to perform annual arbitrage calculations and to rebate excess earnings to the United States Treasury from the investment of the gross proceeds of tax-exempt bonds that were sold after the effective date of that law. The City Treasurer may contract with qualified outside financial consultants to provide the necessary technical expertise that is required to comply with this law. Page 16 of 26 Palm Desert Treasury Policies and Procedures Revision No. 13 No. 2: "Statement of Investment Policy" Adopted: 14.0 Internal Controls The City Treasurer shall ensure that all investment transactions comply with the City's policy, and shall establish internal controls that are designed to prevent losses due to fraud, negligence, and third -party misrepresentation. Internal controls deemed most important shall include: avoidance of collusion; separation of duties and administrative controls; separating transaction authority from accounting and record keeping; custodial safekeeping; clear delegation of authority; management approval and review of investment transactions; specific limitations regarding securities losses and remedial action; written confirmation of telephone transactions; documentation of investment transactions and strategies; and monitoring of results. The City Treasurer shall establish a process of independent review by an external audit firm of the City's investment program every three years. The external auditor shall review the program's management in terms of compliance with, the internal controls that are specified in the City's Treasury Policies and Procedures Manual. An Investment and Finance Committee consisting of City officials and community representatives shall be responsible for reviewing the City investment reports, transactions, policies and procedures, and strategies, on a monthly basis. The Mayor; the Mayor Pro Tempore; the City Manager; the City Attorney; the Redevelopment Agency Executive Director; the City Treasurer; the Deputy City Treasurer; and various citizens who are appointed by the City Council pursuant to City ordinance, shall sit on this committee. 15.0 Performance Standards The investment portfolio shall be designed with the objective of obtaining a rate of return throughout budgetary and economic cycles, commensurate with investment risk constraints and cash flow needs. 15.1 Market Yield (Benchmark) The City's investment portfolios, shall be passively managed with portfolio securities being held to maturity. On selected occasions, however, the City's portfolios may be actively managed for purposes of improving portfolio risk structure, liquidity, or yield in response to market conditions or to meet City requirements. Profit-taking may only be done if the capital gains would: Page 17 of 26 Palm Desert Treasury Policies and Procedures Revision No. 13 No. 2: "Statement of Investment Policy" Adopted: 15.1.1 Exceed the return that would be realized by holding the security to maturity; and 15.1.2 More than offset any income reduction due to reinvestment rate risk. The City shall adopt a benchmark that approximates the composition and weighted -average maturity of each City portfolio, in order to measure whether or not the City's portfolio yields are matching or surpassing the market yield. 16.0 Reporting The City Treasurer shall provide the Investment and Finance Committee and the City Council with a monthly investment report within 30 days of each month -end or at the next scheduled City Council meeting following an Finance Committee meeting. Pursuant to Governmental Accounting Standards Board ("GASB") Statement Number 40, as amended March 2003, the monthly investment report shall 16.0.1 Organized individual securities by investment type (e.g., U.S. Treasuries, corporate bonds, commercial paper, etc:). Dissimilar investments (e.g., U.S. Treasury bills and Treasury strips) should' not be aggregated. 16.0.2 List credit risk ratings for each security, mutual fund, or investment pool from at least two nationally recognized statistical rating organizations ("NRSRO"). If the security, mutual fund, or investment pool has not rating, then it shall be shown as "unrated"._ 16.0.3 Disclose the amount of individual securities and corresponding issuers if they exceed five percent of net plan assets, except for securities guaranteed by the U.S. Government, money market mutual funds, and external investment pools. 16.0.4 Use the specific identification method to reflect interest -rate risk by investment type and amount. This report shall include a complete portfolio inventory with details on issue, par value, book value, coupon/rate, original settlement date of purchase, final maturity date, CUSIP number, average weighted yield, average days to Page 18 of 26 Palm Desert Treasury Policies and Procedures Revision No. 13 No. 2: "Statement of Investment Policy" Adopted: maturity, and market value (including source of market valuation). The report will include a statement on compliance or noncompliance with the City's SOIP and a statement on whether there are or are not sufficient funds to meet the City's anticipated cash requirements for the next six months. 17.0 Investment Policy Adoption The City Treasurer shall submit a Statement of Investment Policy to the Investment and Finance Committee; the City Council; the Redevelopment Agency Board; the Housing Authority Commission; the Financing Authority Commission; and the Recreational Facilities Corporation Board of Directors annually for their review and adoption. 18.0 Regulatory Submission The City Treasurer shall provide the California Debt and Investment Advisory Commission ("CDIAC") with: 18.0.1 Second- and fourth-quarter fiscal year investment reports within 60 days of those quarter -ends. 18.0.2 The City's Statement of Investment Policy within 60 days of calcndar y or cnd June 30 or within 60 days of any amendment thereto. All submissions to CDIAC shall be sent return receipt, certified mail. Page 19 of 26 Palm Desert Treasury Policies and Procedures Revision No. 13 No. 2: "Statement of Investment Policy' Adopted: Appendix A: List of Authorized Financial Institutions The City Treasurer's Office is authorized to transact investment and depository business with the following financial institutions. Investment and depository transactions with firms other than those appearing on this list are prohibited. UNITED STATES GOVERNMENT 1. Federal Reserve Bank PRIMARY DEALERS 1 . Merrill Lynch & Company, Inc. 2. Morgan Stanley & Company, Inc. 3. Citigroup Global Markets, Inc. 4. Zions Bank SECONDARY BROKERS 1. Wells Fargo Institutional Securities, LLC PUBLIC DEPOSITORIES 1. Bank of America 2. California Federal Bank 3. Downey Savings & Loan 4. Northern Trust Bank 5. Union Bank of California 6. Washington Mutual Bank 7. Wells Fargo Bank CUSTODIAN 1. Union Bank of California TRUSTEE 1. Bank of New York Page 20 of 26 Palm Desert Treasury Policies and Procedures Revision No. 13 No. 2: "Statement of Investment Policy" Adopted: Appendix B: Glossary AGENCIES. Federal agency and instrumentality securities. ASKED. The price at which securities are offered. BANKERS'S ACCEPTANCE ("BA"). A draft, bill, or exchange accepted by a bank or a trust company. Both the issuer and the accepting institution guarantee payment of the bill. BID. The price offered by a buyer of securities (when one sells securities, one asks for a bid). See "Offer". BROKER. A broker brings buyers and sellers together so that he can earn a commission. CERTIFICATE OF DEPOSIT ("CD"). A time deposit with a specific maturity, as evidenced by a certificate. Large -denomination CDs are typically negotiable. COLLATERAL. Securities, evidence of deposit, or other property which a borrower pledges to secure repayment of a loan. Also refers to securities pledged by a bank to secure deposits of public monies. COMPREHENSIVE ANNUAL FINANCIAL REPORT ("CAFR"). The official annual report for the City of Palm Desert. It includes five combined statements for each individual fund and account group, that are prepared in conformity with GAAP. It also includes supporting schedules that are necessary to demonstrate compliance with finance -related legal and contractual provisions, extensive introductory material, and a detailed statistical section. COUPON. (a) The annual rate of interest that a bond's issuer promises to pay the bondholder on the bond's face value. (b) A certificate attached to a bond, that evidences interest due on a payment date. DEALER. A dealer, as opposed to a broker, acts as a principal in all transactions, buying and selling for his own account. DEBENTURE. A bond secured only by the general credit of the issuer. Page 21 of 26 Palm Desert Treasury Policies and Procedures Revision No. 13 No. 2: "Statement of Investment Policy" Adopted: DELIVERY VERSUS PAYMENT. There are two methods of delivery of securities: (1) delivery versus payment (DVP); and (2) delivery versus receipt (DVR). DVP is delivery of securities with an exchange of money for the securities. DVR is delivery of securities with an exchange of a signed receipt for the securities. DERIVATIVES. (1) Financial instruments that are linked to, or derived from, the movement of one or more underlying indexes or securities, and may include a leveraging factor; or (2) financial contracts based upon a notional amount whose value is derived from an underlying index or security (e.g., interest rates, foreign exchange rates, equities, or commodities). DISCOUNT. The difference between the acquisition cost of a security and its value at maturity, when quoted at lower than face value. A security that sells below original offering price shortly after sale, is also is considered to be at a discount. DISCOUNT SECURITIES. Non -interest bearing money market instruments that are issued a discount and that are redeemed at maturity for full face value (e.g., U.S. Treasury Bills). DIVERSIFICATION. Dividing investment funds among a variety of securities that offer independent returns. FEDERAL CREDIT AGENCIES. Agencies of the Federal Government that were established to supply credit to various classes of institutions and individuals (e.g., S&Ls, small business firms, students, farmers, farm cooperatives, and exporters). FEDERAL DEPOSIT INSURANCE CORPORATION ("FDIC"). A federal agency that insures bank deposits, currently up to 5100,000 per deposit. FEDERAL FUNDS RATE. The rate of interest at which Fed funds are traded. This rate is currently pegged by the Federal Reserve through open -market operations. FEDERAL HOME LOAN BANKS ("FHLB"). Government -sponsored wholesale banks (currently 12 regional banks) which lend funds and provide correspondent banking services to member commercial banks, thrift institutions, credit unions, and insurance companies. The mission of the FHLBs is to liquefy the housing -related assets of its members, who must purchase stock in their District Bank. Page 22 of 26 Palm Desert Treasury Policies and Procedures Revision No. 13 No. 2: "Statement of Investment Policy" Adopted: FEDERAL NATIONAL MORTGAGE ASSOCIATION ("FNMA"). FNMA, like GNMA, was chartered under the Federal National Mortgage Association Act in 1938. FNMA is a federal corporation working under the auspices of the Department of Housing and Urban Development (HUD). It is the largest single provider of residential mortgage funds in the United States. Fannie Mae, as the corporation is called, is a private stockholder -owned corporation. The corporation's purchases include a variety of adjustable mortgages and second loans, in addition to fixed-rate mortgages. FNMA's securities are also highly liquid and are widely accepted. FNMA assumes and guarantees that all security holders will receive timely payment of principal and interest. FEDERAL OPEN MARKET COMMITTEE ("FOMC"). The FOMC consists of seven members of the Federal Reserve Board and five of the 12 Federal Reserve Bank Presidents. The President of the New York Federal Reserve Bank is a permanent member, while the other Presidents serve on a rotating basis. The Committee periodically meets to set Federal Reserve guidelines regarding purchases and sales of government securities in the open market, as a means of influencing the volume of bank credit and money. FEDERAL RESERVE SYSTEM. The central bank of the United States created by Congress and consisting of a seven -member Board of Governors in Washington, D.C., 12 regional banks, and about 5,700 commercial banks that are members of the system. GOVERNMENT NATIONAL MORTGAGE ASSOCIATION ("GNMA" or "Ginnie Mae"). Securities that influence the volume of bank credit that is guaranteed by GNMA and issued by mortgage bankers, commercial banks, savings and loan associations, and other institutions. A security holder is protected by the full faith and credit of the U.S. Government. Ginnie Mae securities are backed by the FHA, VA, or FMHM mortgages. The term "pass-throughs" is often used to describe Ginnie Maes. LIQUIDITY. A liquid asset is one that can be converted easily and rapidly into cash without a substantial loss of value. In the money market, a security is said to be liquid if the spread between bid and asked prices is narrow, and reasonable size can be done at those quotes. LOCAL GOVERNMENT INVESTMENT FUND ("LAIF"). Monies from local governmental units may be remitted to the California State Treasurer for deposit in this special fund for the purpose of investment. Page 23 of 26 Palm Desert Treasury Policies and Procedures Revision No. 13 No. 2: "Statement of Investment Policy" Adopted: MARKET VALUE. The price at which a security is trading and could presumably be purchased or.sold. MASTER REPURCHASE AGREEMENT. A written contract covering all future transactions between the parties to repurchase -reverse repurchase agreements, that establishes each party's rights in the transactions. A master agreement will often specify, among other things, the right of the buyer (lender) to liquidate the underlying securities in the event of default by the seller (borrower). MATURITY. The date upon which the principal or stated value of an investment becomes due and payable. MONEY MARKET. The market in which short-term debt instruments commercial paper, bankers's acceptances) are issued and traded. (e.g., bills, OFFER. The price asked by a seller of securities (when one buys securities, one asks for an offer). See `Asked" and 'Bid'. OPEN MARKET OPERATIONS. Purchases and sales of government and certain other securities in the open market by the New York Federal Reserve Bank, as directed by the FOMC in order to influence the volume of money and credit in the economy. Purchases inject reserves into the bank system and stimulate growth of money and credit; sales have the opposite effect. Open market operations are the Federal Reserve's most important and most flexible monetary policy tool. PORTFOLIO. A collection of securities that an investor holds. PRIMARY DEALER. A group of government securities dealers that submit daily reports of .market activity and positions, and monthly financial statements to the Federal Reserve Bank of New York, and are subject to its informal oversight. Primary dealers include Securities and Exchange Commission (SEC) -- registered securities broker -dealers, banks, and a few unregulated firms. PRUDENT INVESTOR RULE. An investment standard. A fiduciary, such as a trustee, may invest in a security if it is one that would be bought by a prudent investor acting in like capacity, who is seeking reasonable income and preservation of capital. . Page 24 of 26 Palm Desert Treasury Policies and Procedures Revision No. 13 No. 2: "Statement of Investment Policy" Adopted: QUALIFIED PUBLIC DEPOSITORIES. A financial institution that: (1) does not claim exemption from the payment of any sales, compensating use, or ad valorem taxes under the laws of this state; (2) has segregated for the benefit of the commission eligible collateral having a value of not Tess than its maximum liability; and (3) has been approved by the Public Deposit Protection Commission to hold public deposits. RATE OF RETURN. The yield obtainable on a security based on its purchase price or its current market price. REPURCHASE AGREEMENT ("RP" OR "REPO"). A holder of securities sells them to an investor with an agreement to repurchase the securities at a fixed price on a fixed date. The security "buyer", in effect, lends the "seller" money for the period of the agreement, and the terms of the agreement are structured to compensate him for this. Dealers use RP extensively to finance their positions. Exception: when the Fed is said to be doing RP, it is lending money (increasing bank reserves). SAFEKEEPING. A service to customers rendered by banks for a fee whereby securities and valuables of all types and descriptions are held in the bank's vaults for protection. SECONDARY MARKET. A market made for the purchase and sale of outstanding issues following the initial distribution. SECURITIES AND EXCHANGE COMMISSION. An agency created by Congress to administer securities legislation for the purpose of protecting investors in securities transactions. SEC RULE 15c3-1. See "Uniform Net Capital Rule". STRUCTURED NOTES. Notes issued by instrumentalities (e.g., FHLB, FNMA, SLMA) and by corporations, that have imbedded options (e.g., call features, step- up coupons, floating rate coupons, derivative -based returns) in their debt structure. The market performance of structured notes is affected by fluctuating interest rates; the volatility of imbedded options; and shifts in the yield curve. TREASURY BILLS. A non -interest bearing discount security that is issued by the U.S. Treasury to finance the national debt. Most T-bills are issued to mature in three months, six months, or one year. Page 25 of 26 Palm Desert Treasury Policies and Procedures Revision No. 13 No. 2: "Statement of Investment Policy" Adopted: TREASURY BONDS. Long-term, coupon -bearing U.S. Treasury securities that are issued as direct obligations of the U.S. Government, and having initial maturities of more than 10 years. TREASURY NOTES. Medium -term, coupon -bearing U.S. Treasury securities that are issued as direct obligations of the U.S. Government, and having initial maturities of two to 10 years. UNIFORM NET CAPITAL RULE. SEC requirement that member firms, as well as non-member broker -dealers in securities, maintain a maximum ratio of indebtedness -to -liquid capital of 15 to one. Also called net capita/ rule and net capita ratio. Indebtedness covers all money that is owed to a firm, including margin loans and commitments to purchase securities (one reason that new public issues are spread among members of underwriting syndicates). Liquid capital includes cash and assets easily converted into cash. YIELD. The rate of annual income return on an investment, expressed as a percentage. (a) INCOME YIELD is obtained by dividing the current dollar income by the current market price for the security. (b) NET YIELD or YIELD TO MATURITY is the current income yield minus any premium above par or plus any discount from par in purchase price, with the adjustment spread over the period from the date of purchase to the date of maturity of the bond. Page 26 of 26 CITY OF PALM DESERT OFFICE OF THE CITY TREASURER STAFF REPORT REQUEST: Relist Zions Bank as a broker -dealer for the City of Palm Desert. APPLICANT: N/A CASE NOS. N/A DATE: 22 September 2004 CONTENTS: Exhibit "A": City Council Approval of Zions Bank as a Broker -Dealer Exhibit "B": Removal of Zions Bank from Approved Broker -Dealer List Recommendation: By Minute Motion: That the Investment and Finance Committee relist Zions Bank as a broker -dealer for the City of Palm Desert. Background: Zions Bank Capital Markets is a division of Zions First National Bank ("Zions") which, in turn, is a subsidiary of Zions Bancorporation. Founded in 1873 in Salt Lake City, Utah, Zions is the only primary dealer headquartered west of the Mississippi River. Its Capital Markets Division has a branch office in Oakland, California, and focuses principally on trading Treasuries and Agencies. Zions's California client list includes LAIF; the cities of Los Angeles, San Jose, and Ontario; the counties of Los Angeles, Orange, and Kern; and the San Diego County Water Authority. Zions operates a retail banking business in California under the name of "California Bank & Trust". Zions has not been touched by scandal. On September 23, 1999, the Palm Desert City Council authorized Zions to do business with the City (See Exhibit "A"). The City Treasurer's Office accordingly began to purchase securities from Zions. It became apparent over time, however, that the City did not have enough business to support seven brokers. Consequently, the Investment and Finance Committee authorized the delisting of two brokers, in order to spread the business more evenly. Staff Report Relisting of Zions Bank as a Broker -Dealer 22 September 2004 Page 2 of 2 On May 22, 2000, the City notified Zions that it was being removed from the City's Approved Broker -Dealer list due to "...a substantial and prolonged decline in trading activity by the City of Palm Desert..." (see Exhibit "B"). This was a delisting letter, not a termination letter (e.g., Banc of America Securities). The City Treasurer's Office accordingly marked the Zions file "inactive", and retained it on -site, in the event that a future opportunity to do business with Zions might present itself. The City's current trading volume justifies retaining only four brokers. There is one exception. however. and it is an important exception. Once or twice a year, the City must invest the proceeds of municipal bond offerings. Per Internal Revenue Service ("IRS") regulations, the City must receive a minimum of three competitive offerings. During the last municipal bond financing, Tax Allocation Refunding Revenue Bonds, Project Area No. 1, Series 2004, one of the City's four brokers declined to participate in a competitive offering for the investment of bond proceeds because of the unusual settlement terms (Trade Day + 11 days). A second broker simply did not have any inventory for the date that the City wanted. Consequently, only two competitive offerings were submitted — well below the IRS threshold. In order to avoid a repetition of this situation, the City Treasurer's Office is recommending that the Investment and Finance Committee relist Zions on the Approved Broker -Dealer List as a fifth broker for the City. In future, this should enable the City to receive a minimum of three competitive offerings when municipal bond proceeds are being invested. Zions has indicated that it could accommodate settlement terms of "T + 11". Submitted By: rutamaa .A1, Thomas W. Jeffrey Treasurer Approved By: Paul S. Gibson, C.C.M.T., City Treasurer EXHIBIT "A" N T ER MEMO OFF O C E To: Honorable Mayor and Members of The City Council From: Paul S. Gibson, Finance Director & City Treasurer Subject: Approval of Three New Primary Dealers Date: 14 September 1999 RECOMMENDATION By minute motion, approve Lehman Brothers, Chase Securities, and Zions Bancorporation as broker -dealers for the City of Palm Desert. BACKGROUND The City Treasurer wishes to add three primary dealers to the Approved List in order to enhance competition and thereby lower the City's cost of buying securities. Primary dealers are authorized to buy government securities directly from the U.S. Treasury and to "make markets" in those securities. They belong to an elite group of 30 large securities firms. • Lehman Brothers, the fifth -largest Wall Street investment bank, did $6 trillion of transactions in U.S. Treasury and Federal Agency securities in 1998. • Chase Securities, a subsidiary of Chase Manhattan Corporation, did $2.9 trillion of transactions in U.S. Treasury and Federal Agency securities in 1998. Chase Manhattan is the third -largest U.S. bank holding company as a result of mergers with Manufacturers Hanover and Chemical Bank. • Zions Bancorporation, one of the top 10 municipal financial advisors in 1998, did $945 billion of transactions in U.S. Treasury and Federal Agency securities that year. Zions is a "niche player" that specializes in Federal Agency securities. Staff recomends approval of these dealers. The Finance and Investment Committee has endorsed this recommendation. Respec fully Submitted, Reviewed and Concurred, L. Paul S. Gibson Ramon A. Diaz Finance Director & City Treasurer City Manager 6°T3;o s1XaaT L9VV ' J rri ufTM arra uo TEuTErpo /t,� •.CS anIaniaA --fury • NIVJSSii uv,V :ZNaSEy xrr�tv'vo' adrv' 1 "yV1,tv k:S3,W U2H±O a2Al3Drd aaINfla aancrelaaY :NoILDAIoNnoo zslo EXHIBIT "B" CITY Of Ph1DI DESERT 73-510 FRED WARING DR VE PALM DESERT, CALIFORNIA 92260-2578 TEL: 760 346-061 FAX: 76O 341-7098 info@palm-desert tug 22 May 2000 Zions Bank Capital Markets Attention: Theodore M. Dutkanych Assistant Vice President 0ne South Main Street Salt Lake City, UT 84111 Re: Removal from City Approved Broker -Dealer List Dear Mr. Dutkanych: Due to a substantial and prolonged decline in trading activity by the City of Palm Desert ("City"), the City has been compelled to reassess the continued need for maintaining a large list of approved broker -dealers. After a careful review, the City has decided to eliminate two firms from the City's Approved List. Zions Bank, one of the two most recent additions to that list, has been so designated. Consequently, please be advised that, effective immediately, your firm will no longer be eligible to trade with the City. The City Finance Committee has reviewed and approved this action. Sincerely, Paul S. Gibson City Treasurer STATE OF CALIFORNIA PHILIP ANGELIDES, Treasurer OFFICE OF THE TREASURER SACRAMENTO CITY OF PALM DESERT Attn: CITY TREASURER 73510 FRED WARING DRIVE PALM DESERT Transactions Effective Date 07-15-2004 07-20-2004 Transaction Date Local Agency Investment Fund PO Box 942809 Sacramento, CA 94209-0001 (916) 653-3001 July, 2004 Statement CA 92260 Tran Confirm Type Number 07-14-2004 QRD 07-19-2004 RW Account Summary Total Deposit : Total Withdrawal : 143,176.93 - 143,176.93 OIFY Account Number : 98-33-621 Authorized Caller SYSTEM 269356 THOMAS JEFFREY Beginning Balance : Ending Balance : Amount 143,176.93 - 143,176.93 40,000,000.00 40,000,000.00 Page : 1 of 1 STATE OF CALIFORNIA PHILIP ANGELIDES, Treasurer OFFICE OF THE TREASURER SACRAMENTO PALM DESERT REDEVELOPMENT AGENCY Attn: TREASURER 73-510 FRED WARING DRIVE PALM DESERT Transactions Effective Date 07-15-2004 07-20-2004 Transaction Date Local Agency Investment Fund PO Box 942809 Sacramento, CA 94209-0001 (916) 653-3001 July, 2004 Statement CA 92260 Tran Confirm Type Number 07-14-2004 QRD 07-19-2004 RW Account Summary Total Deposit : Total Withdrawal : 143,176.93 - 143,176.93 F Account Number : 65-33-015 Authorized Caller SYSTEM 738924 THOMAS W. JEFFREY Beginning Balance : Ending Balance : Amount 143,176.93 - 143,176.93 40,000,000.00 40,000,000.00 Page : 1 of 1 STATE OF CALIFORNIA PHILIP ANGELIDES, Treasurer OFFICE OF THE TREASURER SACRAMENTO PALM DESERT HOUSING AUTHORITY Attn: DEPUTY CITY TREASURER 73-510 FRED WARING DRIVE PALM DESERT Transactions Local Agency Investment Fund PO Box 942809 Sacramento, CA 94209-0001 (916) 653-3001 July, 2004 Statement CA 99260-2578 hI'i'r C',= P'AL , 1. Account Number : 25-33-003 Effective Transaction Tran Confirm Authorized Date Date Type Number Caller 07-15-2004 07-14-2004 QRD Account Summary Total Deposit : Total Withdrawal : 22,352.51 0.00 Amount SYSTEM 22,352.51 Beginning Balance : Ending Balance : 6,249,492.52 6,271,845.03 Page : 1 of 1 STATE OF CALIFORNIA PHILIP ANGELIDES, Treasurer OFFICE OF THE TREASURER SACRAMENTO' CITY OF PALM DESERT Attn: CITY TREASURER 73510 FRED WARING DRIVE PALM DESERT Account Summary Local Agency Investment Fund PO Box 942809 Sacramento, CA 94209-0001 (916) 653-3001 August, 2004 Statement CA 92260 Account Number : 98-33-621 Total Deposit : 0.00 Beginning Balance : 40,000,000.00 Total Withdrawal : 0.00 Ending Balance : 40,000,000.00 Page : 1 of 1 STATE OF CALIFORNIA PHILIP ANGELIDES, Treasurer OFFICE OF THE TREASURER SACRAMENTO PALM DESERT REDEVELOPMENT AGENCY Attn: TREASURER 73-510 FRED WARING DRIVE PALM DESERT Account Summary Local Agency Investment Fund PO Box 942809 Sacramento, CA 94209-0001 (916) 653-3001 August, 2004 Statement CA 92260 Total Deposit : 0.00 Beginning Balance : Total Withdrawal : 0.00 Ending Balance : Account Number : 65-33-015 40,000,000.00 40,000,000.00 Page : 1 of 1 STATE OF CALIFORNIA PHILIP ANGELIDES, Treasurer OFFICE OF THE TREASURER SACRAMENTO PALM DESERT HOUSING AUTHORITY Attn DEPUTY CITY TREASURER 73-510 FRED WARING DRIVE PALM DESERT Account Summary Total Deposit : Total Withdrawal : Local Agency Investment Fund PO Box 942809 Sacramento, CA 94209-0001 (916) 653-3001 August, 2004 Statement Account Number : 25-33-003 CA 99260-2578 0.00 Beginning Balance : 6,271,845,03 0.00 Ending Balance : 6,271,845.03 Page : 1 of 1 C A LI PORN I A ASSET MANAGEMENT FROG RANI POINT POWERS AUTHORITY S11 CA LI PoRNI A STREET 23R C, FLOUR SAN FRANCISCO CALIFORNIA 94I I I MR. THOMAS JEFFREY FINANCE DEPARTMENT CITY OF PALM DESERT OPERATING FUND PALM DESERT, CA 92260-2578 Accoutit2Summaryr418ofE8/31/2004 Statement Date Income Dividends Paid This Year 8/31/2004 $87,972.95 TransacfionfiSumma;ktfoe8/1/2004= 8/31/2004 Beginning Balance Purchases $11,309,334.36 s:7RASETTL A, DE DA' , 08/01/04 $0.00 Capital Gains Paid This Year $0.00 Reinvestments 08/31/04 9/1/2004 Accrual Income Div Reinvestment - DIV Message Line'. The Monthly Distribution Yield is 1.32%. The Monthly Effective Annual Yield is 1.33%. $12,696.37 STATEMENT FOR ACCOUNT INFORMATION: STATEMENT DATE: ACCOUNT NUMBER: FUND NAME: Total Shares Owned 11,322,030.730 Redemptions $0.00 800-729-7665 8/31/2004 553-00 Cash Reserve Portfolio Page 1 of 1 Asietiol Account Value $11,322,030.73 LA AMOIJ SHAiiE SHAFiES�TH13 O AN"SAGTION pLue iI-m(4 ACTION $12,696.37 $1.00 12,696.370 Ending Balance $11,322,030.73 TOTAL HARES OWNED -. 11,309,334.360 11,322,030.730 CALIFORNIAASSET MANAGEMENT PROGRAM I DINT YOW'ENS AU'1F10RITY 50 CA LI FCRNIA s llnn l' 2.31t1t FI.0lR SAN FRANCISCO CALIFORNIA 04111 MR. THOMAS JEFFREY FINANCE DEPARTMENT PALM DESERT REDVLPMT AGENCY GENERAL FUND 73-510 FRED WARING DRIVE PALM DESERT, CA 92260-2578 Accoi rit Sumiii asiof,8/31'/2004 Statement Date 8/31/2004 Income Dividends Paid This Year $196,140.61 Capital Gains Paid This Year $0.00 STATEMENT FOR ACCOUNT INFORMATION: 800-729-7665 STATEMENT DATE: 8/31/2004 ACCOUNT NUMBER: 553-02 FUND NAME: Cash Reserve Portfolio Total Shares Owned 20,913,894.120 TCarisacti n Surntnarvgo! 8h1%2004e 8/31/2004+ '.t* Beginning Balance Purchases $29,582,660.60 $0.00 Reinvestments $31 233 52 I':.TRADE' ;SETTLEr'-;-«}tr.. -, DO/LAR+AMOUNT I+ .D.. ATE DA p VTR SICTIO RANSAGTION 08/01/04 Beginning Balance 08/26/04 8/26/2004 Redemption - Wire Red. $8,700,000.00- 08/31/04 9/1/2004 Accrual Income Div Reinvestment - DIV $31,233.52 Message Line: The Monthly Distribution Yield is 1.32%. The Monthly Effective Annual Yield is 1.33%. Redemptions $8,700,000.00 Page 1 of 1 Account Value $20.913,894.12 Ending Balance $20,913,894.12 SHA1410.1 S T,RANSA CATION 29,582,660.600 $1.00 8,700,000.000 - 20,882,660.600 $1.00 31,233.520 20,913,894.120 0 0 FINANCE DEPARTMENT PEKE MEM'1 Liu z N E 0 74 2 0 n Tc i a o 0 m A o g ui c cr. C C o o E C 0 0 < cc K II II m K 0 W E E a w c < ¢ ¢ n i o o e o 0 0 0 o 0 i o 0 0 0 o e o v CO O O Vl O O O - 1-- <h OC 00 Vl .O en 00 O Vl .d N Q` '7 t` l ^ N Vl vl e 'O C CO - refm .0 2 3 C e e O O N 10 0 0 Vl 1/40 en N N N Vt 00 en lc) h 0O 'y = 0 e ON 0 0 O- 0 co r- Q O V N 0 an cr N O. 0 A G C O O O C O O O ,y 0 0 0 0 0 0 - 6 T Ce 0 0 0 0 0 d a a m E- N CC M 0' 0 N 1.. 0 O CJ - O C) O rl .0 W CI Cl. 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C7 'a c U 0 .� ,n y Cl u Y V1 aL•• v 9 v 1.° U {� v' «v. u a e otay :: O a i E' i.4. v 4 0 0 Q I. 61 L L eR+ F' a p v uO C `` y ,Z x�F.]ay. cep w aUo.aU � wv 1 CITY OF PALM DESERT FINANCE DEPARTMENT INTEROFFICE MEMO 's C U_ V C U L Q 4 ▪ e A ..o o a..2 o > O v ri O O t U .0 O =ao.g E� c R o g -y Q 0 m E O. 0 V a inx to To7 x o 4.7 u u a 6 6 Ed6 Q m 0 t 0 0 0 0 0 0 0 0 o t o o e 0 0 0 o V b[ O O 10 O O O 00 O 10 bb C N 'cf rl 7 0 -+ DA en U l en N 9 )n O V 7 1� N L O • N - rl m .0 O 2 n7 e a O ✓ ' N 7 l0 0 7 0 ••- .-. N en 7 T "I- vl N coY q 1- N O O- rl 1/4n - g b C 01 7 0 N )0 O — 0' if) 0 0 N N N .0 N N )0 r) 00 •--• 0 73 - O O O O O O O M G- 0 0 0 0 7 0 T O 0 en CC a a a .. A O N 0n - T O e- U 7- O t--1/40 O 0 T — M a\ aO VI O 1� ♦. O O- o 0 0 rl .o 2 2 2 2 i 2 2 2 2 O. d O 0 rl 0 0 0 00 O- O •0 0 0 0 0 O O '^ o)noo)noo,.ra 0 00000 O o o N rl in v en o r- o. o 9` coo o O o coca o v ..0 -1- 1- N en Nei N rl oR tp o. O O O O O O O y O - r) '0 O. 0- 2p a: -2 Q t O O\ CO 00 C1 r) r- N y 0 Q- CC Ol 00 \O 7 rl O M in 0 U N .. 0 N h 4 r) V' - 0 VJ -0 0 0 c�gc w i Om o o m-0-11_o 0 • q `0N O0. mQ rL`° °a U 15 v 1 • .cC vn t0m rn0. • fc ov o..a � > o4uoE xI. p o g Wcovu U > v o p d Ocd' _1.0 oYFWZ •.EoQ_.71_ z o b onox +- cle c...°L. a'7cC..,1-u<o a E..muyr Ncu u u sv 'o z a..°U. v ao :O` 10 v Q g o=a a 0.G p Y �z=Fii =Crn ..3 F�¢O •o a-, m o cKa,7a.a.0 p W F LI.." ri in R en O 10 0o co 00 O\ r r in cr O N 0E 0 00 1-- 00 )n M ON 10 7 01 .� N 10 N Vl 0 7 0 tb �i y tel 1-• ON en en O (\l M V; y — CO. 10 N ON O CO O a N 0 0 0 0 0 0 0 Ln O O O O O rl O v d q q CI %" 0 o O O 1- O O co )0 N in b0 ▪ Ol — 0 0 Ol h 7 0 LaO O— 0 0 0 '.0 to 7 enen 7 T CM — 7 O O O en `0-0 0 0 cr N "etO N 00 VIto N o 7 o 2 m 0 0 0 0 0 0 0 0- m O-- O- O ✓t O 0 COT } Q v ' 2i2 0' .Y 20 Revenues Rental Dividends/Interest Total Revenues Expenses City of Palm Desert Parkview Office Complex Financial Statement for Fiscal Year 2004-2005 August-04 August-04 # % YID YTD # %� Budget Actual Variance Variance Budget Actual Variance Variance $ 68,500 $ 71,567 $ 3,067 104.48% $ 137,000 $ 143,133 $ 6,133 104.48% $ 700 $ - $ (700) 0.00% $ 1,400 $ - $ (1,400) 0.00% $ 69,200 $ 71,567 $ 2,367 103.42%I I $ 138,400 $ 143,133 $ 4,733 103.42% Professional -Accounting & Auditing $ 8,500 $ 8,829 $ •(329) 103.87% Professional- Consultants $ 6,000 $ 1,579 $ 4,421 26.31% Tenant Improvements $ 3,000 $ - $ 3,000 0.00% Repairs & Maintenance Building $ 8,000 $ 9,713 $ (1,713) 121.42% Repairs & Maintenance - Landscaping $ 2,300 $ - $ 2,300 0.00% Utilities -Water $ 150 $ 106 $ 44 70.66% Utilities-Gas/Electric $ 7,000 $ - $ 7,000 0.00% Utilities -Waste Disposal $ 600 $ 538 $ 62 89.72% Telephone $ 250 $ 515 $ (265) 205.85% Insurance $ 520 $ - $ 520 0.00% 17,000 $ 17,658 $ (658) 103.87% 12,000 $ 9,050 $ 2,950 75.42% 6,000 $ - $ 6,000 0.00% 16,000 $ 16,798 $ (798) 104.99% 4,600 $ - $ 4,600 0.00% 300 $ 106 $ 194 35.33% 14,000 $ 6,318 $ 7,682 45.13% 1,200 $ 1,077 $ 123 89.72% 500 $ 622 $ (122) 124.43% 1,040 $ - $ 1,040 0.00% Total Expenses $ 36,320 $ 21,280 $ 15,040 58.59% $ 72,640 $ 51,629 $ 21,011 71.08% Operating Income $ 32,880 $ 50,287 $ 17,407 152.94% $ 65,760 $ 91,504 $ 25,744 139.15%! Equipment Replacement Reserve $ 16,700 $ 16,666 $ 34 99.80% $ 33,400 $ 33,332 $ 68 99.80% Net Income _ $ 16,180 33,621 $ 17,441 207.79% $ 32,360 $ 58,172 $ 25,812 179.77"/a 2005 Investment Reportlnv Report 2005 a 1 Suite No. City of Palm Desert Parkview Office Complex Vacancy Rate Schedule by Suite August 2004 Tenant 73-710 Fred Waring Drive - Two (2) Story Building Square Feet 100 Hanover 1,915 100A William Bonneheim 645 102 Cove Commission - Fire Marshal 1,360 103 National Multiple Sclerosis 488 104 Arthritis Foundation 960 106 Coachella Valley Economic Partnership 928 108 Assembly Rules Committee - Assemblyman Benoit 450 112 Senator Battin 1,741 114 Chamber of Commerce 1,478 118 Goodwill lndustries 1,250 119 City/CVAG Conference Room 1,380 120 Duke Gerstal 1,750 200 CVAG 4,292 200A University of California Riverside 841 201 University of California Riverside 604 203 Mountain Conservancy 480 205 Adopt -A -Class 700 208 Alzheimer's Association 960 210 Wilson , Pesota & Pichardo 3,040 211 State of California Department of Food & Agriculture 937 217 Joe B. McMillan,. Esq. 775 2005 Investment ReportVacancy Report a- City of Palm Desert Parkview Office Complex Vacancy Rate Schedule by Suite August 2004 220 Environmental Products Applications 1,607 222 Riverside County Supervisor - Roy Wilson (Move in during September) 3,348 Total square footage (2 story Building) 31,929 Vacancy Rate-0.00% 0.00% 73-720 Fred Waring Drive- One Story Building 100 State of California - Water Resources 15,233 102 State of California - Rehabilitation Department 4,396 Total Square Footage 19,629 Vacancy Rate-0.00% 0.00% Overall Vacancy Rate for Both Buildings: Vacancy Rate-0.00% 0.00% Occuoancv Rate -100% 100.00% 2005 Investment ReportVacancy Report ,3 Revenue City of Palm Desert Desert Willow Budget Vs Actual For the month of July 2004 Budgeted Actual Budgeted Actual July July S Percentage Year to Year to $ Percentage 2004 2004 Variance Variance Date Date Variance Variance Course & Ground $ 112,030 $ 151,584 $ 39,554 135.31 % $ 112,030 $ 151,584 $ 39,554 135 31 % Carts $ 16,490 $ 22,620 $ 6,130 137.17% $ 16,490 S 22,620 S 6,130 137.17% Golf Shop $ 24,556 $ 24,820 $ 264 101 08% $ 24.556 5 24,820 $ 264 101.08% Range 5 600 $ 802 $ 202 133 67 % $ 600 S 802 $ 202 133.67 % Food & Beverage $ 44,073 5 63.165 $ 19,092 143.32% $ 44,073 5 63,165 $ 19,092 143.32% Interest Income $ - $ - 5 - 0.00% $ - $ - $ - 000% ITotal Revenues W $ 191,749 S - 262.991 S 65.242 132.99 % 5 197..749 S 262..991 $ 65.242 132.99 %I i Payroll Proshop $ 2,513 $ 1,406 $ 1.107 55,95% $ 2,513 $ 1,406 $ 1,107 55 95% Cart 5 15,403 $ 14,550 $ 853 9446% $ 15.403 $ 14,550 $ 853 94 46% Course & Ground 5 127,391 $ 112,034 $ 15,357 87,94% 5 127,391 $ 112,034 $ 15,357 87 94% Golf Operations $ 19.417 $ 19,435 $ (18) 10009% $ 19,417 $ 19,435 $ (18) 10009% General & Administration $ 41,298 $ 42,262 $ (964) 102 33% $ 41.298 $ 42,262 $ (964) 102.33 % Food & Beverage $ 51,996 $ 56,778 $ (4,782) 109.20% $ 51,996 $ 56,778 $ (4,782) 109 20% (Tdml Payroll Other Expenditures $ 258,018 S 246.465 11,553 95.52% S $ 246,465 5 11,553 95.52 % I Perimeter Landscaping $ - $ - $ - 0 00% $ - S Proshop $ 1,350 $ 1,905 $ (555) 141.11 % $ 1,350 5 Proshop-COGS 5 14,496 $ 12,419 5 2,077 85.67% $ 14,496 5 Cart $ 13,690 $ 13,537 5 153 98.88% $ 13,690 $ Course & Ground -North Course f 59.398 S 44.522 S 14,876 74 96% $ 59,398 $ Course & Ground -South Course $ 61249 $ 55,376 S 5,873 90.41% $ 61,249 S Course & Ground -Desert Pallet-N $ 1,025 $ 1,257 $ (232) 122.63 % $ 1,025 $ Course & Ground -Desert Pallet-S $ 425 $ - $ 425 0.00% $ 425 $ Golf Operations $ 1,125 $ 341 $ 784 30.31% $ 1,125 $ General & Administration $ 64.879 S 49,578 $ 15,301 76 42% $ 64.879 $ Range $ 600 $ 16 $ 584 2.67% S 600 $ Food & Beverage 5 16,238 S 26,717 S (10,479) 164 53% S 16,238 S Food & Beverage COGS $ 13,705 $ 26,776 5 (13,071) 195 37% S 13,705 S Management Fee $ 25,000 $ 25,000 $ 100 00% $ 25,000 $ Financing/Lease $ 4,376 $ 4,193 S 183 95.82% S 4,376 $ i Total Other Expenditures - $ - 000% 1,905 S (555) 141 II% 12,419 S 2.077 85 67% 13,537 $ 153 9888% 44,522 S 14,876 74 96% 55,376 S 5,873 90 41 % 1,257 $ (232) 122 63 % - $ 425 000% 341 $ 784 30 31 % 49,578 S 15,301 76,42% 16 $ 584 2.67°% 26,717 $ (10,479) (645336 26,776 $ (13,071) 195 37% 25,000 $ - 100.00% 4,193 $ 183 95.82% ,5 277.556 $ 261,637 $ 15.919 94.26% , 277.556 $ 261,637 $ 15919 94.26%I Desert Willow Golf Academy Desert Willow Golf Academy $ 7,800 $ 6.769 $ (1,031) 8678% $ 7,800 $ 6,769 $ (1,0311 8678% COGS - Merchandise $ (7,997) $ (7,417) $ 580 92.75% $ (7,997) $ (7,417) $ 580 92 75% Other Expenditures $ (3,5001 $ (3,897) $ (397) I 1 1 34% $ (3,500) $ (3,897) $ (397) 111.34% $ - Lenrning Center Income (Loss) $ (3,697) $ (4,545) $ (848) 122.94% $ (3,697) $ (4,545) $ (848) 122 94% Operating Income (Loss) S (341,5221 $ (249,656) $ 91,866 73 10% $ (141,522) 5 (249,656) 5 91,866 73 10% Equipment Reserve Replacement $ 70.000 $ 69,295 S (705) 98.99% $ 70,000 $ 69,295 $ (705) 98.99% I Net Income (Loss) S (411,5721 S (3111.951) S 92.571 77.51% S (411.5221 S (318.9511 S 92.571 77.51%1 Snapshot of Golf Rounds Budgeted (mo) Actual (m01 Variance Variance% Budgeted (vtd) Actual (vtdl Variance Variance% Resident 350 331 (19) 95% 350 331 Non Resident 2,947 3,920 973 133% 2,947 3,920 Other - 44 44 100% - 44 Complimentary 220 309 89 140% 220 309 'total (19) 95% 973 133 % 44 100% 89 140% 3,517 - 4,604 1,087 131% 3,517 4,604 1,087 131 % Folder: Desert Willow 2004 DW2005:Financial Statement Page 1 0 0 0 0 ▪ a Y Y m° m .0 • 'CI 0 Y a.- i Y Y a' tom 07 O y"'y 0 A .0 • O d w.. Y CO y W CO- N ' r -. Ni- Q th O. Qk 10 ti N N 0 O 0 N rn o M- o COn N N'+ M 0 N O ..N Y R t') LO .. N N C m • C O C• 0 T E 0 0 52 T« C- oU 4) O � G • ei o 9 C v d ,v a 1 I E m a a v .0 a u w a' v .0 �' croi o°'o .5 0 7 L y` a0a LN ❑` m 0 8:? 0 m 0 u a0 7= ... C U UC7�10'U5 F C)0<02 W a..0 Y E 0 0 0 O 1 d tmiu' U °D E 0tn 0 0 0 0 M N N Total Expenditures N 4 al DW2005;Expenditure Chart 59 Graaa )§§\)) # eggegg MWMOM— /!«J). } \®\\§\ ! Fa rn k -°:enr; \`(^\\\( 4;;l;;;21, °!:l;;a!!!!z .��... . ....�. � ....�.��-,.- so 61 , , _ §, ) )ii( OQOi5 - \!)})\ Total Payroll Other Expenditures rel 49 '!(ƒ\®('ng.' \ sn SO he se so 6.0 so so \\\(®f [(!! § 4W --6.2 --4,--® 3 } an \\)\ Lt2aa \/)\}\ eee ` ! §\§§ ;{[ ! `A4 ONNN gee a\; lb 69 so sa. Learning Center In Operating Income (Loss) 0 Equipment Replacement R rn \�r ! !;!§ ! ;!„ a !e! § r ! / 0 0 0 PA 0 a ko , 0 0• O BR 8 be 0 0 o • a 0 `oa a 6E 00 0 eiR V CO 00 00 _ n ;q F Fo r r O .. ~j U � V be.1 a 5 0' 0 0 686 139.02% 0 O V Current F/Y Total N CO 4 0 eg , h '0 CN '0 Current F/Y Total d be 0. DW2005.Rounds Analyss.FC %A 4 -/ o\ \ \ o° 0 W �fa ° 0 W , co 0-, co rj 'Resident INon-Resident 'Other Complimentary (Desert Willow Totals Desert Willow Breakdown of Rounds per point of sale system Desert Willow - Combined Analysis- JULY 2004 331 $ 14,895 $ 45.00 7.20% 3,920 $ 153,806 $ 39.24 85.10% 44 $ 440 $ 10.00 1.00% 309 $ 4,933 $ 15.96 6.70% 4,604 $ 174,074 $ 37.81 100.00% DW2005;POS AVG RD Page 9 Description Resident Rounds Resident Fee Total Resident Non Resident Desert Willow Breakdown of Rounds per point of sale system FIRECLIFF COURSE- JULY 2004 No. Of Revenue Avg. Per Pet to J Rounds Per POS Round Total 160 $ 7,200 $ 45.00 6.55%1 160 $ 7,200 $ 45.00 6.55%} IROC Des. PRTY 6 $ 225 $ 37.50 0.25% IROC Member/ Guest 64 $ 3,392 $ 53.00 2.62% Sunrise 151 $ 11,325 $ 75.00 6.18% Prime 275 $ 15,125 $ 55.00 11.25% Midday 36 $ 1,640 $ 45.56 1.47% Sunset 543 $ 13,575 $ 25.00 22.22% VIP Card 271 $ 8,130 $ 30.00 11.09% Wholesale 102 $ 3,968 $ 38.90 4.17% Outing 391 $ 16,672 $ 42.64 16.00%1 Twilight 97 $ 3,395 $ 35.00 3.97%I Fee Special Event Variable 164 $ 5,900 $ 35.98 6.71% Total Non Resident Rounds 2,100 $ 83,347 $ 39.69 85.92%I Other Rounds Junior Walking 26 $ 260 $ 10.00 1.06%l Total Other 26 $ 260 $ 10.00 1.06%I Complimentary VIP 97 $ 45 $ 0.46 3.97% PGA Member 23 $ 635 $ 27.61 0.94% Champion Club 1 $ 45 $ 45.00 0.04% Employee / Employee Guest 37 $ 1,375 $ 37.16 1.51% Total Complimentary 158 $ 2,100 $ 13.29 6.46%I Total Round (FireClift) 2,444 $ 92,907 $ 38.01 100.00% DW2005;POS AVG RD Page 10 Desert Willow Breakdown of Rounds per point of sale system MOUNTAINVIEW COURSE- JULY 2004 Description Resident Rounds Resident Fee Total Resident Non Resident No. Of Revenue Avg. Per Pct to Rounds Per POS Round Total 171 $ 7,695 $ 45.00 7.92% 171 $ 7,695 $ 45.00 7.92% IROC Member/ Guest 58 $ 3,128 $ 53.93 2.69% Sunrise 124 $ 9,300 1 $ 75.00 ' 5.74% Prime 256 $ 14,080 $ 55.00 11.85% Midday 41 $ 1,925 $ 46.95 1.90% Sunset 566 $ 14,150 $ 25.00 26.20% VIP Card 281 $ 8,430 $ 30.00 13.01% Wholesale 91 $ 3,183 $ 34.98 4.21%l Outing 197 $ 8,375 $ 42.51 9.12% Twilight 77 $ 2,675 $ 34.74 3.56% Fee Special Event Variable 129 $ 5,213 $ 40.41 5.97% Total Non Resident Rounds 1,820 $ 70,459 $ 38.71 84.26% Other Rounds Junior Walking 18 $ 180 $ 10.00 0.83% Total Other 18 $ 180 $ 10.00 0.83% Complimentary VIP 72 $ 1,405 $ 19.51 3.33% PGA Member 36 $ 850 $ 23.61 1.67% Employee / Employee Guest 15 $ 465 $ 31.00 0.69% Champion Club 2 $ 90 $ 45.00 0.09%I USGA Kids on Course 23 $ 23 $ 1.00 1.06%1 COD / PDHS 3 $ $ - 0.14%I Total Complimentary 151 $ 2,833 $ 18.76 6.99%I Total Round (Mountainview) 2,160 $ 81,167 $ 37.58 100% DW2005;POS AVG RD Page 11 City of Palm Desert Desert Willow Cash Reserve Analysis for the month of July 2004 Cash Reserve Analysis IRequired Reserve I°Cash on Hand I Variance- Favorable ( Unfavorable) One Month I $ 500,000.00 I $ 779,273.79 I I $ 279,273.79 Page 12 Food & Beverage Revenues Total Revenues Palmflesert Recreation Facilities Corporation Income Statement Jul-04 Jul-04 # % Budget Actual Variance Variance $44,073 $63,165 $19,092 143.32% $44,073 $63,165 $19,092 143.32Tc Salaries $51,996 $56,778 ($4,782) 109.20% Cost of Goods Sold-F&B $16,238 $26,717 ($10,479) 164.53% Food & Beverage Expense $13,705 $26,776 ($13,071) 195.37% Total Expenses $81,939 $110,271 ($28,332) 134.58% Net Income (Loss) ($37,866) ($47,106) ($9,240) 124.40% Note: The above revenues and expenditures are also included in the Desert Willow analysis. DW2005;PDRFC Budget Page 1 5 Revenue City of Palm Desert Desert Willow Budget Vs Actual For the month of August 2004 Budgeted Actual Budgeted Actual August August S Percentage Year to Year to $ Percentage 2004 2004 Variance Variance Date Date Variance Variance Course & Ground $ 102,332 S 115,649 S 13,317 113.01% $ 214,362 $ 267,233 S 52,871 124.66% Carts $ 16,635 $ 18,680 $ 2,045 112.29% $ 33,125 $ 41,300 $ 8,175 124.68% Golf Shop $ 26,613 $ 21,378 $ (5,235) 80.33% $ 51,169 S 46,198 $ (4,971) 90,29% Range S 750 $ 757 $ 7 100.93% S 1,350 $ 1,559 S 209 I15.48% Food & Beverage $ 49,213 $ 58,053 $ 8.840 117.96% $ 93,286 $ 121.218 $ 27,932 129.94% Interest Income $ - $ - $ - 0.00% $ - $ - $ - 000% ITmal Revenues S 195.543 S 214`17 $ 18.974 109.70°. 5 393.292 �_ 477.508 S 84,216 121.41% Payroll Proshop $ 2,513 S 576 S 1,937 22.92% $ 5,026 S 1,982 S 3,044 3943% Cart $ 15,403 $ 14,105 $ 1,298 91.57% $ 30,806 $ 28,655 $ 2,151 93.02% Course & Ground $ 124,363 $ 121,254 $ 3,109 97.50% $ 251,754 $ 233,288 $ 18,466 92.67% Golf Operations $ 19.417 $ 19,387 S 30 99.85% $ 38,834 $ 38,822 S 12 9997% General & Administration S 41.298 $ 38,212 $ 3,086 92.53% $ 82,596 S 80,474 $ 2,122 9743% Food & Beverage $ 50,278 $ 51,576 S (1,298) 102.58% $ 102,274 $ 108,354 $ (6.080) 105.94% "Total Payroll ... 5 253,272 $ 245,110 S 8,162 96781% S 511v290 S 491.575 5 19.715 96.14%J Other Expenditures Perimeter Landscaping $ - $ - S - 0.00% $ - $ - $ - 0.00% Proshop $ 1,650 S 1,073 S 577 65.03% $ 3,000 $ 2,978 $ 22 99.27% Proshop-COGS $ 13,209 $ 12,413 $ 796 93.97% $ 27,705 $ 24,832 $ 2,873 89.63% Cart $ 13,690 $ 12,509 $ 1,181 9137% $ 27,380 $ 26,046 $ 1.334 95.13% Course & Ground -North Course $ 50,048 $ 57,162 $ (7.114) 114.21 % $ 109,446 $ 101,684 $ 7,762 92 91 % Course & Ground -South Course $ 51,299 $ 61,672 $ (10,373) 120.22% S 112,548 $ 117,048 $ (4.500) 104 00% Course & Ground -Desert Pallet-N $ 425 $ - $ 425 0 00% $ 1,450 $ 1,257 $ 193 86.69% Course &Ground -Desert Pallet-S $ 1,025 $ 577 $ 448 56.29% $ 1,450 $ 577 $ 873 39.79% Golf Operations $ 425 $ 107 $ 318 25.18% $ 1,550 S 448 $ 1,102 28.90% General & Administration $ 53,729 $ 46,376 $ 7.353 86.31 % S 118,608 $ 95,954 $ 22,654 80 90% Range $ 95 S 24 S 71 25.26% $ 695 S 40 S 655 5.76% Food & Beverage $ 16,833 S 21,314 $ (4,481) 126 62% $ 33,071 $ 48,031 $ (14,960) 145 24% Food & Beverage COGS $ 15,346 $ 19,132 $ (3,786) 124.67% $ 29,051 $ 45,908 $ (16,857) 158,03% Management Fee $ 25,000 S 25,000 S - 100.00% $ 50,000 $ 50,000 S - 100.00% Financing/Lease $ 4,365 $ 4,172 $ 193 95.58% $ 8,741 $ 8,365 S 376 95.70% Total Other Expenditures 5 247,139 S 261,531 5 (14,3921 105.82% $ 524.695 S 523.168 5 1.527 99.71%I Desert Willow Golf Academy Desert Willow Golf Academy $ 10,000 $ 12,648 S 2,648 126.48% $ 17,800 S 19,417 $ 1,617 10908% COGS -Merchandise $ (6,152) $ (11,074) $ (4922) 180.01% $ (14,149) S (18.491) $ (4,342) 130,69% Other Expenditures $ (3,300) S (3.950) $ (650) 119 70% S (6.800) $ (7,847) $ (1,047) 115.40% $ - Learning Center income (Loss) 5 548 $ (2,3761 $ (2,9241-433.58% $ (3,1491 S (6,921) S (3,7721 219.78% Operating Income (Loss) 5 (304,320) S (294,500) S 9,820 96,77% S (645,842) S (544,156) $ 101,686 84.26% Equipment Reserve Replacement $ 70,000 $ 69,295 $ (705) 98 99% $ 140,000 $ 138,590 $ (1,410) 98 99th I Net Income (Loss) 5 (374,320), 5 (363,795) 5 10,525 97.19 % S 785 842) S (682.7461 S 103,096 86.88%I Snapshot of Golf Rounds Budgeted (mo) Actual (mo) Variance Variance % Budgeted (vtd) Actual (vtd) Variance Variance % Resident 350 199 (151) 57% 700 1,230 530 176% Non Resident 2,917 3,321 404 114% 5,864 7,241 1,377 123% Other - 82 82 100% - 126 126 100% Comnlimentary 280 233 (47) 83% 500 542 42 108% Total 3,547 3,835 288 108 % 7,064 9,139 2,075 1294/0 Folder: Desert Willow 2004 DW2005,Financml Statement Page 1 m 0 0 F M O co co co t- o') O a, N M N o t. c\ N V b m C v o 0 L T 0 N U a1:4 c5 0 ❑tl 000xa05 co CJ C o 0 N cc 1 O m0 0 0 NN0O CO ON M NOO MOM ' N. 4' O Okr N-' N v)� 0 IN 44 in Cr) N 0 OS rQ Expenditures Total Expenditures 0. 0 0 (0 ON, 0 0 O E Ono o G Q GO 0' a c -*-, co a a ir. DW2005;Expendi are Cher[ 21 Ct ,! „ n s «X - ! „ .§ ;l;;w, B;;n ,« „ !! 0 694.969 -.401 . ---.., 40 wowom /7f®/' / #}2!)\ / (=!l=:, &1,DI;!- E=:4 !»}!!\ { ®----- --00--- \ }(\}\) )l -eMmwm i`\±§' § e-m- } }!(§! !f!/§§ .01616969. [ ; !,| }/|_ / ! !! ! ! 'J / ))\/// )!!/!! ; Other Ependitures |r!!!!<! „ §; 01 MNNO, \)/) eri .§04040;SIE - „ : , ,:0, ) 0 \!!dfl ; / §)_ 00E0 ) )}!)\}})}{) 0 mem ; / agakaz le ) - ; !§i® / !±4 406 t 7 ; el m RA-, ! , §;rz ! §§§ ; | NOW - n 0 ! }}[\}}\ Si 0 WNW 641 Learning Centn Operating Income (Loss) Equipment Replacement Reserve or ; el, ; cm 0 ! 0 00 \ \ 1 �,,e i \ f o GPI ® \ \ 0 ` a co t CC S. 0 ! } oo 5. t \ a - ° o. \ z 8 mo©*3 e- \ \ ti ro 44. tio } \ et / o e • P S N GC 0 0 m Y Q U 43 .0 0 U aio ,w u o Box. 0 a.1 .I U E A 0 co q d 1.1 o o k B o 0 at 0 Y co q c\. 0 0 0 o m I.-o oo0 a 0 a v 0 0 03 0 0 0 0 0 t et,0 0 O. y 'I 0 os 0 E., 6' a+ Y On co N ' O ao es Q N [` 0 CO oei a a ul N M o CI CI In ++ - F Y A. n 0' S uQ cg 7 A Non- resident DW2005;rds ch Desert Willow Breakdown of Rounds per point of sale system Desert Willow - Combined Analysis- AUGUST 2004 Resident Non -Resident Other Complimentary Desert Willow Totals 199 $ 8,955 $ 45.00 5.20% 3,321 $ 123,296 $ 37.13 86.60% 82 $ 820 $ 10.00 2.10% 233 $ 8,510 $ 36.52 6.10%1 3,835 $ 141,581 $ 36.92 100.00%1 DW2005,POS AVG RD Page 9 Desert Willow Breakdown of Rounds per point of sale system FIRECLIFF COURSE- AUGUST 2004 Description Resident Rounds Resident Fee Total Resident Non Resident No. Of Revenue Avg. Per Pet to Rounds Per POS Round Total 120 $ 5,400 $ 45.00 5.37% 120 $ 5,400 $ 45.00 5.37% 1 1ROC Member/ Guest 67 $ 3,460 $ 51.64 3.00%I Sunrise 100 $ 7,500 $ 75.00 4.47%1 Prime 231 $ 12,745 $ 55.17 10.34%' Midday 21 $ 975 $ 46.43 0.94% Sunset 539 $ 13,475 $ 25.00 24.12% VIP Card 228 $ 6,610 $ 28.99 10.20% Wholesale 70 $ 2,557 $ 36.53 3.13% Outing 426 $ 13,955 $ 32.76 19.06% Twilight 104 $ 3,640 $ 35.00 4.65% Fee Special Event Variable 162 $ 4,448 $ 27.46 7.25% Total Non Resident Rounds Other Rounds Junior Walking Total Other Complimentary 1,948 $ 69,365 $ 35.61 87.16% 47 $ 470 $ 10.00 2.10% 47 $ 470 $ 10.00 2.10% VIP 49 $ 2,124 $ 43.35 2.19% PGA Member 14 $ 570 $ 40.71 0.63% USGA Kids on Course 1 $ 1 $ 1.00 0.04% Employee / Employee Guest 56 $ 1,955 $ 34.91 2.51% Total Complimentary 120 $ 4,650 $ 38.75 5.37% Total Round (FireCliff) 2,235 $ 79,885 $ 35.74 100.00% DW2005;POS AVG RD Page 10 Desert Willow Breakdown of Rounds per point of sale system MOUNTAINVIEW COURSE- AUGUST 2004 Description Resident Rounds Resident Fee Total Resident Non Resident No. Of Revenue Avg. Per Pct to Rounds Per POS Round Total 79 $ 3,555 $ 45.00 4.94% 79 $ 3,555 $ 45.00 4.94% IROC Desginated Party 2 $ 75 $ 37.50 0.13% IROC Member/ Guest 74 $ 3,768 $ 50.92 4.63% Sunrise 90 $ 6,750 $ 75.00 5.63%I Prime 181 $ 9,955 $ 55.00 11.31%I Midday 11 $ 495 $ 45.00 0.69%I Sunset 481 $ 12,025 $ 25.00 30.06%I VIP Card 212 $ 6,860 $ 32.36 13.25%1 Wholesale 74 $ 4,442 ! $ 60.03 4.63% Outing 91 $ 3,420 $ 37.58 5.69%I Twilight 92 $ 3,220 $ 35.00 5.75% Fee Special Event Variable 67 $ 2,996 $ 44.72 4.19% Total Non Resident Rounds Other Rounds Junior Walking Total Other Complimentary 1,373 $ 53,931 $ 39.28 85.81%1 1 35 $ 350 $ 10.00 2.19%I 35 $ 350 $ 10.00 2.19% VIP 26 $ 1,135 $ 43.65 1.63% PGA Member 10 $ 540 $ 54.00 0.63%l Employee / Employee Guest 36 $ 2,090 $ 58.06 2.25% Champion Club 1 $ 55 $ 55.00 0.06% USGA Kids on Course 40 $ 40 $ 1.00 2.50%I Total Complimentary 113 $ 3,860 $ 34.16 7.06%I ' Total Round (Mountainview) 1,600 $ 61,696 $ 38.56 100% Desert Willow - Confined Analysis- AUGUST 2004 1 Resident 199 $ 8,955 $ 45.00 5.20%I Non -Resident 3,321 $ 123,296 $ 37.13 86.60%I Other 82 $ 820 $ 10.00 2.10%1 Complimentary 233 $ 8,510 $ 36.52 6.10%I Desert Willow Totals 3,835 $ 141,581 $ 36.92 100.00%j DW2005;POS AVG RD Page 11 Cash Reserve Analysis 'Required Reserve Irash on Hand Variance- Favorable ( Unfavorable) City of Palm Desert Desert Willow Cash Reserve Analysis for the month of August 2004 1 1 1 One Month $ 500,000.00 $ 693,945.34 $ 193,945.34 1 1 1 Page 12 Food & Beverage Revenues Total Revenues PalmDesert Recreation Facilities Corporation Income Statement Aug-04 Aug-04 # Budget Actual Variance Variance ' $49,213 $58,053 $8,840 117.%% $49,213 $58,053 $8,840 117.96% Salaries $50,278 $51,576 ($1,298) 102.58% Cost of Goods Sold-F&B $16,833 $21,314 ($4,481) 126.62% Food & Beverage Expense $15,346 $19,132 ($3,786) 124.67% Total Expenses $82,457 $92,022 ($9,565) 111.60% Net Income (Loss) ($33,244) ($33,969) ($725) 102.18% Note: The above revenues and expenditures are also included in the Desert Willow analysis. DW2005,PDRFC Budget Page 1 PALM DESERT REDEVELOPMENT AGENCY MEMORANDUM TO: INVESTMENT AND FINANCE COMMITTEE FROM: DENNIS M. COLEMAN, REDEVELOPMENT/HOUSING FINANCE MANAGER DATE: SEPTEMBER 22, 2004 SUBJECT: REQUEST FOR QUALIFICATIONS FOR BOND UNDERWRITING SERVICES Recommendation: That the Investment and Finance Committee approve the Request for Qualifications (RFQ) for Bond Underwriting Services. Discussion: As you may recall from previous meetings of this Committee, staff had stated that we would bring back to the Committee an RFQ for Bond Underwriting Services. We have attached an RFQ for your review and discussion. If the substance of the RFQ is approved, then staff would recommend that we set up a subcommittee to review and short list the respondents for presentations to the Investment and Finance Committee. The full committee could then decide on which firms to recommend to the City Council/Agency Board for selection to the pool. Staff would like to discuss with the Committee the number of firms to be solicited and the size of the underwriting pool at their September 22 meeting. mh Attachment (1) G.ARDA\Dennis Colman\DATA\W PREPORTS''092204 iR rfq undrnnnmg wpd CITY OF PALM DESERT/PALM DESERT REDEVELOPMENT AGENCY REQUEST FOR QUALIFICATIONS BOND UNDERWRITING SERVICES The City of Palm Desert and the Palm Desert Redevelopment Agency are interested in establishing a pool of underwriting firms to conduct all underwriting transactions over the next three years. If your firm is interested in responding to this RFQ, please read the RFQ carefully and fully respond to each question. Please pay particular attention to the proposal submission and presentation requirements listed below: 1. UNDERWRITER RFQ REQUIREMENTS AND QUESTIONS Responses to this RFQ will be used to establish a pool of eligible qualified firms to provide underwriting services for General City/Agency finance transactions to be undertaken within the next three years. A. General Underwriter Minimum Qualification Reauirements Firms must have a minimum of five (5) years of satisfactory experience in providing underwriting services to California public agencies and have at least one office located in California. If the firm has been in business for less than five years, the experience of its principals may be used to meet this requirement. Detailed information regarding experience in these areas must be provided. B. General Underwriter Scope of Services From time to time, the City/Agency may require services from pre - qualified bond underwriting firms who are members of the pool established as a result of this RFP. The members may be selected for a particular project on any basis that meets the interests of the City/Agency. Members may be asked to submit specific qualifications and a fee proposal for specific transactions. All fees are contingent upon the closing of the transaction. The City/Agency also reserve the right to select firms for individual transactions on a rotating basis. The City/Agency anticipate that any firm selected will be called upon to: Provide customary underwriter services in connection with the City/Agency finance transactions; including specific project review, preparation, and implementation of rating agency and insurance company presentations. ii. Propose or review and comment upon transaction documents to the extent they relate to the issuance of obligations by the City/Agency. iii. Propose or review and comment upon the structure, alternatives, and feasibility of any proposed transactions. iv. Advise City/Agency staff on the size and timing of transactions and issuance of additional obligations, redemption prior to maturity and call premiums. v. Participate in meetings with and presentations to the City Council, City/Agency staff, consultants, rating agencies, and insurance companies. This may include appearances at meetings of the City Council. vi. Other underwriter services that the City/Agency may request. The above list is not meant to constitute an exhaustive list of duties. Firms selected may be called upon to provide other services not identified here in connection with a particular transaction. C. Proposal Questions In a table, list the last three (3) years of California debt experience (broken out by new issue COPs / leases, new issue revenue bonds, new issue tax allocation bonds (80% and 20%), new issue land -based assessment district, Mark - Roos Pools, Mello -Roos bonds and all refundings including the par, agency, date, and name of issue. Indicate whether your firm was a senior manager or co -manager. ii. List any transactions in which PROPOSER has participated on behalf of Palm Desert City/Agency. The City/Agency will review all contracts the PROPOSER has performed for the City/Agency, as PROPOSER'S past performance will be considered in the evaluation process. As such, the PROPOSER must list and describe all work performed for the City/Agency. iii. Describe your firm's technical capability in optimizing bond portfolios and what software your firm utilizes in structuring bond issues. 2 iv. Describe your firm's capabilities and strategies to market and sell Palm Desert paper. Include a discussion of your firm's retail and institutional distribution capabilities in California and a description of the number of personnel in the sales force, both nationally and in California. v. Name 1-3 financings that the firm, and preferably the project manager, has been involved in during the last 3-5 years that demonstrate the firm's creativity or of which you are especially proud. What were some of the challenges you encountered and how did you overcome them? vi. Describe how your firm distinguishes itself from other firms. List any issues you see concerning the marketing and sales of Palm Desert paper. vii. Describe the experience, qualification and other vital information, including relevant experience on previous similar projects, of all key individuals who may be assigned to a City/Agency transaction. Key personnel include partners, managers, associates and other professional staff that will perform work and/or services in this project. This information shall include functions to be performed by the key individuals. viii. What is your maximum underwriting liability pursuant to SEC guidelines? Please explain how you derived this figure. During the last three (3) years, describe any situation where you underwrote unsold bonds for a client, including the amount you underwrote and the client. Describe your secondary market activities. ix. Describe any other experience in areas such as: • Synthetic refundings ▪ Auction Rate / VRDOs G Any other creative structures you wish to discuss x. Please disclose whether the firm, or any of its partners, members, associates, or employees, has within the last five (5) years been convicted of any crime or offense arising directly or indirectly from the conduct of the firm's business, or whether any of the firm's partners, members, associates or employees has, within the last five (5) years, been convicted of any crime or offense involving financial misconduct or fraud. If so, please describe any such indictments or charges and surrounding circumstances in detail. 3 Please disclose whether the firm, or any of its partners, members, associates or employees, has ever been indicted or otherwise charged in connections with any criminal matter arising directly or indirectly from the conduct or the firm's business which is still pending, or whether any of the firm's partners, associates or employees has ever been indicted or otherwise charges in connection with any criminal matter involving financial misconduct or fraud which is still pending. If so, please describe any such indictments or charges and surrounding circumstances in detail. xi. Fees: Include proposed gross spread and any pre -sale hourly rates by title. Would the fee compensation for certain types of transactions be different and what the range might be for those transactions (e.g. tax allocation vs. land -based, etc.). Please note that for specific transactions, the City/Agency may solicit a detailed cost proposal from a number of pool members. The range of compensation asked for at this time is to provide general information to assist in selecting firms to participate in the pool. Additionally, please provide a list and any cap on expenses for which the firm would expect to be reimbursed. Note that all fees will be paid on a contingent basis upon successful closing of the transaction. xii. Supplemental Information - Any additional information the PROPOSER wishes to include. xiii. PROPOSER is required to submit five (5) references for which these services have been performed within the last three (3) years. 2. PROPOSAL SUBMISSION A. General All interested and qualified PROPOSERS are invited to submit a proposal for consideration. Submission of a proposal indicates that the PROPOSER has read and understands this entire RFP, to include all appendixes, attachments, exhibits, schedules, and addendum (as applicable) and all concerns regarding this RFP have been satisfied. 4 ii. Proposal must be submitted in the format described below. Proposals are to be prepared in such a way as to provide a straightforward, concise description of capabilities to satisfy the requirements of this RFP. Expensive bindings, colored displays or promotional materials, are neither necessary nor desired. Emphasis should be concentrated on conformance to the RFP instructions, responsiveness to the RFP requirements, and on completeness and clarity of content. iii. Proposals must be complete in all respects as required in this section. A proposal may not be considered if it is conditional or incomplete. iv. All proposals and materials submitted become the property of the City/Agency. All proposals received are subject to the "California Public Records Act". v. - If any PROPOSER, in his/her response, has trade secrets or other information, which is proprietary by law, the PROPOSER must notify the City/Agency of its request to keep said information confidential. This request must be made in writing and attached to the envelope containing the proposal response. The proprietary or confidential data shall be readily separable from the response in order to facilitate eventual public inspection of the non -confidential portion of the response. The City/Agency will review this request and notify the PROPOSERS in writing of its decision as to whether confidentiality can be maintained under law, in the event a public records request is made for the PROPOSER's response. B. Proposal Presentation i. All proposals must be submitted on 8 '/z" x 11" paper, neatly typed, double -sided on recycled paper, with normal (1-inch) margins, and single-spaced. Each page, including attachments and exhibits, must be clearly and consecutively numbered at the bottom center of the page. ii. One (1) marked as original and nine (9) copies (total of 10) of the complete proposal must be received by the deadline below for receipt of proposals. The original and all copies must be in a sealed envelope or container and submitted to the City/Agency: 5 Due Date: Place: City of Palm Desert Attn: Dennis M. Coleman Title: Redevelopment/Housing Finance Manager 73-510 Fred Waring Dr. Palm Desert, CA 92260 (760) 776-6341 Phone (760) 341-6372 Fax dcolemane.ci.palm-desert.ca.us Questions regarding the RFQ may be addressed via email, phone or to the Financial Advisor: Del Rio Advisors Kenneth L. Dieker 1325 Country Club Drive Modesto, CA 95356 (209) 543-8704 Phone (209) 545-1754 Fax kdiekerc munisoft.com iii. Hand carried proposals may be delivered to the address above ONLY between the hours of 8:00 a.m. to 5:00 p.m., Monday through Friday, excluding holidays observed by the City/Agency. PROPOSERS are responsible for informing any commercial delivery service, if used, of all delivery requirements, and for ensuring that the address information appears on the outer wrapper or envelope used by such service. PROPOSERS are solely responsible for ensuring that the responses are delivered in a timely manner. City/Agency is not responsible for any incorrect or late deliveries. 3. EVALUATION/SELECTION PROCESS A. Introduction Following the opening of the proposal packages, the proposals will be evaluated by an Evaluation Committee. The committee will be comprised of appropriate City/Agency personnel from several departments, and members of the Investment and Finance Committee. 6 B. Proposal Evaluation i. Initial Review Staff will initially review each proposal for adherence to the minimum requirements. If a proposal does not meet these minimum requirements, it may be rejected as non- responsive to the RFP. Proposals deemed non -responsive at this point will not be further evaluated. ii. Technical Review The Evaluation Committee will evaluate responsive proposals on the experience and qualifications of the firm, the approach to the services and the fees for services, using the following criteria: Criteria 1. Experience (20%) — Firm has strong CA financing experience relevant to our needs: including COPs, revenue bonds, new issues, refundings, short-term financings, swaps, synthetic and forward refundings, variable and auction rate structures; good bond proceed and escrow investment experience and modeling capabilities, etc. 2. Approach (15%) — Proposal demonstrates a clear understanding of the scope, ability to work with staff is evident, demonstrated ability to take initiative in performing transaction duties, clear identification of ability and tools used to estimate refunding savings, escrow earnings, to market and sell CA paper, etc. 3. Assigned Professionals (35%) — have clear city/agency and related transactional experience, are available to provide services as needed, Firm has staffing resources to meet City's/Agency's needs and can commit staff named in proposal, named professional has managed relevant projects, etc. 4. Cost (20%) — Hourly rates and cost ranges are reasonable and comparable to industry norms and other proposals. 5. Strong Customer Service Ethic (10%) — References indicate that named professionals are responsive to requests for additional analysis and information, met or exceed all performance expectations, and would be hired again. Upon completion of the Initial and Technical (qualifications) evaluation, the Committee may require oral presentation(s) of those PROPOSER(s) the Evaluation Committee deem to warrant further consideration C. Award Following the evaluation of the proposals, the Evaluations Committee will present the Investment and Finance Committee with a list of firms recommended for admittance to the Pool. Upon concurrence of the Investment and Finance Committee, the list of prospective Pool members will be submitted to the City Council for its approval. G \RDA\Dennis Coleman \DATA\Word Data\Underwnter RFQ 5-5-04 doc 8 E. Parkview Professional Office Buildings - Financial Report for July and August 2004 (Reports will be distributed at the meeting) F. Palm Desert Golf Course Facilities Corporation Financial Information for July and August 2004 (Reports will be distributed at the meeting) $24,945,000 Palm Desert Financing Authority Tax Allocation Revenue Refunding Bonds (Project Area No. 1, As Amended) 2004 Series A Post -Pricing Book September 22, 2004 citigroup'er 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 Table of Contents Section Executive Summary Marketing Information Bond Insurance Presentation Market Analysis Pricing Wires Final Numerical Analysis Distribution Analysis Closing Wire Instructions Tab 1 2 3 4 5 6 7 8 citigroupJ 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 • 1 1 DI 11I 1 1 1 1 1 Tab 1 Executive Summary citigroupJ Executive Summary Palm Desert Financing Authority $24,945,000 Tax Allocation Revenue Refunding Bonds 2004 Series A Transaction Overview Issue Size: $24,945,000 Structure: The Bonds will be tax-exempt, fixed rate bonds maturing annually on April 1, starting in 2005 through 2025. Interest on the Refunding Bonds is payable semiannually on April 1 and October 1, commencing April 1, 2005. Debt Structure: The Bonds are being structure to achieve level aggregate debt service in Project Area No. 1. The Authority will issue new money with the savings so as to have at least $1 present value savings per a settlement with the Western Center on Law and Poverty. Dated Date: June 24, 2004 Sale Date: June 9, 2004 Settlement Date: June 24, 2004 Purpose: The 2004 Series A Tax Allocation Refunding Revenue Bonds are being issued to advance refund the callable portion of Series 1995 Tax Allocation Revenue Bonds, (ii) to finance certain redevelopment activities within or of benefit to the Project Area (ii) acquire a debt service reserve surety bond for the Bonds, and (iii) pay certain costs incurred with the execution and delivery of the Bonds. Credit Enhancement: Ambac Assurance Corporation- Insured at 93.4 bps. Ratings: Moody's: (Aaa with insurance) Fitch: (AAA with insurance) Call Features: Callable on 4/1/2014 at par. citigroup' i 1 1 1 1 1 0 11 1 a 1 1 1 1 1 Summary of Refunding Results PALM DESERT FINANCING AUTHORITY Tax Allocation Revenue Refundnig Bonds Series 2004A FINAL SUMMARY OF REFUNDING RESULTS Refunding Bonds Par Amount of Refunding: $24,945,000 Dated and Delivery Date: Net Present Value of Savings: Savings as % of Bonds Refunded: All -In TIC: Average Life: June 24, 2004 $796,645.64 3.59% 4.953% 11.953 years Refunded Bonds Par Amount of Refunded Bonds: $22,195,000 Average Life: Average Coupon: Redemption Date: r- 5.6 5.4 + 5.2 5 4.8 12.764 5.915% April 1, 2014 Final Pricing: June 9, 2004 Net PV Savings: $796.654.64 Savings as a % of Bonds Refunded: 3.59% 4.6 4.4 4.2 — 3/24 3/31 4/7 4/14 4/21 4/28 5/5 5/12 5/19 5/26 6/2 6/9 —Bond Buyer RBI I. The Bald Buyer Revenue Bond Index is the average yield on twenty-five revenue bonds with thirty year maturities. Source: Citigroup Global Markets Inc. Public Finance Application Database. citigroup'' ..4" Deal Information ➢ Present Value Savings of $796,646 or 3.59 % of Refunded par amount ➢ Savings provided Agency with proceeds to be used for projects ➢ Aggressive bonds insurance bids by all four solicited Insurance Companies ➢ Insurance awarded to Ambac after bidding 93.4 basis points ➢ Strong Underwriting — 32% of issue taken into Citigroup inventory at the time firm commitment to underwrite was made ➢ Strong Retail — 51% of issue placed with retail investors citigrour Bond Pricing Comparison Issuer Palm Desert Financing Authority Sale Date 6/9/2004 Par Amount ($000) 24,945 Rating Aaa/AAA Underlying NA Insurance Ambac Call Provision 8/1/14 CO par Underwriter Otgroup Global Markets Inc. Jefferson School District 6/7/2004 4,285 AAA/AAA NIA XLCA 7/1/07 @ par Stone & Youngberg Coupon Yield Coupon Yield 2004 2005 3.000% 1.4006k 3.000% 1.700% 2006 3.000% 2.050% 3.000% 2.200% 2007 4.000% 2.500% 3.000% 2.600% 2008 4.000% 2.900% 3.000% 3.050% 2009 5.000% 3.200% 3.250% 3.300% 2010 5.000% 3.450% 3.600% 3.600% 2011 4.500% 3.650% 3.750% 3.820% 2012 4.500% 3.880% 4.000% 4.070% 2013 4.500% 4.100% 4.125% 4.200% 2014 4.000% 4.200% 4.250% 4.380% 2015 4.250°/0 4.350% 4.375% 4.600% 2016 4.500% 4.500% 4.500% 4.600% 2017 4.500% 4.620% 4.600% 4.700% 2018 4.625% 4.720% 4.750% 4.800% 2019 5.000% 4.750% 4.750% 4.880% 2020 4.750% 4.910% 4.800% 4.930% 2021 4.750% 4.950% 4.900% 4.980% 2022 5.000% 5.000% 5.000% 5.030% 2023 5.000% 5.030% 5.000% 5.080% 2024 5.000% 5.080% 5.000% 5.120% 2025 5.000% 5.120% citigrouppJ Bond Pricing Comparison Issuer Sale Date Par Amount ($000) Rating Underlying Insurance Call Provision Underwriter Coupon Fairfield Suisuin USD 6/8/2004 55,000 Aaa/AAA/AAA NA fv®IA 8/1/14 0 par Citlgroup Yield Brisbane School District 6/2/2004 7,460 Aaa/AAA/AAA Al FSA 7/1/2014 UBS Financial Services Coupon Yield 2004 2005 3.000 1.60 2.000 1.40 2006 3.000 2.10 2.000 2.00 2007 4.000 2.50 3.000 2.40 2008 4 000 2.95 3.000 2 85 2009 5.000 3.20 3.500 3.13 2010 5.000 3.45 4.000 3.45 2011 5.000 3.65 4.000 3.65 2012 5.000 3.85 4.000 3.85 2013 5.000 4.05 4.000 4.00 2014 5.000 4.18 4.254 4.10 2015 5.000 4.32 4.250 4.20 2016 5.250 4.35 4.250 4.35 2017 5.250 4.40 4.375 4.45 2018 5.250 4.52 4.500 4.55 2019 5.250 4.60 4.500 4.60 2020 5.250 4.67 4.600 4.65 2021 5.250 4.74 4.625 4.70 2022 5.250 4.82 5 000 4.76 2023 5.000 5.00 5.000 4.81 2024 5.000 5.05 5.000 4.86 2025 5.000 5.10 5.000 4.93 citigrour Bond Pricing Comparison Issuer Oxnard Financing Authority Wastewater Sale Date 6/2/2004 Par Amount ($000) 80,000 Rating AAA Underlying A+ Insurance FGC Call Provision 6/1/2014 Underwriter EJ De La Rosa Moreno Valley USD 6/3/2004 50,000 AAA/AAA A/A+ FSA 8/1/14 @ par George K. Baum 8 Conpany Coupon Viekl Coupon Yield 2004 2005 2006 2007 3.000 2.40 2008 3.375 2.88 2009 3.625 3.13 2010 3.750 3.45 2011 4.000 3.63 2012 4.125 3.85 2013 4.375 4.00 2014 4.500 4.15 2015 4.000 4.28 2016 5.250 4.34 2017 5.000 4.43 2018 5 000 4.50 2019 5.250 4.58 2020 5.250 4.65 2021 5.000 4.88 5.250 4.72 2022 5.000 4.95 5.250 4.79 2023 5.000 5.00 5.250 4.85 2024 5.000 5.05 5.250 4.90 2025 5.000 5.100 5.000 5.10 2026 5.000 5.130 5.000 5.140 ,.emu.. w... ., :, citigroup' i Bond Pricing Comparison Issuer RNR School Financing Authority #92-1 Sale Date 6/3/2004 Par Amount ($000) 15,635 Rating AAA/AAA Underlying NA Insurance XLCA Call Provision 9/1/14 @ par Underwriter Stone & Youngberg LLC Yield Coupon Yield 2004 2005 2006 2007 3.000 2.50 2008 3.000 3.00 2009 3.500 3.30 2010 4.000 3.55 2011 4.000 3.75 2012 4.000 3 95 2013 4.000 4.12 2014 4.250 4.30 2015 4.375 4.45 2016 4.500 4.55 2017 4.600 4.65 2018 4.625 4.75 2019 4.750 4.85 2020 5.000 4.95 2021 5.000 5.00 2022 5.000 5.05 2023 2024 2025 citigroup'J z Tab 2 Marketing Information citigroup'J 1 1 1 1 1 1 1 1 1 1 1 1 1 1 E y g PRELIMINARY OFFICIAL STATEMENT DATED JUNE 4, 2004 @ T U m w NEW ISSUE Ratings: S&P: AAA 9. @ . FULL BOOK ENTRY Fitch: AAA a ` - o art Ambac Insured a a) o (See "RATINGS" herein} ID N 3_ m �. In the opinion of Richards, Watson Gershon, A Professional Corporation, Los Angeles, California, Bond Counsel, based on existing law and @ y m assuming compliance with certain covenants set forth in the documents pertaining to the Bonds and requirements of the Intemal Revenue Code of 1986 as moo amended (the "Code), described herein, interest on the Bonds is not includable in gross income of the owners thereof for federal income tax purposes. In o T (I) amended further opinion of Bond Counsel, interest on the Bonds is not treated as an Item of tax preference in calculating the federal alternative minimum taxable a 3 Income of Individuals and corporations. Interest on the Bonds, however, is included as an adjustment in the calculation of federal corporate alternative _o _o m minimum taxable Income and may therefore affect a corporation 's alternative minimum tax and environmental tax liabilities. In the further opinion of Bond o d Counsel, interest on the Bonds is exempt from personal Income taxes imposed by the .State of California. See "CONCLUDING INFORMATION - Tax E o 'c Exempt Status of the Bonds" herein. o m co $24,320,000* CIS° d PALM DESERT FINANCING AUTHORITY E ° s TAX ALLOCATION REFUNDING REVENUE BONDS 0 coC .. Q o .N (PROJECT AREA NO. 1, AS AMENDED) 2004 SERIES A ur @ @ O n o .m 1-5 c w.y0 Dated: Date of Delivery Due: April 1, as shown on the Inside cover hereof m o 4 E o- The Palm Desert Financing Authority, Tax Allocation Refunding Revenue Bonds (Project Area No. 1, As Amended) 2004 Senes A (the 'Bonds') N will be issued by the Palm Desert Financing Authority (the 'Authonty) under an Indenture of Trust, dated as of June 1, 2004 (the 'Indenture"), by and .a-2_r c o between the Authority and BNY Western Trust Company, Los Angeles, California as trustee for the Bonds (the 'Trustee"). The proceeds of the Bonds Will 5 @ o be disbursed to make a loan (the "Loan) to the Palm Desert Redevelopment Agency (the "Agency") pursuant to a Project Area No. 1, As Amended, Loan d ro Agreement dated as of June 1, 2004 (the "Loan Agreement) by and among the Authority, the Agency and the Trustee. The Agency will use proceeds of the @ Loan to refinance a portion of the Agency's obligations under a loan agreement entered into in 1995, to finance certain redevelopment activities within or of inc or benefit to the Project Area, to provide a surety bond for the reserve fund and to pay costs of issuance of the Bonds. L U d ~ c o The Bonds will be Issued as fully registered instruments without coupons, in the denomination of $5,000 or any integral multiple thereof, In book- ' 03 E o entry form, initially registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ("DTC"). Purchasers will not E @ receive physical certificates representing their interest in the Bonds. For so long as the Bonds are registered In the name of Cede & Co., all payments of a @ o- principal and interest on the Bonds will be made to DTC, which, in tum, is obligated to remit such principal and interest to DTC Participants (defined herein) ci COn CD for subsequent disbursement to the Beneficial Owners (defined herein) of the Bonds. See "THE BONDS — Book -Entry Only System' herein. E a ; o13 8 The principal or redemption price of each Bond will be payable upon the presentation and surrender of such Bond, when due or redeemed, as O = applicable, at the corporate trust office of the Trustee. Interest on the Bonds will be payable on April 1 and October 1 of each year (the "Interest Payment rn ar Dates'), commencing October 1, 2004, by check or draft, mailed on the Interest Payment Date to each Owner of the Bonds as of the Record Date preceding m c a such Interest Payment Date, except the Trustee will, at the written request of any Owner of $1,000,000 or more in aggregate principal amount of Bonds, u 'E a make payments of interest on such Bonds on the Interest Payment Date by wire transfer to the account in the United States designated by such Owner to o .i 3 the Trustee in writing as described herein. See 'Appendbc H — Book -Entry System" herein. tea@ . co To The Bonds are subject to optional redemption and mandatory sinking fund redemption as described herein. 7 « co m `o The Bonds are special obligations of the Authority payable from and secured by Revenues (as defined herein), consisting primarily of amounts @ m c payable by the Agency under the Loan Agreement. The Loan Agreement is secured by and payable from Tax Revenues, as defined herein. The Agency C w ° currently has outstanding, and may, pursuant to the terms of the Loan Agreement and the Indenture, issue additional obligations secured by Tax Revenues d 8 m on a parity with the Loan (the "Parity Debt"). See "SECURITY FOR THE BONDS° herein. @ c E L @ - in Z E h Payment of the principal of and interest on the Bonds when due will be insured by a financial guaranty insurance policy to be issued U a`- simultaneously with the delivery of the Bonds by Ambac Assurance Corporation. See 'BOND INSURANCE' herein. Fa'= U O U 0 L Ambac C = c_,O N . E The Bonds are not a debt of the City of Palm Desert (the 'City') or of the State of California or any of its political subdivisions (other than the `c_ E 3 Authority), and neither the City nor the State of California nor any of Its political subdivisions (other than the Authonty) is liable therefor. The Loan is not a @ `o c debt of the Authority or of the State of California or any of Its political subdivisions (other than the Agency), and neither the Authority nor the State of mCalifornia nor any of its political subdivisions (other than the Agency) is liable therefor. Neither the Bonds nor the Loan constitutes an Indebtedness within c w o the meaning of any constitutional or statutory debt limitation or restriction. Neither the members of the Authority nor of the Agency nor any persons @ c o executing the Bonds or the Loan Agreement are liable personally thereon. In no event will the obligations of the Agency under the Loan Agreement be 0 y payable out of any funds or properties of the Agency other than Tax Revenues (as defined herein) set forth in the Loan Agreement. =' ? - The Bonds are offered when, as and it issued and accepted by the Underwriter, subject to the approval as to legality by Richards, Watson & coa c Gershon, A Professional Corporation, Los Angeles, California, Bond Counsel. Certain legal matters will be passed on for the Underwriter by Jones Hall, A m •w Professional Law Corporation, San Francisco, California, Califomia. It is anticipated that the Bonds will be available for delivery in New York, New York '3 `c c through the facilities of DTC on or about June 22, 2004. O coo E°' �.12 @ D Citigroup ki Ero@ `I O a) yOs lc @ The date of this Official Statement is , 2004. F- o 1 i 1 1 1 1 t 1 1 1 1 1 1 1 1 1 t 1 1 NEW ISSUE Ratings: S&P: AM FULL BOOK ENTRY Fitch: AAA Ambac Insured (See "RATINGS" herein) In the opinion of Richards, Watson & Gershon, A Professional Corporation. Los Angeles, California, Bond Counsel, based on existing law and assuming compliance with certain covenants set forth in the documents pertaining to the Bonds and requirements of the Internal Revenue Code of 1986 as emended (the 'Code), described herein, interest on the Bonds is not includable in gross income of the owners thereof for federal income tax purposes. In the further opinion of Bond Counsel, interest on the Bonds is not treated as an item of tax preference in calculating the federal alternative minimum taxable income of individuals end corporations. Interest on the Bonds, however, rs included as an adyustment in the calculation of federal corporate alternative minimum taxable income and may therefore affect a corporation 's alternative minimum tax and environmental tax liabilities. In the further opinion of Bond Counsel, interest on the Bonds is exempt from personal income taxes imposed by the State of California. See 'CONCLUDING INFORMATION - Tax Exempt Status of the Bonds" herein $24,945,000 PALM DESERT FINANCING AUTHORITY TAX ALLOCATION REFUNDING REVENUE BONDS (PROJECT AREA NO. 1, AS AMENDED) 2004 SERIES A Dated: Date of Delivery Due: Aprll 1, as shown on the inside cover hereof The Palm Desert Financing Authority, Tax Allocation Refunding Revenue Bonds (Project Area No 1, As Amended) 2004 Senes A (the "Bonds") will be issued by the Palm Desert Financing Authority (the 'Authority') under an Indenture of Trust, dated as of June 1, 2004 (the 'Indenture"), by and between the Authority and BNY Western Trust Company, Los Angeles, California as trustee for the Bonds (the'Tnistee) The proceeds of the Bonds will be disbursed to make a loan (the 'Loan") to the Palm Desert Redevelopment Agency (the 'Agency') pursuant to a Project Area No. 1. As Amended, Loan Agreement dated as of June 1, 2004 (the 'Loan Agreement') by and among the Authority. the Agency and the Trustee The Agency will use proceeds of the Loan to refinance a portion of the Agency's obligations under a loan agreement entered into in 1995, to finance certain redevelopment activities within or of benefit to the Project Area, to provide a surety bond for the reserve fund and to pay costs of issuance of the Bonds. The Bonds will be issued as fully registered instruments without coupons, in the denomination of $5,000 or any integral multiple thereof, in book - entry form, initially registered in the name of Cede 8 Co., as nominee of The Depository Trust Company, New York, New York ("DTC'). Purchasers will not receive physical certificates representing their interest in the Bonds. For so long as the Bonds are registered in the name of Cede 8 Co , all payments of principal and interest on the Bonds will be made to DTC, which, in turn, is obligated to remit such pnncipal and interest to DTC Participants (defined herein) for subsequent disbursement to the Beneficial Owners (defined herein) of the Bonds. See'THE BONDS — Book -Entry Only System" herein. The pnncipal or redemption pnce of each Bond will be payable upon the presentation and surrender of such Bond, when due or redeemed, as applicable, at the corporate trust office of the Trustee. Interest on the Bonds will be payable on Apnl 1 and October 1 of each year (the 'Interest Payment Dates"), commendng April 1, 2004, by check or draft, mailed on the Interest Payment Date to each Owner of the Bonds as of the Record Date preceding such Interest Payment Date, except the Trustee will, at the written request of any Owner of $1,000,000 or more in aggregate principal amount of Bonds, make payments of interest on such Bonds on the Interest Payment Date by wire transfer to the account in the United States designated by such Owner to the Trustee in writing as described herein. See 'Appendix 11 — Book -Entry System' herein. The Bonds are subject to optional redemption as described herein. The Bonds are special obligations of the Authonty payable from and secured by Revenues (as defined herein), consisting primanly of amounts payable by the Agency under the Loan Agreement The Loan Agreement is secured by and payable from Tax Revenues, as defined herein The Agency currently has outstanding, and may, pursuant to the terms of the Loan Agreement and the Indenture, issue additional obligations secured by Tax Revenues on a parity with the Loan (the 'Panty Debt') See 'SECURITY FOR THE BONDS' herein Payment of the pnncipal of and interest on the Bonds when due will be insured by a financial guaranty insurance policy to be issued simultaneously with the delivery of the Bonds by Ambac Assurance Corporation. See 'BOND INSURANCE' herein A7Wh4 MATURITY SCHEDULE (See Inside Cover) The Bonds are not a debt of the City of Palm Desert (the 'City') or of the State of California or any of its political subdivisions (other than the Authority), and neither the City nor the State of California nor any of its political subdivisions (other than the Authority) is liable therefor. The Loan is not a debt of the Authority or of the State of California or any of its political subdivisions (other than the Agency), and neither the Authonty nor the State of California nor any of its political subdivisions (other than the Agency) is liable therefor. Neither the Bonds nor the Loan constitutes an indebtedness within the meaning of any constitutional or statutory debt limitation or restriction. Neither the members of the Authority nor of the Agency nor any persons executing the Bonds or the Loan Agreement are liable personally thereon. In no event will the obligations of the Agency under the Loan Agreement be payable out of any funds or properties of the Agency other than Tax Revenues (as defined herein) set forth in the Loan Agreement. The Bonds are offered when, as and if issued and accepted by the Underwriter, subject to the approval as to legality by Richards, Watson 8 Gershon, A Professional Corporation, Los Angeles, California, Bond Counsel. Certain legal matters will be passed on for the Underwriter by Jones Hall, A Professional Law Corporation, San Francisco, California, California. It is anticipated that the Bonds will be available for delivery in New York, New York through the facilities of DTC on or about June 24, 2004. Citigroup The date of this Official Statement is June 9, 2004. 1 SMITH BARNEYa citigroupJ 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 Municipal Retail Marketing TAX-EXEMPT SECURITIES THE OFFERING Managers: Schedule*: Bond Ratings: $24,320,000* PALM DESERT FINANCING AUTHORITY (Riverside County, California) TAX ALLOCATION REFUNDING BONDS (PROJECT AREA NO. 1, AS AMENDED) 2004 SERIES A Citigroup Global Markets Inc. (Sole Manager) POS Mailing: June 7, 2004 Pricing: June 9, 2004 Dated: June 22, 2004 Delivery: June 22, 2004 o S&P: AAA Insured o Fitch: AAA Insured Credit Enhancement: Ambac Assurance Corporation Maturity Schedule* o Serial Current Interest Bonds maturing from April 1, 2005 — April 1, 2025 * Preliminary. subject to change Maturity Date Principal Maturity Date Principal Amount Amount 4/1/2005 $ 465,000 4/1/2016 $ 1,240,000 4/1/2006 825,000 4/1/2017 1,295,000 4/1/2007 905,000 4/1/2018 1,435,000 4/1/2008 815,000 4/1/2019 1,395,000 4/1/2009 995,000 4/1/2020 1,500,000 4/1/2010 895,000 4/1/2021 1,605,000 4/1/2011 1,075,000 4/1/2022 1,695,000 4/1/2012 1,000,000 4/1/2023 205,000 4/1/2013 1,105,000 4/1/2024 2,255,000 4/ 1 /2014 1,165,000 4/1/2025 1,260,000 4/ 1 /2015 1,190,000 Palm Desert Financing Authority — 2004 Series A Tax Allocation Refunding Revenue Bonds Page 2 Sales Memo September 21, 2004 Tax Status: Interest on the Bonds is: o Exempt from federal income tax o Exempt from state of California personal income taxes o Non-AMT Interest: Interest on the Bonds is payable on October 1, 2004, and thereafter on each April I and October 1. Use of Proceeds: The 2004 Series A Bonds are being issued to: (i) advance refund the callable portion of Series 1995 Tax Allocation Revenue Bonds, (ii) to finance certain redevelopment activities within or of benefit to the Project Area (iii) acquire a debt service reserve surety bond for the Bonds, and (iv) pay certain costs incurred in connection with the execution and delivery of the Bonds. Call Features: To be determined at pricing SECURITY Security for the Bonds: Per the Loan Agreement with the Palm Desert Financing Authority the Redevelopment Agency has pledged tax revenues on parity with the Agency's remaining unrefunded 1995 Tax Allocation Bonds (TABs), 1997 TABs, 2002 TABs and 2003 TABs.. Reserve Fund: A Reserve Fund surety will be issued by Ambac Assurance Corporation for the credit of the Reserve Fund established under the Indenture of Trust as security for the Bonds. Bond Insurance: Payment of principal and interest on the Bonds will be unconditionally guaranteed by Ambac under a Municipal Bonds New Issue Insurance Policy. GENERAL INFORMATION The City: The Project Area: The City is located in Riverside County within the central portion of the Coachella Valley. The City occupies a land area of 25.5 square miles and is bounded by Indian Wells to the East, Rancho Mirage on the West, Santa Rosa Mountains to the South and Interstate 10 to the North. Original Project Area (Adopted July 16, 1975) o Encompasses 420 parcels totaling 580 acres o Retail and Office Development along Highway 1 1 I o Plan effectiveness 2015 o Tax Increment Collected through FY 2003 - $99,799,962 o Tax Increment Limit - $758,000,000 o Time Limit to Receive Tax Increment 2025 o No Debt Limit Added Territory (Adopted November 25, 1981) o Encompasses 10,814 parcels totaling 5,240 acres o Broad Range of Land Uses, Including Residential Single and Multifamily, Retail and Office Commercial Development * Preliminary, subject to change Palm Desert Financing Authority — 2004 Series A Tax Allocation Refunding Revenue Bonds Page 3 Sales Memo September 21, 2004 o Plan effectiveness 2021 Tax Increment Collected through FY 2003 - $136,530,5041 • Tax Increment Limit - $500,000,0002 o Time Limit to Receive Tax Increment 2031 • Debt Limit - $200,000,000 + CPI SALES POINTS c Interest on the Bonds is exempt from Federal and State of CA income taxes and is not subject to AMT. o The Bonds have been rated AAA by S&P and Fitch as a result of the insurance provided by Ambac. o Large project area size with diversity in property ownership and type (only 11.02% of the Project Area's assessed value is in the top 15 owners). o Project Area Additional Bonds Debt Service Coverage is estimated to be I.58x in FY 2004 versus the minimum requirement of 1.15x coverage. o Significant new development and growth potential. o Strategically located in the heart of a growing and vibrant regional economy. MARKETING Pricing: Brad Thiel (213) 486-8817 Banking: Marketing: Joe Crowley (213) 486-8925 Nikolai Sklaroff (415) 955-1619 Carmen Vargas (213) 486-8995 Elaine Miller (212) 723-7117 Mary Traynor (212) 723-7117 Exclude taxing agency pass throughs but includes housing funds. 2 Tax increment cap of $500 million is exclusive of amounts paid to taxing agencies and exclusive of amounts paid directly or indirectly by the Agency or any taxing entity of finance the acquisition of land, construction of buildings, facilities, structures or improvements for such taxing agencies. * Preliminary, subject to change 3 Tab 3 Bonds Insurance Presentation citigroupi 1 1 1 :tat' c CD 0 L N a ann.) N c• o c 2 c m° of\ a Oka rs to 0 g ei Vi S in w 15 so, 7 C9 `CC' p P (1) 0coo @ ' ® 0 Ps :./ o© gtic 1 II 1 II t t II I I II II I I I I t II II I co Aa c V oP % on o J its sta 1 V+ r c 0 0 N 4) tts cgs c T 4) to to to 3 0 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 r ze- \I 0) 2 46 cu co o 0. 15 0 al i r U O z O al D- O a) 4- V _ a) ow � 0- CO - X C (I (� F- U a) C N < IS 0 0) i 12 E Ea a) ce O 0 a) -oas O 0 5 m m a)>= a) p p8 'ccs v O '4O C 2 C C O V C O O � W it o 0 co 0 0 0 O 0 0 Tour of Project Area nsurance Bid Request Bond LL co cu cc U a) U) a) 0 O m 4- M N C 4 O N -,--' N 4 CD G — U co N O N 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 :to 5 V E 0 i 0 V W r City of Palm Desert Population (% qinitwo ienuuy) O co CO N O N CO CO t N O 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 0 0 0 0 0 0 0 0 0 0 0 o 0 0 0 0 0 0 0 tr9 CdON N T O Cn 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 r 2 (3 is C C 0 ro a 0 a Source: State of California Department of Finance, Demographic Research Unit (January of Each Year) i 1 1 1 1 1 r 1 1 S >1 • ▪ mm E c 0 W 0o000000 o6 (0 (f) Cr) N atom $ 0 nt 0) r 0 O c th c O m r bey _ c 0 0 0 N L c aa)) E 0 Q c N u c 0 E 0 0 v 0 a) 0) ¢0) T C 0 co Source: County of Riverside Assessor City of Palm Desert Taxable Retail Sales 0 m 9 rn CV CO 1111111111111 000000000000000 00000000000000 C7 N T O O) CO N. CO In Ch N T T T T T (suauu $) • City's Taxable Sales Have Increased by 60% Since 1997 or 10% annually on average. 0 Source: City of Palm Desert & State Board of Equalization cu i2 E c O V W tom ) 0 0 0 0 0 0 0 0 0 0 o a o 0 0 co. Lc? OtoOtAO Lnoto0tf) Otn0 OCocoN:Ncoto totn14C9 C9NN 1111111111111 1 1 1 1 1 1 1 1 O O O O O O O O O O O O O O O O O O O o AAcocoV/ L O o c o^ O^ o o o yo o NN I` co O CO 0 V V V 0 0 0 N 0) N 0) (3) CC C 2,N co 0 r r' Uo o.0 E 0) •C o) f/N - r i 0) 0) 0 • 1 y> T 5 ■ E O c O 0 W Estate Markets co 0 cc and Commercia Residentia Total New Nonresidential Construction Total New Residential Construction I I ! I 0 LO 0 Ln 0 N a a N CO r- 1 1 1 1 1 1 1 00 CCO CO a N 0 o en N I.1.1p151 Ln 1 0 1 0 0 N 0 0 N N elk 111/1011• _ O^O I} N O 0 O I} N • Q) I} Q1 I � CO I I 1 .- O N 0 Ci 1 I 1 1 1 1 1 1 1 1 1 1 1 4 c E 1 1 1 o n 1 1i I (9 ccr N„ to 443 6) 16 ccs 6) c6 co Cg 0.- N o us- 0 0 O O O„ N co to ta G e 0 0 0 to N,. cA v N 6 CD Q -0 CO CD 01 1S O C 4- cad N co N 30 7 r ti- ssue Debt for Both 0. lrg h� %3 r z as _____ -- < < t a ` Uz m m m m oS " 6 6 Q. 4 O.0 DDDDDr 8 2 1 1 V c a) a. 0) E 0 0) a) op ix California Redevelopment A•encie ax Increment Revenue FY 2111-1 4 $188,459,074 0 CO CO LO O O C'D O) 0 O a) o LO Cri co / co CO t co O CO N CO CV 1- CO O) Lf) LO eeee cn C!) CD 0 U) 0) Q C (n o ndustry Urban Dev. San Francisco a) ea N E a. N (-6 4 Lf) O Source: California State Controller, Community Redevelopment Agencies Annual Report 2001-02 % % 1 1 % 1 % 1 � cfr a) 0 6 6 3 o f Is % a = « ® & s £\k % \ 11 D E % R % 2 t \ \ 0 .0 / / 2 ® C \ u c m o` 9- o a \f « ƒ / f E. k % as o - 0 o= E 0 c ct 0 ƒ% ƒ ƒ 0 t 0 = 2 % R ? 0 00 0 0�0 m o c % 0_0 0 _ - D oo 2 0 20C - RR_ as \ />E &&c_ U E p I\ f- m 6 Q toy/ m�t�� CD d' S 9��� 23k�7, % Y3 a oR®/ =?U\OV2/ U) 22� ®�«% 77o�4-0 k\� c®\�\ 27�Ek �f7\°��2 a) 0) �2®EE ci. -a2£@aa.0A O���R �a7k°C�17ƒo'�� 2\� 79 976 -t 6c±Q a „ 219-777 '�«'0071 q�is\fin 0 � a_0-7« �& Np & a CL Ili & » N, Ei- \'' CC o 1 r O a� O2 0 I i 1 ' it V fy G tor T 0, 0 A co o u es tD cfl g O- Nco r O r IN M 0 o re d� Ut CP N a 'G 1, N �1 O 7 p 9 vCr) O r'• - 0 O 4- ill �cr o Nco IS �a) ��O 0v �< O= �- O N c p 3 � L O + t '6 in Co- N U N mof s �o dJ cUO t- t- dJ p N %I.v O AS N o -° cc;.,' zto r NamAcd • .ifo1nPa a) a)A v cc;.,' t 7 C _0 OQ N V J cc 'O N Cid.V ay t pi ti ' -6 o �s m r���°'��N��Ja��F'`-coo s�Uoi it t ' o r m Siiio gi .o ., 9 0 iv W, N' ' use a nla Q C. .th . .,..- 0 • 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 The Project Area co co ® co a) r N N c N p1 c co coN679- o FY 2003 Tax Increment • FY 2004 Projected Ti • Bonds Outstanding O O co co 'l- ets 6 0 - LO N- Ln ,-Cr T- r r 0 �1 ...... •0 f.2 i ca ® a) Es_ "'-' EY. a) g Ici U 0 0 > 0 U -0 0 0 • • • Bonds Test 7;1" 1 1 1 1 ca a) Q 1 a) fat a � o ctf U at � N N 1 1 crs U c6 N O 7 za "To 'O 5) 0 c O en C 0 0 0 0 0 0 0 0 0 CO CO ct Co O N CO O O n 0 • 4 r r O (O r O N N O co (o n tO O) O) O (O ' (O N CO O (n T CO (n n 7 1- O N N o O a) in a) co O n (f) (O r (n N (O O O O - (a N CO CO O N COCD y(OOCO C) CV (O r CJ CA oD N d- (O N (O Co CO $3,256,494,241 °) a) co o N CO ' • O apa0 N N (no N N CO (Oo CO CO T T C I a) O Or n O Connnercial Recreational To ET c J C( N C r 'al_ J .a 3 3 O O O O CC a) lL N coY co c7 > dS m D D 1- F 0 O 0 0 0 0 0 0 O T T T T O O r O r O T O O T o co (OO (ND (nO LO V r CO CO CND) (n O N O O) n r (n O lf) N a0 u) c (O t O In N CO n (o r CO T CO d- T CA CO Cn lO Ln co a0 N O (D 0) T 0 y, (4T M N 0 co M M Corrurercial T W C\J o La T r Recreational Institutional Vacant Land C $ 731,898,678 CO N O co U) C co O» 0 N Source: Rosenow Spevacek Group, Inc. 1 1 1 1 Historical Assessed Values 1 1 1 0 0 0 0 0 0 0 0 0 0 L O N O U) O tU) 0 LO V V C6 C''i N N T suoi��iyy ui anIeA 0 0 N co Source: Rosenow Spevacek Group Inc. 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 Diversity in Project Area Tax Base Too 15 Taxoavers in Proiect Areat'> • 0 0 0 0 cr, cr, cr, cr, 0 cr, 0 cr, 0 N 00 LO N O) T CO T 00 Ln O) 0) CO (D (O (n V CO N L.- CO Ln "t CO CO N N N N N T r r O O O O O O O O O O O co r O 0 coMin (°)) co O) concoMr (0 M n N n O O) Ln In V CO (A (D O LO OD r M N to 0) O) co O N O O T CO CO CO '7 M M r >..0- cas co c Q c — D LL C 0 t3 0 c p C J CD E co • 0 a7 S O O ��yy. 0 LIT)2 Li T N M V Ln co c — O N C w C O C a1 O. cd O y O C a 'ro -. .-. • Lfj Total Assessed Value of Top 15 Tax Payers ill Source: Rivers ide CountyAssessor local secured and unsecured tax rolls. N Source: RosenowSpevacek Group, Inc. 1 1 1 1 1 1 1 0 0 O C U U CO C p CC 0 i U U �--, U) o coc� 0 i TD U C ✓ Q U CD O U _0 4-0( CD N C U o U O (� a cts c a' O I N 00 O < N it CELo C �T-a _a rU i '% U w= _cc Li O a O U c CO N •(t) = o C C a) E U o �'12>o E > > al o CL O 1-1 m RI O O c� c� X (� �, �_ � )) - V a) a) o CO D C 6" O U i 0 0 0 C 0 n O O N U) N N co C 0E-O0I000W -u) > > > > > > > > > Source: Rosenow Spevacek Group, Inc. 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 Net Tax Revenue r 0 QCD V'om) N O O r CO CS 1 CND M O M 7 co EA 0 0 ' 0 lt) r ' - O CO N 1.6 N 0) r 7 CD to rea Gross Tax Increment Revenue a 7 lL c a a 0 > 0 a (n Y d 3 c g d Y (1) y r 1- r U N C CD as CO X 32 it) nt'N CO r COO () 00) CO 0) CO O CO CD a CCOO tN. a)O 00) O CO 0 CO_ U) 7 'I a) C1 d' (Ij to r 0 N r r r (0D 10 CO N CD 0 N r CO O CO 0) O N') C(1) (!) N CO r CO O. N 0) V V r 0 M N r r d 3 11) 0 E a 0 c o O a7 0 N y o a 0 r Cn c L C a 0) a$ 0 in N a tvE J LL c E u O (1'i w > Y O ai m a 8, CD Q L a) w Z 0 CD a) :2 c O ca >8a 2 7 C 0 N Y > c a Q a, ^u YES 0 c 0 a` 5 Q -O 10- Q 0 Source: Rosenow Spevacek Group Inc. 1 1 1 1 1 11 1 1 1 1 1 1 1 1 1 1 1 1 1 1 r 1 1 to II ii I y N t 0 .00 0 ASs 1 1 1 co,ccs co cD 9 0 e 3 N s N p0 teG 4- c> N ea re: cpd. O �.vW C Y O , O � o c N 0- -o vc6 rr. se o� %°� a so o N 7 a) al 3 O • • • \t $ 1 1 1 1 1 1 1 $ 1 1 1 1 1 1 1 1 1 Financing Structure Palm Desert Financing Authority 0 Cr) 2 Size of Issue*: Project Area No. 1, as Amended § •% $5 u) G§ E cc1E \ : � a) )/ \ 22 m I o = - -� \ at co \ cc I/m t$x®R /2E %2 003 \\ •'0 E( ®=a <E Structured with at least 1.15x coverage Structure: Surety In Place to Cover Debt Service Reserve Fund Requirement \ / \ 2 &f <co 0 /( \CC »§ k\ §/ c /\ / § • 4 &w 27 Ea. 2 $10,870,259 — Combined Parity Pledge ,)� • ■ ■ 'On parity with the Agency's 1997 and 2002 Project Area No.1 Tax Allocation Revenue Bonds. Preliminary, Subject to Change. 1 1 1 1 1 1 ,1 1 1 1 1 1 1 1 1 Financing Structure Source and Uses of Funds(1) 2004 Series A Bond Proceeds: $24,290,000.00 Par Amount 633,808.00 E 0 0 a) u7 co Ts c .o) O $24.923.808.00 Total Sources cn a) cn CO 0 • Q coo d co o ^ � L 10 0) co , M VI N ES $677,944.07 $24.923.808.00 Total Uses U C m O) c C O 0 a c ro c 0 U N_ 0 N m itt o m a U N U CO J C c0) E v U as 1 1 1 1 1 as z c 0 cmNp (Ny (0 yN m (pE NF n (b N mn N pOp (Q pN N 1-. pN pN - vN Q L0 {m{pp {{myy m N O O '0 N Cl m OI (� O m Cl m m 0) N N N N m m O <0 N m- N N m d m m m m 1� n n m m m m aid d OO OO m f f b d ui d o a�a�o(oN.yyo oo oo e p 000n�n'm d)moo `mo noeoiooio� 0 Q O . ...... . . v N N N N W.-N N N U O p g (CNfyl t0 N INm a b N m 0 W to O' O N S O m e 0m0 e 0 N 00 O 0') O N N r m 0 f' N N (N'l N N m m N O) 0) 0) 0) 0) m m N N N N CI N l7 N N N N 0 m m m N 0) m m m N m 0) m m m 0i 0) 0) 0l O m m )C O N i0 (0 rN N O 0 U m 2 0) O N m^ O n n 00 10 O N O l� m vm 8 N n O ° n> 00mm0mmm0adm`8mImm0`0 00'i-° a a m m m m m m m m m m rn m m m m m m m m v el ON Z am ^wMa, ef f 8f f'N y_m mm 1n000 v ZAAmEL IUGiEhwguma0QQL00-m mirrmmmm00imOOOOOfNddmdre mQQ0i N m m o m`$m_e"SNoeiq us'i_o mmm�omm�nlor-o (000 op N ~ a mm coo 0<4 R�ncm+_', R mmLn me�umm10. M�om�iqmm og 1"1§q 8 mmppgg co c 8 mmmmmmZimmmmmmsFi Pf a H W m8 8 m-, `-,3 m�'�, 10Q00. ui "u%00 0 m m e m v m ui_m `gv_ 113 a amp s v a e e e e v e e v e v m Q m . al p p r% 255 P 1ng N NgNNd snye bq NN/i-O-Nm010.0O.qbmbm< Oa "pGV 7mVIN N N NNNNNN NNNNmhOm m LOLOm v 0 0 m N N m Y) N N N m N N N 0 m d N m N N m ^ m IY m 410 0 O 2 m8 m §N m =0 a , m 8 .45 pS N N m 0 a a N y - a 0 0 '0 Q Ep omp 0 y Oy , Opp 110--p N q 0q O m m v N v I_ N � Nl p N m N m O ry Nry m m 0m � 0 O N -. Qj. 0) m 9 > C.2Y 0 p O mp O t3N8 p e N �e OO m^I phi t0'I nO �<p O m 0 t7 8 V O N 0 N 0 Cpml N Ym) G. C ml N .O a f,88 P m N N I� O d N d O [m'I R °) m m m m m W d O@ l7 of l7 ci V O kR m C OO I- e> a N a a {V S 2 -<a ta c a a s 1' 1 07 7 ill' <i °m= }pNEpp 1pp�mpjpp� ONN O N m h0m(Oy(y(Ny(My�yrym(my I(�y (myAmy {(��l]m'm m §OO OOO OOOO O O O OOOOOOOOOO p 00O O0NNNNNNNNNNNNNNNNNNNNNNNNNNNNOm 6 Q 0a-L �Ba 95 <fla Preliminary, subject to change. 1 nsurer Presentations May 24, 2004 N May 27, 2004 • r Co June 2, 2004 June 3, 2004 Price Bonds June 9, 2004 a) CD 0 0 m June 22, 2004 O O • • Subject to change. 0 c 0 _ itO 9. C G a) 1 a N u) CO v c) r c N y- 4--1 O 1 0 i 0 I 1 CD -0 V CD o- 3 °a 0" E 4 0 7 a) To �t c o ►s v' > a' ) a N r U J ' to r Q. NP N i o • • 1 1 1 1 1 1 1 1 1 1 1 1 1 1 11 1 t 1 1 0 0.4\ o O 0 ir CC r 03 o 0 0 0 ICA) 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 Tab 4 Market Analysis citigroup'1' Market Commentary 8.00 - 7.00 - 6.00 - a, 5.00- 4.00 - 3.00 0' Len O a Historical Market Indices 6/9/1994 to 6/9/2004 0' 0' 00 0 O O 0\ O Bond Buyer RBI 10 Yr Treasury 30 Yr Treasury Source: Citigroup Public Finance Applications Database. O 0' citigroup' 1 1 1 1 1 1 1 1 1 Market Commentary Historical Market Indices 6/9/2003 to6/9/04 6.00 - 5.50 - 5.00 - 4.50 - 4.00- a 3.50 - 3.00 - 2.50 - 2.00 1 1 e 1 e 1 0 0 0 0 0 0 ▪ 0 0 • 0 0 0 ▪ 0 0 CT O� CTC ▪ U CN O' —. CN CT - O ▪ N --, N M 7 N b Bond Buyer RBI 10 Year Treasury Source: Citigroup Public Finance Applications Database. 30 Year Treasury citigroup' J`' 1 Yield Comparison Bond Buyer RBI 10 Yr Treasury 30 Yr Treasury 6/4/2003 6/11/2003 6/18/2003 6/25/2003 7/23/2003 7/30/2003 8/20/2003 8/27/2003 9/17/2003 9/24/2003 10/22/2003 10/29/2003 11/19/2003 11/26/2003 12/17/2003 12/24/2003 1 /21 /2004 1/28/2004 2/18/2004 2/25/2004 3/3/2004 3/10/2004 3/17/2004 3/24/2004 3/31/2004 4/7/2004 4/14/2004 4/21/2004 4/28/2004 5/5/2004 5/12/2004 5/19/2004 5/26/2004 6/2/2004 6/9/2004 Average 4.82500 4.78714 4.87429 4.95857 5.18571 5.38857 5.42286 5.40143 5.25143 5.22286 5.26286 5.24143 5.17000 5.09000 5.06000 5.04000 4.94000 5.02000 4.83000 4.81000 4.85000 4.75000 4.73000 4.79000 4.91000 5.07000 5.18000 5.20000 5.28000 5.32000 5.43100 5.44100 5.40000 5.36000 5.39000 5.12563 3.34000 3.16143 3.33857 3.51714 4.20829 4.36200 4.47543 4.48543 4.17729 4.03243 4.24786 4.30729 4.17800 4.22000 4.16200 4.18786 4.05586 4.14286 4.06086 3.99571 3.87157 3.74257 3.59729 3.81614 3.91557 4.21457 4.37429 4.42786 4.48250 4.60000 4.76900 4.74200 4.64900 4.72000 4.80500 4.15311 4.36300 4.21600 4.40429 4.55857 5.14729 5.30843 5.27243 5.24914 5.08314 4.95771 5.13100 5.15086 5.05967 5.06000 4.98386 5.00014 4.92800 4.97400 4.92286 4.86300 4.77800 4.69014 4.68457 4.75086 4.93500 5.04729 5.19214 5.22329 5.27300 5.37000 5.48800 5.44400 5.35100 5.41700 5.48000 5.02788 citigroup' I 1 r r r r r r r r r' \ 3 r r r Tab 5 Pricing Wires citigroup"J' 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 i-Deal Page 1 of 2 Wires Rec'd Date/Time (PST) Sender ST Wire Type/Title Master Message # 06/09/04 07:10 AM Citigroup Global Mkt CA PRELIMINARY PRICING WIRE 2250112 ] RE: $24,910,000* PALM DESERT FINANCING AUTHORITY (RIVERSIDE COUNTY, CALIFORNIA) TAX ALLOCATION REFUNDING BONDS (PROJECT AREA NO 1. AS AMENDED) 2004 SERIES A WE HAVE A RELEASE. MOODY'S: AMBAC INSURED DATED: 06/24/2004 DUE: 04/01 S&P: AAA FITCH: AAA FIRST COUPON: 10/01/2004 ADD'L TAKEDOWN MATURITY AMOUNT* COUPON PRICE (pts) 04/01/2005 495M 3.00 % 1.50 1/4 (Approx. $ Price 101.141) 04/01/2006 850M 3.00 % 2.10 1/4 (Approx. $ Price 101.553) 04/01/2007 930M 4.00 % 2.50 3/8 (Approx. $ Price 103.986) 04/01/2008 845M 4.00 % 2.90 1/2 (Approx. $ Price 103.897) 04/01/2009 1,025M 5.00 % 3.20 1/2 (Approx. $ Price 107.898) 04/01/2010 940M 5.00 % 3.45 1/2 (Approx. $ Price 108.041) 04/01/2011 1,120M 5.00 % 3.65 1/2 (Approx. $ Price 108.027) 04/01/2012 1,045M 5.00 % 3.85 1/2 (Approx. $ Price 107.653) 04/01/2013 1,155M 4.50 % 4.10 1/2 (Approx. $ Price 102.915) 04/01/2014 1,210M 4.00 % 4.20 1/2 (Approx. $ Price 98.405) 04/01/2015 1,240M 4.25 % 4.37 1/2 (Approx. $ Price 98.972) 04/01/2016 1,285M 4.50 % 100.00 1/2 04/01/2017 1,335M 4.50 % 4.60 1/2 (Approx. $ Price 99.036) 04/01/2018 1,465M 4.625 % 4.70 1/2 (Approx. $ Price 99.239) 04/01/2019 1,420M 4.75 % 4.80 1/2 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 i-Deal Page 2 of 2 (Approx. $ Price 99.468) 04/01/2020 1,515M 4.75 % 4.90 (Approx. $ Price 98.358) 04/01/2021 1,620M 4.75 % 4.95 (Approx. $ Price 97.731) 04/01/2022 1,695M 5.00 % 100.00 04/01/2023 205M 5.00 % 5.03 (Approx. $ Price 99.63 ) 04/01/2024 2,255M 5.00 % 5.08 (Approx. $ Price 99.001) 04/01/2025 1,260M 5.00 % 5.14 (Approx. $ Price 98.217) CALL FEATURES: Optional call in 04/01/2014 @ 100.00 * - APPROXIMATE SUBJECT TO CHANGE 1/2 1/2 5/8 5/8 5/8 5/8 Order period until 9:00 A.M., P.D.T., today, Wednesday, 06/09/04. The manager reserves the right to terminate or extend the order period prior to or later than the above mentioned time and date and to confirm bonds at their discretion. The compliance addendum MSRB Rule G-11 will apply. The award is expected on Wednesday, June 9, 2004. Delivery is expected on June 24, 2004. This issue is book entry. DTC is pending. Citigroup Global Markets Inc. By: Citigroup Global Markets Inc. Los Angeles, CA Terms and Conditions of Use and Privacy Statement 02004 i-Deal, LLC. All Rights Reserved. 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 i-Deal Page 1 of 2 Wires Rec'd Date/Time (PST) Sender ST Wire Type/Title Master Message # 06/09/04 03:07 PM Citigroup Global Mkt CA REPRICE/RESTRUCTURE WIRE 2250794 RE: $24,945,000* PALM DESERT FINANCING AUTHORITY (RIVERSIDE COUNTY, CALIFORNIA) TAX ALLOCATION REFUNDING BONDS (PROJECT AREA NO 1. AS AMENDED) 2004 SERIES A MOODY'S: AMBAC INSURED DATED: 06/24/2004 DUE: 04/01 S&P: AAA FITCH: AAA FIRST COUPON: 04/01/2005 ADD'L TAKEDOWN MATURITY AMOUNT* COUPON PRICE (pts) 04/01/2005 495M 3.00 % 1.40 1/4 (Approx. $ Price 101.218) 04/01/2006 855M 3.00 % 2.05 1/4 (Approx. $ Price 101.64 ) 04/01/2007 940M 4.00 % 2.50 3/8 (Approx. $ Price 103.986) 04/01/2008 850M 4.00 % 2.90 1/2 (Approx. $ Price 103.897) 04/01/2009 1,030M 5.00 % 3.20 1/2 (Approx. $ Price 107.898) 04/01/2010 945M 5.00 % 3.45 1/2 (Approx. $ Price 108.041) 04/01/2011 1,130M 4.50 % 3.65 1/2 (Approx. $ Price 105.052) 04/01/2012 1,050M 4.50 % 3.88 1/2 (Approx. $ Price 104.119) 04/01/2013 1,155M 4.50 % 4.10 1/2 (Approx. $ Price 102.915) 04/01/2014 1,210M 4.00 % 4.20 1/2 (Approx. $ Price 98.405) 04/01/2015 1,235M 4.25 % 4.35 1/2 (Approx. $ Price 99.141) 04/01/2016 1,280M 4.50 % 100.00 1/2 04/01/2017 1,335M 4.50 % 4.62 1/2 (Approx. $ Price 98.845) 04/01/2018 1,460M 4.625 % 4.72 1/2 (Approx. $ Price 99.039) 04/01/2019 1,420M 5.00 % 4.75 1/2 (Approx. $ PTC 04/01/2014 101.928) 04/01/2020 1,520M 4.75 % 4.91 1/2 i-Deal Page 2 of 2 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 (Approx. $ Price 98.25 ) 04/01/2021 1,620M 4.75 % 4.95 (Approx. $ Price 97.731) 04/01/2022 1,695M 5.00 % 100.00 04/01/2023 205M 5.00 % 5.03 (Approx. $ Price 99.63 ) 04/01/2024 2,255M 5.00 % 5.08 (Approx. $ Price 99.001) 04/01/2025 1,260M 5.00 % 5.12 (Approx. $ Price 98.468) CALL FEATURES: Optional call in 04/01/2014 @ 100.00 * - APPROXIMATE SUBJECT TO CHANGE The compliance addendum MSRB Rule G-11 will apply. The award is expected on Wednesday, June 9, 2004. Delivery is expected on June 24, 2004. This issue is book entry. DTC is pending. Citigroup Global Markets Inc. By: Citigroup Global Markets Inc. Los Angeles, CA Terms and Conditions of Use and Privacy Statement 1/2 5/8 5/8 5/8 5/8 ©2004 i-Deal, LLC. All Rights Reserved. i-Deal Page 1 of 2 Wires Rec'd Date/Time (PST) Sender ST Wire Type/Title Master Message # Type 06/10/04 09:15 AM Citigroup Global Mkt CA FINAL PRICING WIRE 2251384 Neg RE: $24,945,000 PALM DESERT FINANCING AUTHORITY (RIVERSIDE COUNTY, CALIFORNIA) TAX ALLOCATION REFUNDING BONDS (PROJECT AREA NO 1. AS AMENDED) 2004 SERIES A WE HAVE RECEIVED THE WRITTEN AWARD. MOODY'S: AMBAC INSURED DATED: 06/24/2004 DUE: 04/01 S&P: AAA FITCH: AAA FIRST COUPON: 04/01/2005 ADD'L TAKEDOWN MATURITY AMOUNT COUPON PRICE (pts) 04/01/2005 495M 3.00 % 1.40 1/4 (Approx. $ Price 101.218) 04/01/2006 855M 3.00 % 2.05 1/4 (Approx. $ Price 101.64 ) 04/01/2007 940M 4.00 % 2.50 3/8 (Approx. $ Price 103.986) 04/01/2008 850M 4.00 % 2.90 1/2 (Approx. $ Price 103.897) 04/01/2009 1,030M 5.00 % 3.20 1/2 (Approx. $ Price 107.898) 04/01/2010 945M 5.00 % 3.45 1/2 (Approx. $ Price 108.041) 04/01/2011 1,130M 4.50 % 3.65 1/2 (Approx. $ Price 105.052) 04/01/2012 1,050M 4.50 % 3.88 1/2 (Approx. $ Price 104.119) 04/01/2013 1,155M 4.50 % 4.10 1/2 (Approx. $ Price 102.915) 04/01/2014 1,210M 4.00 % 4.20 1/2 (Approx. $ Price 98.405) 04/01/2015 1,235M 4.25 % 4.35 1/2 (Approx. $ Price 99.141) 04/01/2016 1,280M 4.50 % 100.00 1/2 04/01/2017 1,335M 4.50 % 4.62 1/2 (Approx. $ Price 98.845) 04/01/2018 1,460M 4.625 % 4.72 1/2 (Approx. $ Price 99.039) i-Deal Page 2 of 2 04/01/2019 1,420M 5.00 % 4.75 1/2 (Approx. $ PTC 04/01/2014 101.928) 04/01/2020 1,520M 4.75 % 4.91 1/2 (Approx. $ Price 98.25 ) 04/01/2021 1,620M 4.75 % 4.95 1/2 (Approx. $ Price 97.731) 04/01/2022 1,695M 5.00 % 100.00 5/8 04/01/2023 205M 5.00 % 5.03 5/8 (Approx. $ Price 99.63 ) 04/01/2024 2,255M 5.00 % 5.08 5/8 (Approx. $ Price 99.001) 04/01/2025 1,260M 5.00 % 5.12 5/8 (Approx. $ Price 98.468) CALL FEATURES: Optional call in 04/01/2014 @ 100.00 The compliance addendum MSRB Rule G-11 will apply. The award is expected on Wednesday, June 9, 2004. Delivery is firm for June 24, 2004. This issue is book entry. DTC is pending. Citigroup Global Markets Inc. By: Citigroup Global Markets Inc. Los Angeles, CA Terms and Conditions of Use and Privacy Statement ©2004 i-Deal, LLC. All Rights Reserved. i-Deal Page 1 of 2 Wires Rec'd Date/Time (PST) Sender 06/10/04 09:15 AM Citigroup Global Mkt CA CUSIP WIRE RE: $24,945,000 PALM DESERT FINANCING AUTHORITY (RIVERSIDE COUNTY, CALIFORNIA) TAX ALLOCATION REFUNDING BONDS (PROJECT AREA NO 1. AS AMENDED) 2004 SERIES A This issue is book entry through DTC. Award: Delivery: Initial trade: Date of Execution: Time of Execution: MATURITY 04/01/2005 04/01/2006 04/01/2007 04/01/2008 04/01/2009 04/01/2010 04/01/2011 04/01/2012 04/01/2013 04/01/2014 04/01/2015 04/01/2016 04/01/2017 04/01/2018 04/01/2019 04/01/2020 04/01/2021 04/01/2022 04/01/2023 04/01/2024 04/01/2025 06/09/2004 06/24/2004 (Firm) 06/09/2004 06/09/2004 8:30AM Pacific Citigroup Global Markets Inc. CUSIP 696617MK2 696617ML0 696617MM8 696617MN6 696617MP1 696617MQ9 696617MR7 696617MS5 696617MT3 696617MU0 696617MV8 696617MW6 696617MX4 696617MY2 696617MZ9 696617NA3 696617NB1 696617NC9 696617ND7 696617NE5 696617NF2 By: Citigroup Global Markets Inc. Los Angeles, CA ST Wire Type/Title Master Message # TDype 2251389 Neg COUPON 3 3 4 4 5 5 4 4 4 4 4 4 4 4 5 4 4 5 5 5 5 .000 .000 .000 .000 .000 .000 .500 .500 .500 .000 .250 .500 .500 .625 .000 .750 .750 .000 .000 .000 .000 i-Deal Page 2 of 2 Terms and Conditions of Use and Privacy Statement ©2004 i-Deal, LLC. All Rights Reserved. 6 Tab 6 Final Numerical Analysis citigroup1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 SOURCES AND USES OF FUNDS Palm Desert Financing Authority Refunding 1995 TABs-Project Area #1 Revised Final Pricing Numbers Sources: Bond Proceeds. Par Amount Net Premium Uses: 24,945,000.00 244,058.85 25,189,058.85 Project Fund Deposits: Project Fund 792,000.00 Refunding Escrow Deposits' Cash Deposit Open Market Purchases Delivery Date Expenses: Cost of Issuance Underwriter's Discount Bond insurance (@ 93.4 bps) Surety Bond @ 3.25% 903.74 23,620,074.61 23,620,978.35 144,700.00 187,087.50 364,687.87 78,999.38 775,474 75 Other Uses of Funds. Additional Proceeds 605 75 25,189,058.85 Jun 16, 2004 12:17 pm Prepared by Cingroup Global Markets Inc. Page 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 Bond Component Serial Bond BOND SUMMARY STATISTICS Palm Desert Financing Authority Refunding 1995 TABs-Protect Area #1 Revised Final Pricing Numbers Dated Date 06/24/2004 Delivery Date 06/24/2004 Last Maturity 04/01/2025 Arbitrage Yield True Interest Cost (TIC) Net Interest Cost (NIC) All -In TIC Average Coupon Average Life (years) Duration of Issue (years) Par Amount Bond Proceeds Total Interest Net Interest Total Debt Service Maximum Annual Debt Service Average Annual Debt Service 4.796088% 4 884210% 4.758639% 4 953048% 4.729216% 11.953 8 650 24,945,000.00 25,189.058 85 14,100.810 45 14,043,839 10 39.045,810 45 2,430,750.00 1,879,964.12 Par Average Average Value Price Coupon Life 24,945,000.00 100 978 4 729% 11.953 24,945000.00 11 953 All -In Arbitrage TIC TIC Yield Par Value 24.945.000.00 24,945,000 00 24,945,000 00 + Accrued Interest + Premium (Discount) 244,058 85 244,058 85 244.058 85 - Underwriter's Discount (187,087.50) (187,087.50) - Cost of Issuance Expense (144,700.00) - Other Amounts (443,687.25) (443,687 25) (443.687.25) Target Value 24.558,284 10 24,413,584.10 24,745,371.60 Target Date Yield 06/24/2004 4.884210% 06/24/2004 06/24/2004 4.953048% 4.796088% Jun 16. 2004 12:17 pm Prepared by Citigroup Global Markets Inc. Page 2 1 SUMMARY OF REFUNDING RESULTS Palm Desert Financing Authority Refunding 1995 TABs-Project Area #1 Revised Final Pacing Numbers Dated Date Delivery Date Arbitrage yield Escrow yield Bond Par Amount True Interest Cost Net Interest Cost Average Coupon Average Lite I Par amount of refunded bonds Average coupon of refunded bonds Average life of refunded bonds PV of pnor debt to 06/24/2004 @ 4.796088% Net PV Savings Percentage savings of refunded bonds Percentage savings of refunding bonds 1 1 1 1 1 1 1 1 1 Jun 16, 2004 12 17 pm Prepared by Citigroup Global Markets Inc 06/24/2004 06/24/2004 4 796088% 1.652570% 24,945,000 00 4.884210% 4,758639% 4,729216% 11 953 22.195,000 00 5 915143% 12 764 24,749,411.49 796.645.64 3.589302% 3 193608% Page 3 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 Bond SUMMARY OF BONDS REFUNDED Palm Desert Financing Authority Refunding 1995 TABs-Protect Area #1 Revised Final Pricing Numbers Maturity Interest Par Ca tl Call Date Rate Amount Date Price Series 1995 Tax Allocation Revenue Bonds -#1, 19951: TERM24 04/01/2024 5.950% 15,075,000.00 04/01/2005 102.000 TERM25 04/01/2025 5.850% 7,120,000.00 04/01/2005 102.000 22,195,000.00 Jun 16, 2004 12:17 pm Prepared by Citigroup Global Markets Inc. Page 4 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 PRIOR BOND DEBT SERVICE Palm Desert Financing Authority Refunding 1995 TABs-Project Area #1 Revised Final Pricing Numbers Series 1995 Tax Allocation Revenue Bonds - #1 (199511 Period Annual Ending Principal Coupon Interest Debt Service Debt Service 06/24/2004 10/01/2004 656,741 25 656,741.25 04/01/2005 656,741.25 656,741.25 1.313.482.50 10/01/2005 656,741.25 656,741.25 04/01/2006 640,000 656,741.25 1,296,741.25 1.953.482.50 10/01/2006 637.766.25 637,766.25 04/01/2007 675,000 637.766.25 1,312,766.25 1,950,532.50 10/01/2007 617.762.50 617 762.50 04/01/2008 720.000 617,762 50 1,337,762.50 1,955.525 00 10/01/2008 596,440.00 596440.00 04/01/2009 760.000 596,440 00 1,356 440.00 1,952,880.00 10101(2009 573,927 50 573,927.50 04/01/2010 800,000 573,927.50 1,373,927.50 1.947,85500 10/01/2010 550.230.00 550.230.00 04/01/2011 850.000 550.230.00 1,400,230.00 1,950,460.00 10/01/2011 525.062.50 525,062.50 04/01/2012 900,000 525,062.50 1,425,062.50 1,950,125 00 10/01/2012 498.417.50 498,417.50 04/01/2013 955,000 498.417.50 1,453,417.50 1,951,835.00 10/01/2013 470.136.25 470,136.25 04/01/2014 1,010,000 470,136.25 1,480,136.25 1,950,272.50 10/01/2014 440.231 25 440,231.25 04/01/2015 1,070.000 440.231.25 1,510,231.25 1,950,462.50 10/01/2015 408,558.75 408,558.75 04/01/2016 1,135,000 408,558.75 1,543,558.75 1.952,117 50 10/01/2016 374,935.00 374,935.00 04/01/2017 1,205,000 374.935.00 1,579,935.00 1,954,870.00 10/01/2017 339.261.25 339,261.25 04/01/2018 1,275,000 339,261.25 1,614,261.25 1,953,522.50 10/01/2018 301,520.00 301,520.00 04/01/2019 1.350.000 301,520 00 1,651,520.00 1,953,040.00 10/01/2019 261.57250 261,572.50 04/01/2020 1,430,000 261,572.50 1,691,572.50 1,953.145 00 10/01/2020 219,270.00 219.270 00 04/01/2021 1,515,000 219,270.00 1,734,270.00 1,953,540.00 10/01/2021 174.441.25 174 441.25 04/01/2022 1.605,000 174,441.25 1,779 441.25 1.953.882.50 10(0112022 126.950.00 126,950.00 04/01/2023 1,700.000 126,950 00 1,826,950.00 1,953,900.00 10/01/2023 76,637.50 76,637.50 04/01/2024 1,800,000 76,637.50 1,876,637 50 1.953,275 00 10/01/2024 23,400.00 23.400.00 04/01/2025 800,000 5.850% 23,400.00 823,400 00 846.800.00 22,195,000 17,060,005.00 39,255,005.00 39,255,005.00 Jun 16, 2004 12.17 pm Prepared by Citigroup Global Markets Inc. Page 5 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 Date SAVINGS Palm Desert Financing Authority Refunding 1995 TABs-Project Area #1 Revised Final Pricing Numbers Prior Refunding Debt Service Debt Service Savings Present Value Annual to 06/24/2004 Savings @ 4.7960883% 10/01/2004 656,741.25 656,741.25 648.407.80 04/01/2005 656,741.25 1,370,560.45 (713,819.20) (57,077.95) (688,256.79) 10/01/2005 656,741.25 561,531.25 95.210.00 89,650.60 04/01/2006 1,296,741.25 1,416,531.25 (119,790.00) (24,580 00) (110,153 81) 10/01/2006 637,766.25 548,706.25 89,060 00 79.977 90 04/01/2007 1,312,766.25 1,488,706.25 (175,940 00) (86,880.00) (154,297.97) 10/01/2007 617,762.50 529,906.25 87,856.25 75,244.82 04/01/2008 1,337,762.50 1,379,906.25 (42,143.75) 45,712.50 (35,248.89) 10/01/2008 596,440.00 512,906.25 83,533.75 68,231.14 04/01/2009 1,356440.00 1,542,906.25 (186,46625) (102,932,50) (148,740.49) 10/01/2009 573,927.50 487,156.25 86.771 25 67,59478 04/01/2010 1,373,927.50 1,432,156.25 (58228.75) 28,542.50 (44,297 90) 10/01/2010 550,230.00 463,531.25 86,698 75 64,412 01 04/01/2011 1,400,230.00 1,593,531.25 (193.301 25) (106,60250) (140,248 10) 10/01/2011 525,062.50 438.106.25 86.956.25 61,612.88 04/01/2012 1,425,062.50 1,488,106.25 (63.043.75) 23.912.50 (43.623.55) 10/01/2012 498.417.50 414,481.25 83,936.25 56,720.09 04(01(2013 1,453,417.50 1,569,481.25 (116,063 75) (32.127.50) (76,593.57) 10/01/2013 470,13625 388,493.75 81,642.50 52,616.30 04/01/2014 1,480,136.25 1,591493.75 (118.357.50) (36,715.00) (74,491.75) 10/01/2014 440,231 25 364,293.75 75.937.50 46,674.21 04/0112015 1,510,231.25 1,599,293.75 (89.062.50) (13,125 00) (53,459.38) 10/01/2015 408,558.75 338,050.00 70.508 75 41,331.43 04/01/2016 1,543,558.75 1,618,050.00 (74,491.25) (3.982.50) (42.643.32) 10/01/2016 374,935.00 309,250.00 65,685.00 49 04/0112017 1,579,935.00 1,644,250.00 (64,315.00) 1,370.00 (336,7216.721 54) 10/01/2017 339.261.25 279,212.50 60,048.75 32.016.56 04/01/2018 1,614,261.25 1,739,212.50 (124.951.25) (64.902 50) (65,060 84) 10/01/2018 301,520.00 245,450.00 56.07000 28,511.36 04/01/2019 1,651,520.00 1,665,450.00 (13,930.00) 42,140.00 (6,917.46) 10/01/2019 261,572.50 209,950.00 51.622.50 25,034,74 04/01/2020 1,691,572.50 1,729,950.00 (38,377 50) 13,245 00 (18,175,61) 10/01/2020 219,27000 173.850.00 45,420.00 2,007.9 04/01/2021 1,734,270.00 1793,850.00 21,007.19 (59,580.00) (14,160.00) (2,910.9) 10/01/2021 174,441.25 135,375.00 39.066.25 17.232 14 04/01/2022 1279.441.25 1,830,375.00 (50,933.75) (11,867.50) (21,940 75) 10/01/2022 126.950.00 93,000.00 33,950.00 14,282 16 04/01/2023 1,821950.00 298.000.00 1.528.950.00 1.562.900 00 628.138 98 10/01/2023 76,637.50 87,87500 (11,237.50) (4,508.59) 04/01/2024 1,876,637.50 2342,875.00 (466.237.50) (477,475.00) (182.678.04) 10/01/2024 23.400.00 31,500.00 (8,10000) (3,099.36) 04/01/2025 823,40000 1,291,500.00 (468,100.00) (476,200 00) (174,917.98) 39,255,005.00 39,045,810.45 209,194.55 209,194.55 4,039.89 Savings Summary PV of savings from cash flow Plus: Refunding funds on hand Net PV Savings 4,039 89 792,605.75 796,645.64 Jun 16, 2004 12:17 pm Prepared by Citigroup Global Markets Inc. Page 6 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 BOND DEBT SERVICE Palm Desert Financing Authority Refunding 1995 TABs-Project Area #1 Revised Final Pricing Numbers Penod Annual Ending Principal Coupon Interest Debt Service Debt Service 06/24/2004 04/01/2005 495,000 3.000% 875,560.45 1,370,560.45 1,370,560.45 10/01/2005 561.531.25 561,531.25 04/0112006 855,000 3.000% 561,531.25 1,416,531.25 1,978,062.50 10/01/2006 548,706 25 548,706.25 04/01/2007 940.000 4 000% 548,706.25 1,488,706.25 2,037,412.50 10/01/2007 529,906.25 529,906.25 04/01/2008 850,000 4.000% 529.906.25 1,379,906.25 1,909,812.50 10/01/2008 512,906 25 512,906.25 04/01/2009 1,030.000 5.000% 512,90625 1,542,906.25 2,055,812.50 10/01/2009 487,156.25 487,156.25 04/01/2010 945500 5.000% 487.156.25 1,432,156.25 1,919,312.50 10/01/2010 463,531.25 463,531.25 04/01/2011 1,130,000 4.500% 463,531.25 1,593,531.25 2,057,062.50 10/01/2011 438.10625 438,106.25 04/01/2012 1,050.000 4 500% 438,106.25 1,488,106.25 1,926212.50 10/01/2012 414,481.25 414,481.25 04/01/2013 1,155,000 4.500% 414,481.25 1,569,481.25 1,983,962.50 10/01/2013 388,493 75 388,493.75 04/01/2014 1.210,000 4 000% 388,493.75 1,598,493.75 1,986,987.50 10/01/2014 364,293.75 364,293 75 04/01/2015 1.235,000 4.250% 364,293.75 1,599,293.75 1,963,587.50 10/01/2015 338,050.00 338,050.00 04101/2016 1.280,000 4.500% 338,050.00 1,618,05000 1,956,100.00 10/01/2016 309,250.00 309,250.00 04/01/2017 1.335,000 4 500% 309,250.00 1,644,250.00 1,953,500.00 10/01/2017 279,212.50 279,212.50 04/01/2018 1,460.000 4.625% 279,212.50 1,739,212.50 2018,425.00 10/01/2018 245,450 00 245,450.00 04/01/2019 1.420,000 5.000% 245,450.00 1,665,450.00 1,910,900 00 10/01/2019 209,950.00 209,950.00 04/01/2020 1,520.000 4.750% 209,950.00 1,729,950.00 1,939,900.00 10/01/2020 173,850.00 173,850.00 0410112021 1,620,000 4 750% 173,850.00 1,793,850.00 1,967,700 00 10/01/2021 135,375.00 135,375.00 04/01/2022 1,695,000 5.000% 135,375.00 1,830,375.00 1,965,750.00 10/01/2022 93,000.00 93.000.00 04/01/2023 205,000 5.000% 93,000.00 298,000.00 391,000.00 10/01/2023 87,875.00 87,875 00 04/01/2024 2255,000 5.000% 87,875.00 2.342.875.00 2,430,750.00 10/01/2024 31,500.00 31,500.00 04/01/2025 1,260,000 5.000% 31,500.00 1,291,500.00 1,323500.00 24,945,000 14,100,810.45 39.045,810 45 39,045,810 45 Jun 16, 2004 12'17 pm Prepared by Citigroup Global Markets Inc. Page 7 BOND PRICING 0 a Y Et E O o 928 ao 000000000000000000000 N) N n 0 0 0 0 0 0 O 0 0 0 O 0 0 0 N N N N N N M N N N N N N N N N N N N N N m m I D m 0 0 0 0 0 o 0 0 o O N 00000 ONO N r O V N V V m o N N m N tO m O m N V N m O)NoCO,I'-t'o)mo)m 00N or' ml-n m NNwN V mm V m0)0 '-Mt ON NNO N 0 0 0 v CO O O N (0N CO V O M m r- N M O w'rt7-IAn r)c' oo OV NIG(O IVOi t7MWINNVM'vv tNN� N- V N m U0 0 0 'c 0 a o O V = y o m m Om 0 SD e S 22 o OD omy >g V L Q G Q N rnaoZC U o (Om'-(NONN-ONOm 0'00rm N CUNVmOOVmVOVl'NNMomom Nmmm00-V OmOON-0OOVm CQa rMMN mo V Nm0)Om0)-oer OAO0 EH76 000000000p)O)OO)O)000)00)O)O) ✓ o C W O) {L 0 m J. o c✓) O eeeoe eeeee°oaeeeeee`e ' E5 m 000000000000000000000 d` y O N O O O N N m O O N O N N N v N O M m V O) OMN V <Om.-N tOo t0N N O)0)000 rNNNM t')MM V V V V V V V V ONNNN o co C a e00ee0 ee0 0 e0ee0 0 a 0 ee0 0000000000002.00000000 0 0 0 N O N O N N O O O O 000000 N0 10 0 0 N N m O n I0 0 0 0 0 M M V V N N V V V Q V Q C V N V V Y) N o N 000000000000000000000 0 000000000000000000000 0 O000000,00000000000000 0 NHOO6NOOIn0OONO0ooIs o)Ino N O)N NM V MN N.-MM ONN NO)ON(O V Vm0mOOrO.-NNNM V V NmcNNN 0) N o tO nm C)OvNM V 10 (Nm O) OvNM V N 00000 N N N N N N 000000000000000000000 N N N N N N N N N N N N N N N N N N N N N mo 2 O O O O O O O O O O O O O O O O O O O O O 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Bond Component Serial Bond: 100.228388% V V N o N N o N 000 ow m N co 000 NNN Om CON O N N O 0 0 O O O n) N V m 1 (0a0 > v mmo 000 N _ O NMN N 2c pm 00 m OC.,01 o 00 217, mOCE 0 0 N_ U d N C Ed 0om afUm0 02^)o to" a ED. C DU ad MD a4 25,001,971.35 Net Proceeds m a Jun 16, 2004 12-17 pm Prepared by Citigroup Global Markets Inc. 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 FORMULA VERIFICATION Palm Desert Financing Authority Refunding 1995 TABS -Project Area #1 Revised Final Pricing Numbers Component Formula Value INS 0.934% of total adjusted Debt Service 364,687.87 SURETY Maximum annual Debt Service' 3.25% 78.999.38 Jun 16, 2004 12:17 pm Prepared by Citigroup Global Markets Inc. Page 9 0 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 ESCROW REQUIREMENTS Palm Desert Financing Authority Refunding 1995 TABs-Project Area #1 Revised Final Pricing Numbers Penod Principal Redemption Ending Interest Redeemed Premium Total 10/01/2004 656.741.25 656,741.25 04/01/2005 656,741.25 22,195,000.00 443.900.00 23,295,641.25 1,313,482.50 22,195,000.00 443,90000 23,952,382.50 Jun 16, 2004 12.17 pm Prepared by Citigroup Global Markets Inc. Page 10 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 ESCROW DESCRIPTIONS Palm Desert Financing Authority Refunding 1995 TABS -Project Area #1 Revised Final Pricing Numbers Type of Matunty Par Interest Interest Interest Security Date Amount Rate Yield Price Class Frequency Day Basis Jun 24, 2004' TBill 09/30/2004 469,000 1.282% 99.657000 At Maturity Annual ACT/ACT TNote 03/31/2005 23,107,000 1.625% 1.861% 99820313 Periodic Semiannual ACT/ACT 23,576.000 Jun 16, 2004 12'17 pm Prepared by Ciligroup Global Markets Inc. Page 11 1 1 1 1 1 1 1 1 1 1 1 1 1 1 ESCROW STATISTICS Palm Desert Financing Authority Refunding 1995 TABs-Protect Area #1 Revised Final Pncing Numbers Modified Yield to Yield to Perfect Value of Total Duration Receipt Disbursement Escrow Negative Cost of Escrow Cost (years) Date Date Cost Arbitrage Dead Time 23,620,978.35 0749 1 852570% 1.852334% 23,109,823.86 511.036.69 117.80 23,620,978.35 23,109,823.86 511,036.69 117.80 Delivery date Arbitrage yield 06/24/2004 4.796088% Jun 16, 2004 12-17 pm Prepared by Cingroup Global Markets Inc. Page 12 r 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 ESCROW SUFFICIENCY Palm Desert Financing Authority Refunding 1995 TABs-Project Area #1 Revised Final Pricing Numbers Escrow Net Escrow Excess Excess Date Requirement Receipts Receipts Balance 06/24/2004 903.74 903 74 903.74 09/30/2004 656,744 38 656.744.38 657,648.12 10/01/2004 656,741.25 (656,741.25) 906.87 03/31/2005 23,294,744.38 23,294,744.38 23,295,651.25 04/01/2005 23,295,641.25 (23.295.641.25) 10.00 23,952,382.50 23,952,392.50 10.00 Jun 16, 2004 12:17 pm Prepared by Citigroup Global Markets Inc. Page 13 • 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 Type of Matunty Security Date ESCROW COST DETAIL Palm Desert Financing Authonty Refunding 1995 TABs-Protect Area #1 Revised Final Pricing Numbers Par Amount Rate Accrued Total Yield Price Cost Interest Cost TBill 09/30/2004 469.000 1 281897% 99.6570000 467,391.33 467,391.33 TNote 03/31/2005 23,107,000 1.625% 1.860571% 99.8203125 23,065,479.61 87,203.67 23,152,683.28 23.576.000 23,532,870.94 87,203.67 23,620.074 61 Purchase Cost of Cash Total Date Securities Deposit Escrow Cost Yield 06/24/2004 23,620,074.61 903.74 23,620,978.35 1.852570% 23,620,074.61 903.74 23.620.978.35 Jun 16, 2004 12:17 pm Prepared by Citigroup Global Markets Inc. Page 14 1 1 1 1 1 1 1 1 1 1 1 1 Date 09/30/2004 03/31/2005 ESCROW CASH FLOW Palm Desert Financing Authority Refunding 1995 TABs-Project Area #1 Revised Final Pricing Numbers Present Value Net Escrow to 06/24/2004 Principal Interest Receipts @ 1.8525701% 469,000.00 187,744.38 656,744.38 653,522.80 23,107,000.00 187,744 38 23,294,744.38 22.966.551.81 23,576,000,00 375.488.76 23,951,488.76 23,620,074.61 Escrow Cost Summary Purchase date 06/24/2004 Purchase cost of securities 23.620.074 61 Target for yield calculation 23,620,074.61 Jun 16, 2004 12:17 pm Prepared by Citigroup Global Markets Inc Page 15 1 1 1 r 1 1 1 1 1 1 1 1 AGGREGATE DEBT SERVICE Palm Desert Financing Authority Refunding 1995 TABs-Project Area #1 Revised Final Pricing Numbers Refunding 1995 Period TABs-Project Unrefunded Aggregate Ending Area #1 Bonds Debt Service 04/01/2005 1,370,560.45 268,260 1,638,820.45 04/01/2006 1,978,062.50 1,978,062.50 04/01/2007 2,037,412.50 2,037,412.50 04/01/2008 1, 909, 812.50 1,909,812.50 04/01/2009 2,055,812.50 2,055,812.50 04/01/2010 1,919,312.50 1,919,312.50 04/01/2011 2,057,062.50 2,057,062.50 04/01/2012 1,926,212.50 1,926212.50 04/01/2013 1. 983, 962.50 1. 983, 962.50 04/01/2014 1,986,987.50 1,986,987.50 04/01/2015 1,963,587.50 1,963,587.50 04/01/2016 1,956,100.00 1,956,100.00 04/01/2017 1, 953, 500.00 1, 953, 500.00 04/01/2018 2,018,425.00 2,018,425.00 04/01 / 2019 1. 910, 9 00.0 0 1, 910.9 00.00 04/01/2020 1,939,900.00 1,939,900.00 04/01/2021 1,967,700.00 1,967,700.00 04/01/2022 1,965,750.00 1,965,750.00 04/01/2023 391,000.00 391,000.00 04/01/2024 2,430,750.00 2,430,750.00 04/01/2025 1,323,000.00 1,323,000.00 39,045,810.45 268,260 39,314,070.45 Jun 16, 2004 12.17 pm Prepared by Citigroup Global Markets Inc. Page 16 1 1 1 1 1 1 1 1 1 Cost of Issuance COST OF ISSUANCE Palm Desert Financing Authority Refunding 1995 TABS -Project Area #1 Revised Final Pricing Numbers $11000 Amount Bond Counsel 2.00441 50,000.00 Financial Advisor 1.92423 48,000.00 S 8 P 0.46903 11,700.00 Fitch 0.14031 3,500.00 Trustee 0.20044 5.000.00 Printing(Misc 0.30066 7,500.00 Verification 0,16035 4,000.00 Fiscal Consultant 0.60132 15,000.00 5 80076 144,700.00 1 Jun 16, 2004 12:17 pm Prepared by Citigroup Global Markets Inc Page 17 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 PROOF OF ARBITRAGE YIELD Palm Desert Financing Authority Refunding 1995 TABs-Project Area #1 Revised Final Pricing Numbers Present Value to 06/24/2004 Date Debt Service @ 4.7960883% 04/01/2005 1,370,560 45 1,321,479.63 10/01/2005 561,531.25 528,742.90 04/01/2006 1, 416, 531.25 1.302, 582.12 10/01/2006 548,706.25 492,750.64 04/01/2007 1, 488, 706.25 1, 305, 583.47 10/01/2007 529.906.25 453,840.25 04/0112008 1,379,906.25 1,154,149.02 10/01/2008 512,906.25 418.946.57 04/01/2009 1,542,906.25 1,230,746.25 10/01/2009 487,156.25 379,494.60 04/01/2010 1,432,156.25 1.089, 522.15 10/01/2010 463,531.25 344,376.11 04/01/2011 1, 593, 531.25 1,156,173.26 10/01/2011 438,106.25 310,420 31 04/01/2012 1,488,106.25 1,029,705.32 10/01/2012 414,481.25 280,086.54 04/01/2013 1569,481.25 1, 035. 742.56 10/01/2013 388.493.75 250,373.33 04/01/2014 1,598,493.75 1,006,058.68 10/01/2014 364,293.75 223,909.45 04/01/2015 1,599,293.75 959,969.17 10/01/2015 338.050.00 198,161.06 04/01/2016 1,618,050.00 926,270.13 10/01/2016 309.250.00 172,887.57 04/01/2017 1,644,250.00 897.697.98 10/01/2017 279.212.50 148,869.45 04/01/2018 1,739,212.50 905,590.22 10/01/2018 245,450.00 124,810.31 04/01/2019 1,665,450.00 827,041.59 10/01/2019 209.950.00 101,816.92 04/01/2020 1,729,950.00 819.305.71 10/01/2020 173,850.00 80,407.30 04/01/2021 1,793,850.00 810.242.89 10/01/2021 135.375.00 50713.97 04/01/2022 1830.375.00 788,471.24 10/01/2022 93.000.00 39.12344 04/01/2023 298,000.00 122,427.43 10/01/2023 87,875.00 35,256.25 04/01/2024 2,342,875.00 917.969.51 10/01/2024 31,500.00 12,053.08 04101/2025 1,291,500.00 482.603 23 39,045,810.45 24,745,371.60 Proceeds Summary Delivery date 06/24/2004 Par Value 24,945,000.00 Premium (Discount) 244,058.85 Arbitrage expenses (443,687.25) Target for yield calculation 24,745,371.60 Jun 16, 2004 12:17 pm Prepared by Citigroup Global Markets Inc. Page 18 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 Underwriters Discount UNDERWRITER'$ DISCOUNT Palm Desert Financing Authority Refunding 1995 TABs-Project Area #1 Revised Final Pricing Numbers $/1000 Amount Average Takedown 5 09000 126,970.05 Management Fee 1.00220 25,000.00 Underwnters Counsel 1.00220 25,000.00 CDIAC 0.12026 3,000.00 CUSIP 002004 500.00 Day Loan 0.04000 997 80 PSA/Cal PSA 0.04000 997.80 Dalcomp 0.06250 1,559.06 Travel/Miscellaneous 0.12278 3,062.79 7.50000 187,087.50 Jun 16, 2004 12:17 pm Prepared by Citigroup Global Markets Inc. Page 19 1 1 1 1 1 1 1 1 1 1 1 1 Bond Component Serial Bond: FORM 8038 STATISTICS Palm Desert Financing Authority Refunding 1995 TABS -Project Area #1 Revised Final Pricing Numbers Dated Date Delivery Date 06/24/2004 06/24/2004 Redemption Date Pnncipal Coupon Price Issue Price at Maturity 04/01/2005 495,000.00 3.000% 101.218 501,029.10 495,000.00 04/01/2006 855,000.00 3.000% 101.640 869,022.00 855,000.00 04/01/2007 940,000.00 4.000% 103.986 977,46840 940,000.00 04/01/2008 850,000.00 4 000% 103.897 883,124.50 850,000.00 04/01/2009 1,030,000.00 5.000% 107.898 1,111,349 40 1,030,000.00 04/01/2010 945,000.00 5.000% 108.041 1,020,98745 945,000.00 04/01/2011 1,130,000.00 4.500% 105.052 1,187,087.60 1,130,000 00 04/01/2012 1050,000.00 4.500% 104.119 1,093,249.50 1,050,000.00 04/01/2013 1,155,000.00 4.500% 102.915 1,188,668.25 1,155,000.00 04/01/2014 1,210,000 00 4.000% 98 405 1,190,700.50 1,210,000.00 04/01/2015 1,235,000.00 4.250% 99.141 1,224,391.35 1,235,000.00 04/01/2016 1,280,000.00 4.500% 100.000 1,280,000 00 1,280,000.00 04/01/2017 1,335,000.00 4.500% 98 845 1,319,580.75 1,335,000.00 04/01/2018 1,460,000.00 4.625% 99.039 1,445,969.40 1,460,000.00 04/01/2019 1,420,000.00 5.000% 101.928 1,447,377.60 1,420,000.00 04/01/2020 1,520,00000 4.750% 98 250 1,493,400.00 1,520,000.00 04/01/2021 1,620,000.00 4.750% 97.731 1,583,242.20 1020,000.00 04/01/2022 1,695,000 00 5.000% 100 000 1,695,000.00 1,695,000.00 04/01/2023 205,000.00 5.000% 99.630 204,241.50 205,000.00 04/01/2024 2,255,000.00 5.000% 99001 2232,472.55 2255,000.00 04/01/2025 1,260,000.00 5.000% 98.468 1240,696.80 1260,000 00 24,945,000.00 25,189,058.85 24,945,000.00 Stated Weighted Net Matunty Interest Issue Redemption Average Interest Date Rate Price at Maturity Maturity Yield Cost Final Maturity 04/01/2025 5.000% 1,240,696.80 1,260,000.00 Entire Issue 25,189,058.85 24,945,000.00 11.8338 4 7961% 4 6487% Proceeds used for accrued interest Proceeds used for bond issuance costs (including underwriters' discount) Proceeds used for credit enhancement Proceeds allocated to reasonably required reserve or replacement fund Proceeds used to currently refund prior issues Proceeds used to advance refund prior issues Remaining weighted average maturity of the bonds to be currently refunded Remaining weighted average maturity of the bonds to be advance refunded 0 00 331,787 50 443,687.25 0.00 0.00 23,620,978.35 0.0000 12.7638 Jun 16, 2004 12:17 pm Prepared by Citigroup Global Markets Inc Page 20 1 1 1 1 1 1 1 1 1 1 1 1 'I FORM 8038 STATISTICS Palm Desert Financing Authority Refunding 1995 TABs-Protect Area #1 Revised Final Pricing Numbers Bond Component Date Series 1995 Tax Allocation Revenue TERM24 04/01/2006 TERM24 04/01/2007 TERM24 04/01/2008 TERM24 04/01/2009 TERM24 04(0112010 TERM24 04/01/2011 TERM24 04/01/2012 TERM24 04/01/2013 TERM24 04/01/2014 TERM24 04/01/2015 TERM24 04/01/2016 TERM24 04/01/2017 TERM24 04/01/201B TERM24 04/01/2019 TERM24 04/01/2020 TERM24 04/01/2021 TERM24 04/012022 TERM24 04/01/2023 TERM24 04/01/2024 TERM25 04/01/2006 TERM25 04/012007 TERM25 04/01/2008 TERM25 04/01/2009 TERM25 04/01/2010 TERM25 04/0112011 TERM25 04/01/2012 TERM25 04/01/2013 TERM25 04/01/2014 TERM25 04/012015 TERM25 04/01/2016 TERM25 04/01/2017 TERM25 04/01/2018 TERM25 04101/2019 TERM25 04/01/2020 TERM25 04/01/2021 TERM25 04/012022 TERM25 04/01/2023 TERM25 04/01/2024 TERM25 04/01/2025 Refunded Bonds Principal Coupon Price Issue Price Bonds - #1: 510.000.00 520.000.00 525.000.00 565,000.00 595,000.00 610,000.00 640,000.00 695,000.00 725,000.00 750,000.00 850,000.00 855,000.00 895.000.00 920,000 00 950,000.00 1,030,000.00 1.090,000.00 1,175,000.00 1,175.000.00 130,000.00 155,000.00 195,000.00 195,000,00 205,000.00 240,000.00 260,000.00 260,000.00 285,000.00 320,000.00 285,000.00 350,000.00 380,000.00 430,000.00 480,000.00 485,000.00 515,000.00 525,000,00 625,000.00 800.000.00 22,195,000.00 5.950% 100.000 510,000.00 5.950% 100.000 520,000.00 5.950% 100.000 525,000.00 5.950% 100.000 565,000.00 5.950% 100.000 595.000.00 5.950% 100.000 610,000.00 5.950% 100 000 640,000.00 5.950% 100.000 695,000.00 5.950% 100 000 725,000.00 5.950% 100.000 750,00000 5.950% 100.000 850,00000 5.950% 100.000 855,000.00 5.950% 100.000 895,000.00 5.950% 100.000 920,000.00 5 950% 100 000 950,000.00 5.950% 100.000 1,030,000.00 5.950% 100.000 1,090,000.00 5.950% 100.000 1,175,000.00 5,950% 100.000 1,175,000.00 5.850% 100.000 130,000.00 5.850% 100.000 155,000.00 5.850% 100.000 195,000.0D 5.850% 100.000 195.000.00 5.850% 100.000 205,000.00 5.850% 100.000 240,000.00 5.850% 100.000 260,000.00 5.850% 100.000 260,000.00 5.850% 100.000 285600.00 5.850% 100 000 320,000.00 5.850% 100.000 285,000.00 5.850% 100.000 350,000 00 5.850% 100.000 380,000.00 5.850% 100.000 430,000,00 5.850% 100.000 480,000.00 5.850% 100.000 485,00000 5.850% 100.000 515,000 00 5.850% 100.000 525,000.00 5.850% 100.000 625,000.00 5.850% 100.000 800,000.00 22.195,000.00 Series 1995 Tax Allocation Revenue Bonds - #1 All Refunded Issues Last Call Date 04/01/2005 04/012005 Remaining Weighted Issue Average Date Maturity O6/14/1995 12.7638 12.7638 Jun 16. 2004 12:17 pm Prepared by Citigroup Global Markets Inc. Page 21 1 1 1 1 1 1 1 11 1 1 1 1 1 1 1 1 .1 1 1 BOND DEBT SERVICE Palm Desert Financing Authority Refunding 1995 TABs-Project Area #1 Revised Finat Pricing Numbers Period Ending Principal Coupon Interest Debt Service 04/01/2005 495.000 3.000% 875,560.45 1,370,560.45 04/01/2006 855.000 3.000% 1.123.062.50 1,978,062.50 04/01/2007 940,000 4.000% 1,097,412.50 2,037,412.50 04/01/2008 850,000 4.000% 1,059,812.50 1,909,812.50 04/01/2009 1,030,000 5.000% 1,025,812.50 2,055,812.50 04/01/2010 945,000 5.000% 974,312.50 1,919,312.50 04/01/2011 1,130,000 4.500% 927,062.50 2,057,062.50 04/01/2012 1,050,000 4.500% 876,212.50 1,926,212.50 04/01/2013 1,155,000 4.500% 828,962.50 1,983,962.50 04/01/2014 1,210,000 4.000% 776,987.50 1.986.987.50 04/01/2015 1.235,000 4.250% 728.587.50 1,963,587.50 04/01/2016 1.280,000 4.500% 676,100.00 1,956,100.00 04/01/2017 1,335.000 4.500% 618,500.00 1,953,500.00 04/01/2018 1.460,000 4.625% 558,425.00 2018,425.00 04/01/2019 1,420,000 5.000% 490.900.00 1,910,900.00 04/01/2020 1.520,000 4.750% 419.900.00 1,939,900.00 04/01/2021 1,620.000 4.750% 347,700.00 1,967,700.00 04/01/2022 1,695,000 5.000% 270,750.00 1,965,750.00 04/01/2023 205,000 5.000% 186,000.00 391,000.00 04/01/2024 2255.000 5.000% 175,750.00 2,430,750.00 04/01/2025 1,260,000 5.000% 63,000.00 1,323,000.00 24,945,000 14,100,810.45 39,045,810.45 Jun 16, 2004 12:17 pm Prepared by Citigroup Global Markets Inc. Page 22 1 1 1 i 1 1 1 1 1 1 1 1 1 1 1 1 1 1 FORMULA VERIFICATION Palm Desert Financing Authority Refunding 1995 TABs-Project Area #1 Revised Final Pricing Numbers Component Formula Value INS 0.934% of total adjusted Debt Service 364,687.87 SURETY Maximum annual Debt Service' 3.25% 78,999.38 Jun 16, 2004 12:17 pm Prepared by Citigroup Global Markets Inc. Page 23 7 1 1 1 1 1 1 1 1 I 1 1 I 1 I 1 I 1 I 1 Tab 7 Distribution Analysis citigroupi 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 Analysis of Distribution 2,500,000 2,000,000 1,500,000 1,000,000 500,000 Member Orders 23% Retail 7 56% 7 Type of Allotments By Maturity on Pricing Date ■ Retail/Bank Trust 0 Institutional 0 Citigroup Inventory Orders Orders vs. Allotments Institutional 21% Allotments Citigroup Inventory Institutional 32% 17% aisMA/ Retail 51% citigrou15, 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 Analysis a DistAbuiSn ]Institutional Allotments By on Pricing Date* Broidy Capital Management Franklin Fund Allstate Insurance Company TOTAL: *Confidential 1,500 1,420 1,345 $4,265 catBgroe Tab 8 Closing Wire Instructions citigroupi CITIGROUP GLOBAL MARKETS INC. TO: Carlos Ortega, City of Palm Desert Paul Gibson, City of Palm Desert Luis Espinoza, City of Palm Desert Justin McCarthy, City of Palm Desert David Yrigoyen, City of' Palm Desert Dennis Coleman, City of Palm Desert William L. Strausz, Richards, Watson & Gershon Trisha Ortiz, Richards, Watson & Gershon Ken Dieker, MuniSoft Kassandra Booth, MuniSoft Dave Fama, Jones Hall Gonzalo Urey, BNY Western Trust Company Terence Gallagher, Ambac Assurance Corporation Mary Jo Murphy, Citigroup FROM: Citigroup Global Markets Inc. DATE: June 21, 2004 RE: $24,945,000 Palm Desert Financing Authority Tax Allocation Refunding Revenue Bonds (Project Area No. 1, As Amended) 2004 Series A 444 South Flower Street, 27th Floor, Los Angeles, CA 90071 Email: Email: Email: Email: Email: Email: Email: Email: Email: Email: Email: Email: Email: Email: cortega@ci.palm-desert.ca.us pgibson@ci.palm-desert.ca.us lespinoza@ci.palm-desert.ca.us jmcarthy@ci.palm-desert.ca.us dyrigoyen@ci.palm-desert.ca.us dcoleman@ci.palm-desert.ca.us wstrausz@rwglaw.com tortiz@rwglaw.com kdieker@munisoft.com kbooth@munisoft.com dfama@joncshall.com gurey@bankofny.com tegallagher@ambac.com mary.jo.murphy@citigroup.com This memorandum describes the flow of funds that is to occur for the closing of the Palm Desert Financing Authority Tax Allocation Refunding Revenue Bonds (Project Area No.1, As Amended) 2004 Series A. The flow of funds for the Bonds is to occur on the morning of Thursday, June 24, 2004. Unless otherwise noted, all funds will be delivered in same day funds (Federal Funds). Closing must be completed no later than 12:00 noon EST. Pre -closing and closing will take place (attendance not required) at the offices of: Richards, Watson & Gershon 355 South Grand Avenue, 40ih Floor Los Angeles, CA 90071-3101 Pre -closing: Wednesday, June 23,2004 2:00 p.m. PST Closing: Thursday, June 24, 2004 8:00am (PST) via teleconference Dial: (888) 764-8294 Leader: Joe Crowley Passcode: 59516# Citigroup will provide Fed Reference number to BNY Western Trust Company. BNY Western Trust Company will confirm receipt of funds and will contact Citigroup and Richards. Watson & Gershon to coordinate the release of the Bonds through DTC. Palm Desert Financing Authority Tax Allocation Refunding Revenue Bonds (Project Area No.1, As Amended) 2004 Series A Closing Memorandum I. The amount due at closing (Settlement Amount) is calculated as follows: Par Amount Net Premium Underwriter's Discount Purchase Price Less Bond Insurance & Surety Premium Net Bond Proceeds $24,945,000.00 244,058.85 (187,087.50) $25,001,971.35 (443,687.25) $24,558,284.10 Page 2 June 21, 2004 II. At the opening of business on June 24, 2004, Citigroup will wire $443,687.25 to Ambac Assurance Corporation (representing the insurance premium payment of $364,687.87 and the surety bond premium of $78,999.38) as follows: Amount: $443,687.25 Bank: Citibank N.A. ABA No. 021-0000-89 For: Ambac Assurance Corporation Account No. 40609486 Attention: Terence Gallagher (212) 208-3139 Policy #s: 22635BE & SB 1860BE 1[l. Citigroup will then deliver $24,558,284.10 representing the net bond proceeds for the 2004 Series A Bonds to BNY Western Trust Company, the trustee for the 2004 Series A Bonds. The Trustee is not to apply such funds without an affirmative action on the part of Citigroup which will take place once all legal documents are in order and the transaction is closed. The wiring instructions are as follows: Amount: $24,558,284.10 Bank: The Bank of New York ABA #: 021000018 A/C I11-565 Ref: #876520, Palm Desert TARB #1 Revenue Series 04 Attention: Gonzalo Urey, (213) 630-6237 IV. Upon receiving an affirmative action from Citigroup, BNY Western Trust Company, as trustee, will apply the 2004 Series A Bonds as follows: Sources of Funds Net Proceeds: Total Funds Available: Application of Funds Transfer to the Escrow Fund: Transfer to the Project Fund: Transfer to the Costs of Issuance Fund: Total Application of Funds $24,558,284.10 $24,558,284.10 $ 23,620,978.35 792,605.75 144,700.00 $24,558,284.10 Palm Desert Financing Authority Tax Allocation Refunding Revenue Bonds (Project Area No.1, As Amended) 2004 Series A Closing Memorandum V. TRANSFER OF 2004 Series A BONDS Page 3 June 21, 2004 The Bonds are to be held in registered form in the name of Cede & Co. as bondholder and nominee of the Depository Trust Company (DTC), New York, New York. They are dated June 24, 2004. Bond Counsel will deliver the Bonds to the Bond Trustee, on behalf of DTC, on June 23, 2004 for closing on June 24, 2004. Specific information for the Bonds is as follows: Maturity Principal Coupon CUSIP 4/ 1 /2005 495,000 3.000% 696617M K2 4/1/2006 855,000 3.000% 696617ML0 4/1/2007 940,000 4.000% 696617MM8 4/1/2008 850,000 4.000% 696617MN6 4/1/2009 1,030,000 5.000% 696617MPI 4/1/2010 945,000 5.000% 696617MQ9 4/1/2011 1,130,000 4.500% 6966I7MR7 4/1/2012 1,050,000 4.500% 696617MS5 4/1/2013 1,155,000 4.500% 696617MT3 4/1/2014 1,210,000 4.000% 696617MUO 4/1/2015 1,235,000 4.250% 696617MV8 4/1/2016 1,280,000 4.500% 696617MW6 4/1/2017 1,335,000 4.500% 696617MX4 4/1/2018 1,460,000 4.625% 6966I7MY2 4/ 1 /2019 1,420,000 5.000% 696617MZ9 4/1/2020 1,520,000 4.750% 696617NA3 4/ 1 /2021 1,620,000 4.750% 6966I 7NB I 4/ 1 /2022 1,695,000 5.000% 696617NC9 4/1/2023 205,000 5.000% 696617ND7 4/1/2024 2,255,000 5.000% 696617NE5 4/ 1 /2025 1,260,000 5.000% 696617NF2 Upon closing, Bond Counsel, Trustee and the Citigroup Banking Team will contact Mary Jo Murphy of Citigroup Operations who will notify DTC of the closing. If there are any questions and/or comments to these instructions, please contact us. Joe Crowley, Citigroup Nikolai Sklaroff, Citigroup Carmen Vargas, Citigroup (213) 486-8925 (415)955-1619 (213) 486-8995 ioseoh.i.crowlev@citigrouo.com nikolai.i.sklaroff@citi erouo.com carmen. vareas @ c it i eroun.com 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 Any terms set forth herein are intended for discussion purposes only and are subject to the final terms as set forth in separate definitive written agreements. Prior to entering into any transaction contemplated hereby (a "Transaction') you should determine, without reliance upon us or our affiliates, the economic risks and merits (and independently determine that you are able to assume these nsks), as well as the legal. tax and accounting characterizations and consequences of any such Transaction. In this regard. by accepting this presentation, you acknowledge that (a) we are not in the business of providing (and you are not relying on us for) legal. tax or accounting advice. (b) there may be legal, tax or accounting risks associated with any Transaction, (c) you should receive (and rely on) separate and qualified legal, tax and accounting advice and (d) you should apprise senior management in your organization as to such legal, tax and accounting advice (and any nsks associated with any Transaction) and our disclaimer as to these matters. We are required to obtain, verify and record certain information that identifies each entity that enters into a formal business relationship with us. We will ask for your complete name. street address, and taxpayer ID number. We may also request corporate formation documents. or other forms of identification, to verify information provided. Any prices or levels contained herein are preliminary and indicanve only and do not represent bids or offers. These indications are provided solely for your information and consideration, are subject to change at any time without notice and are not intended as a solicitation with respect to the purchase or sale of any instrument. The information contained in this presentation may include results of analyses from a quantitative model which represent potential future events that may or may not be realized. and is not a complete analysis of every matenal fact representing any product. Any estimates included herein constitute our judgment as of the date hereof and are subject to change without any notice. We and/or our affiliates may make a market in these instruments for our customers and for our own account. Accordingly, we may have a position in any such instrument at any time. We maintain a policy of strict compliance to the anti -tying provisions of the Bank Holding Company Act of 1956. as amended. and the regulations issued by the Federal Reserve Board implementing the anti -tying rules (collectively, the "Anti -tying Rules"). Moreover our credit policies provide that credit must be underwritten in a safe and sound manner and be consistent with Section 23B of the Federal Reserve Act and the requirements of federal law. Consistent with these requirements and our Anti -tying Policy: You will not be required to accept any product or service offered by Citibank or any Citigroup affiliate as a condition to the extension of commercial loans or other products or services to you by Citibank or any of its subsidiaries. unless such a condition is permitted under an exception to the Anti -tying Rules. We will not vary the price or other terms of any Citibank product or service based on the condition that you purchase any particular product or service from Citibank or any Citigroup affiliate, unless we are authonzed to do so under an exception to the Anti -tying Rules. We will not require you to provide property or services to Citibank or any affiliate of Citibank as a condition to the extension of a commercial loan to you by Citibank or any Citibank subsidiary, unless such a requirement is reasonably required to protect the safety and soundness of the loan. We will not require you to refrain from doing business with a competitor of Citigroup or any of its affiliates as a condition to receiving a commercial loan from Citibank or any of its subsidiaries, unless the requirement is reasonably designed to ensure the soundness of the loan. Although this material may contain publicly available information about Smith Barney equity research or Citigroup corporate bond research, Citigroup policies prohibit analysts from participating in any efforts to solicit investment banking business: accordingly, research analysts may not have any communications with companies for the purpose of soliciting investment banking business. Moreover, Citigroup policy (i) prohibits research analysts from participating in road show meetings; (ii) prohibits investment banking personnel from having any input into company -specific research coverage decisions and from directing research analysts to engage in marketing or selling efforts to investors with respect to an investment banking transaction: (iii) prohibits employees from offering, directly or indirectly, a favorable or negative research opinion or offering to change an opinion as consideration or inducement for the receipt of business or for compensation; and (iv) prohibits analysts from being compensated for specific recommendations or views contained in research reports. So as to reduce the potential for conflicts of interest, as well as to reduce any appearance of conflicts of interest, Citigroup has enacted policies and procedures designed to limit communications between its investment banking and research personnel to specifically prescnbed circumstances. 0004 Citigroup Global Markets Inc. Member SIPC. CITIGROUP and Umbrella Device are trademarks and service marks of Citicorp or its affiliates and are used and registered throughout the world.