NEW ISSUE - FULL BOOK-ENTRY RATING: Standard & Poor's: "AA" See "RATING" herein.

In the opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, subject, however to cerlain qualifications described herein, under existing law, the interest on the 2017B Bonds is excluded from gross income for federal income tax purposes, and such interest is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, provided, however, that, for the purpose of computing the alternative minimum tax imposed on certain corporations, such interest is taken into account in determining certain income and earnings. In the furlher opinion of Bond Counsel, interest on the 20178 Bonds is exempt from California personal income taxes. See "TAX MATTERS."

$19,725,000 FREMONT PUBLIC FINANCING AUTHORITY Lease Revenue Bonds, Series 2017B (2017 Fixed Rate Refinancing Project)

Dated: Date of Delivery Due: October 1, as shown on inside cover

Authority for Issuance. The bonds captioned above (the "2017B Bonds") are being issued by the Fremont Public Financing Authority (the "Authority") under a resolution adopted by the Board of Directors of the Authority on July 11, 2017, and an Indenture ofTrust dated as of August 1, 2017 (the "Indenture") by and between the Authority and The Bank of New York Mellon Trust Company, NA as trustee (the "Trustee"). See "THE 2017B BONDS -Authority for Issuance." Purpose. The 2017B Bonds are being issued primarily to refinance on a current basis the outstanding certificates of participation of the City of Fremont (the "City") captioned "$27,675,000 City of Fremont Certificates of Participation (2008 Refinancing Project)" and the City's related lease payment obligation. In addition, the proceeds of the 2017B Bonds will be used to pay the costs of issuing the 2017B Bonds. See "FINANCING PLAN." Security. Under the Indenture, the 2017B Bonds are payable from and secured by a first pledge of and lien on "Revenues" (as defined in this Official Statement) received by the Authority under the Lease Agreement, dated as of August 1, 2017, by and between the Authority, as lessor, and the City, as lessee (the "Lease"), consisting primarily of lease payments (the "Lease Payments") made by the City under the Lease with respect to the lease of certain real property, as further described in this Official Statement. The 2017B Bonds are also secured by certain funds on deposit under the Indenture. Neither the Authority nor the City is establishing a reserve fund for the 2017B Bonds. See "SECURITY FOR THE 2017B BONDS." Book-Entry Only. The 2017B Bonds will be issued in book-entry form only, and will be initially issued and registered in the name of Cede & Co. as nominee ofThe Depository Trust Company, New York, New York ("DTC"). The 2017B Bonds are issuable as fully registered securities in denominations of $5,000 or any integral multiple of $5,000. Purchasers of the 2017B Bonds (the "Beneficial Owners") will not receive physical certificates representing their interest in the 2017B Bonds. See "THE 2017B BONDS" and "APPENDIX F - DTC AND THE BOOK-ENTRY ONLY SYSTEM" Payments. Interest on the 2017B Bonds accrues from the date of delivery and is payable semiannually on April 1 and October 1 of each year, commencing October 1, 2017. Payments of principal and interest on the 2017B Bonds will be paid by the Trustee to DTC for subsequent disbursement to OTC Participants, which will remit such payments to the Beneficial Owners of the 2017B Bonds. See "THE 2017B BONDS - General Provisions." Redemption. The 2017B Bonds are subject to optional redemption and special mandatory redemption from insurance or condemnation proceeds prior to maturity. See "THE 2017B BONDS - Redemption." NEITHER THE 2017B BONDS, NOR THE OBLIGATION OFTHEAUTHORITYTO PAY PRINCIPAL OF OR INTEREST THEREON, NOR THE OBLIGATION OF THE CITY TO MAKE THE LEASE PAYMENTS, CONSTITUTE A DEBT OR A LIABILITY OF THE AUTHORITY, THE CITY, THE STATE OF CALIFORNIA OR ANY OF ITS POLITICAL SUBDIVISIONS \MTHIN THE MEANING OF ANY CONSTITUTIONAL LIMITATION ON INDEBTEDNESS, OR A PLEDGE OF THE FULL FAITH AND CREDIT OF THE CITY THE 2017B August BONDS ARE SECURED SOLELY BY THE PLEDGE OF REVENUES AND CERTAIN FUNDS HELD UNDER THE INDENTURE. THE 2017B BONDS ARE NOT SECURED BY A PLEDGE OF THE TAXING POWER OF THE CITY

MATURITY SCHEDULE (see inside cover)

Cover Page. This cover page contains certain information for general reference only. It is not a summary of all the provisions of the 2017B Bonds. Prospective investors must read the entire Official Statement to obtain information essential to making an informed investment decision. The 20178 Bonds were sold and awarded pursuant to a competitive bidding process held on August 8, 2017, as set forth in the Official Notice of Sale. The 2017B Bonds are offered when, as and if issued and received by the Purchaser, and subject to the approval as to their legality by Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel. Cerlain legal matters will also be passed upon for the Authority and the City by Jones Hall, A Professional Law Corporation, as Disclosure Counsel. Certain legal matters will be passed upon for the City by the City Attorney It is anticipated that the 20178 Bonds will be delivered in book-entry form through the facilities of OTC on or about August 22, 2017.

The date of this Official Statement is: August 8, 2017 FREMONT PUBLIC FINANCING AUTHORITY Lease Revenue Bonds, Series 2017B (2017 Fixed Rate Refinancing Project)

MATURITY SCHEDULE (Base CUSIP:t 357144)

$19,725,000 Serial Bonds

Maturity Date Principal lnteres (October 1) Amount Rate Yield Price CUSIPt

2018 $565,000 5.000% 0.820% 104.601% AA2 2019 595,000 5.000 0.920 108.498 ABO 2020 625,000 5.000 1 020 112.145 ACS 2021 660,000 5.000 1.120 115.535 AD6 2022 695,000 5.000 1.250 118.500 AE4 2023 730,000 5.000 1.420 120.873 AF1 2024 765,000 5.000 1.600 122.757 AG9 2025 805,000 5.000 1.780 124.210 AH? 2026 845,000 5.000 1.950 125.338 AJ3 2027 890,000 5.000 2.100 126.285 AKO 2028 935,000 5.000 2.220 125 045C AL8 2029 985,000 5.000 2.340 123.818C AM6 2030 1,035,000 5.000 2.420 123 009C AN4 2031 1,075,000 3.000 2.950 100.432C AP9 2032 1,110,000 3.000 3050 99.396 AQ7 2033 1,145,000 3.000 3.170 97.866 AR5 2034 1,175,000 3.000 3.190 97.507 AS3 2035 1,215,000 3.000 3.230 96.863 AT1 2036 1,250,000 3.125 3.270 97.949 AUS 2037 1,290,000 3.125 3.300 97.440 AV6 2038 1,335,000 3.250 3.330 98.791 AW4

C Priced to first optional par call on October 1, 2027. t CUSIP Copyright 2017, CUSIP Global Services, and a registered trademark of American Bankers Association. CUSIP data herein is provided by CUSIP Global Services, which is managed on behalf of American Bankers Association by S&P Capital IQ. Neither the City nor the Purchaser takes any responsibility for the accuracy of the CUSIP data. FREMONT PUBLIC FINANCING AUTHORITY CITY OF FREMONT (ALAMEDA COUNTY, CALIFORNIA)

BOARD OF DIRECTORS OF THE AUTHORITY AND MEMBERS OF THE CITY COUNCIL

Lily Mei, Chair and Mayor Rick Jones, Vice Chair and Vice Mayor Vinnie Bacon, Member and Council Member Raj Salwan, Member and Council Member David Bonaccorsi, Member and Council Member

CITY OFFICIALS AND STAFF

Fred Diaz, City Manager David Persselin, Finance Director Susan Gauthier, City Clerk

PROFESSIONAL SERVICES

BOND AND DISCLOSURE COUNSEL

Jones Hall, A Professional Law Corporation San Francisco, California

MUNICIPAL ADVISOR

Public Resources Advisory Group Oakland, California

Trustee

The Bank of New York Mellon Trust Company, N.A. Los Angeles, California GENERAL INFORMATION ABOUT THIS OFFICIAL STATEMENT

Use of Official Statement. This Official Statement is submitted in connection with the sale of the 2017B Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other purpose. This Official Statement is not a contract between any bond owner and the Authority or the Purchaser. No Offering Except by This Official Statement. No dealer, broker, salesperson or other person has been authorized by the Authority or the Purchaser to give any information or to make any representations other than those contained in this Official Statement and, if given or made, such other information or representation must not be relied upon as having been authorized by the Authority or the Purchaser. No Unlawful Offers or Solicitations. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor may there be any sale of the 2017B Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale. Information in Official Statement. The information set forth in this Official Statement has been furnished by the Authority and other sources which are believed to be reliable, but it is not guaranteed as to accuracy or completeness. Estimates and Forecasts. When used in this Official Statement and in any continuing disclosure by the Authority in any press release and in any oral statement made with the approval of an authorized officer of the City or the Authority or any other entity described or referenced herein, the words or phrases "will likely result," "are expected to", "will continue", "is anticipated", "estimate", "project", "forecast", "expect", "intend" and similar expressions identify "forward looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in such forward-looking statements. Any forecast is subject to such uncertainties. Inevitably, some assumptions used to develop the forecasts will not be realized and unanticipated events and circumstances may occur. Therefore, there are likely to be differences between forecasts and actual results, and those differences may be material. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, give rise to any implication that there has been no change in the affairs of the City, Authority or any other entity described or referenced herein since the date hereof. Involvement of Purchaser. The following statement has been included in this Official Statement on behalf of the Purchaser of the 201 ?B Bonds: The Purchaser has reviewed the information in this Official Statement in accordance with, and as a part of, its responsibilities to investors under the Federal Securities Laws as applied to the facts and circumstances of this transaction, but the Purchaser does not guarantee the accuracy or completeness of such information. Stabilization of and Changes to Offering Prices. The Purchaser may overallot or take other steps that stabilize or maintain the market prices of the 201 ?B Bonds at levels above that which might otherwise prevail in the open market. If commenced, the Purchaser may discontinue such market stabilization at any time. The Purchaser may offer and sell the 2017B Bonds to certain securities dealers, dealer banks and banks acting as agent at prices lower than the public offering prices stated on the inside cover page of this Official Statement, and those public offering prices may be changed from time to time by the Purchaser. Document Summaries. All summaries of the Indenture or other documents referred to in this Official Statement are made subject to the provisions of such documents and qualified in their entirety to reference to such documents, and do not purport to be complete statements of any or all of such provisions. No Securities Laws Registration. The 2017B Bonds have not been registered under the Securities Act of 1933, as amended, in reliance upon exceptions therein for the issuance and sale of municipal securities. The 201 ?B Bonds have not been registered or qualified under the securities laws of any state. Effective Date. This Official Statement speaks only as of its date, and the information and expressions of opinion contained in this Official Statement are subject to change without notice. Neither the delivery of this Official Statement nor any sale of the 2017B Bonds will, under any circumstances, give rise to any implication that there has been no change in the affairs of the City, the Authority, the other parties described in this Official Statement, or the condition of the property within the City since the date of this Official Statement. Website. The City maintains a website. However, the information presented on the website is not a part of this Official Statement and should not be relied upon in making an investment decision with respect to the 2017B Bonds. TABLE OF CONTENTS

INTRODUCTION ...... 1 Employee Relations ...... 35 FINANCING PLAN ...... 4 Risk Management...... 35 Refunding Plan for 2008 Certificates ...... 4 Employee Retirement System ...... 36 Estimated Sources and Uses of Funds .... 5 Other Post-Employment Benefits THE LEASED PROPERTY ...... 6 ("OPEB") ...... 39 Description and Location ...... 6 Investment Policies and Procedures ...... 41 Modification of Leased Property ...... 7 CONSTITUTIONAL AND STATUTORY Substitution ...... 7 LIMITATIONS ON TAXES AND Release of Leased Property ...... 8 APPROPRIATIONS ...... 43 THE 2017B Bonds ...... 10 Article XIIIA of the State Constitution ..... 43 Authority for Issuance ...... 10 Legislation Implementing Article XIIIA .... 43 General Provisions ...... 10 Article XIIIB of the State Constitution ..... 44 Redemption ...... 11 Articles XIIIC and XIIID of the State Book-Entry Only System ...... 12 Constitution ...... 44 Transfer, Registration and Exchange ..... 12 Proposition 1A; Proposition 22 ...... 46 DEBT SERVICE SCHEDULE ...... 14 Possible Future Initiatives ...... 46 SECURITY FOR THE 2017B Bonds ...... 15 BOND OWNERS' RISKS ...... 47 Revenues; Pledge of Revenues ...... 15 No Pledge of Taxes ...... 47 Allocation of Revenues by Trustee; Limitations on Taxes and Fees ...... 47 Application of Funds ...... 16 Additional Obligations of the City ...... 47 Lease Payments; Covenant to Default ...... 48 Appropriate ...... 16 Abatement ...... 48 Limited Obligation ...... 17 No Debt Service Reserve Fund ...... 49 Abatement ...... 17 Property Taxes ...... 49 No Reserve Fund ...... 18 Limitations on Remedies Available to Bond Property Insurance ...... 18 Owners ...... 50 CITY FINANCIAL INFORMATION ...... 20 Loss of Tax-Exemption ...... 50 General ...... 20 Secondary Market for Bonds ...... 51 City Services and Government...... 20 TAX MATTERS ...... 52 Budget Process ...... 20 CERTAIN LEGAL MATTERS ...... 53 General Fund Budgets ...... 21 LITIGATION ...... 53 Adopted Budget for Fiscal Year 2017-1823 RATING ...... 53 State Budget and Its Impact on the City. 23 CONTINUING DISCLOSURE ...... 54 Financial Statements ...... 24 MUNICIPAL ADVISOR ...... 54 Major Revenues ...... 27 COMPETITIVE SALE OF 2017B BONDS .. 55 Property Taxes ...... 27 PROFESSIONAL SERVICES ...... 55 Sales and Use Taxes ...... 31 EXECUTION ...... 55 Other Taxes and Revenues ...... 33 Long-Term Obligations ...... 35

APPENDIXA­ GENERAL INFORMATION ABOUT THE CITY OF FREMONT AND ALAMEDA COUNTY APPENDIX B - SUMMARY OF PRINCIPAL LEGAL DOCUMENTS APPENDIXC - FISCAL YEAR 2015-16 COMPREHENSIVE ANNUAL FINANCIAL REPORT APPENDIX D - PROPOSED FORM OF OPINION OF BOND COUNSEL APPENDIX E - FORM OF CONTINUING DISCLOSURE CERTIFICATE APPENDIX F - OTC AND THE BOOK-ENTRY ONLY SYSTEM

-i- (THIS PAGE INTENTIONALLY LEFT BLANK) OFFICIAL STATEMENT

$19,725,000 FREMONT PUBLIC FINANCING AUTHORITY Lease Revenue Bonds, Series 20178 (2017 Fixed Rate Refinancing Project)

The purpose of this Official Statement, which includes the cover page, inside cover page and attached appendices, is to set forth certain information concerning the sale and delivery of the bonds captioned above (the "20178 Bonds") by the Fremont Public Financing Authority (the "Authority"). All capitalized terms used in this Official Statement, unless noted otherwise, have the meanings set forth in the Indenture (as defined below).

INTRODUCTION

This introduction is not a summary of this Official Statement. It is only a brief description of and guide to, and is qualified by, more complete and detailed information contained in the entire Official Statement and the documents summarized or described herein. A full review should be made of the entire Official Statement. The offering of the 20178 Bonds to potential investors is made only by means of the entire Official Statement.

Authority for Issuance. The Authority is issuing the 2017B Bonds under the following:

(a) Article 4 of Chapter 5, Division 7, Title 1 of the California Government Code, as amended, commencing with Section 6584 (the "Law"),

(b) resolutions adopted by the Board of Directors (the "Board") of the Authority on July 11, 2017 (the "Authority Resolution"), and by the City Council (the "City Council") of the City of Fremont (the "City") on July 11, 2017 (the "City Resolution"), and

(c) an Indenture of Trust (the "Indenture") dated as of August 1, 2017, by and between the Authority and The Bank of New York Mellon Trust Company, N.A., as trustee (the "Trustee").

The Authority. The Authority is a joint powers authority between the City and the Fremont Industrial Development Authority pursuant to an Amended and Restated Joint Exercise of Powers Agreement dated as of April 11, 2017, entered into under Articles 1 through 4 (commencing with Section 6500) of Chapter 5 of Division 7 of Title 1 of the California Government Code, as amended, for the purpose, among others, of having the Authority provide financing and refinancing for certain projects of the City by entering into, among other arrangements, lease/leasebacks with the City.

-1- The City. The City is a general law city which was incorporated in 1956. It comprises approximately 90 square miles located on the east side of the San Francisco Bay in southwestern Alameda County (the "County"), approximately 50 miles southeast of the City of San Francisco and 15 miles north of the City of San Jose, and borders Santa Clara County to the south. For demographic and financial information regarding the City and County, see "APPENDIX A - GENERAL INFORMATION ABOUT THE CITY OF FREMONT AND ALAMEDA COUNTY," and "APPENDIX C - FISCAL YEAR 2015-16 COMPREHENSIVE ANNUAL FINANCIAL REPORT."

Purpose of the 2017B Bonds. The 2017B Bonds are being issued to:

• refinance on a current basis outstanding certificates of participation of the City captioned "$27,675,000 Certificates of Participation (2008 Refinancing Project)" (the "2008 Certificates") and the City's related lease payment obligation; and

• pay the costs of issuing the 2017B Bonds.

See "FINANCING PLAN."

Security for the 2017B Bonds and Pledge of Revenues. Under the Indenture, the 2017B Bonds are payable from and secured by a first pledge of and lien on "Revenues" (as defined in this Official Statement) received by the Authority under the Lease Agreement dated as of August 1, 2017, between the Authority, as lessor, and the City, as lessee (the "Lease"), consisting primarily of lease payments (the "Lease Payments") made by the City under the Lease. The 2017B Bonds are also secured by certain funds on deposit under the Indenture. See "SECURITY FOR THE 2017B BONDS."

The City and the Authority will enter into a Site Lease dated as of August 1, 2017 (the "Site Lease"). Under the Site Lease, the City will lease certain real property to the Authority, consisting of four City fire stations (as described herein, the "Leased Property"). Concurrently, the City and the Authority will enter into the Lease, under which the Authority will lease the Leased Property back to the City for the purpose of refinancing 2008 Certificates. See "THE LEASED PROPERTY."

Form of Bonds; Book-Entry Only. The 2017B Bonds will be issued in fully registered form, registered in the name of The Depository Trust Company, New York, New York ("DTC"), or its nominee, which will act as securities depository for the 2017B Bonds. Purchasers of the 2017B Bonds will not receive certificates representing the 2017B Bonds that are purchased. See "THE 2017B BONDS - Book-Entry Only System" and "APPENDIX F - OTC AND THE BOOK-ENTRY ONLY SYSTEM."

Redemption. The 2017B Bonds are subject to optional redemption and special mandatory redemption from the proceeds of insurance or condemnation proceeds prior to their stated maturity dates. See "THE 2017B BONDS- Redemption."

Abatement. The Lease Payments are subject to complete or partial abatement in the event and to the extent that there is substantial interference with the City's use and possession of the Leased Property or any portion thereof. If the Lease Payments are abated under the Lease, the Bond Owners would receive less than the full amount of principal of and interest on the 2017B Bonds. To the extent proceeds of rental interruption insurance are available (as described below), Lease Payments (or a portion thereof) may be made from those proceeds during periods of

-2- abatement. See "SECURITY FOR THE 2017B BONDS - Abatement" and "BOND OWNERS' RISKS."

Changes Since Preliminary Official Statement. Certain information contained in the sections captioned "CITY FINANCIAL INFORMATION - Employee Retirement System - Benefits Provided" and "- Funded Status" have been changed from the language appearing in the Preliminary Official Statement to reflect more currently available information.

Legal Opinion. Upon delivery of the 2017B Bonds, Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel ("Bond Counsel") will release its final approving legal opinion with respect to the 2017B Bonds, regarding the validity and tax-exempt status of the 2017B Bonds, in the form attached hereto as APPENDIX D.

Risks of Investment. Debt service on the 2017B Bonds is payable only from Lease Payments and other amounts payable by the City to the Authority under the Lease. For a discussion of some of the risks associated with the purchase of the 2017B Bonds, see "BOND OWNERS' RISKS."

NEITHER THE 2017B BONDS, THE OBLIGATION OF THE AUTHORITY TO PAY PRINCIPAL OF OR INTEREST THEREON, NOR THE OBLIGATION OF THE CITY TO MAKE THE LEASE PAYMENTS, CONSTITUTE A DEBT OR A LIABILITY OF THE AUTHORITY, THE CITY, THE STATE OR ANY OF ITS POLITICAL SUBDIVISIONS WITHIN THE MEANING OF ANY CONSTITUTIONAL LIMITATION ON INDEBTEDNESS, OR A PLEDGE OF THE FULL FAITH AND CREDIT OF THE CITY. THE 2017B BONDS ARE SECURED SOLELY BY THE PLEDGE OF REVENUES AND CERTAIN FUNDS HELD UNDER THE INDENTURE. THE 2017B BONDS ARE NOT SECURED BY A PLEDGE OF THE TAXING POWER OF THE CITY.

-3- FINANCING PLAN

Refunding Plan for 2008 Certificates

Authority and Purpose of 2008 Certificates. The City executed and delivered the 2008 Certificates on September 30, 2008, in the principal amount of $27,675,000. The 2008 Certificates are currently outstanding in the principal amount of $22,820,000. The 2008 Certificates were executed and delivered primarily for the purposes of financing the prepayment of three series of outstanding certificates of participation of the City captioned "$8,200,000 Variable Rate Demand Certificates of Participation (1990 Building and Equipment Acquisition Financing Project)," "$5,100,000 Variable Rate Demand Certificates of Participation (1991 Fire Stations Financing Project)," and "$21,930,000 Variable Rate Demand Certificates of Participation (2003 Refinancing Project)."

The refinancing plan calls for the outstanding 2008 Certificates maturing on and after August 1, 2018, to be redeemed in full, on a current basis, on or about August 22, 2017 (the "Redemption Date"), at a redemption price equal to 101 % of the principal amount thereof, together with interest coming due and payable on the Redemption Date.

Irrevocable Escrow Fund Deposit. In order to accomplish the refinancing plan, a portion of the proceeds of the 2017B Bonds will be transferred to the Trustee for deposit into a refunding fund held by the Trustee under the Indenture. The Trustee shall immediately disburse amounts in said refunding fund to The Bank of New York Mellon Trust Company, N .A., acting as the trustee for the 2008 Certificates (the "2008 Trustee"), for deposit in an escrow fund (the "Escrow Fund") to be established under an Escrow Deposit and Trust Agreement dated as of the Closing Date (the "Escrow Agreement") between the City and the 2008 Trustee. The 2008 Trustee will hold the amounts on deposit in the Escrow Fund in cash, uninvested. These funds will be sufficient to prepay the 2008 Certificates in full on the Redemption Date, and to defease the outstanding 2008 Certificates as of the date of issuance of the 2017B Bonds.

The moneys held by the 2008 Trustee in the Escrow Fund are pledged to the payment and redemption of the 2008 Certificates and will not be available for payment of the 20178 Bonds.

-4- Estimated Sources and Uses of Funds

The estimated sources and uses of funds relating to the 2017B Bonds are as follows:

Sources of Funds: Principal Amount of 2017B Bonds $19,725,000.00 Plus: Net Original Issue Premium 1,891,185.60 Plus: Funds Available with respect to 2008 Certificates 1,873,597.69 TOTAL SOURCES $23,489,783.29

Uses of Funds: Deposit to Escrow Fund 111 $23,114,632.63 Deposit to Costs of Issuance Fund 1' 1 199,161.33 Purchaser's Discount 175,989.33 TOTAL USES $23,489,783.29

(1) Represents funds to be used to prepay and defease the 2008 Certificates. See"- Refunding Plan for 2008 Certificates" above. (2) Represents funds to be used to pay Costs of Issuance, which include legal fees, printing costs, rating agency fees and other costs of issuing the 2017B Bonds.

-5- THE LEASED PROPERTY

Description and Location

Lease Payments will be made by the City under the Lease for the use and occupancy of the Leased Property, which consists of the following four City fire stations.

Fire Station No. 1. Fire Station No. 1, originally built in 1962, is located at 4200 Mowry Avenue, west of Fremont Boulevard in the central part of the City, on a one acre site. It is an existing facility in operation with the City's Fire Department. Fire Station No. 1 is a 9,575 square foot, single story, masonry and wood frame facility with a three bay garage for fire apparatus, sleeping quarters, offices, shop, dining room, living room and kitchen, and support equipment for a maximum of ten firefighters. It has a concrete block exterior and an asphalt shingle roof. The facility is designed as an essential service facility to operate before, during and after a major earthquake with minimal repairs. A seismic retrofit was completed in 2006 to improve the building performance. The facility has an emergency power generator and is equipped to dispense diesel fuel.

Fire Station No. 4. Fire Station No. 4, completed in 1991, is located at 1000 Pine Street, at the corner of Paseo Padre Parkway in the south-eastern part of the City, on a ten acre site that includes the City's Old Mission Park (unimproved open space). It is an existing facility in operation with the City's Fire Department. Fire Station No. 4 is a 7,760 square foot, two story, steel and wood frame facility with a two bay garage for fire apparatus, sleeping quarters that can also be converted into a community meeting room, offices, shop, dining room, living room and kitchen and support equipment for a maximum often firefighters. It has a stucco exterior and a light weight mission-tile roof. The facility is designed as an essential service facility to operate before, during and after a major earthquake with minimal repairs. A seismic retrofit was completed in 2006 to improve the building performance. The facility has an emergency power generator and is equipped to dispense diesel fuel.

Fire Station No. 10. Fire Station No. 10, completed in 1991, is located at 5001 Deep Creek Road, south of Paseo Padre Parkway in the northern part of the City, on a one acre site. It is an existing facility in operation with the City's Fire Department. Fire Station No. 1O is a 6,080 square foot steel and wood frame facility with a two bay garage for fire apparatus, sleeping quarters that can also be converted into a community meeting room, offices, shop, dining room, living room and kitchen and support equipment for a maximum of ten firefighters. It has a stucco exterior and a light weight mission-tile roof. The facility is designed as an essential service facility to operate before, during and after a major earthquake with minimal repairs. A seismic retrofit was completed in 2006 to improve the building performance. The facility has an emergency power generator and is equipped to dispense diesel fuel.

Also on the Fire Station No. 1O site is a 2,446 square-foot single story pre-fabricated metal building with a 250 square-foot mezzanine and four garage bays used by the City for storage and maintenance.

Fire Station No. 11. Fire Station No. 11, built in 2011, is located at 47200 Lakeview Boulevard, adjacent to Interstate 880 in the southern part of the City, on a one acre site. It is an existing facility in operation with the City's Fire Department. Fire Station No. 11 is a 10,375 square foot, single story, steel and wood frame facility with a three bay garage for fire apparatus, sleeping quarters that can also be converted into a community meeting room, offices, shop, dining room, living room, and kitchen, with support equipment for a maximum of ten firefighters. It has stucco

-6- and metal siding exterior and a metal standing seam roof. The facility is designed as an essential service facility to operate before, during and after a major earthquake with minimal repairs. The facility has an emergency power generator and is equipped to dispense diesel fuel.

The following table shows the estimated building values (based on replacement cost for insurance purposes), land values (based on a 2015 impact fee study commissioned by the City), and the total values for the Leased Property.

Leased Property Building Value Land Value Total Fire Station No. 1 $ 4,308,750 $ 1,946,700 $ 6,255,450 Fire Station No. 4 3,492,000 1,890,000 5,382,000 Fire Station No. 10 3,949,200 1,890,000 5,839,200 Fire Station No. 11 4,668,750 1,993,000 6,661,750 Total $16,418,700 $7,719,700 $24,138,400

Modification of Leased Property

Under the Lease, the City has the right, at its own expense, to make additions, modifications and improvements to the Leased Property or any portion thereof. All additions, modifications and improvements to the Leased Property will thereafter comprise part of the Leased Property and become subject to the provisions of the Lease.

Such additions, modifications and improvements may not in any way damage the Leased Property, or cause the Leased Property to be used for purposes other than those authorized under the provisions of state and federal law; and the Leased Property, upon completion of any additions, modifications and improvements made thereto under this provision of the Lease, must be of a value which is not substantially less than the value thereof immediately prior to the making of such additions, modifications and improvements.

The City will not permit any mechanic's or other lien to be established or remain against the Leased Property for labor or materials furnished in connection with any remodeling, additions, modifications, improvements, repairs, renewals or replacements made by the City under this provision of the Lease; except that if any such lien is established and the City first notifies or causes to be notified the Authority of the City's intention to do so, the City may in good faith contest any lien filed or established against the Leased Property, and in such event may permit the items so contested to remain undischarged and unsatisfied during the period of such contest and any appeal therefrom and will provide the Authority with full security against any loss or forfeiture which might arise from the nonpayment of any such item, in form satisfactory to the Authority. The Authority will cooperate fully in any such contest, upon the request and at the expense of the City.

Substitution

Under the Lease, the City has the option at any time and from time to time, to substitute other real property (the "Substitute Property") for the Leased Property or any portion thereof (the "Former Property"), upon satisfaction of all of the requirements set forth in the Lease, which includes (among others) the following:

The City has filed with the Authority and the Trustee, and caused to be recorded in the office of the County Recorder, sufficient memorialization of an amendment

-7- of the Lease, the Site Lease and the Assignment Agreement that adds the legal description of the Substitute Property and deletes therefrom the legal description of the Former Property, and has filed and caused to be recorded corresponding amendments to the Site Lease and Assignment Agreement.

The City has obtained a CL TA policy of title insurance insuring the City's leasehold estate under the Lease in the Substitute Property, subject only to Permitted Encumbrances (as defined in the Lease), in an amount at least equal to the estimated value thereof.

The City has certified in writing to the Authority and the Trustee that the Substitute Property serves the municipal purposes of the City and constitutes property which the City is permitted to lease under the laws of the State of California, and has been determined to be essential to the proper, efficient and economic operation of the City and to serve an essential governmental function of the City.

The City has filed with the Authority and the Trustee a written certificate of the City or other written evidence stating that the useful life of the Substitute Property at least extends to the final maturity date of the 2017B Bonds, that the estimated value of the Leased Property, after substitution of the Substitute Property and release of the Former Property, is at least equal to the aggregate Outstanding principal amount of the 2017B Bonds, and the fair rental value of the Leased Property, after substitution of the Substitute Property and release of the Former Property, is at least equal to the Lease Payments thereafter coming due and payable under the Lease.

See "APPENDIX B - SUMMARY OF PRINCIPAL LEGAL DOCUMENTS."

Upon the satisfaction of all such conditions precedent, the Term of the Lease will thereupon end as to the Former Property and commence as to the Substitute Property, and all references to the Former Property will apply with full force and effect to the Substitute Property. The City is not entitled to any reduction, diminution, extension or other modification of the Lease Payments whatsoever as a result of any substitution of property under this provision of the Lease.

Release of Leased Property

Under the Lease, the City has the option at any time and from time to time to release any portion of the Leased Property from the Lease (the "Released Property") provided that the City has satisfied all of the requirements under the Lease that are conditions precedent to such release, which include (among others) the following:

The City has filed with the Authority and the Trustee, and caused to be recorded in the office of the County Recorder sufficient memorialization of an amendment of the Lease, the Site Lease and the Assignment Agreement which removes the Released Property from the Lease, the Site Lease and the Assignment Agreement.

The City has certified in writing to the Authority and the Trustee that the value of the property which remains subject to the Lease following such release is at least equal to the aggregate Outstanding principal amount of the 2017B Bonds, and the fair rental value of the property which remains subject to the Lease following such

-8- release is at least equal to the Lease Payments thereafter coming due and payable thereunder.

See "APPENDIX B - SUMMARY OF PRINCIPAL LEGAL DOCUMENTS."

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-9- THE 20178 BONDS

This section provides summaries of the 20178 Bonds and certain provisions of the Indenture. See APPENDIX B for a more complete summary of the Indenture. Capitalized terms used but not defined in this section have the meanings given in APPENDIX B.

Authority for Issuance

The 2017B Bonds are being issued under the Law, the Authority Resolution (which was adopted by the Board of the Authority on July 11, 2017), the City Resolution (which was adopted by the City Council on July 11, 2017), and the Indenture. Under the Authority Resolution and the City Resolution, the 2017B Bonds may be issued in a principal amount not to exceed $25,000,000.

General Provisions

Bond Terms. The 2017B Bonds will be dated their date of delivery and issued in fully registered form without coupons in integral multiples of $5,000, so long as no Bond has more than one maturity date.

Interest on the 2017B Bonds will be payable on April 1 and October 1 in each year, commencing October 1, 2017 (each an "Interest Payment Date"). The 2017B Bonds will mature in the amounts and on the dates, and bear interest at the annual rates, set forth on the inside cover page of this Official Statement.

Calculation of Interest. Interest on the 2017B Bonds is payable from the Interest Payment Date next preceding the date of authentication thereof unless:

(a) a 2017B Bond is authenticated on or before an Interest Payment Date and after the close of business on the preceding Record Date, in which event it will bear interest from such Interest Payment Date,

(b) a 2017B Bond is authenticated on or before the first Record Date, in which event interest thereon will be payable from the Closing Date, or

(c) interest on any 2017B Bond is in default as of the date of authentication thereof, in which event interest thereon will be payable from the date to which interest has been paid in full, payable on each Interest Payment Date.

Interest with respect to the 2017B Bonds will be computed on the basis of a 360-day year com posed of 12 months of 30 days each.

Record Date. Under the Indenture, "Record Date" means, with respect to any Interest Payment Date, the 15th calendar day of the month preceding such Interest Payment Date, whether or not such day is a Business Day.

Payments of Principal and Interest. Interest is payable on each Interest Payment Date to the persons in whose names the ownership of the 2017B Bonds is registered on the Registration Books at the close of business on the immediately preceding Record Date, except as provided below. Interest on any 2017B Bond which is not punctually paid or duly provided for on any Interest Payment Date is payable to the person in whose name the ownership of such 2017B Bond is registered on the Registration Books at the close of business on a special record

-10- date for the payment of such defaulted interest to be fixed by the Trustee, notice of which is given to such Owner by first-class mail not less than 1O days prior to such special record date.

The Trustee will pay interest on the 2017B Bonds by check of the Trustee mailed by first class mail, postage prepaid, on each Interest Payment Date to the Owners of the 2017B Bonds at their respective addresses shown on the Registration Books as of the close of business on the preceding Record Date. At the written request of the Owner of 2017B Bonds in an aggregate principal amount of at least $1,000,000, which written request is on file with the Trustee as of any Record Date, the Trustee will pay interest on such 2017B Bonds on each succeeding Interest Payment Date by wire transfer in immediately available funds to such account of a financial institution within the United States of America as specified in such written request, which will remain in effect until rescinded in writing by the Owner.

The Trustee will pay principal of the 2017B Bonds in lawful money of the United States of America by check of the Trustee upon presentation and surrender thereof at the Office of the Trustee.

While the 20178 Bonds are subject to the book-entry system, the principal, interest and any redemption premium with respect to the 20178 Bonds will be paid by the Trustee to OTC for subsequent disbursement to beneficial owners of the 20178 Bonds. See "- Book-Entry Only System" below.

Redemption

Optional Redemption. The 2017B Bonds maturing on or before October 1, 2027 are not subject to optional redemption prior to their stated maturity. The 2017B Bonds maturing on or after October 1, 2028 are subject to redemption, as a whole or in part at the election of the Authority among maturities on such basis as designated by the Authority and by lot within a maturity, at the option of the Authority, on October 1, 2027 and on any date thereafter, at a redemption price equal to 100% of the principal amount of 2017B Bonds to be redeemed, together with accrued interest thereon to the date fixed for redemption, without premium.

Special Mandatory Redemption From Insurance or Condemnation Proceeds. The 2017B Bonds are subject to redemption as a whole, or in part on a pro rata basis among maturities, on any date, from any Net Proceeds required to be used for such purpose as provided in the Indenture, at a redemption price equal to 100% of the principal amount thereof plus interest accrued thereon to the date fixed for redemption, without premium.

Selection of Bonds for Redemption. Whenever provision is made in the Indenture for the redemption of less than all of the 2017B Bonds of a single maturity, the Trustee will select the 2017B Bonds of that maturity to be redeemed from all 2017B Bonds of that maturity to be redeemed by lot in any manner which the Trustee in its sole discretion deems appropriate. For purposes of such selection, the Trustee shall treat each 2017B Bond as consisting of separate $5,000 portions and each such portion shall be subject to redemption as if such portion were a separate 2017B Bond.

Notice of Redemption. The Trustee shall mail notice of redemption of the 2017B Bonds by first class mail, postage prepaid, not less than 30 nor more than 60 days before any redemption date, to the respective Owners of any 2017B Bonds designated for redemption at their addresses appearing on the Registration Books and to one or more Securities Depositories and to the Municipal Securities Rulemaking Board as provided in the Continuing Disclosure Certificate.

-11- Neither the failure to receive any notice nor any defect therein will affect the sufficiency of the proceedings for such redemption or the cessation of accrual of interest from and after the redemption date.

Rescission of Redemption. Redemption notices may be conditional. The Authority has the right to rescind any notice of optional redemption of the 2017B Bonds by written notice to the Trustee on or prior to the date fixed for redemption.

Any notice of redemption will be cancelled and annulled if for any reason funds will not be or are not available on the date fixed for redemption for the payment in full of the 2017B Bonds then called for redemption, and such cancellation will not constitute an Event of Default under the Indenture.

The Authority and the Trustee have no liability to the Bond Owners or any other party related to or arising from such rescission of redemption. The Trustee will mail notice of such rescission of redemption in the same manner as the original notice of redemption was sent under the Indenture.

Effect of Redemption. If notice of redemption has been duly given as provided in the Indenture, and moneys for payment of the redemption price of, together with interest accrued to the date fixed for redemption on, including any applicable premium, the 2017B Bonds (or portions thereof) so called for redemption being held by the Trustee, on the redemption date designated in such notice, the 2017B Bonds (or portions thereof) so called for redemption will become due and payable, interest on the 2017B Bonds so called for redemption will cease to accrue, said 2017B Bonds (or portions thereof) will cease to be entitled to any benefit or security under the Indenture, and the Owners of said 2017B Bonds will have no rights in respect thereof except to receive payment of the redemption price thereof.

Book-Entry Only System

The 2017B Bonds will be issued as fully registered bonds in book-entry only form, registered in the name of Cede & Co. as nominee of OTC, and will be available to ultimate purchasers in the denomination of $5,000 or any integral multiple of $5,000, under the book-entry system maintained by OTC. While the 2017B Bonds are subject to the book-entry system, the principal, interest and any redemption premium with respect to a 2017B Bond will be paid by the Trustee to OTC, which in turn is obligated to remit such payment to its OTC Participants for subsequent disbursement to Beneficial Owners of the 2017B Bonds. Purchasers of the 2017B Bonds will not receive certificates representing their interests therein, which will be held at OTC.

See "APPENDIX F - OTC AND THE BOOK-ENTRY ONLY SYSTEM" for further information regarding OTC and the book-entry system.

Transfer, Registration and Exchange

The following provisions regarding the exchange and transfer of the 20178 Bonds apply only during any period in which the 20178 Bonds are not subject to DTC's book-entry system. While the 20178 Bonds are subject to DTC's book-entry system, their exchange and transfer will be effected through OTC and the Participants and will be subject to the procedures, rules and requirements established by OTC. See "APPENDIX F - OTC AND THE BOOK-ENTRY ONLY SYSTEM."

-12- Bond Register. The Trustee will keep or cause to be kept, at the Office of the Trustee, sufficient records for the registration and transfer of ownership of the 2017B Bonds, which shall upon reasonable notice as agreed to by the Trustee, be open to inspection during regular business hours by the Authority; and, upon presentation for such purpose, the Trustee shall, under such reasonable regulations as it may prescribe, register or transfer or cause to be registered or transferred, on such records, the ownership of the 2017B Bonds as provided in the Indenture.

Transfer of Bonds. Any 2017B Bond may, in accordance with its terms, be transferred, upon the Registration Books, by the person in whose name it is registered, in person or by a duly authorized attorney of such person, upon surrender of such 2017B Bond to the Trustee at its Office for cancellation, accompanied by delivery of a written instrument of transfer in a form acceptable to the Trustee, duly executed. The Trustee will require the Owner requesting such transfer to pay any tax or other governmental charge required to be paid with respect to such transfer. Whenever any 2017B Bond or 2017B Bonds are surrendered for transfer, the Authority will execute and the Trustee will authenticate and deliver to the transferee a new 2017B Bond or 2017B Bonds of like series, interest rate, maturity and aggregate principal amount. The Authority will pay the cost of printing 2017B Bonds and any services rendered or expenses incurred by the Trustee in connection with any transfer of 2017B Bonds.

Exchange of Bonds. The 2017B Bonds may be exchanged at the Office of the Trustee for a like aggregate principal amount of 2017B Bonds of other authorized denominations and of the same series, interest rate and maturity. The Trustee will require the Owner requesting such exchange to pay any tax or other governmental charge required to be paid with respect to such exchange. The Authority will pay the cost of printing 2017B Bonds and any services rendered or expenses incurred by the Trustee in connection with any exchange of 2017B Bonds.

Limitations on Transfer and Exchange. The Trustee may refuse to transfer or exchange, under these provisions of the Indenture, any 2017B Bonds selected by the Trustee for redemption under the Indenture, or any 2017B Bonds during the period established by the Trustee for the selection of 2017B Bonds for redemption.

-13- DEBT SERVICE SCHEDULE

The table below shows annual debt service payments on the 2017B Bonds.

Year Ending Total October 1 Principal Interest Debt Service 2017 $86,760.10 $86,760.10 2018 $565,000 800,862.50 1,365,862.50 2019 595,000 772,612.50 1,367,612.50 2020 625,000 742,862.50 1,367,862.50 2021 660,000 711,612.50 1,371,612.50 2022 695,000 678,612.50 1,373,612.50 2023 730,000 643,862.50 1,373,862.50 2024 765,000 607,362.50 1,372,362.50 2025 805,000 569,112.50 1,374,112.50 2026 845,000 528,862.50 1,373,862.50 2027 890,000 486,612.50 1,376,612.50 2028 935,000 442,112.50 1,377,112.50 2029 985,000 395,362.50 1,380,362.50 2030 1,035,000 346,112.50 1,381,112.50 2031 1,075,000 294,362.50 1,369,362.50 2032 1,110,000 262,112.50 1,372,112.50 2033 1,145,000 228,812.50 1,373,812.50 2034 1,175,000 194,462.50 1,369,462.50 2035 1,215,000 159,212.50 1,374,212.50 2036 1,250,000 122,762.50 1,372,762.50 2037 1,290,000 83,700.00 1,373,700.00 2038 1,335,000 43,387.50 1,378,387.50 Totals: $19,725,000 $9,201,535.10 $28,926,535.10

-14- SECURITY FOR THE 20178 BONDS

The principal of and interest on the 20178 Bonds are not a debt of the Authority or the City, nor a legal or equitable pledge, charge, lien or encumbrance, upon any of their respective property, or upon any of their income, receipts, or revenues except the Revenues and other amounts pledged under the Indenture.

This section provides summaries of the security for the 20178 Bonds and certain provisions of the Indenture, the Lease and the Site Lease. See "APPENDIX B - SUMMARY OF PRINCIPAL LEGAL DOCUMENTS" for a more complete summary of the Indenture, the Lease and the Site Lease. Capitalized terms used but not defined in this section have the meanings given in APPENDIX B.

Revenues; Pledge of Revenues

Pledge of Revenues and Other Amounts. Subject only to the provisions of the Indenture permitting the application thereof for the purposes and on the terms and conditions set forth therein, all of the Revenues and all amounts (including proceeds of the sale of the 2017B Bonds) held in any fund or account established under the Indenture are pledged to secure the payment of the principal of and interest and premium (if any) on the 2017B Bonds in accordance with their terms and the provisions of the Indenture. Said pledge constitutes a lien on and security interest in the Revenues and such amounts and will attach, be perfected and be valid and binding from and after the Closing Date, without the need for any physical delivery thereof or further act.

Definition of Revenues. "Revenues" are defined in the Indenture as follows:

(a) all amounts received by the Authority or the Trustee under or with respect to the Lease, including, without limiting the generality of the foregoing, all of the Lease Payments (including both timely and delinquent payments, any late charges, and whether paid from any source), but excluding (i) any amounts described in the provisions of the Lease relating to permitted amendments that provide for additional rental to be pledged or assigned for the payment of bonds issued to finance or refinance projects for which the City is authorized to expend its funds, and (ii) any Additional Rental Payments (consisting of certain administrative costs due to the Authority and the Trustee under the Lease), and

(b) all interest, profits or other income derived from the investment of amounts in any fund or account established under the Indenture.

Assignment to Trustee. Under the Assignment Agreement, the Authority has transferred to the Trustee all of the rights of the Authority in the Lease (other than the rights of the Authority under the provisions of the Lease regarding Additional Rental Payments, advances, release and indemnification covenants, and agreement to pay attorneys' fees, and its rights to give approvals and consents thereunder).

The Trustee is entitled to collect and receive all of the Revenues, and any Revenues collected or received by the Authority will be deemed to be held, and to have been collected or received, by the Authority as the agent of the Trustee and will forthwith be paid by the Authority to the Trustee.

The Trustee is also entitled to and may, subject to the provisions of the Indenture regarding rights of the Trustee, take all steps, actions and proceedings which the Trustee determines to be

-15- reasonably necessary in its judgment to enforce, either jointly with the Authority or separately, all of the rights of the Authority and all of the obligations of the City under the Lease.

Allocation of Revenues by Trustee; Application of Funds

Deposit of Revenues in Bond Fund. All Revenues will be promptly deposited by the Trustee upon receipt thereof in a special fund designated as the "Bond Fund" which the Trustee will establish, maintain and hold in trust; except that all moneys received by the Trustee and required under the Indenture or under the Lease to be deposited in the Redemption Fund or the Insurance and Condemnation Fund will be promptly deposited in such funds.

All Revenues deposited with the Trustee will be held, disbursed, allocated and applied by the Trustee only as provided in the Indenture. Any surplus remaining in the Bond Fund, after payment in full of the principal of and interest on the 2017B Bonds or provision therefore under Indenture, and any applicable fees and expenses to the Trustee, will be withdrawn by the Trustee and remitted to the City.

Allocation of Revenues. On or before each Interest Payment Date, the Trustee will transfer from the Bond Fund and deposit into the following respective accounts (each of which the Trustee will establish and maintain within the Bond Fund), the following amounts in the following order of priority:

(a) Deposit to Interest Account. The Trustee will deposit in the Interest Account an amount required to cause the aggregate amount on deposit in the Interest Account to be at least equal to the amount of interest becoming due and payable on such Interest Payment Date on all 2017B Bonds then Outstanding.

(b) Deposit to Principal Account. The Trustee will deposit in the Principal Account an amount required to cause the aggregate amount on deposit in the Principal Account to equal the principal amount of the 2017B Bonds coming due and payable on such Interest Payment Date.

Lease Payments; Covenant to Appropriate

Obligation to Pay. Under the Lease, subject to the provisions of Lease regarding abatement and prepayment, the City agrees to pay to the Authority, its successors and assigns, the Lease Payments in the respective amounts specified in the Lease, to be due and payable in immediately available funds on the Interest Payment Dates immediately following each of the respective Lease Payment Dates specified in the Lease, and to be deposited by the City with the Trustee on each of the Lease Payment Dates specified in the Lease.

Any amount held in the Bond Fund, the Interest Account and the Principal Account on any Lease Payment Date (other than amounts resulting from the prepayment of the Lease Payments in part but not in whole under the Lease, and amounts required for payment of past due principal or interest on any 2017B Bonds not presented for payment) will be credited towards the Lease Payment then required to be paid under the Lease. The City is not required to deposit any Lease Payment with the Trustee on any Lease Payment Date if the amounts then held in the Bond Fund, the Interest Account and the Principal Account are at least equal to the Lease Payment then required to be deposited with the Trustee.

-16- The Lease Payments payable in any Rental Period are for the use of the Leased Property during that Rental Period.

Fair Rental Value. The aggregate amount of the Lease Payments and Additional Rental Payments coming due and payable during each Rental Period constitute the total rental for the Leased Property for such Rental Period, and are payable by the City in each Rental Period for and in consideration of the right of the use and occupancy of, and the continued quiet use and enjoyment of the Leased Property during each Rental Period.

The City and the Authority have agreed and determined that the total Lease Payments represent the fair rental value of the Leased Property. In making that determination, consideration has been given to the estimated value of the Leased Property, other obligations of the City and the Authority under this Lease, the uses and purposes which may be served by the Leased Property and the benefits therefrom which will accrue to the City and the general public.

Source of Payments; Covenant to Budget and Appropriate. Under the Lease, the Lease Payments are payable from any source of available funds of the City, subject to the provisions of the Lease regarding abatement. See" -Abatement" below.

The City covenants in the Lease to take all actions required to include the Lease Payments in each of its budgets during the Term of the Lease and to make the necessary appropriations for all Lease Payments and Additional Rental Payments. This covenant of the City constitutes a duty imposed by law and each and every public official of the City is required to take all actions required by law in the performance of the official duty of such officials to enable the City to carry out and perform the covenants and agreements agreed to be carried out and performed by the City under the Lease.

Limited Obligation

THE OBLIGATION OF THE CITY TO MAKE THE LEASE PAYMENTS DOES NOT CONSTITUTE A DEBT OF THE CITY, THE AUTHORITY OR THE STATE OR OF ANY POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMIT OR RESTRICTION, AND DOES NOT CONSTITUTE AN OBLIGATION FOR WHICH THE CITY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE CITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION.

Abatement

Termination or Abatement Due to Eminent Domain. Under the Lease, if the Leased Property is taken permanently under the power of eminent domain or sold to a government threatening to exercise the power of eminent domain, the Term of the Lease thereupon ceases as of the day possession is taken. If less than all of the Leased Property is taken permanently, or if the Leased Property is taken temporarily, under the power of eminent domain, then:

(a) the Lease will continue in full force and effect with respect thereto and does not terminate by virtue of such taking, and the parties waive the benefit of any law to the contrary; and

-17- (b) the Lease Payments are subject to abatement in an amount determined by the City such that the resulting Lease Payments represent fair consideration for the use and occupancy of the remaining usable portions of the Leased Property.

Abatement Due to Damage or Destruction. Under the Lease, the Lease Payments are subject to abatement during any period in which by reason of damage or destruction ( other than by eminent domain as described above) there is substantial interference with the use and occupancy by the City of the Leased Property or any portion thereof.

The Lease Payments are subject to abatement in an amount determined by the City such that the resulting Lease Payments represent fair consideration for the use and occupancy of the remaining usable portions of the Leased Property not damaged or destroyed. Such abatement will continue for the period commencing with such damage or destruction and ending with the substantial completion of the work of repair or reconstruction.

In the event of any such damage or destruction, this Lease continues in full force and effect and the City waives any right to terminate this Lease by virtue of any such damage and destruction.

No Reserve Fund

No debt service reserve fund has been established with respect to the 2017B Bonds. See "BOND OWNERS' RISKS - No Debt Service Reserve Fund."

Property Insurance

Liability and Property Damage Insurance. Under the Lease, the City is required to maintain or cause to be maintained throughout the Term of the Lease, but only if and to the extent available from reputable insurers at reasonable cost in the reasonable opinion of the City, a standard commercial general liability insurance policy or policies in protection of the Authority, the City, and their respective members, officers, agents, employees and assigns. Said policy or policies shall provide for indemnification of said parties against direct or contingent loss or liability for damages for bodily and personal injury, death or property damage occasioned by reason of the operation of the Leased Property.

Such policy or policies shall provide coverage in such liability limits and be subject to such deductibles as the City deems adequate and prudent. Such insurance may be maintained as part of or in conjunction with any other insurance coverage carried by the City, and may be maintained in whole or in part in the form of self-insurance by the City, subject to the provisions of the Lease, or in the form of the participation by the City in a joint powers agency or other program providing pooled insurance.

The proceeds of such liability insurance must be applied toward extinguishment or satisfaction of the liability with respect to which paid.

Casualty Insurance. Under the Lease, the City is required to procure and maintain, or cause to be procured and maintained, throughout the Term of the Lease, casualty insurance against loss or damage to all buildings situated on the Leased Property, in an amount at least equal to the lesser of (a) 100% of the replacement value of the insured buildings, or (b) 100% of the aggregate principal amount of the Outstanding 2017B Bonds.

-18- Such insurance must, as nearly as practicable, cover loss or damage by explosion, windstorm, riot, aircraft, vehicle damage, smoke and such other hazards as are normally covered by such insurance, and must include earthquake insurance if available at reasonable cost from reputable insurers in the judgment of the City.

Such insurance may be subject to such deductibles as the City deems adequate and prudent. Such insurance may be maintained as part of or in conjunction with any other insurance coverage carried by the City, and may be maintained in whole or in part in the form of the participation by the City in a joint powers agency or other program providing pooled insurance; provided that such insurance may not be maintained by the City in the form of self-insurance. The Net Proceeds of such insurance must be applied as provided in the Lease and described below.

Rental Interruption Insurance. Under the Lease, the City is required to procure and maintain, or cause to be procured and maintained, throughout the Term of the Lease, rental interruption or use and occupancy insurance to cover loss, total or partial, of the use of any portion of the Leased Property constituting buildings or other improvements as a result of any of the hazards covered in the casualty insurance described above, in an amount at least equal to the maximum such Lease Payments coming due and payable during any consecutive two Fiscal Years.

Such insurance may be maintained as part of or in conjunction with any other insurance coverage carried by the City, and may be maintained in whole or in part in the form of the participation by the City in a joint powers agency or other program providing pooled insurance; provided that such insurance may not be maintained by the City in the form of self-insurance.

The Net Proceeds of such insurance, if any, must be paid to the Trustee and deposited in the Bond Fund, to be applied as a credit towards the payment of the Lease Payments allocable to the insured improvements as the same become due and payable.

Application of Net Proceeds. The Trustee, as assignee of the Authority under the Assignment Agreement, has the right to receive all Net Proceeds. As provided in the Indenture, the Trustee will deposit all Net Proceeds in the Insurance and Condemnation Fund to be applied to the redemption of 2017B Bonds as set forth in the Indenture.

-19- CITY FINANCIAL INFORMATION

General

The City is a general law city which was incorporated in 1956. It comprises approximately 90 square miles located on the east side of the San Francisco Bay in the southwestern portion of the County, approximately 50 miles southeast of the City of San Francisco and 15 miles north of the City of San Jose, and borders Santa Clara County to the south.

City Services and Government

The City has operated under the council-manager form of government since its incorporation in 1956. Policy-making and legislative authority are vested in a five-member governing council consisting of the Mayor and four Councilmembers. The City Council is responsible for, among other things, passing ordinances, adopting the budget, approving the Mayor's nominees to commissions, and hiring both the City's manager and its attorney.

The City Manager is responsible for carrying out the policies and ordinances of the City Council, for overseeing the day-to-day operations of the City, and for appointing the heads of the various departments. The City Council is elected on a non-partisan basis. Councilmembers serve four-year staggered terms, with two Councilmembers elected every two years. The Mayor is elected to serve a four-year term. The Mayor and Councilmembers are elected at large and all are subject to a two-term limit.

On June 13, 2017, the City Council adopted an ordinance establishing six council districts and a by-district election process for six Councilmembers, with the Mayor continuing to be separately elected to a four-year term by a citywide vote. Councilmembers will serve four-year staggered terms, with three Councilmembers elected every two years. Current Councilmembers will continue in office until the expiration of the full term to which they were elected. At the end of the term of each Councilmember, that Councilmember's successor will be elected on a by-district basis. The election to be held in November 2018 will include Council Districts 1, 2, 3, and 4, with a two-year term for the Councilmember elected to Council District 1. The election to be held in November 2020 will include Council Districts 1, 5, and 6.

The City provides a broad range of services, including police and fire protection, construction and maintenance of streets, parks, storm drains and other infrastructure, building inspections, licenses and permits, recreational and cultural activities, and human services programs. The City also manages franchises for solid waste, cable television, and energy.

Budget Process

The City's budget policies are subject to California State law, generally accepted accounting principles ("GAAP"), and actions of the City Council. The budget process enables the City Council to make resource allocation decisions, including choices about staffing, technology, equipment, and priorities to be addressed in the coming fiscal year. The City's Annual Operating Budget is adopted by the City Council by July 1 each year. Although the City Council first reviews the budget in May, the City Manager's Office, the Finance Department, and other departments begin to prepare it at least six months before that. Throughout the year, staff provides revenue projections and updates on the City's financial performance, and continues to assess City needs. In producing the budget, the Budget Team receives input from the public, City Council, and staff.

-20- At the mid-year budget review that typically takes place in February or March, the Finance Director provides an update to the City Council on the current year's budget and outlines policy issues facing the City. The City Council provides feedback and direction regarding proposed priorities for the future programming of General Fund resources. With this direction and the Finance Department's revenue projections, each department prepares a proposed budget. The Budget Team works closely with department managers to ensure that budgets reflect the City Council's interests, priorities, and goals.

Several weeks before the budget is adopted, the Finance Director presents the budget for the coming year to the City Council, along with information on current year accomplishments and future year goals. Copies of the proposed budget document are available to the public at public hearings, and they are also available in the City Clerk's Office, and on the City's website. The Finance Director presents the budget to the City Council in a televised public forum. Included in the Finance Director's presentation are an update of the City's financial position and General Fund forecast; a review of the national, State, and local economies; a discussion of financial policies; and an update on department activities. After reviewing the proposed budget and receiving public comment at public hearings, the City Council may direct staff to revise the proposed budget. On or before June 30, the City Council votes to adopt the budget, including any revisions to the proposed budget. At any time after the adoption of the budget, the City Council may amend or supplement the budget.

Upon final adoption by the City Council, the budget becomes the legal authorization for the various departments to expend resources, subject to conditions established by the City Manager and City Council. Through a resolution adopted by the City Council, the City Manager is authorized to transfer appropriations as needed from any account in the budget to any other accounts within the same fund to meet overall budget requirements. This resolution further authorizes the City Manager to transfer funds designated as "Transfers" in appropriate increments and intervals. The City Council has adopted several financial and budgetary policies, which address debt, reserves, and spending authorizations, and which help guide long-term planning.

General Fund Budgets

General. The City's General Fund budget figures for fiscal year 2016-17, estimated actual figures for fiscal year 2016-17, and General Fund adopted budget figures for fiscal year 2017-18 are set forth in the following table. The City's audited financial statements for the fiscal year ended June 30, 2016, are included as APPENDIX C to this Official Statement.

-21- Table 1 CITY OF FREMONT General Fund Adopted Budgets For Fiscal Years 2016-17 and 2017-18 (Dollars in Thousands)

Adopted Estimated Adopted Budget Actual Budget 2016-17 2016-17 2017-18 Sources Beginning Unreserved Fund Balance $ 2,419 $ 4,381 $ 2,766 Revenues Taxes: Property Tax 85,116 87,015 91,318 Sales Tax 47,143 47,576 50,717 Business Tax 9,916 11,286 11 ,081 Hotel/Motel Tax 9,165 8,254 8,502 Property Transfer Tax 1,841 2,085 2,272 Paramedic Tax 1 ,171 1,176 1,176 Franchise Fees 9,978 9,996 10,200 Charaes for Services 6,636 6,525 6,222 Fines 2,644 2,770 2,775 Use of Money and Property 1,208 679 738 Intergovernmental 317 206 328 Other Revenues 452 368 352 Total Revenues 175,587 177,936 185,681 Transfers In 6,334 6,276 6,477 Total Sources 184,340 188,593 194,924 Uses Expenditures General Government 14,885 14,838 15,743 Police 73,575 70,758 77,619 Fire 46,343 43,902 49,767 Maintenance (Streets/Facilities) 15,102 14,748 14,767 Maintenance (Parks/Street Medians) 7,942 7,752 8,335 Human Services - - 3,562 Code Enforcement/Community Development Adm in 1,478 1,336 1,681 Non-departmental 3,282 1,347 3,320 Less: Citywide SavinQs (6,900) - (5,730) Debt Service 7,887 7,196 9,279 Less: Debt Service Savings (724) - (1,029) Total Expenditures 162,870 161,877 177,314 Transfers Out 1 20,250 22,581 13,464 Total Uses 183,120 184,458 190,778 Ending Fund Balance Reserved Fund Balance 2 30,929 30,929 32,283 Unreserved Fund Balance 1,220 2,766 2,792 Total Ending Fund Balance $ 32,149 $ 33,695 $ 35,075 Notes: 1 Beginning in FY 2017-18, a portion of the Human Services budget was moved to the General Fund and the transfer to the Human Services Special Revenue Fund was eliminated. 2 Reserved Fund Balance includes the Contingency Reserve, Program Investment Reserve, and Economic Volatility Reserve, maintained in aggregate at 15% of budgeted expenditures and transfers out, as well as the Budget Uncertainty Reserve.

-22- Adopted Budget for Fiscal Year 2017-18

Total General Fund budgeted resources in the coming fiscal year will be adequate to support total budgeted expenditures of $190.8 million. The fiscal year 2017-18 budget also maintains the City Council's long-standing funding priorities by allocating over three-quarters of the budget to direct costs for public safety and maintenance. The share of General Fund resources budgeted for these purposes is actually 87% when overhead costs required to support these functions are allocated. The fiscal year 2017-18 budget is 4.2% higher than the fiscal year 2016-17 adopted budget and 3.4% greater than the prior year's estimated actual expenditures.

Reflecting continued improvement in the local economy, General Fund resources are estimated to increase by 4.3% in fiscal year 2017-18. Although revenues are increasing, the City is making up for position reductions and streets and facilities maintenance that was deferred during the economic downturn. That means that, although the City is able to maintain and, in some cases, improve on the current level of services while making strategic investments for the future, it still has unfunded needs. Moreover, the City will face increasing budgetary pressure in future years resulting primarily from significant increases in pension costs.

There has been no use of the Budget Uncertainty Reserve since fiscal year 2010-11, and none is anticipated for the foreseeable future. This reserve has a balance of $3.7 million which, when added to the City's "core" reserves of $28.6 million, results in a total reserve level of 16.9% of budgeted expenditures and transfers out for fiscal year 2017-18. In addition, the fiscal year 2017-18 budget anticipates ending the prior fiscal year with $2.8 million in fund balance.

As the City was engaged in a collective bargaining process with its labor groups when the fiscal year 2017-18 budget was adopted, the budget includes a placeholder compensation increase amount. The actual compensation costs resulting from the agreed-upon settlements will require approximately $1 million of additional personnel appropriations in the General Fund. During the fiscal year, staff will recommend budget rebalancing actions to the City Council that could include increased revenue estimates and reduced expenditure appropriations.

State Budget and Its Impact on the City

General. Information about the fiscal year 2017-18 adopted State budget and other State budgets is regularly available at various State-maintained websites. An impartial analysis of the budget is posted by the Legislative Analyst Office at www.lao.ca.gov. In addition, various State official statements, many of which contain a summary of the current and past State budgets, may be found at the website of the State Treasurer, www.treasurer.ca.gov. The information referred to in this paragraph is prepared by the respective State agency maintaining each website and not by the City or Purchaser, and the City and Purchaser take no responsibility for the continued accuracy of the Internet addresses or for the accuracy or timeliness of information posted there, and such information is not incorporated in this Official Statement by these references.

Future State Budgets. The City cannot predict what actions will be taken in future years by the State Legislature and the Governor to address a State budget deficit. Future State budgets will be affected by national and state economic conditions and other factors over which the City has no control. To the extent that the State budget process results in reduced revenues to the City, the City will be required to make adjustments to its budget. Decrease in such revenues may have an adverse impact on the City's ability to pay the 2017B Bonds.

-23- Financial Statements

The accounting policies of the City conform to generally accepted accounting principles. The Governmental Accounting Standards Board ("GASB") published its Statement No. 34 "Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments" on June 30, 1999. Statement No. 34 provides guidelines to auditors, state and local governments and special purpose governments such as school districts and public utilities, on new requirements for financial reporting for all governmental agencies in the United States. Generally, the basic financial statements and required supplementary information should include (i) Management's Discussion and Analysis; (ii) financial statements prepared using the economic measurement focus and the accrual basis of accounting; (iii) fund financial statements prepared using the current financial resources measurement focus and the modified accrual method of accounting; and (iv) required supplementary information.

Accounts of the City are organized on the basis of funds, each of which is considered a separate accounting entity. There are three groups of funds: governmental funds (which include the General Fund), proprietary funds (which include internal service funds) and fiduciary funds (which are used to account for resources held for the benefit of parties outside the City). Information is presented separately in the governmental statement of revenues, expenditures, and changes in fund balances for the General Fund and the other major funds. Data for the non­ major funds are combined into a single aggregated presentation.

All governmental funds and fiduciary funds use the modified accrual basis of accounting. The proprietary funds use the accrual basis of accounting. The General Fund is the general operating fund of the City and is used to account for all financial resources except those required to be accounted for in a separate fund.

In fiscal year 2014-15, the City implemented GASB Statements No. 68 and 71. These statements establish standards for measuring and recognizing liabilities, deferred outflows of resources, deferred inflows of resources and pension plan expenses. GASB Statements No. 68 and No. 71 do not change the pension funding obligations of the City and have had no effect on the General Fund.

The City's most recent audited financial statements are included in the Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2016, which is attached as APPENDIX C to this Official Statement. The financial statements were prepared by the City and audited by Macias Gini & O'Connell LLP (the "Auditor").

The Financial Statements should be read in their entirety. The City has neither requested nor obtained permission from the Auditor to include the audited financial statements as an appendix to this Official Statement. Accordingly, the Auditor has not performed any post-audit review of the financial condition or operations of the City or General Fund. In addition, the Auditor has not reviewed this Official Statement.

Set forth on the following pages are (i) a general fund balance sheet for fiscal years 2012- 13 through 2015-16 and (ii) a statement of revenues, expenditures and changes in fund balances for the City's general fund for the same period.

-24- Table 2 CITY OF FREMONT General Fund Balance Sheet

Audited Audited Audited Audited 2012-13 2013-14 2014-15 2015-16 Assets: Cash and investments held by City $27,660,152 $31,503,665 $34,076,112 $24,119,639 Receivables: Property tax 1,317,153 870,036 752,431 839,309 Sales tax 4,685,628 5,617,399 5,927,542 14,926,104 Due from other governmental agencies 1,199,184 635,215 595,205 1,347,957 Housing loans receivable, net 364,442 314,556 260,482 114,719 Accrued interest 359,746 329,491 444,534 748,671 Transient occupancy tax 514,760 619,073 822,482 787,868 Franchise fees 932,006 957,023 990,456 926,635 Accounts receivable 563,434 433,614 410,004 171,702 Other 89,042 124,280 117,492 284,502 Prepaid assets 2,173,335 2,193,530 Due from other funds 2,617,214 2,364,599 5,056,283 3,971,023 Total assets 40,302,761 43,768,951 51,626,358 50,431,659

Liabilities: Accounts payable 3,439,829 2,425,745 1,677,839 2,720,434 Salaries and wages payable 5,397,777 8,719,301 8,284,574 8,323,216 Unearned revenue 154,846 154,016 155,768 146,677 Total liabilities 8,992,452 11,299,062 10,118,181 11,190,327

Deferred inflows of resources-unavailable revenue 260,482 114,719

Fund Balance: Nonspendable: Long term loans receivable 314,556 Prepaid assets 2,173,335 2,193,530 Assigned for: Purchase orders and contracts 1,010,793 1,833,795 644,427 Unassigned 31,310,309 31,144,540 37,240,565 36,288,656 Total fund balance 31,310,309 32,469,889 41,247,695 39,126,613

Total liabilities and fund balance $40,302,761 $43,768,951 $51,626,358 $50,431 ,659

Source: City of Fremont Comprehensive Annual Financial Reports.

-25- Table 3 CITY OF FREMONT Statement of General Fund Revenues, Expenditures and Changes in Fund Balance

Audited Audited Audited Audited 2012-13 2013-14 2014-15 2015-16 Revenues: Property taxes $74,048,402 $70,146,322 $75,028,000 $79,387,844 Sales taxes 34,404,123 38,862,070 40,743,875 48,580,024 Vehicle license fees 93,304 91,786 Intergovernmental 237,922 283,660 1,046,139 564,969 Business tax 7,368,022 7,828,030 9,420,130 10,125,832 Other taxes 6,074,227 7,649,868 8,939,844 9,887,434 Franchise fees 8,470,739 8,924,582 9,298,688 9,605,547 Charges for services 8,180,308 8,475,556 8,796,513 9,078,856 Investment earnings (271,446) 413,141 416,039 1,271,369 Other 2,632,474 2,205,507 2,517,760 2,102,100 Total revenues 141,238,075 144,788,736 156,298,774 170,603,975

Expenditures: Current: General government 11,705,622 12,325,158 13,687,288 14,534,805 Police services 51,779,397 55,416,788 60,121,890 67,208,825 Fire services 31,819,848 33,659,059 37,063,504 43,406,101 Capital assets maintenance and operations 18,603,890 19,412,703 19,897,835 21,445,806 Community development and environmental services 751,531 1,026,185 1,230,461 1,327,238 Capital outlay 88,984 501,669 270,413 1,084,778 Debt service: Principal Interest and fiscal charges 1,134,588 722,828 542,535 491,554 Total expenditures 115,883,860 123,064,390 132,813,926 149,499,107

Excess of revenues over (under) expenditures 25,354,215 21,724,346 23,484,848 21,104,868

Other financing sources {uses): Proceeds from sale of capital assets 729,628 Transfers in 4,705,679 5,708,581 7,418,952 5,603,226 Transfers out (29,751,591) (26,273,347) (22,125,994) (29,558,804) Total other financing sources (uses) (25,045,912) (20,564,766) (14,707,042) (23,225,950)

Net change in fund balance 308,303 1,159,580 8,777,806 (2,121,082)

Fund balance - July 1 31,002,006 31,310,309 32,469,889 41,247,695 Fund balance - June 30 $31,310,309 $32,469,889 $41,247,695 $39,126,613

Source: City of Fremont Comprehensive Annual Financial Reports.

-26- Major Revenues

General. Taxes and other sources of revenue received by the City are listed in the table below, which presents the major revenues of the City's General Fund for the last four audited fiscal years and the estimated actuals for fiscal year 2016-17.

Certain general taxes currently imposed by the City are affected by Proposition 218. See "CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS - Article XIIIC and Article XIIID of the State Constitution."

Table 4 CITY OF FREMONT Major Revenues by Source - General Fund (Dollars in thousands)

% of Audited Audited Audited Audited Estimated 2016-17 2012-13 2013-14 2014-15 2015-16 2016-17 Total Property Tax $74,048 $70,146 $75,028 $79,388 $87,015 47.2% Sales Tax 34,404 38,862 40,744 48,580 47,576 25.8% Business Tax 7,368 7,828 9,421 10,126 11,286 6.1% Franchise Fees 8,471 8,925 9,299 9,606 9,996 5.4% Hotel/Motel Tax 4,872 6,155 7,181 8,087 8,254 4.5% Major Revenues $129,163 $131,916 $141,673 $155,787 $164,127 89.1%

Source: Fiscal Year 2017-18 Adopted Operating Budget.

Property Taxes

General. This section describes property tax levy and collection procedures and certain information regarding historical assessed values and major property tax payers in the City.

Property taxes represent the largest source of tax revenue to the City (approximately 47.2% of General Fund revenues in fiscal year 2016-17). The City has projected to receive $91.3 million in property tax revenue for fiscal year 2017-18. See" -Assessed Valuation" below.

Property taxes have historically been the primary revenue source affected by voter initiatives and legislative actions. See "CONSTITUTIONAL AND STA TU TORY LIMITATIONS ON TAXES AND APPROPRIATIONS" and "BOND OWNERS' RISKS - Limitations on Taxes and Fees."

ERAF Shift Legislation. Certain property taxes have been shifted from local government agencies to schools by the State Legislature for deposit in the Education Revenue Augmentation Fund ("ERAF"), a shift that has resulted in diversion of City property taxes since fiscal year 1992- 93.

Levy and Collection. Property taxes are levied for each fiscal year on taxable real and personal property as of the preceding January 1. For assessment and collection purposes, property is classified either as "secured" or "unsecured" and is listed accordingly on separate parts of the assessment roll. The "secured roll" is that part of the assessment roll containing State­ assessed public utilities property and real property the taxes on which are a lien sufficient, in the

-27- opinion of the County Assessor, to secure payment of the taxes. Other property is assessed on the "unsecured roll."

Property taxes on the secured roll are due in two installments, on November 1 and February 1 of each fiscal year, and become delinquent on December 1O and April 10, respectively. A penalty of 10% attaches immediately to all delinquent payments. Property on the secured roll with respect to which taxes are delinquent become tax defaulted on or about June 30 of the fiscal year. Such property may thereafter be redeemed by payment of a penalty of 1.5% per month to the time of redemption, plus costs and a redemption fee. If taxes are unpaid for a period of five years or more, the property may be sold at public auction.

Property taxes on the unsecured roll are due as of the January 1 lien dates and become delinquent on August 31. A 10% penalty attaches to delinquent unsecured taxes. If unsecured taxes are unpaid at 5:00 p.m. on October 31, an additional penalty of 1.5% attaches to them on the first day of each month until paid. The County has four ways of collecting delinquent unsecured personal property taxes: (1) a civil action against the taxpayer; (2) filing a judgment in the office of the County Clerk specifying certain facts in order to obtain a lien on certain property of the taxpayer; (3) filing a certificate of delinquency for record in the County Recorder's office in order to obtain a lien on certain property of the taxpayer; and (4) seizure and sale of personal property, improvements or possessory interests belonging or assessed to the assessee.

Assessed Valuation. All property is assessed using full cash value as defined by Article XIIIA of the State Constitution. State law provides exemptions from ad valorem property taxation for certain classes of property such as churches, colleges, non-profit hospitals, and charitable institutions. See "CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS."

Future assessed valuation growth allowed under Article XIIIA of the State Constitution (new construction, certain changes of ownership, 2% inflation) will be allocated on the basis of "situs" among the jurisdictions that serve the tax rate area within which the growth occurs. Local agencies and schools will share the growth of "base" revenues from the tax rate area. Each year's growth allocation becomes part of each agency's allocation in the following year.

-28- Assessed Valuation History. The following table shows a ten-year history of the City's assessed valuation.

Table 5 CITY OF FREMONT Assessed Value of Taxable Property Fiscal Years 2008-09 through 2017-18 (Dollars in thousands)

Taxable Fiscal Less Assessed Year Secured Unsecured Exemptions Public Utilities Value 2008-09 $32,521,734 $2,185,774 $(753,714) $3,090 $33,956,884 2009-10 32,197,081 2,445,549 (809,531) 3,090 33,836,189 2010-11 32,096,417 2,550,780 (841,788) 3,093 33,808,502 2011-12 31,689,717 2,435,867 (835,287) 3,093 33,293,390 2012-13 32,152,556 2,461,490 (833,858) 67,380 33,847,568 2013-14 33,986,979 2,299,499 (826,210) 59,209 35,519,477 2014-15 36,409,171 2,284,533 (888,111) 52,259 37,857,852 2015-16 39,250,284 2,348,141 (849,704) 52,259 40,800,980 2016-17 43,064,886 2,215,574 (850,960) 3,444 44,432,944 2017-18 45,835,860 2,391,771 (894,592) 8,303 47,341,342

Source: City of Fremont Comprehensive Annual Financial Report, and City of Fremont for Fiscal Years 2016-17 and 2017-18.

Proposition 13 and Proposition 8 Property Value Adjustments. Proposition 13, adopted in 1978, established the base year value concept for property tax assessments. Under Proposition 13, the 1975-1976 fiscal year serves as the original base year used in determining the assessment for real property. Thereafter, annual increases to the base year value are limited to the inflation rate, as measured by the California Consumer Price Index, or 2%, whichever is less. A new base year value, however, is generally established whenever a property, or portion thereof, has had a change in ownership or has been newly constructed.

Proposition 8, enacted in 1978, allows for a temporary reduction in assessed value when a property suffers a "decline-in-value." As of January 1st (lien date) each year, the Assessor must enroll either a property's Proposition 13 value (adjusted annually for inflation by no more than 2%) or its current market value, whichever is less. When the current market value replaces the higher Proposition 13 value, the lower value is commonly referred to as a "Proposition 8 Value." "Proposition 8 values" are temporary and, once enrolled, must be reviewed annually by the assessor until the Proposition 13 adjusted base year value is enrolled.

-29- Major Property Taxpayers. The following table shows the principal property taxpayers in the City as determined by their taxable assessed valuations in fiscal year 2016-17.

Table 6 CITY OF FREMONT Principal Property Tax Payers (Dollars in Thousands)

Fiscal Year 2016-17 Percentage of Total City Taxable Taxable Assessed Assessed Taxpayer Value Rank Value 111 Tesla Motors Inc. $1,594,813 1 3.57% Western Digital (Fremont) LLC 391,071 2 0.87 Hart Pacific Commons LLC 324,787 3 0.73 LAM Research Corporation 293,941 4 0.66 BRE Properties, Inc. 240,772 5 0.54 John T. Arrillaga & Richard T. Peery Trust 218,741 6 0.49 Essex Portfolio LP 199,615 7 0.45 Seagate Technology LLC 195,133 8 0.44 SCI LP I 178,154 9 0.40 SI 30 LLC 167,318 10 0.37 Top Ten Total $3,804,346 8.51%

Source: City of Fremont Comprehensive Annual Financial Report.

Teeter Plan. The Board of Supervisors of the County has approved the implementation of the Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the "Teeter Plan"), as provided for in Section 4701 et seq. of the California Revenue and Taxation Code. Under the Teeter Plan, the County apportions secured property taxes on an accrual basis when due (irrespective of actual collections) to local political subdivisions, including the City, for which the County acts as the tax-levying or tax-collecting agency. The Teeter Plan was effective beginning the fiscal year commencing July 1, 1993.

The Teeter Plan is applicable to all tax levies on secured property for which the County acts as the tax-levying or tax-collecting agency, or for which the County treasury is the legal depository of the tax collections.

The Teeter Plan is to remain in effect unless the Board of Supervisors of the County orders its discontinuance or unless, prior to the commencement of any fiscal year of the County (which commences on July 1 ), the Board of Supervisors receives a petition for its discontinuance joined in by resolutions adopted by at least two-thirds of the participating revenue districts in the County, in which event the Board of Supervisors is to order discontinuance of the Teeter Plan effective at the commencement of the subsequent fiscal year. If the Teeter Plan is discontinued subsequent to its implementation, only those secured property taxes actually collected would be allocated to political subdivisions (including the City) for which the County acts as the tax-levying or tax­ collecting agency.

-30- Sales and Use Taxes

General. Sales and use taxes represent the second largest source of tax revenue to the City (approximately 25.8% of General Fund revenues in fiscal year 2016-17). This section describes the current system for levying, collecting and distributing sales and use tax revenues in the State of California. The City has budgeted to receive $50.7 million in sales tax revenue for fiscal year 2017-18.

Sales Tax Rates. The City collects a percentage of taxable sales in the City (minus certain administrative costs imposed by the State Board of Equalization) pursuant to the Bradley-Burns Uniform Local Sales and Use Tax (the "Sales Tax Law"), as shown below.

Currently, taxable transactions in the City are subject to the following sales and use tax, of which the City's share is only a portion. The State collects and administers the tax, and makes distributions on taxes collected within the City, as follows:

Table 7 CITY OF FREMONT Sales Tax Rates Fiscal Year 2017-18

Component Rate State-Wide Tax Rate 7.25% Alameda County 1.00 City of Fremont 1.00 Total City of Fremont Tax Rate 9.25%

Source: California State Board of Equalization.

Sales and use taxes are complementary taxes; when one applies, the other does not. In general, the statewide sales tax applies to gross receipts of retailers from the sale of tangible personal property in the State of California. The use tax is imposed on the purchase, for storage, use or other consumption in the State of tangible personal property from any retailer. The use tax generally applies to purchases of personal property from a retailer outside the State of California where the use will occur within the State of California. The Sales Tax is imposed upon the same transactions and items as the statewide sales tax and the statewide use tax.

Certain transactions are exempt from the State sales tax, including sales of the following products:

food products for home consumption; prescription medicine; newspapers and periodicals; edible livestock and their feed; seed and fertilizer used in raising food for human consumption; and gas, electricity and water when delivered to consumers through mains, lines and pipes.

-31- This is not an exhaustive list of exempt transactions. A comprehensive list can be found in the State Board of Equalization's Publication No. 61 entitled "Sales and Use Taxes: Exemptions and Exclusions," which can be found on the State Board of Equalization's website at http://www.boe.ca.gov/. The reference to this Internet website is provided for reference and convenience only. The information contained within the website may not be current, has not been reviewed by the City and is not incorporated in this Official Statement by reference.

Sales Tax Collection Procedures. Collection of the sales and use tax is administered by the California State Board of Equalization. Under the Sales and Use Tax Law, all sales and use taxes collected by the State Board of Equalization under a contract with any city, city and county, redevelopment agency, or county are required to be transmitted by the Board of Equalization to such city, city and county, redevelopment agency, or county periodically as promptly as feasible. These transmittals are required to be made at least twice in each calendar quarter.

Under its procedures, the State Board of Equalization projects receipts of the sales and use tax on a quarterly basis and remits an advance of the receipts of the sales and use tax to the City on a monthly basis. The amount of each monthly advance is based upon the State Board of Equalization's quarterly projection. During the last month of each quarter, the State Board of Equalization adjusts the amount remitted to reflect the actual receipts of the sales and use tax for the previous quarter.

According to the State Board of Equalization, it distributes quarterly tax revenues to cities, counties and special districts using the following method:

Using the prior year's like quarterly tax allocation as a starting point, the State Board of Equalization first eliminates nonrecurring transactions such as fund transfers, audit payments and refunds, and then adjusts for growth, in order to establish the estimated base amount. The State Board of Equalization disburses 90% to each local jurisdiction in three monthly installments (advances) prior to the final computation of the quarter's actual receipts. Ten percent is withheld as a reserve against unexpected occurrences that can affect tax collections (such as earthquakes, fire or other natural disaster) or distributions of revenue such as unusually large refunds or negative fund transfers. The first and second advances each represent 30% of the 90% distribution, while the third advance represents 40%. One advance payment is made each month, and the quarterly reconciliation payment (clean-up) is distributed in conjunction with the first advance for the subsequent quarter. Statements showing total collections, administrative costs, prior advances and the current advance are provided with each quarterly clean-up payment.

The Board of Equalization receives an administrative fee based on the cost of services provided by the Board to the City in administering the City's sales tax, which is deducted from revenue generated by the sales and use tax before it is distributed to the City.

Historical Composition of Sales Tax Revenue. A historical summary of sales tax composition by category is shown in the following table. The data presented show the full value of the City's 1.0% share of sales taxes under the Sales Tax Law, and do not reflect the State's

-32- "triple-flip" adjustments, administrative fees, or the 5% of the City's revenue allocable to Alameda County. Annual figures are not yet available for fiscal year 2016-17.

Table 8 CITY OF FREMONT Sales Tax Revenue by Category

Category 2011-12 2012-13 2013-14 2014-15 2015-16 Business and Industry $9,859,910 $9,658,987 $10,891,333 $11,528,862 $13,852,678 Autos and Transportation 6,121,884 7,182,529 8,398,341 9,564,172 10,784,997 General Consumer Goods 5,360,601 5,826,898 5,777,266 6,043,642 6,464,689 Restaurants and Hotels 2,424,816 2,624,452 2,879,157 3,285,525 3,467,706 Building and Construction 1,914,356 1,849,743 2,156,588 2,267,253 2,385,696 Fuel and Service Stations 2,986,992 2,926,414 2,878,607 2,787,602 2,176,622 Food and Drugs 1,221,441 1,244,316 1,291,795 1,339,772 1,389,606 County Pool 4,118,375 4,671,896 5,536,398 5,427,835 6,597,861 State Pool 23,365 13,937 24,611 25,775 23,696 Transfers and Unidentified (2,897) (3,585) (2,607) (5,344) (11,234) Total $34,028,844 $35,995,587 $39,831,489 $42,265,094 $47,132,318

Source: City of Fremont.

Other Taxes and Revenues

Business Taxes. Business taxes are paid by individuals and entities for the privilege of conducting business in the City and to help play for public services that contribute to a favorable business environment. The tax rate depends upon the type and size of the business. Some businesses pay a flat rate, but most pay based on either their gross receipts or payroll. Business tax receipts tend to fluctuate with economic cycles, though to a lesser degree than sales taxes. As part of a local business stimulus endeavor in 2009, the City Council adopted limited term exemptions for clean-tech and bio-tech companies to attract and retain those businesses, promote the health of the City's industrial base, and continue the Council's commitment to long­ term sustainable energy and environmental goals. The exemption applies for up to five consecutive years for new businesses moving into the City, and up to two consecutive years for businesses that are already currently established in the City. The original exemption was renewed for five years by the City Council in 2012 and again in 2016, with the current exemption expiring on December 31, 2021.

The fiscal year 2017-18 business tax estimate is $11.1 million, a decrease of 1.8% from the prior year estimate. Business taxes currently make up 6.1 % of General Fund revenues.

Franchise Fees. State law provides cities with the authority to grant franchises to privately-owned utility and other companies for their use of the public right-of-way. The City receives franchise fees from the electric and gas utility, the solid waste collection company, local cable companies, and certain other entities for their privilege of using the public right-of-way within the City. The dominant franchise fees are calculated as a percentage of the respective franchisee's gross revenues (subject to specified statutory adjustments) earned from services delivered or performed by the franchisee within the City.

Electricity franchise: PG&E franchise fee revenues change because of changes to the cost of natural gas and other resources used to generate electricity, consumer power demands (which are affected by the economy), interstate energy contract pricing,

-33- and State and federal regulatory changes. In August 2016, PG&E filed a settlement agreement with the California Public Utilities Commission (CPUC) for its three-year "rate case" that took effect on January 1, 2017. The settlement agreement provides for a 1.1 % revenue increase in the first year, a 5.5% revenue increase in the second year, and a 4.2% revenue increase in the third year. The City's forecast assumes that the City's electricity franchise fees will increase at these rates. Decreased demand (a factor of weather and price) or significant interstate cost decreases are factors that might negatively affect this revenue.

Gas franchise: Gas franchise fee revenues comprise less than 5% of total franchise fee revenues.

Cable franchise: AB 2987 was signed into California law and became effective January 1, 2007. This legislation transferred the franchising functions to the State and set a fixed franchise fee of 5%. The fiscal year 2017-18 projection of $2.2 million assumes no change from the prior year. Cable franchise revenue has averaged under 2% annual growth over the last five years, and has essentially remained flat for the last two years. The lack of growth in this category may be the result of consumer shifts toward television access technologies which are not subject to the franchise fee.

Solid waste collection franchise: Solid waste collection ("garbage") franchise fee revenues are estimated to increase by 3.7% to $4.7 million in Fiscal Year 2017-18. Solid waste rate increases typically occur every other year, in even years, with the last increase occurring in January 2016. With an increased focus on recycling (which is not subject to franchise fees), new revenue growth will likely be coming primarily from fee increases and new development adding to the customer base.

Hotel/Motel Occupancy Taxes. The hotel/motel occupancy tax rate of 10% is charged on hotel and motel room occupancies of 30 days or less. It is paid by hotel and motel customers in addition to the room rate so that Fremont visitors may contribute to the cost of the public services they enjoy during their stay. Fiscal year 2017-18 hotel/motel occupancy tax revenues are estimated at $8.5 million, an increase of 3.0% from the fiscal year 2016-17 level and constituting 4.6% of General Fund revenues.

-34- Long-Term Obligations

As of June 30, 2017, the City had $167.0 million in long-term debt outstanding. Of this amount, $40.3 million was for general obligation bonds and $126.7 million was related to certificates of participation, lease revenue bonds, and other lease financing. Following is a summary schedule of outstanding debt (dollars in thousands):

Balance June 30, 2017 General Obligation Bonds: 2009 General Obligation Bonds $ 13.760 2012 General Obligation Refunding Bonds 6.775 2013 General Obligation Refunding Bonds 19.820 Subtotal 40.355

Public Financing Authority Lease Obligations: 2008A Certificates of Participation (2008 Financing Project) 23.455 2012A Certificates of Participation (2012 Refinancing Project) 8.905 2016 Energy and Water Efficiency Lease Financing 9.100 2017A Lease Revenue Bonds (2017 Variable Rate Refinancing Project) 85.205 Subtotal 126.665

Total $167,020

Source: City of Fremont Fiscal Year 2017-18 Adopted Operating Budget.

Employee Relations

There are approximately 916 full and part-time employees of the City, represented by formal labor organizations or not represented, as shown in the table below.

Number of Contract Labor Group Employees Expiration Date City of Fremont Employees Association 247 6/30/2019 Fremont Police Association 183 6/30/2019 International Association of Firefighters Local 1689 126 6/30/2019 Fremont Association of Management Employees 111 6/30/2019 Operating Engineers Local 3 100 6/30/2019 Teamsters 69 6/30/2019 Professional Engineers and Technicians Association 30 6/30/2019 Fremont Police Management Association 11 6/30/2019 Battalion Chiefs 6 6/30/2019 Not represented 33 6/30/2019 Total 916

Risk Management

The City is exposed to various risks related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The city established the Risk Management Internal Service Fund to account for and finance its uninsured risks of loss. Under the City's risk management program, the City retains risk for up to $500,000 for each workers' compensation claim, up to $500,000 in excess of $40,000,000 for each general liability

-35- claim, and up to $25,000 for each property claim. The liability for general liability claims and workers' compensation claims in excess of $500,000 is discussed below.

See Note 7 in the City's fiscal year 2015-16 audited financial statements, which are attached to this Official Statement as APPENDIX C, for additional information about the City's risk management practices.

Employee Retirement System

This caption contains certain information relating to California Public Employees' Retirement System ("Ca/PERS'). The information is primarily derived from information produced by Ca/PERS, its independent accountants and actuaries. The City has not independently verified the information provided by Ca/PERS and makes no representations and expresses no opinion as to the accuracy of the information provided by Ca/PERS.

The comprehensive annual financial reports of Ca/PERS are available on its Internet website at www.calpers.ca.gov. The Ca/PERS website also contains Ca/PERS' most recent actuarial valuation reports and other information concerning benefits and other matters. Such information is not incorporated by reference in this Official Statement. None of the Authority, City or Purchaser can guarantee the accuracy of such information. Actuarial assessments are "forward-looking" statements that reflect the judgment of the fiduciaries of the pension plans, and are based upon a variety of assumptions, one or more of which may not materialize or may be changed in the future. Actuarial assessments will change with the future experience of the pension plans.

Plan Description. All qualified permanent and probationary employees are eligible to participate in the City's separate City of Fremont Safety (police and fire) and City of Fremont Miscellaneous (all other) Plans, agent multiple-employer defined benefit pension plans administered by CalPERS, which acts as a common investment and administrative agent for its participating employers.

Benefits Provided. All regular City employees classified as full-time, as well as part-time regular employees and temporary City workers who work 1,000 or more hours per year, are required to participate in CalPERS. The City's pension plans provide retirement and disability benefits, annual cost-of-living adjustments ("COLA"), and death benefits to plan members and beneficiaries through CalPERS. Benefits are based on years of credited service, equal to one year of full-time employment, and best after five years of service. These benefit provisions and all other requirements are established by State statute and City ordinance.

City employees are entitled to an annual retirement benefit, payable monthly for life, the amount of which is based on a formula which varies depending on the employee's retirement plan, date of hire, and participation in a public retirement plan prior to City employment. As of December 31, 2012, the City had established two tiers of retirement benefits: a "Tier 1" benefit applicable to employees hired prior to April 8, 2012; and a "Tier 2" benefit applicable to employees hired on or after April 8, 2012. On January 1, 2013, the Public Employees' Pension Reform Act of 2013 ("PEPRA") took effect. PEPRA distinguishes between so-called "classic" employees, who were in a public retirement plan (not necessarily CalPERS) prior to January 1, 2013, and "new" employees, who first became a member of a public retirement plan on or after January 1, 2013. Classic employees hired by the City on or after April 8, 2012, are eligible for the City's Tier 2 benefit, while new employees are eligible for the retirement benefits established by PEPRA.

-36- A summary of the City's benefit formulas is provided below:

Tier 1 Tier2 PEPRA Safety Misc. Safety Misc. Safety Misc. Retirement Age 50 55 55 60 57 62 Benefit Formula 3.0% 2.5% 3.0% 2.0% 2.7% 2.0% Average Final 12 Months 12 Months 36 Months 36 Months 36 Months 36 Months Compensation Period Maximum % of Final 90% No Max 90% No Max 90% No Max Compensation COLA 2.0% 3.0% 2.0% 2.0% 2.0% 2.0%

The City is required to contribute at an actuarially determined rate of annual covered payroll for normal cost and an actuarially determined dollar amount to amortized the unfunded liability. The actuarially determined rates and contribution amounts for each plan for the fiscal years ended June 30, 2017, through June 30, 2019, are as follows:

Fiscal Year 2016-17 Fiscal Year 2017-18 Fiscal Year 2018-19 Employer Employer Employer Employer Payment of Employer Payment of Employer Payment of Normal Unfunded Normal Unfunded Normal Unfunded Cost Rate Liability Cost Rate Liability Cost Rate Liability Safety Plan 17.565% $11,447,419 17.095% $13,157,986 17.370% $15,402,750 Miscellaneous 9.939 8,049,825 9.658 9,053,565 9.818 10,393,979 Plan

Source: Ca!PERS Actuarial Reports dated October 2015, August 2016 and July 2017.

On July 14, 2017, CalPERS announced preliminary investment returns for the 12-month period ended June 30, 2017, of 11.2%. Although such returns are significantly higher than CalPERS' current assumed rate of investment return (7.50%), they follow the prior 12-month investment return of 0.6% and, along with other factors (including future investment returns and contributions rates), may result in increased required contributions in the future. See "-Recent Actions Taken by CalPERS" below.

The City's total contributions to each plan in fiscal years 2013-14, 2014-15, and 2015-16 were as follows:

Miscellaneous Plan Total City Fiscal Year Contribution 2013-14 $10,225,328 2014-15 10,615,278 2015-16 12,301,280

Safety Plan Total City Fiscal Year Contribution 2013-14 $13,719,650 2014-15 15,067,536 2015-16 17,558,445

-37- Funded Status. The following table sets forth the schedule of funding progress for the City's Miscellaneous and Safety pension plans as of the three most recent actuarial valuation dates.

Miscellaneous Plan

Valuation Annual Date Market Value Unfunded Funded Covered 1 (June 30) Accrued Liability of Assets Liability Ratio ( l Payroll

2014 $422.833.958 $319 .390 .248 $103,443.710 75.5% $42,454,728 2015 441.149.244 321.418,405 119 .730 .839 72.9 45.076.041 2016 461,429,403 318.661,453 142.767 .950 69.1 48.523.375

(1) Based on the market value of assets. Source: Ca/PERS Actuarial Report Dated July 2017.

Safety

Valuation Annual Date Market Value Unfunded Funded Covered 1 (June 30) Accrued Liability of Assets Liability Ratio ( l Payroll

2014 $561.643,420 $399 .629 .617 $162.013.803 71.2% $35,546.231 2015 590.667. 127 399. 129 .081 191.538.046 67.6 38.266.915 2016 619.870,451 391.160.098 228,710.353 63.1 39.148.651

(1) Based on the market value of assets. Source: Ca/PERS Actuarial Report Dated July 2017.

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

On February 18, 2014, the CalPERS Board approved new demographic actuarial assumptions based on a 2013 study of recent experience. The largest impact, applying to all benefit groups, is a new 20-year mortality projection reflecting longer life expectancies and that longevity will continue to increase. Because retirement benefits will be paid out for more years, the cost of those benefits will increase as a result. The Board of Administration also assumed earlier retirements for Police 3%@50, Fire 3%@55, and Miscellaneous 2.7%@55 and 3%@60, which will increase costs for those groups. As a result of these changes, rates will increase beginning in fiscal year 2016-17 (based on the June 30, 2014 valuation) with full impact in fiscal year 2020-21 .

On November 18, 2015, the CalPERS Board adopted a funding risk mitigation policy intended to incrementally lower its discount rate - its assumed rate of investment return - in years of good investment returns, help pay down the pension fund's unfunded liability, and provide greater predictability and less volatility in contribution rates for employers. The policy establishes

-38- a mechanism to reduce the discount rate by a minimum of 0.05 percentage points to a maximum of 0.25 percentage points in years when investment returns outperform the existing discount rate, currently 7.5%, by at least four percentage points. CalPERS staff modeling anticipates the policy will result in a lowering of the discount rate to 6.5% in about 21 years, improve funding levels gradually over time and cut risk in the pension system by lowering the volatility of investment returns. More information about the funding risk mitigation policy can be accessed through CalPERS' web site at the following website address:

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

The reference to this Internet website is provided for reference and convenience only. The information contained within the website may not be current, has not been reviewed by the City and is not incorporated in this Official Statement by reference.

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

Valuation Fiscal Year Required Discount Date Contribution Rate June 30, 2016 2018-19 7.375% June 20, 2017 2019-20 7.250 June 30, 2018 2020-21 7.000

For public agencies like the City, the new discount rate will increase contribution costs beginning in fiscal year 2018-19. Lowering the discount rate means employers that contract with CalPERS to administer their pension plans will see increases in their normal costs and unfunded actuarial liabilities. Active members hired after January 1, 2013, under the Public Employees' Pension Reform Act will also see their contribution rates rise. The three-year reduction of the discount rate will result in average employer rate increases of about 1 percent to 3 percent of normal cost as a percent of payroll for most miscellaneous retirement plans, and a 2 percent to 5 percent increase for most safety plans. Additionally, many CalPERS employers will see a 30 to 40 percent increase in their current unfunded accrued liability payments. These payments are made to amortize unfunded liabilities over 20 years to bring the pension fund to a fully funded status over the long-term.

Other Post-Employment Benefits ("OPES")

Plan Description and Eligibility. The City provides post-employment healthcare benefits, in accordance with bargaining unit agreements, to employees who retire directly from the City under CalPERS at the minimum age of 50 with at least 5 years of CalPERS service or disability. Retirees must make an election within 120 days following the date of separation from City employment to be eligible for benefits. The number of retirees eligible to receive the benefit was 714 as of June 30, 2016. The City reimburses all or part of premium payments for medical insurance. The reimbursement amount is subject to a negotiation process and varies by bargaining unit and retirement date. The benefit is paid monthly to the retiree subject to proof of coverage and attestation of premium payment. The benefit generally ceases upon death of the retiree. The total actuarially determined contribution for fiscal year 2017-18 is $8,228,000, based on the June 30, 2016 actuarial valuation.

-39- The City's Comprehensive Annual Financial Report for the fiscal year ended June 30, 2016, and in particular Note 1O thereto, includes information about the City's postemployment healthcare liabilities and funding.

Funding Policy. In fiscal year 2015-16, the City began prefunding its OPES obligations by prepaying the entire annual determined contribution ("ADC") to a trust administered by CalPERS (California Employers' Retiree Benefit Trust ("CERBT"). Prior to that, the City funded its OPES obligations on a pay-as-you-go basis. The City has elected to reimburse itself from the CERBT for the cost of benefits incurred during the year.

Annual OPEB Cost and Net Obligation. The City's annual OPES obligation is calculated based on the ADC, an amount actuarially determined in accordance with the parameters of GASB Statement No. 45. The ADC represents a level of funding that, if paid on an ongoing basis, is projected to cover the normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a 22-year closed period beginning July 1, 2015.

The following table shows the components of the City's annual OPES cost for fiscal year 2015-16, the amount actually contributed to the plan, and changes in the City's net OPES obligation for these benefits:

OPEB Components for Fiscal Year 2015-16

Net OPEB Obligation (Asset) Annual required contribution $ 7,324,000 Interest on net OPEB obligation 2,204,000 Amortization of new OPEB obligation (2,146,000) Annual OPEB cost (expense) 7,382,000 Contribution made (7,324,000) Increase in net OPEB obligation 58,000 Net OPEB Obligation - beginning of year 30 401 000 Net OPEB Obligation - end of year l, 30 459 000

Source: City of Fremont Comprehensive Annual Financial Report for Fiscal Year Ended June 30, 2016.

The City's annual OPES cost, the percentage of annual OPES cost contributed to the plan, and the net OPES obligation (asset) for the year ended June 30, 2016 and the two preceding years, were as follows (amounts in thousands):

Fiscal Year Percentage Ended Annual Contributions of Annual OPEB Net OPEB June 30, OPEB Cost Made Cost Contributed Obligation 2014 $7,921,000 $2,719,000 34.3% $25,023,000 2015 8,321,000 2,943,000 35.4 30,401,000 2016 7,382,000 7,324,000 99.2 30,459,000

-40- OPEB Funded Status. The schedule of funding progress below, determined as part of the June 30, 2016 actuarial valuation (the most recent valuation available), shows the actuarial value of assets, actuarial accrued liability, their relationship, and the relationship of the unfunded actuarial accrued liability to payroll.

Entry Age UAAL as Actuarial Actuarial Unfunded Percentage of Valuation Actuarial Value Accrued Actuarial Covered Covered Date of Assets Liability Accrued Liability Funded Ratio Payroll Payroll 6/30/2016 $4,046,000 $85,396,000 $81 ,350 ,000 4.7% $85,716,000 94.9%

Actuarial Methods and Assumptions. Actuarial valuations involve estimates of the value of reported amounts and assumptions about the probability of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trends. Actuarially determined amounts are subject to continual revision as actual results are compared to past expectations and new estimates are made into the future. The actuarial methods and the assumptions used include techniques that are designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations.

In the June 30, 2016, actuarial valuation that determined both the annual required contribution for fiscal year 2017-18 and the most recent funding status and progress, the entry age normal cost method was used. The actuarial assumptions include a 6.75% investment rate of return, a 3.0% general rate of inflation, and 3.25% in aggregate payroll increases. Medical trends for Medicare and non-Medicare are assumed to increase from the prior year by 7 .2% and 7.0%, respectively, for fiscal year 2016-17 and are graded down to an ultimate rate of 5.0% and 5.0% respectively, by fiscal year 2020-21. The unfunded actuarial accrued liability is amortized as a level percentage of projected payroll over a 22-year closed period. There is no assumed post-employment benefit increase.

Investment Policies and Procedures

The City invests its funds in accordance with the City's Investment Policy (the "Investment Policy"), which is subject to annual review and approval by the City Council. The purpose of the Investment Policy is to establish the investment goals of safety, liquidity, and yield (in that order). The Investment Policy complies with the provisions of the California Government Code, Sections 53600 through 53659 (the authority governing investments for municipal governments in the State). The Investment Policy limits the City to investments authorized by State law (Sections 53601 et sec). In addition, the Investment Policy establishes further guidelines.

It is the policy of the City to invest public funds in a prudent manner which will provide the highest yield consistent with the maximum security and preservation of invested principal, while meeting the daily cash flow demands of the City, and conforming to all applicable federal, state and local statutes governing the investment of public funds.

-41- The City Council receives monthly cash and investments reports. As of June 30, 2017, the City has invested funds as set forth in the table below.

Table 9 CITY OF FREMONT Investment Portfolio as of June 30, 2017

Percentage of Value Portfolio Investments City Pool Investments in Securities at Market Value $176.685.790 55% State of California Local Agency Investment Funds (LAIF) 65.000.000 20 California Asset Management Program (CAMP) 73.307.771 23 Money Market Funds 6.9292.478 2 Total $321,923,039 100%

Source: City of Fremont Finance Department.

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-42- CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS

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

Article XIIIA of the State Constitution

On June 6, 1978, California voters approved Proposition 13, which added Article XIIIA to the State Constitution. Article XIIIA, as amended, limits the amount of any ad valorem tax on real property to one percent of the full cash value thereof, except that additional ad valorem taxes may be levied to pay debt service (i) on indebtedness approved by the voters prior to July 1, 1978, (ii) on bonded indebtedness approved by a two-thirds vote on or after July 1, 1978, for the acquisition or improvement of real property or (iii) bonded indebtedness incurred by a school district, community college district or county office of education for the construction, reconstruction, rehabilitation or replacement of school facilities, including the furnishing and equipping of school facilities or the acquisition or lease of real property for school facilities, approved by 55 percent of the voters voting on the proposition. Article XIIIA defines full cash value to mean "the county assessor's valuation of real property as shown on the 1975-76 tax bill under "full cash value," or thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred after the 1975 assessment." This full cash value may be increased at a rate not to exceed two percent per year to account for inflation.

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

Legislation Implementing Article XIIIA

Legislation has been enacted and amended a number of times since 1978 to implement Article XIIIA. Under current law, local agencies are no longer permitted to levy directly any property tax (except to pay voter-approved indebtedness). The one percent property tax is automatically levied by the County and distributed according to a formula among taxing agencies. The formula apportions the tax roughly in proportion to the relative shares of taxes levied prior to 1989.

Increases of assessed valuation resulting from reappraisals of property due to new construction, change in ownership or from the two percent annual adjustment are allocated among the various jurisdictions in the "taxing area" based upon their respective "situs." Any such allocation made to a local agency continues as part of its allocation in future years.

All taxable property is shown at full market value on the tax rolls. Consequently, the tax rate is expressed as $1 per $100 of taxable value. All taxable property value included in this Official Statement is shown at 100 percent of market value (unless noted differently) and all tax rates reflect the $1 per $100 of taxable value.

-43- Article XIIIB of the State Constitution

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

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

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

The City has never exceeded its appropriations limit.

Articles XIIIC and XIIID of the State Constitution

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

On November 2, 2010, California voters approved Proposition 26, entitled the "Supermajority Vote to Pass New Taxes and Fees Act." Section 1 of Proposition 26 declares that Proposition 26 is intended to limit the ability of the State Legislature and local government to circumvent existing restrictions on increasing taxes by defining the new or expanded taxes as "fees." Proposition 26 amended Articles XIIIA and XIIIC of the State Constitution. The amendments to Article XIIIA limit the ability of the State Legislature to impose higher taxes (as defined in Proposition 26) without a two-thirds vote of the Legislature. The amendments to Article

-44- XIIIC define "taxes" that are subject to voter approval as "any levy, charge, or exaction of any kind imposed by a local government," with certain exceptions.

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

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

Reduction or Repeal of Taxes, Assessments, Fees and Charges. Article XIIIC also removes limitations on the initiative power in matters of reducing or repealing local taxes, assessments, fees or charges. No assurance can be given that the voters of the City will not, in the future, approve an initiative or initiatives which reduce or repeal local taxes, assessments, fees or charges currently comprising a substantial part of the City's General Fund. If such repeal or reduction occurs, the City's ability to pay debt service on the 2017B Bonds could be adversely affected.

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

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

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

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

Proposition 62

Proposition 62 was adopted by the voters at the November 4, 1986, general election and (a) requires that any new or higher taxes for general governmental purposes imposed by local governmental entities such as the City be approved by a two-thirds vote of the governmental entity's legislative body and by a majority vote of the voters of the governmental entity voting in an election on the tax, (b) requires that any special tax (defined as taxes levied for other than general governmental purposes) imposed by a local governmental entity be approved by a two­ thirds vote of the voters of the governmental entity voting in an election on the tax, (c) restricts the use of revenues from a special tax to the purposes or for the service for which the special tax was imposed, (d) prohibits the imposition of ad valorem taxes on real property by local

-45- governmental entities except as permitted by Article XIIIA, (e) prohibits the imposition of transaction taxes and sales taxes on the sale of real property by local governmental entities, and (f) requires that any tax imposed by a local governmental entity on or after August 1, 1985, be ratified by a majority vote of the voters voting in an election on the tax within two years of the adoption of the initiative or be terminated by November 15, 1988.

California appellate court cases have overturned the provIsIons of Proposition 62 pertaining to the imposition of taxes for general government purposes. However, the California Supreme Court upheld Proposition 62 in its decision on August 28, 1995, in Fresno County Transportation Authority v. Guardino. This decision reaffirmed the constitutionality of Proposition 62. Certain matters regarding Proposition 62 were not addressed in the Supreme Court's decision, such as what remedies exist for taxpayers subject to a tax not in compliance with Proposition 62, and whether the decision applies to charter cities. The City has not experienced any substantive adverse financial impact as a result of the passage of this initiative.

Proposition 1A; Proposition 22

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

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

Possible Future Initiatives

Articles XIIIA, XIIIB, XIIIC and XIIID and Propositions 62,111,218 and 1A were each adopted as measures that qualified for the ballot pursuant to the State's initiative process. From time to time other initiative measures could be adopted, further affecting revenues of the City or the City's ability to expend revenues. The nature and impact of these measures cannot be anticipated by the City.

-46- BOND OWNERS' RISKS

The following describes certain special considerations and risk factors affecting the payment of and security for the 20178 Bonds. The following discussion is not meant to be an exhaustive list of the risks associated with the purchase of any 20178 Bonds and does not necessarily reflect the relative importance of the various risks. Potential investors in the 20178 Bonds are advised to consider the following special factors along with all other information in this Official Statement in evaluating the 20178 Bonds. There can be no assurance that other considerations will not materialize in the future.

No Pledge of Taxes

General. The obligation of the City to pay the Lease Payments and Additional Rental does not constitute an obligation of the City for which the City is obligated to levy or pledge any form of taxation or for which the City has levied or pledged any form of taxation. The obligation of the City to pay Lease Payments and Additional Rental does not constitute a debt or indebtedness of the Authority, the City, the State of California or any of its political subdivisions within the meaning of any constitutional or statutory debt limitation or restriction.

The City is currently liable on other obligations payable from general revenues, which are described above under "CITY FINANCIAL INFORMATION - Long-Term General Fund Obligations."

Limitations on Taxes and Fees

Limitations on Taxes and Fees. Certain taxes, assessments, fees and charges presently imposed by the City could be subject to the voter approval requirements of Article XIIIC and Article XIIID of the State Constitution. Based upon the outcome of an election by the voters, such fees, charges, assessments and taxes might no longer be permitted to be imposed, or may be reduced or eliminated and new taxes, assessments fees and charges may not be approved. The City has assessed the potential impact on its financial condition of the provisions of Article XIIIC and Article XIIID of the State Constitution respecting the imposition and increase of taxes, fees, charges and assessments and does not believe that an election by the voters to reduce or eliminate the imposition of certain existing fees, charges, assessments and taxes would substantially affect its financial condition. However, the City believes that if the initiative power was exercised so that all local taxes, assessments, fees and charges that may be subject to Article XIIIC and Article XIIID of the State Constitution are eliminated or substantially reduced, the financial condition of the City, including its General Fund, could be materially adversely affected.

Although the City does not currently anticipate that the provisions of Article XIIIC and Article XIIID of the State Constitution would adversely affect its ability to pay Lease Payments and its other obligations payable from the General Fund, no assurance can be given regarding the ultimate interpretation or effect of Article XIIIC and Article XIIID of the State Constitution on the City's finances. See "CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS."

Additional Obligations of the City

The City has existing obligations payable from its General Fund. See "CITY FINANCIAL INFORMATION -Long-Term General Fund Obligations." The City is permitted to enter into other obligations which constitute additional charges against its revenues without the consent of

-47- Owners of the 2017B Bonds. To the extent that additional obligations are incurred by the City, the funds available to pay Lease Payments may be decreased.

The Lease Payments and other payments due under the Lease (including payment of costs of repair and maintenance of the Leased Property, taxes and other governmental charges levied against the Leased Property) are payable from funds lawfully available to the City. If the amounts that the City is obligated to pay in a fiscal year exceed the City's revenues for such year, the City may choose to make some payments rather than making other payments, including Lease Payments and Additional Rental, based on the perceived needs of the City. The same result could occur if, because of California Constitutional limits on expenditures, the City is not permitted to appropriate and spend all of its available revenues or is required to expend available revenues to preserve the public health, safety and welfare.

Default

Whenever any event of default referred to in the Lease happens and continues, the Authority is authorized under the terms of the Lease to exercise any and all remedies available under law or granted under the Lease. See "APPENDIX B - SUMMARY OF PRINCIPAL LEGAL DOCUMENTS" for a detailed description of available remedies in the case of a default under the Lease.

If a default occurs, there is no remedy of acceleration of the total Lease Payments due over the term of the Lease. The Trustee is not empowered to sell the Leased Property and use the proceeds of such sale to prepay the 2017B Bonds or pay debt service on the 2017B Bonds.

The City will be liable only for Lease Payments on an annual basis and, in the event of a default, the Trustee would be required to seek a separate judgment each year for that year's defaulted Lease Payments. Any such suit for money damages would be subject to limitations on legal remedies against municipalities in the State, including a limitation on enforcement of judgments against funds of a fiscal year other than the fiscal year in which the Lease Payments were due and against funds needed to serve the public welfare and interest.

Abatement

Under certain circumstances related to damage, destruction, condemnation or title defects which cause a substantial interference with the use and possession of the Leased Property, the City's obligation to make Lease Payments will be subject to full or partial abatement and could result in the Trustee having inadequate funds to pay the principal and interest on the 2017B Bonds as and when due. See "SECURITY FOR THE 2017B BONDS - Abatement" and "APPENDIX B - SUMMARY OF PRINCIPAL LEGAL DOCUMENTS."

Although the City is required under the Lease to maintain property and liability insurance with respect to the Leased Property, the required insurance coverage is subject to certain conditions and restrictions. See "SECURITY FOR THE 2017B BONDS- Property Insurance."

In addition, the Authority is required to use the proceeds of rental interruption insurance maintained under the Lease to make debt service payments on the 2017B Bonds during any period of abatement. See "SECURITY FOR THE 2017B BONDS- Property Insurance." However, there is no assurance that the Authority will receive proceeds of rental interruption insurance in time to make debt service payments on the 2017B Bonds when due.

-48- No Debt Service Reserve Fund

The Authority will not fund a debt service reserve fund for the 2017B Bonds. If Revenues are insufficient for the Authority to pay debt service on the 2017B Bonds when due, no debt service reserve will be available under the Indenture for the Authority to make such payments.

Property Taxes

Levy and Collection. The City does not have any independent power to levy and collect property taxes. Any reduction in the tax rate or the implementation of any constitutional or legislative property tax decrease could reduce the City's property tax revenues, and accordingly, could have an adverse impact on the ability of the City to make Lease Payments. Likewise, delinquencies in the payment of property taxes could have an adverse effect on the City's ability to pay principal of and interest on the 2017B Bonds when due.

Reduction in Inflationary Rate. Article XIIIA of the California Constitution provides that the full cash value base of real property used in determining assessed value may be adjusted from year to year to reflect the inflationary rate, not to exceed a 2% increase for any given year, or may be reduced to reflect a reduction in the consumer price index or comparable local data. See "CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS." Such measure is computed on a calendar year basis. Because Article XIIIA limits inflationary assessed value adjustments to the lesser of the actual inflationary rate or 2%, there have been years in which the assessed values were adjusted by actual inflationary rates, which were less than 2%. Since Article XIIIA was approved, the annual adjustment for inflation has fallen below the 2% limitation a limited number of times.

The City is unable to predict if any adjustments to the full cash value base of real property within the City, whether an increase or a reduction, will be realized in the future.

Appeals of Assessed Values. There are two types of appeals of assessed values that could adversely impact property tax revenues:

Proposition 8 Appeals. Most of the appeals that might be filed in the City would be based on Section 51 of the Revenue and Taxation Code, which requires that for each lien date the value of real property must be the lesser of its base year value annually adjusted by the inflation factor pursuant to Article XIIIA of the State Constitution or its full cash value, taking into account reductions in value due to damage, destruction, depreciation, obsolescence, removal of property or other factors causing a decline in value.

Under California law, property owners may apply for a reduction of their property tax assessment by filing a written application, in form prescribed by the State Board of Equalization, with the appropriate county board of equalization or assessment appeals board. In most cases, the appeal is filed because the applicant believes that present market conditions (such as residential home prices) cause the property to be worth less than its current assessed value. These market-driven appeals are known as Proposition 8 appeals.

Any reduction in the assessment ultimately granted as a Proposition 8 appeal applies to the year for which application is made and during which the written application was filed. These reductions are often temporary and are adjusted back to their original values when market conditions improve. Once the property has regained its prior value,

-49- adjusted for inflation, it once again is subject to the annual inflationary factor growth rate allowed under Article XIIIA.

Base Year Appeals. A second type of assessment appeal is called a base year appeal, where the property owners challenge the original (basis) value of their property. Appeals for reduction in the "base year" value of an assessment, if successful, reduce the assessment for the year in which the appeal is taken and prospectively thereafter. The base year is determined by the completion date of new construction or the date of change of ownership. Any base year appeal must be made within four years of the change of ownership or new construction date.

No assurance can be given that property tax appeals in the future will not significantly reduce the City's property tax revenues.

Limitations on Remedies Available to Bond Owners

The ability of the City to comply with its covenants under the Lease may be adversely affected by actions and events outside of the control of the City, and may be adversely affected by actions taken (or not taken) by voters, property owners, taxpayers or payers of assessments, fees and charges. See "CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS" above. Furthermore, any remedies available to the owners of the 2017B Bonds upon the occurrence of an event of default under the Lease or the Indenture are in many respects dependent upon judicial actions, which are often subject to discretion and delay and could prove both expensive and time consuming to obtain.

In addition to the limitations on Bondowner remedies contained in the Lease and the Indenture, the rights and obligations under the 2017B Bonds, the Lease and the Indenture may be subject to the following: the United States Bankruptcy Code and applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or affecting the enforcement of creditors' rights generally, now or hereafter in effect; usual equity principles which may limit the specific enforcement under State law of certain remedies; the exercise by the United States of America of the powers delegated to it by the Federal Constitution; and the reasonable and necessary exercise, in certain exceptional situations, of the police power inherent in the sovereignty of the State and its governmental bodies in the interest of serving a significant and legitimate public purpose. Bankruptcy proceedings, or the exercise of powers by the federal or state government, if initiated, could subject the Owners of the 2017B Bonds to judicial discretion and interpretation of their rights in bankruptcy or otherwise, and consequently may entail risks of delay, limitation or modification of their rights.

The opinion to be delivered by Bond Counsel, concurrently with the issuance of the 2017B Bonds, will include a qualification that the rights of the owners of the 2017B Bonds and the enforceability of the 2017B Bonds and the Indenture, the Lease and the Site Lease may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights heretofore or hereafter enacted and may also be subject to the exercise of judicial discretion in accordance with principles of equity or otherwise in appropriate cases. See "APPENDIX D - PROPOSED FORM OF OPINION OF BOND COUNSEL."

Loss of Tax-Exemption

As discussed under the caption "TAX MATTERS," interest on the 2017B Bonds could become includable in gross income for purposes of federal income taxation retroactive to the date

-50- the 2017B Bonds were issued, as a result of future acts or omissions of the Authority or the City in violation of their respective covenants in the Lease and the Indenture. Should such an event of taxability occur, the 2017B Bonds are not subject to special redemption and will remain Outstanding until maturity or until redeemed under other provisions set forth in the Indenture.

Secondary Market for Bonds

There can be no guarantee that there will be a secondary market for the 2017B Bonds or, if a secondary market exists, that any 2017B Bonds can be sold for any particular price. Occasionally, because of general market conditions or because of adverse history or economic prospects connected with a particular issue, secondary marketing practices in connection with a particular issue are suspended or terminated. Additionally, prices of issues for which a market is being made will depend upon then-prevailing circumstances. Such prices could be substantially different from the original purchase price.

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-51- TAX MATTERS

In the opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, subject, however to the qualifications set forth below, under existing law, the interest on the 2017B Bonds is excluded from gross income for federal income tax purposes and such interest is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, provided, however, that, for the purpose of computing the alternative minimum tax imposed on corporations (as defined for federal income tax purposes), such interest is taken into account in determining certain income and earnings.

The opinions set forth in the preceding paragraph are subject to the condition that the Authority comply with all requirements of the Internal Revenue Code of 1986 (the "Tax Code") that must be satisfied subsequent to the issuance of the 2017B Bonds. The Authority has covenanted to comply with each such requirement. Failure to comply with certain of such requirements may cause the inclusion of such interest in gross income for federal income tax purposes to be retroactive to the date of issuance of the 2017B Bonds.

If the initial offering price to the public (excluding bond houses and brokers) at which a 2017B Bond is sold is less than the amount payable at maturity thereof, then such difference constitutes "original issue discount" for purposes of federal income taxes and State of California personal income taxes. If the initial offering price to the public (excluding bond houses and brokers) at which a 2017B Bond is sold is greater than the amount payable at maturity thereof, then such difference constitutes "original issue premium" for purposes of federal income taxes and State of California personal income taxes. De minimis original issue discount and original issue premium is disregarded.

Under the Tax Code, original issue discount is treated as interest excluded from federal gross income and exempt from State of California personal income taxes to the extent properly allocable to each owner thereof subject to the limitations described in the first paragraph of this section. The original issue discount accrues over the term to maturity of the 2017B Bond on the basis of a constant interest rate compounded on each interest or principal payment date (with straight-line interpolations between compounding dates). The amount of original issue discount accruing during each period is added to the adjusted basis of such 2017B Bonds to determine taxable gain upon disposition (including sale, redemption, or payment on maturity) of such 2017B Bond. The Tax Code contains certain provisions relating to the accrual of original issue discount in the case of purchasers of the 2017B Bonds who purchase the 2017B Bonds after the initial offering of a substantial amount of such maturity. Owners of such 2017B Bonds should consult their own tax advisors with respect to the tax consequences of ownership of 2017B Bonds with original issue discount, including the treatment of purchasers who do not purchase in the original offering, the allowance of a deduction for any loss on a sale or other disposition, and the treatment of accrued original issue discount on such 2017B Bonds under federal individual and corporate alternative minimum taxes.

Under the Tax Code, original issue premium is amortized on an annual basis over the term of the 2017B Bond (said term being the shorter of the 2017B Bond's maturity date or its call date). The amount of original issue premium amortized each year reduces the adjusted basis of the owner of the 2017B Bond for purposes of determining taxable gain or loss upon disposition. The amount of original issue premium on a 2017B Bond is amortized each year over the term to maturity of the 2017B Bond on the basis of a constant interest rate compounded on each interest or principal payment date (with straight-line interpolations between compounding dates). Amortized 2017B Bond premium is not deductible for federal income tax purposes. Owners of

-52- premium 2017B Bonds, including purchasers who do not purchase in the original offering, should consult their own tax advisors with respect to State of California personal income tax and federal income tax consequences of owning such 2017B Bonds.

In the further opinion of Bond Counsel, interest on the 2017B Bonds is exempt from California personal income taxes.

Owners of the 2017B Bonds should also be aware that the ownership or disposition of, or the accrual or receipt of interest on, the 2017B Bonds may have federal or state tax consequences other than as described above. Bond Counsel expresses no opinion regarding any federal or state tax consequences arising with respect to the 2017B Bonds other than as expressly described above.

CERTAIN LEGAL MATTERS

Jones Hall, A Professional Law Corporation, Bond Counsel, will render an opinion with respect to the validity of the 2017B Bonds, the form of which is set forth in APPENDIX D." Certain legal matters will also be passed upon for the City and the Authority by Jones Hall, as Disclosure Counsel. Certain legal matters will be passed upon for the City and the Authority by the City Attorney.

LITIGATION

To the best knowledge of the City, there is no action, suit, proceeding, inquiry or investigation before or by any court or federal, state, municipal or other governmental authority pending and notice of which has been served on and received by the City or, to the knowledge of the City, threatened against or affecting the City or the assets, properties or operations of the City which, if determined adversely to the City or its interests, would have a material and adverse effect upon the consummation of the transactions contemplated by or the validity of the Lease, the Site Lease or the Indenture, or upon the financial condition, assets, properties or operations of the City, and the City is not in default with respect to any order or decree of any court or any order, regulation or demand of any federal, state, municipal or other governmental authority, which default might have consequences that would materially adversely affect the consummation of the transactions contemplated by the Lease, the Site Lease or the Indenture, or the financial conditions, assets, properties or operations of the City, including but not limited to the payment and performance of the City's obligations under the Lease.

RATING

S&P Global Ratings, a business unit of Standard & Poor's Financial Services LLC ("S&P"), has assigned its municipal bond rating of "AA" to the 2017B Bonds.

This rating reflects only the views of S&P, and an explanation of the significance of this rating, and any outlook assigned to or associated with this rating, should be obtained from S&P.

Generally, a rating agency bases its rating on the information and materials furnished to it and on investigations, studies and assumptions of its own. The City has provided certain

-53- additional information and materials to the rating agency (some of which does not appear in this Official Statement).

There is no assurance that this rating will continue for any given period of time or that this rating will not be revised downward or withdrawn entirely by the rating agency, if in the judgment of the rating agency, circumstances so warrant. Any such downward revision or withdrawal of any rating on the 2017B Bonds may have an adverse effect on the market price or marketability of the 2017B Bonds.

CONTINUING DISCLOSURE

The City (on behalf of the Authority and itself) will covenant for the benefit of owners of the 2017B Bonds to provide certain financial information and operating data relating to the City (the "Annual Report"), by not later than nine months after the end of the City's fiscal year (presently June 30) and commencing April 1, 2018 with the report for the fiscal year ending June 30, 2017, and to provide notices of the occurrence of certain listed events.

These covenants have been made in order to assist the purchaser of the 2017B Bonds in complying with Securities Exchange Commission Rule 15c2-12(b)(5), as amended (the "Rule"). The specific nature of the information to be contained in the Annual Report or the notices of listed events is set forth in "APPENDIX E - FORM OF CONTINUING DISCLOSURE CERTIFICATE."

The City and certain related entities, previously entered into certain disclosure undertakings under the Rule in connection with the issuance of long-term obligations. In connection with the preparation of this Official Statement, the City caused a review of filings available on the EMMA internet site maintained by the Municipal Securities Rulemaking Board covering the prior five years to be performed. Based on such review, the City believes that neither it nor its related entities have failed to comply in any material respect during the past five years with their prior continuing disclosure undertakings under the Rule.

The City will serve as the initial dissemination agent with respect to its undertaking pursuant to the Rule with respect to the Refunding Bonds.

MUNICIPAL ADVISOR

The City and the Authority have retained Public Resources Advisory Group, Oakland, California, as municipal advisor (the "Municipal Advisor") in connection with the offering of the 2017B Bonds and the preparation of this Official Statement. The Municipal Advisor assisted in the preparation and review of this Official Statement. All financial and other information presented in this Official Statement has been provided by the City and the Authority from their records, except for information expressly attributed to other sources. The Municipal Advisor takes no responsibility for the accuracy or completeness of the data provided by the City, Authority or others and has not undertaken to make an independent verification or does not assume responsibility for the accuracy, completeness, or fairness of the information contained in this Official Statement.

-54- COMPETITIVE SALE OF 20178 BONDS

The 20178 Bonds were sold pursuant to a competitive bidding process held on August 8, 2017, under the terms set forth in the Official Notice of Sale for the 20178 Bonds (the "Official Notice of Sale").

The 20178 Bonds were awarded to Morgan Stanley & Co, LLC (the "Purchaser"), whose proposal represented the lowest trust interest cost for the 2017B Bonds as determined in accordance with the Official Notice of Sale. The Purchaser has agreed to purchase the 2017B Bonds at a purchase price of $21,440,196.27 (which is equal to the par amount of the 2017B Bonds ($19,725,000), plus a net original issue premium of $1,891,185.60, less a Purchaser's discount of $175,989.33).

The Purchaser intends to offer the 2017B Bonds to the public at the offering prices set forth on the cover page of this Official Statement. The Purchaser may offer and sell to certain dealers and others at a price lower than the offering prices stated on the cover page hereof. The offering price may be changed from time to time by the Purchaser.

The Purchaser has entered into a distribution agreement with its affiliate, Morgan Stanley Smith Barney LLC. As part of the distribution arrangement, the Purchaser may distribute municipal securities to retail investors through the financial advisor network of Morgan Stanley Smith Barney LLC. As part of this arrangement, the Purchaser may compensate Morgan Stanley Smith Barney LLC for its selling efforts with respect to the 2017B Bonds.

PROFESSIONAL SERVICES

In connection with the issuance of the 2017B Bonds, fees payable to the following professionals involved in the offering are contingent upon the issuance and delivery of the 2017B Bonds: Jones Hall, A Professional Law Corporation, as Bond Counsel and Disclosure Counsel; Public Resources Advisory Group, as municipal advisor to the Authority and the City; and The Bank of New York Mellon Trust Company, N.A., as Trustee.

EXECUTION

The execution of this Official Statement and its delivery have been authorized by the Board of the Authority and the City Council of the City.

FREMONT PUBLIC FINANCING AUTHORITY

By: Isl David Persselin Treasurer

CITY OF FREMONT

By: ----~ls~l~D~a~v~i=d~P~e~r~ss~e~l~in~-----­ Finance Director

-55- (THIS PAGE INTENTIONALLY LEFT BLANK) APPENDIX A

GENERAL INFORMATION ABOUT THE CITY OF FREMONT AND THE COUNTY OF ALAMEDA

The following information concerning the City of Fremont (the "City") and the County of Alameda (the "County") is included only for the purpose of supplying general information regarding the area of the District. The 20178 Bonds are not a debt of the City, the County, the State of California (the "State') or any of its political subdivisions (other than the Authority), and none of the City, the County, the State or any of its political subdivisions (other than the Authority) is liable therefor.

General

The City. The City is a general law city which was incorporated in 1956. It comprises approximately 90 square miles located on the east side of the San Francisco Bay in southwestern Alameda County, approximately 50 miles southeast of the City of San Francisco and 15 miles north of the City of San Jose, and borders Santa Clara County to the south.

Key industries in the City include clean technology, biotechnology and advanced manufacturing. Over 850 manufacturing companies are located in the City, including Tesla, Lam Research and ThermoFisher Scientific. One example of new development in the City is the Warm Springs innovation district, which is planned for approximately 4,000 residential units and 11 million square feet in total (4.6 million of commercial square feet) at build-out. The first phase of this project is currently under construction, but there is no guarantee full build-out will occur.

The County. The County is located on the east side of the San Francisco Bay, extending to the City of Albany on the north, the City on the south, and the City of Livermore on the east, and is approximately ten miles west of San Francisco. Automobile access to San Francisco is provided by the San Francisco-Oakland Bay Bridge. In addition to a large cluster of high tech companies, the City has attracted many biotechnology and clean technology companies and serves as a center for advanced manufacturing in the region.

The northern part of the County has direct access to San Francisco Bay and the City of San Francisco. It is highly diversified with residential areas, active commercial areas, traditional heavy industry, the University of California at Berkeley, the Port of Oakland, and sophisticated manufacturing, computer services and biotechnology firms. The middle of the County is also highly developed including older established residential and industrial areas. The southeastern corner of the County, including the cities of Pleasanton and Livermore, have been strong growth in residential development and manufacturing. Many high-tech firms have moved from neighboring Silicon Valley in Santa Clara County to the County.

A-1 Population

The historic population estimates of the cities in the County, as of January 1 of the past five years are shown in the following table:

ALAMEDA COUNTY Population Estimates Calendar Years 2013 through 2017 as of January 1

2013 2014 2015 2016 2017 Alameda 76,086 76,792 77,653 79,338 79,928 Albany 18,660 18,672 18,827 18,905 18,988 Berkeley 116,355 117,705 119,246 119,997 121,238 Dublin 50,197 53,648 56,164 57,394 59,686 Emeryville 10,541 10,763 10,900 11 ,730 11,854 Fremont 221,806 225,275 228,032 229,504 231,664 Hayward 152,073 154,238 156,620 159,104 161,040 Livermore 83,954 85,250 86,578 88,207 89,648 Newark 43,591 43,973 44,430 44,767 45,422 Oakland 407,660 412,290 417,993 423,191 426,074 Piedmont 10,953 11,052 11,174 11,227 11,283 Pleasanton 71,618 72,505 74,344 75,040 75,916 San Leandro 86,395 87,058 87,866 87,882 88,274 Union City 71,480 72,056 72,774 73,010 73,452 Unincorporated County 145,722 147,071 148,717 149,937 150,892 County Total 1,567,091 1,588,348 1,611,318 1,629,233 1,645,359

Source: State of California, Department of Finance, E-4 Population Estimates for Cities, Counties, and the State, 2011-2017, with 2010 Census Benchmark. Sacramento, California, May 2017.

Employment

The City's major employers are set forth below:

CITY OF FREMONT Major Employers (As of June 30, 2017)

% of Total City Company Name Employment 111 Employment Tesla Motors 1,000-6,000 3.05% Fremont Unified School District 2,886 2.52 Washington Hospital 1,000-5,000 2.62 Western Digital 1,000-5,000 2.62 Lam Research Corporation 1,000-5,000 2.62 Seagate Magnetics 1,000-5,000 2.62 City of Fremont 904 0.79 Kaiser Permanente 500-999 0.65 Thermo Fisher Scientific 500-999 0.65 Synnex Information Tech. Inc. 500-999 0.65

(1) Number of employees listed as a range as provided by source. Source: City of Fremont Economic Development Department; Info USA.

A-2 The County's major employers are set forth below in alphabetized order.

COUNTY OF ALAMEDA Major Employers (As of June 2017)

Employer Name Location Industry Alameda County Law Enforcement Oakland Govern men! Offices-County Alameda County Sheriff's Ole Oakland Govern men! Offices-County Alameda Health System San Leandro Health Care Management Alta Bates Summit Medical Ctr Berkeley Hospitals Alta Bates Summit Medical Ctr Oakland Hospitals Bayer Health Care Berkeley Laboratories-Pharmaceutical (mfrs) California State-East Bay Hayward Schools-Universities & Colleges Academic Children's Hosp & Research Ctr Oakland Hospitals Coopervision Inc Advanced Pleasanton Optical Goods-Wholesale Dell EMC Pleasanton Computer Software East Bay Water Oakland Transit Lines Highland Hospital Oakland Hospitals Kaiser Oakland Oakland Health Services Life Scan Inc Fremont Physicians & Surgeons Equip & Su pis-Mfrs Merritt Pavilion Lab Oakland Laboratories-Medical Oakland Police Patrol Div Oakland Police Departments Residntial Stdenis Svc Program Berkeley Schools-Universities & Colleges Academic Safeway Inc Pleasanton Grocers-Retail Tesla Motors Fremont Automobile Dealers-Electric Cars Transportation Dept-California Oakland Govern men! Offices-State University of Ca-Berkeley Berkeley Schools-Universities & Colleges Academic University of CA-BERKELEY Berkeley Schools-Universities & Colleges Academic Valley Care Health System Livermore Health Services Washington Hosp Healthcare Sys Fremont Hospitals Western Digital Corp Fremont Electronic Equipment & Supplies-Mfrs

Source: California Employment Development Department, extracted from The America's Labor Market Information System (ALMIS) Employer Database. 2017 2nd Edition.

A-3 The City is included in the Oakland-Hayward-Berkeley Metropolitan Division ("MD"), which consists of Alameda and Contra Costa Counties. The unemployment rate in the Oakland­ Hayward-Berkeley MD was 3.4 percent in May 2017, down from a revised 3.5 percent in April 2017, and below the year-ago estimate of 3.9 percent. This compares with an unadjusted unemployment rate of 4.2 percent for California and 4. 1 percent for the nation during the same period. The unemployment rate was 3.3 percent in Alameda County, and 3.5 percent in Contra Costa County.

The following table shows the average annual estimated numbers by industry comprising the civilian labor force, as well as unemployment information for years 2012 through 2016.

Oakland-Hayward-Berkeley Metropolitan Division (Alameda and Contra Costa Counties) Industry Employment and Labor Force (Annual Averages)

2012 2013 2014 2015 2016 Civilian Labor Force 111 1,334,200 1,340,800 1,350,300 1,370,500 1,394,400 Employment 1,216,900 1,242,500 1,269,900 1,304,400 1,334,200 Unemployment 117,300 98,300 80,400 66,100 60,200 Unemployment Rate 8.8% 7.3% 6.0% 4.8% 4.3% Wage and Salart Em~lotment: 1' 1 Agriculture 1,500 1,400 1,300 1,200 1,300 Mining and Logging 900 900 800 900 900 Construction 52,000 56,400 58,600 62,800 67,500 Manufacturing 79,900 80,100 82,800 87,500 89,900 Wholesale Trade 43,700 45,200 46,200 47,600 49,000 Retail Trade 104,700 108,300 110,500 113,100 115,000 Transportation, Warehousing, Utilities 32,300 32,900 35,000 37,400 38,700 Information 22,900 22,700 23,000 24,900 26,400 Finance and Insurance 36,000 37,100 37,300 38,800 40,300 Real Estate and Rental and Leasing 15,400 16,200 16,800 16,800 17,000 Professional and Business Services 165,400 170,400 173,500 176,600 180,800 Educational and Health Services 164,700 170,500 173,100 178,600 184,900 Leisure and Hospitality 91,800 97,200 102,100 106,600 111 ,400 Other Services 36,400 37,000 37,500 38,100 39,200 Federal Government 14,200 13,800 13,800 13,800 13,900 State Government 38,500 38,900 39,300 39,900 39,800 Local Government 110,100 110,600 113,400 115,600 120,200 Total, All Industries 131 1,010,400 1,039,500 1,064,800 1,100,200 1,136,100

( 1) Labor force data is by place of residence; includes self-employed individuals, unpaid family workers, household domestic workers, and workers on strike. (2) Industry employment is by place of work; excludes self-employed individuals, unpaid family workers, household domestic workers, and workers on strike. (3) Totals may not add due to rounding. Source: State of California Employment Development Department. [Oakland Hayward Berkeley MD (Alameda and Contra Costa Counties) Industry Employment & Labor Force - by Annual Average March 2016 Benchmark. Updated monthly (mid-month} at http://www.labormarketinfo.edd.ca.gov/data/employment-by-industry.htmlJ

A-4 Construction Activity

The following tables show a five-year summary of the valuation of building permits issued in the City.

CITY OF FREMONT Total Building Permit Valuations (Figures in Thousands) Fiscal Years 2012-13 through 2016-17

2012-13 2013-14 2014-15 2015-16 2016-17 Permit Valuation New Single-family $49.425.5 $46.342.6 $53.311.4 $142.953.5 $126.734.5 New Multi-family 21.899.1 0.0 37.829.2 32.674.1 270.553.3 Res. Alterations/Additions 55.175.1 65.427.9 74.231.7 94.694.6 83.647.5 Total Residential 126.499.7 111.770.5 165.372.3 270.322.2 480.935.3

New Commercial 58.683.6 22.919.9 32.155.0 27.870.3 58.649.1 New Industrial 0.0 29.490.6 75.310.5 25.097.1 7.739.3 New Other 50.651.9 17.638.3 14.228.2 2.484.0 1.106.5 Com. Alterations/Additions 83.094.7 239.331.4 182.039.6 219.577.1 138.714.4 Total Nonresidential 192.430.2 309.380.2 303.733.3 275.026.5 206.209.3

New Dwelling Units Single Family 178 151 143 381 340 Multiple Family 1 0 30 18 37 TOTAL 179 151 173 399 377

Source: City of Fremont, Community Development Department.

A-5 Effective Buying Income

"Effective Buying Income" is defined as personal income less personal tax and nontax payments, a number often referred to as "disposable" or "after-tax" income. Personal income is the aggregate of wages and salaries, other labor-related income (such as employer contributions to private pension funds), proprietor's income, rental income (which includes imputed rental income of owner-occupants of non-farm dwellings), dividends paid by corporations, interest income from all sources, and transfer payments (such as pensions and welfare assistance). Deducted from this total are personal taxes (federal, state and local), nontax payments (fines, fees, penalties, etc.) and personal contributions to social insurance. According to U.S. government definitions, the resultant figure is commonly known as "disposable personal income."

The following table summarizes the total effective buying income for the City, the County, the State and the United States for the period 2012 through 2016:

CITY OF FREMONT Effective Buying Income 2012 through 2016

Median Total Effective Household Buying Income Effective Buying Year Area (000's Omitted) Income 2012 City of Fremont $6,878,773 $73,624 Alameda County 43,677,855 55,396 California 864,088,828 47,307 United States 6,737,867,730 41,358

2013 City of Fremont $6,888,630 $74,658 Alameda County 43,770,518 57,467 California 858,676,636 48,340 United States 6,982,757,379 43,715

2014 City of Fremont $7,586,198 $79,419 Alameda County 47,744,408 60,575 California 901,189,699 50,072 United States 7,357,153,421 45,448

2015 City of Fremont $8,494,130 $84,913 Alameda County 52,448,661 64,030 California 981,231,666 53,589 United States 7,757,960,399 46,738

2016 City of Fremont $9,078,279 $88,392 Alameda County 56,091,066 67,631 California 1,036,142,723 55,681 United States 8,132,748, 136 48,043

Source: The Nielsen Company (US). Inc.

A-6 Commercial Activity

Summaries of historic taxable sales within the City and the County during the past five years in which data is available are shown in the following tables. Annual figures are not yet available for calendar year 2016.

Total taxable sales during the first quarter of calendar year 2016 in the City were reported to be $913,349,000, a 4.99% increase over the total taxable sales of $869,914,000 reported during the first quarter of calendar year 2015.

CITY OF FREMONT Taxable Retail Sales Number of Permits and Valuation of Taxable Transactions (Dollars in Thousands)

Retail Stores Total All Outlets

Number Taxable Number Taxable of Permits Transactions of Permits Transactions 2011 2,576 $1,956,662 4,584 $2,835,327 2012 2,700 2,167,588 4,649 3,024,543 2013 2,727 2,208,548 4,671 3,186,126 2014 2,790 2,324,817 4,746 3,508,343 2015(l) 2,785 2,475,488 5,193 3,784,244

(1) Permit figures for calendar year 2015 are not comparable to that of prior years due to outlet counts in these reports including the number of outlets that were active during the reporting period. Retailers that operate part-time are now tabulated with store retailers. Source: State of California, Board of Equalization.

Total taxable sales during the first quarter of calendar year 2016 in the County were reported to be $7,029,210,000, a 3.76% increase over the total taxable sales of $6,774,553,000 reported during the first quarter of calendar year 2015.

ALAMEDA COUNTY Taxable Retail Sales Number of Permits and Valuation of Taxable Transactions (Dollars in Thousands)

Retail Stores Total All Outlets

Number Taxable Number Taxable of Permits Transactions of Permits Transactions 2011 24,809 $14,519,756 38,577 $23,430,799 2012 26,027 15,781,349 39,706 25,181,571 2013 27,017 16,893,102 40,662 26,624,571 2014 27,152 17,820,857 40,746 28,377,714 2015(l) 17,260 18,702,806 45,197 29,770,157

(1) Permit figures for calendar year 2015 are not comparable to that of prior years due to outlet counts in these reports including the number of outlets that were active during the reporting period. Retailers that operate part-time are now tabulated with store retailers. Source: State of California, Board of Equalization.

A-7 Transportation

Interstate Highway 880 and Interstate Highway 680 provide access to the nearby cities of Oakland, San Francisco, Sacramento, San Jose, and the Central Valley.

Fremont is located 21 miles from the Oakland International Airport, 18 miles from San Jose Municipal Airport and 31 miles from San Francisco International Airport. Deep water shipping facilities are available at the Port of Oakland and the Port of San Francisco, 26 miles and 36 miles from the City, respectively.

A.G. Transit and Altamont Commuter Express provide regional bus service and connect with the two Fremont Bay Area Rapid Transit (BART) stations. The two BART stations in the city connect Fremont with San Francisco and cities in four county areas. BART is currently extending its service an additional ten miles south to San Jose. It is anticipated that service to San Jose could begin in 2018.

Education

The Fremont Unified School District provides K-12 and special education programs. Berkeley City College, Canada College, the College of Alameda, City College of San Francisco, Chabot College, Contra Costa College, Diablo Valley College, Foothill College, Laney College, Los Medanos College, Merritt College, Ohlone College, the College of San Mateo, Skyline College and St. Mary's College are all within an hour's drive from the City. The University of California - Berkeley, California State University- East Bay, the University of San Francisco, San Francisco State University and Stanford University are also within an hour's drive from the City.

A-8 APPENDIX B

SUMMARY OF PRINCIPAL LEGAL DOCUMENTS

The following is a brief summary of the provisions of the Site Lease, Lease Agreement and the Indenture of Trust relating to the Bonds. Such summary is not intended to be definitive, and reference is made to the complete documents for the complete terms thereof.

DEFINITIONS

Except as otherwise defined in this summary, the terms previously defined in this Official Statement have the respective meanings previously given. In addition, the following terms have the following meanings when used in this summary:

"Additional Rental Payments" means the amounts of additional rental which are payable by the City under the Lease Agreement.

"Bond Counsel" means (a) Jones Hall, A Professional Law Corporation, or (b) any other attorney or firm of attorneys appointed by or acceptable to the Authority of nationally-recognized experience in the issuance of obligations the interest on which is excludable from gross income for federal income tax purposes under the Tax Code.

"Bond Fund" means the fund by that name established and held by the Trustee under the Indenture.

"Bond Year" means each twelve-month period extending from October 2 in one calendar year to October 1 of the succeeding calendar year, both dates inclusive; except that the first Bond Year commences on the Closing Date and extends to and including October 1, 2017.

"Closing Date" means the date of original issuance of the Bonds.

"Escrow Agreement" means the Escrow Deposit and Trust Agreement dated as of the Closing Date, between the City and the 2008 Trustee, relating to the payment and prepayment of the 2008 Certificates and the discharge of the City's obligations relating thereto.

"Federal Securities" means: (a) any direct general obligations of the United States of America (including obligations issued or held in book entry form on the books of the Department of the Treasury of the United States of America), for which the full faith and credit of the United States of America are pledged; (b) obligations of any agency, department or instrumentality of the United States of America, the timely payment of principal and interest on which are directly or indirectly secured or guaranteed by the full faith and credit of the United States of America.

"Fiscal Year" means any twelve-month period extending from July 1 in one calendar year to June 30 of the succeeding calendar year, both dates inclusive, or any

B-1 other twelve-month period selected and designated by the Authority as its official fiscal year period.

"Lease Payment Date" means, with respect to any Interest Payment Date, the Business Day immediately preceding such Interest Payment Date.

"Lease Payments" means the amounts payable by the City under the Lease Agreement as rental for the Leased Property, including any prepayment thereof and including any amounts payable upon a delinquency in the payment thereof, but excluding Additional Rental Payments.

"Leased Property" means the real property described in Appendix A to the Lease, together with all improvements and facilities at any time situated thereon.

"Net Proceeds" means amounts derived from any policy of casualty insurance or title insurance with respect to the Leased Property, or the proceeds of any taking of the Leased Property or portion thereof in eminent domain proceedings (including sale under threat of such proceedings), to the extent remaining after payment therefrom of all expenses incurred in the collection and administration thereof.

"Owner", when used with respect to any Bond, means the person in whose name the ownership of such Bond is registered on the Bond registration books of the Trustee.

"Permitted Encumbrances" means, as of any time: (a) liens for general ad valorem taxes and assessments, if any, not then delinquent, or which the City may permit to remain unpaid under Article V of the Lease; (b) the Site Lease, the Lease and the Assignment Agreement; (c) any right or claim of any mechanic, laborer, material man, supplier or vendor not filed or perfected in the manner prescribed by law; (d) the exceptions disclosed in the title insurance policy with respect to the Leased Property issued as of the Closing Date by Stewart Title Guaranty Company; and (e) easements, rights of way, mineral rights, drilling rights and other rights, reservations, covenants, conditions or restrictions which exist of record and which the City certifies in writing will not materially impair the use of the Leased Property for its intended purposes.

"Permitted Investments" means any of the following:

(a) any direct general obligations of the United States of America (including obligations issued or held in book entry form on the books of the Department of the Treasury of the United States of America), for which the full faith and credit of the United States of America are pledged.

(b) obligations of any agency, department or instrumentality of the United States of America, the timely payment of principal and interest on which are directly or indirectly secured or guaranteed by the full faith and credit of the United States of America.

(c) Any direct or indirect obligations of an agency or department of the United States of America whose obligations represent the full faith and credit of the United States of America, or which are rated A or better by S&P.

B-2 (d) Interest-bearing deposit accounts (including certificates of deposit) in federal or State chartered savings and loan associations or in federal or State of California banks (including the Trustee), provided that: (i) the unsecured obligations of such commercial bank or savings and loan association are rated A or better by S&P; or (ii) such deposits are fully insured by the Federal Deposit Insurance Corporation or secured at all times by collateral described in (a) or (b) above.

(e) Commercial paper rated "A-1+" or better by S&P.

(f) Federal funds or bankers acceptances with a maximum term of one year of any bank which an unsecured, uninsured and unguaranteed obligation rating of "A-1 +" or better by S&P.

(g) Money market funds registered under the Federal Investment Company Act of 1940, whose shares are registered under the Federal Securities Act of 1933, and having a rating by S&P of at least AAAm-G, AAAm or Mm, which funds may include funds for which the Trustee, its affiliates, parent or subsidiaries provide investment advisory or other management services. Money market funds permitted under this paragraph shall not include funds with a floating net asset value.

(h) Obligations the interest on which is excludable from gross income pursuant to Section 103 of the Tax Code and which are either (a) rated A or better by S&P, or (b) fully secured as to the payment of principal and interest by Permitted Investments described in clauses (a) or (b ).

(i) Obligations issued by any corporation organized and operating within the United States of America having assets in excess of $500,000,000, which obligations are rated A or better by S&P.

U) Bonds or notes issued by any state or municipality which are rated A or better by S&P.

(k) Any investment agreement with, or guaranteed by, a financial institution the long-term unsecured obligations or the claims paying ability of which are rated A or better by S&P at the time of initial investment, by the terms of which all amounts invested thereunder are required to be withdrawn and paid to the Trustee in the event either of such ratings at any time falls below A.

(I) The Local Agency Investment Fund of the State of California, created pursuant to Section 16429.1 of the California Government Code, to the extent the Trustee is authorized to register such investment in its name.

B-3 "Record Date" means, with respect to any Interest Payment Date, the 15th calendar day of the month preceding such Interest Payment Date, whether or not such day is a Business Day.

"Revenues" means: (a) all amounts received by the Authority or the Trustee under or with respect to the Lease Agreement, including, without limiting the generality of the foregoing, all of the Lease Payments (including both timely and delinquent payments, any late charges, and whether paid from any source), but excluding (i) any amounts payable by the City under the Lease Agreement in respect of additional debt, and (ii) any Additional Rental Payments; and (b) all interest, profits or other income derived from the investment of amounts in any fund or account established under the Indenture.

"Site Lease Payment" means the amount of up-front rent which is payable under the Site Lease in consideration of the lease of the Leased Property by the City to the Authority thereunder.

"S&P" means S&P Global Ratings, a business unit of Standard & Poor's Financial Services LLC business, its successors and assigns.

"Tax Code" means the Internal Revenue Code of 1986 as in effect on the Closing Date or as it may be amended to apply to obligations issued on the Closing Date, together with applicable temporary and final regulations promulgated, and applicable official public guidance published, under said Code.

"2008 Certificates" means the outstanding Certificates of Participation (2008 Refinancing Project) originally executed and delivered in the aggregate principal amount of $27,675,000.

"2008 Trustee" means The Bank of New York Mellon Trust Company, N.A.,, its successors and assigns, as successor trustee for the 2008 Certificates.

SITE LEASE

Under the Site Lease, the City agrees to lease the Leased Property to the Authority in consideration of the payment by the Authority of the Site Lease Payment on the Closing Date. The Authority agrees to cause the full amount of the Site Lease Payment to be raised from the proceeds of the Bonds, and to cause the Site Lease Payment to be deposited with the 2008 Trustee in the Escrow Fund established under the Escrow Agreement. No further rent payment is due by the Authority for the lease of the Leased Property under the Site Lease. The Site Lease is for a term commencing on the Closing Date and extending to the date on which no Bonds remain outstanding under the Indenture, but not later than ten years following the final stated maturity date of the Bonds. In the event of any release or substitution of property under the Lease Agreement as described below, the description of the property leased under the Site Lease will be modified accordingly.

B-4 LEASE AGREEMENT

Lease of Leased Property; Term

Under the Lease Agreement, the Authority leases the Leased Property back to the City. The Lease Agreement is for a term commencing on the Closing Date and extending to the date on which no Bonds remain outstanding under the Indenture, but not later than ten years following the final stated maturity date of the Bonds.

Lease Payments

The City agrees to pay semiannual Lease Payments, subject to abatement as described below, as the rental for the use and occupancy of the Leased Property. On each Lease Payment Date, the City is obligated to deposit with the Trustee the full amount of the Lease Payments coming due and payable on the next Interest Payment Date, to the extent required to be paid by the City under the Lease Agreement. Any amount held in the Bond Fund, the Interest Account or the Principal Account on any Lease Payment Date (other than amounts specifically required to be credited to the prepayment of Lease Payments), will be credited towards the Lease Payment then coming due and payable.

Source of Payments

The Lease Payments are payable from any source of available funds of the City, subject to the provisions of the Lease Agreement relating to abatement.

Budget and Appropriation

The City covenants to take all actions required to include the Lease Payments in each of its budgets during the Term of the Lease Agreement and to make the necessary appropriations for all Lease Payments and Additional Rental Payments. Such covenant constitutes a duty imposed by law and each and every public official of the City is required to take all actions required by law in the performance of the official duty of such officials to enable the City to carry out and perform the covenants and agreements in the Lease Agreement agreed to be carried out and performed by the City.

Abatement of Lease Payments

The Lease Payments will be abated under the Lease Agreement during any period in which there is substantial interference with the City's use and occupancy of all or any portion of the Leased Property, including interference due to: (a) damage or destruction of the Leased Property in whole or in part or (b) eminent domain proceedings with respect to the Leased Property or any portion thereof.

The amount of such abatement is required to be an amount determined by the City, such that the resulting Lease Payments represent fair consideration for the use and occupancy of the remaining usable portions of the Leased Property. In the event of such abatement, the City will have no obligation to pay abated Lease Payments and there is no remedy available to the Trustee or the Bond Owners arising from such abatement. Notwithstanding the foregoing, there will be no abatement of Lease Payments to the extent that Net Proceeds are available to pay Lease Payments which would otherwise

B-5 be abated under the Lease, such proceeds being constituted a special fund for the payment of the Lease Payments.

Option to Prepay

The City has the option to prepay the principal components of the Lease Payments in whole, or in part in any integral multiple of $5,000, from any source of legally available funds, on any Interest Payment Date on which the Bonds are subject to optional redemption, at a prepayment price equal to the aggregate principal components of the Lease Payments to be prepaid, together with the interest component of the Lease Payment required to be paid on such Interest Payment Date, and together with a prepayment premium equal to the premium (if any) required to be paid on the resulting redemption of Bonds under the Indenture.

Security Deposit

Notwithstanding any other prov1s1on of the Lease, the City may on any date secure the payment of the Lease Payments allocable to the Leased Property in whole or in part by depositing with the Trustee an amount of cash which, together with other available amounts on deposit in the funds and accounts established under the Indenture, is either:

(a) sufficient to pay such Lease Payments, including the principal and interest components thereof, in accordance with the Lease Payment schedule set forth in the Lease Agreement, or

(b) invested in whole or in part in non-callable Federal Securities in such amount as will, in the opinion of an independent certified public accountant, (which opinion must be addressed and delivered to the Trustee), together with interest to accrue thereon and together with any cash which is so deposited, be fully sufficient to pay such Lease Payments when due under the Lease Agreement, as the City instructs at the time of said deposit.

If the City makes a security deposit under the Lease Agreement with respect to all unpaid Lease Payments, and notwithstanding the provisions of the Lease Agreement, (a) the Term of the Lease will continue, (b) all obligations of the City under the Lease, and all security provided by the Lease for said Lease Payments, will thereupon cease and terminate, excepting only the obligation of the City to make, or cause to be made all of said Lease Payments from such security deposit, and (c) under the Lease Agreement, title to the Leased Property will vest in the City on the date of said deposit automatically and without further action by the City or the Authority. Said security deposit constitutes a special fund for the payment of Lease Payments in accordance with the provisions of the Lease.

Substitution of Property

The City has the option at any time and from time to time during the term of the Lease Agreement to substitute other land, facilities or improvements (the "Substitute Property") for the Leased Property or portion thereof (the "Former Property") provided

B-6 that the City must satisfy all of the requirements set forth in the Lease Agreement, including the following:

(a) No Event of Default has occurred and is continuing.

(b) The City has filed with the Authority and the Trustee, and caused to be recorded in the office of the Alameda County Recorder sufficient memorialization of, an amendment to the Lease Agreement which that the legal description of the Substitute Property to the Lease Agreement and deletes therefrom the legal description of the Former Property, and has filed and caused to be recorded corresponding amendments to the Site Lease and Assignment Agreement.

(c) The City has obtained a CL TA policy of title insurance insuring the City's leasehold estate in the Substitute Property, subject only to Permitted Encumbrances, in an amount at least equal to the estimated value thereof.

(d) The City has certified in writing to the Authority and the Trustee that the Substitute Property serves the municipal purposes of the City and constitutes property which the City is permitted to lease under the laws of the State of California, and has been determined to be essential to the proper, efficient and economic operation of the City and to serve an essential governmental function of the City.

(e) The Substitute Property does not cause the City to violate any of its covenants, representations and warranties made in the Lease Agreement.

(f) The City has filed with the Authority and the Trustee a written certificate of the City or other written evidencing stating that the useful life of the Substitute Property at least extends to the final maturity date of the Bonds, that the estimated value of the Leased Property, after substitution of the Substitute Property and release of the Former Property, is at least equal to the aggregate Outstanding principal amount of the Bonds, and the fair rental value of the Leased Property, after substitution of the Substitute Property and release of the Former Property, is at least equal to the Lease Payments thereafter coming due and payable under the Lease Agreement.

(g) The City has mailed written notice of such substitution to each rating agency which then maintains a rating on the Bonds.

Following the date on which all of the foregoing conditions precedent to such substitution are satisfied, the term of the Lease Agreement ceases with respect to the Former Property and continues with respect to the Substitute Property, and all references to the Former Property will apply with full force and effect to the Substitute Property. The City will not be entitled to any reduction, diminution, extension or other modification of the Lease Payments whatsoever as a result of such substitution.

B-7 Release of Property

The City has the option at any time and from time to time during the term of the Lease Agreement to release any portion of the Leased Property from the Lease Agreement (the "Released Property") provided that the City must satisfy all of the requirements set forth in the Lease Agreement, including the following:

(a) No Event of Default has occurred and is continuing.

(b) The City has filed with the Authority and the Trustee, and caused to be recorded in the office of the Alameda County Recorder sufficient memorialization of an amendment of the Site Lease and the Assignment Agreement which removes the Released Property from the Site Lease, the Assignment Agreement and the Lease.

(c) The City has certified in writing to the Authority and the Trustee that the value of the property which remains subject to the Lease Agreement following such release is at least equal to the aggregate Outstanding principal amount of the Bonds, and the fair rental value of the property which remains subject to the Lease Agreement following such release is at least equal to the Lease Payments thereafter coming due and payable under the Lease Agreement.

(d) The City has mailed written notice of such release to each rating agency which then maintains a rating on the Bonds.

Upon the satisfaction of all such conditions precedent, the Term of the Lease Agreement will thereupon end as to the Released Property. The City is not entitled to any reduction, diminution, extension or other modification of the Lease Payments whatsoever as a result of such release. The Authority and the City will execute, deliver and cause to be recorded all documents required to discharge the Site Lease, the Lease Agreement and the Assignment Agreement of record against the Released Property.

Maintenance, Utilities, Taxes and Modifications

The City, at its own expense, has agreed to maintain or cause to be maintained the Leased Property in good repair; the Authority has no responsibility for such maintenance. The City is also obligated to pay all taxes and assessments charged to the Leased Property. The City has the right under the Lease Agreement to remodel the Leased Property and to make additions, modifications and improvements to the Leased Property, provided that any such additions, modifications and improvements to the Leased Property are of a value which is not substantially less than such value of the Leased Property immediately prior to making such additions, modifications and improvements. The City will not permit any mechanic's or other lien to be established or to remain against the Leased Property, except that the City has the right in good faith to contest any such lien.

B-8 Insurance

The Lease Agreement requires the City to maintain or cause to be maintained the following insurance against risk of physical damage to the Leased Property and other risks for the protection of the Bond Owners, the Authority and the Trustee:

Public Liability and Property Damage Insurance. The City shall maintain or cause to be maintained throughout the Term of the Lease, but only if and to the extent available from reputable insurers at reasonable cost in the reasonable opinion of the City, a standard commercial general liability insurance policy or policies in protection of the Authority, the City, and their respective members, officers, agents, employees and assigns. Said policy or policies shall provide for indemnification of said parties against direct or contingent loss or liability for damages for bodily and personal injury, death or property damage occasioned by reason of the operation of the Leased Property. Such policy or policies shall provide coverage in such liability limits and be subject to such deductibles as the City deems adequate and prudent. Such insurance may be maintained as part of or in conjunction with any other insurance coverage carried by the City, and may be maintained in whole or in part in the form of self-insurance by the City, or in the form of the participation by the City in a joint powers agency or other program providing pooled insurance. The proceeds of such liability insurance must be applied toward extinguishment or satisfaction of the liability with respect to which paid.

If any insurance required pursuant to this provision is provided in the form of self­ insurance, the City must file with the Trustee annually, within 90 days following the close of each Fiscal Year, a statement of the risk manager of the City or an independent insurance adviser engaged by the City identifying the extent of such self-insurance and stating the determination that the City maintains sufficient reserves with respect thereto. If any such insurance is provided in the form of self-insurance by the City, the City has no obligation to make any payment with respect to any insured event except from those reserves.

Casualty Insurance. The City shall procure and maintain, or cause to be procured and maintained, throughout the Term of the Lease, casualty insurance against loss or damage to all buildings situated on the Leased Property, in an amount at least equal to the lesser of (a) 100% of the replacement value of the insured buildings, or (b) 100% of the aggregate principal amount of the Outstanding Bonds. Such insurance must, as nearly as practicable, cover loss or damage by explosion, windstorm, riot, aircraft, vehicle damage, smoke and such other hazards as are normally covered by such insurance, and must include earthquake insurance if available at reasonable cost from reputable insurers in the judgment of the City. Such insurance may be subject to such deductibles as the City deems adequate and prudent. Such insurance may be maintained as part of or in conjunction with any other insurance coverage carried by the City, and may be maintained in whole or in part in the form of the participation by the City in a joint powers agency or other program providing pooled insurance; provided that such insurance may not be maintained by the City in the form of self-insurance. The Trustee, as assignee of the Authority under the Assignment Agreement, has the right to receive all Net Proceeds. As provided in the Indenture, the Trustee will deposit all Net Proceeds in the Insurance and Condemnation Fund to be applied as set forth in "Damage, Destruction and Eminent Domain" below.

B-9 Rental Interruption Insurance. The City shall procure and maintain, or cause to be procured and maintained, throughout the Term of the Lease, rental interruption or use and occupancy insurance to cover loss, total or partial, of the use of any portion of the Leased Property constituting buildings or other improvements as a result of any of the hazards covered in the insurance required by the casualty insurance described above in an amount at least equal to the maximum such Lease Payments coming due and payable during any consecutive two Fiscal Years. Such insurance may be maintained as part of or in conjunction with any other insurance coverage carried by the City, and may be maintained in whole or in part in the form of the participation by the City in a joint powers agency or other program providing pooled insurance; provided that such insurance may not be maintained by the City in the form of self-insurance. The Net Proceeds of such insurance, if any, must be paid to the Trustee and deposited in the Bond Fund, to be applied as a credit towards the payment of the Lease Payments allocable to the insured improvements as the same become due and payable.

Recordation and Title Insurance. On or before the Closing Date the City shall, at its expense, (a) cause the Site Lease, the Assignment Agreement and the Lease, or a memorandum thereof or thereof in form and substance approved by Bond Counsel, to be recorded in the office of the Alameda County Recorder, and (b) obtain a CL TA title insurance policy insuring the City's leasehold estate in the Leased Property, subject only to Permitted Encumbrances, in an amount at least equal to the aggregate principal amount of the Bonds. All Net Proceeds received under any such title insurance policy must be deposited with the Trustee in the Bond Fund to be credited towards the prepayment of the remaining Lease Payments under the Lease.

Damage, Destruction and Eminent Domain

Application of Net Proceeds. The Trustee, as assignee of the Authority under the Assignment Agreement, has the right to receive all Net Proceeds. As provided in the Indenture, the Trustee will deposit all Net Proceeds in the Insurance and Condemnation Fund to be applied as set forth in the Indenture.

Termination or Abatement Due to Eminent Domain If all or any part of the Leased Property is taken by eminent domain proceedings (or sold to a government threatening to exercise the power of eminent domain) the Authority shall deposit or cause to be deposited with the Trustee the Net Proceeds therefrom, which the Trustee shall deposit in the Insurance and Condemnation Fund and which shall be applied and disbursed by the Trustee as follows:

(a) If the City has not given written notice to the Trustee, within 90 days following the date on which such Net Proceeds are deposited with the Trustee, of its determination that such Net Proceeds are needed for the replacement of the Leased Property or such portion thereof, the Trustee shall transfer such Net Proceeds to the Redemption Fund to be applied towards the redemption of the Bonds.

(bi) If the City has given written notice to the Trustee, within 90 days following the date on which such Net Proceeds are deposited with the Trustee, of its determination that such Net Proceeds are needed for replacement of the Leased Property or such portion thereof, the Trustee shall pay to the City, or to its order, from said proceeds

B-10 such amounts as the City may expend for such replacement, upon the filing of Written Requisitions of the City as agent for the Authority.

Abatement Due to Damage or Destruction. The Lease Payments are subject to abatement during any period in which by reason of damage or destruction (other than by eminent domain which is addressed above) there is substantial interference with the use and occupancy by the City of the Leased Property or any portion thereof. The Lease Payments are subject to abatement in an amount determined by the City such that the resulting Lease Payments represent fair consideration for the use and occupancy of the remaining usable portions of the Leased Property not damaged or destroyed. The abatement will continue for the period commencing with such damage or destruction and ending with the substantial completion of the work of repair or reconstruction. In the event of any such damage or destruction, the Lease continues in full force and effect and the City waives any right to terminate the Lease by virtue of any such damage and destruction.

Any Net Proceeds of insurance against accident to or destruction of the Leased Property collected by the City or the Authority in the event of any such accident or destruction shall be paid to the Trustee and deposited by the Trustee promptly upon receipt thereof in the Insurance and Condemnation Fund. If the City fails to determine and notify the Trustee in writing of its determination, within 90 days following the date of such deposit, to replace, repair, restore, modify or improve the Leased Property which has been damaged or destroyed, then such Net Proceeds shall be promptly transferred by the Trustee to the Redemption Fund and applied to the redemption of Bonds. Notwithstanding the foregoing sentence, however, if the Leased Property is damaged or destroyed in full, the Net Proceeds of such insurance shall be used by the City to rebuild or replace the Leased Property if such proceeds are not sufficient to redeem Outstanding Bonds equal in aggregate principal amount to the unpaid Lease Payments allocable to the Leased Property. All proceeds deposited in the Insurance and Condemnation Fund and not so transferred to the Redemption Fund shall be applied to the prompt replacement, repair, restoration, modification or improvement of the damaged or destroyed portions of the Leased Property by the City. Any balance of the proceeds remaining after such work has been completed as certified by the City under a Written Certificate to the Trustee shall be paid to the City.

Assignment; Subleases

The Authority has assigned certain of its rights under the Lease Agreement to the Trustee under the Assignment Agreement. The City may not assign any of its rights in the Lease Agreement. The City may sublease all or a portion of the Leased Property, but only under the conditions contained in the Lease Agreement, including the condition that such sublease not cause the interest component of the Lease Payments to become subject to federal or State of California personal income taxes.

Amendment of Lease Agreement

The Authority and the City may at any time amend or modify any of the provisions of the Lease Agreement, but only: (a) with the prior written consents of the Owners of a majority in aggregate principal amount of the outstanding Bonds; or (b)

B-11 without the consent of any of the Bond Owners, but only if such amendment or modification is for any one or more of the following purposes:

• to add to the covenants and agreements of the City contained in the Lease, other covenants and agreements thereafter to be observed, or to limit or surrender any rights or power therein reserved to or conferred upon the City;

• to make such provisions for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective provision contained therein, to conform to the original intention of the City and the Authority;

• to modify, amend or supplement the Lease Agreement in such manner as to assure that the interest on the Bonds remains excluded from gross income under the Tax Code;

• to amend the description of the Leased Property to reflect accurately the property originally intended to be included therein;

• to obligate the City to pay additional amounts of rental for the use and occupancy of the Leased Property, but only if (A) such additional amounts of rental are pledged or assigned for the payment of any bonds, notes, leases or other obligations the proceeds of which are applied to finance or refinance the acquisition or construction of any real or personal property for which the City is authorized to expend funds subject to its control, (B) the City has obtained and filed with the Trustee an appraisal showing that the appraised value of the Leased Property is at least equal to the aggregate principal amount of the outstanding Bonds and all such other bonds, notes, leases or other obligations, and (C) the City has filed with the Trustee written evidence that the amendments made under this clause will not of themselves cause a reduction or withdrawal of any rating then assigned to the Bonds;

• in any other respect whatsoever as the Authority and the City may deem necessary or desirable, provided that, in the opinion of Bond Counsel, such modifications or amendments do not materially adversely affect the interests of the Owners of the Bonds.

Events of Default

Each of the following constitutes an Event of Default under and as defined in the Lease Agreement:

• Failure by the City to pay any Lease Payment or other payment required to be paid under the Lease Agreement at the time specified therein.

B-12 • Failure by the City to observe and perform any covenant, condition or agreement on its part to be observed or performed under the Lease Agreement, other than as referred to in the preceding paragraph, for a period of 30 days after written notice specifying such failure and requesting that it be remedied has been given to the City by the Authority or the Trustee; provided, however, that if in the reasonable opinion of the City the failure stated in the notice can be corrected, but not within such 30-day period, such failure will not constitute an Event of Default if the City commences to cure such failure within such 30- day period and thereafter diligently and in good faith cures such failure in a reasonable period of time.

• Certain events relating to the insolvency or bankruptcy of the City.

Remedies on Default

Upon the occurrence and continuance of any Event of Default, the Authority has the right to terminate the Lease Agreement or, with or without such termination, re-enter, take possession of and re-let the Leased Property. When the Authority does not elect to terminate the Lease Agreement, the City remains liable to pay all Lease Payments as they come due and liable for damages resulting from such Event of Default. Any amounts collected by the Authority from the reletting of the Leased Property will be credited towards the unpaid Lease Payments. Any net proceeds of re-leasing or other disposition of the Leased Property are required to be applied as set forth in the Indenture. Under the Assignment Agreement, the Authority assigns all of its rights with respect to remedies in an Event of Default to the Trustee, so that all such remedies will be exercised by the Trustee and the Bond Owners as provided in the Indenture.

The Trustee has no right to accelerate Lease Payments and, due to the governmental nature of the Leased Property, it is uncertain whether a court would permit the exercise of the remedies of re-entry, repossession or re-letting.

B-13 INDENTURE OF TRUST

Establishment of Funds and Accounts; Flow of Funds

Costs of Issuance Fund. A portion of the proceeds of the Bonds will be deposited by the Trustee in the Costs of Issuance Fund on the Closing Date. The moneys in the Costs of Issuance Fund will be disbursed to pay costs of issuing the Bonds and other related financing costs from time to time upon receipt of written requests of the Authority. On January 1, 2018, or at the earlier written request of the Authority, all amounts remaining in the Costs of Issuance Fund will be transferred by the Trustee to the Interest Account and the Trustee will thereupon close the Costs of Issuance Fund.

Establishment and Application of Refunding Fund. The Trustee will establish, maintain and hold in trust a separate fund designated as the "Refunding Fund" into which the Trustee will deposit a portion of the proceeds of sale of the Bonds. The Trustee will immediately disburse amounts in the Refunding Fund to the 2008 Trustee for deposit in the Escrow Fund established under the Escrow Agreement. Following such transfer, the Trustee will close the Refunding Fund.

Site Lease Payment. Proceeds representing the Site Lease Payment will be transferred to the 2008 Trustee for application pursuant to the Escrow Agreement, to be applied to refund and defease the 2008 Certificates in full.

Bond Fund; Deposit and Transfer of Amounts Therein. All Revenues will be deposited by the Trustee in the Bond Fund promptly upon receipt. On or before each Interest Payment Date, the Trustee shall transfer from the Bond Fund and deposit into the following respective accounts ( each of which the Trustee will establish and maintain within the Bond Fund), the following amounts in the following order of priority:

(a) Interest Account. The Trustee will deposit in the Interest Account an amount required to cause the aggregate amount on deposit in the Interest Account to equal the amount of interest coming due and payable on such date on all outstanding Bonds. All moneys in the Interest Account will be used and withdrawn by the Trustee solely for the purpose of paying the interest on the Bonds as it comes due and payable, including accrued interest on any Bonds redeemed prior to maturity.

(b) Principal Account. The Trustee will deposit in the Principal Account an amount required to cause the aggregate amount on deposit therein to equal the principal amount of the Bonds maturing on such date. All moneys in the Principal Account will be used and withdrawn by the Trustee solely for the purpose of paying the principal of the Bonds at the maturity thereof.

Redemption Fund. The Trustee will establish and maintain a Redemption Fund, amounts in which will be used and withdrawn by the Trustee solely for the purpose of paying the principal of on the Bonds to be redeemed. At any time prior to giving notice of redemption of any such Bonds, the Trustee may apply such amounts to the purchase

B-14 of Bonds at public or private sale, as and when and at such prices (including brokerage and other charges, but excluding accrued interest, which is payable from the Interest Account) as the Authority directs, except that the purchase price (exclusive of accrued interest) may not exceed the redemption price then applicable to the Bonds.

Investment of Funds; Determination of Value of Investments

All moneys in any of the funds or accounts held by the Trustee under the Indenture will be invested by the Trustee solely in Permitted Investments as directed by the Authority in advance of the making of such investments. In the absence of any such direction of the Authority, the Trustee will invest any such moneys in Permitted Investments consisting of money market funds. Obligations purchased as an investment of moneys in any fund will be deemed to be part of such fund or account.

All interest or gain derived from the investment of amounts in any of the funds or accounts established under the Indenture will be deposited in the Bond Fund. For the purpose of determining the amount in any fund or account established under the Indenture, the value of investments credited to such fund will be calculated at the market value thereof, in accordance with the procedures specified in the Indenture.

Covenants of the Authority

Payment of Bonds. The Authority will punctually pay or cause to be paid the principal of and interest and premium (if any) on the Bonds, in strict conformity with the terms of the Bonds and of the Indenture, but only out of the Revenues and other assets pledged for such payment as provided in the Indenture. The Authority will not create, or permit the creation of, any pledge, lien, charge or other encumbrance upon the Revenues and other assets pledged or assigned under the Indenture while any of the Bonds are outstanding, except the pledge and assignment created by the Indenture.

Accounting Records and Financial Statements. The Trustee will at all times keep, or cause to be kept, proper books of record and account, prepared in accordance with industry standards, in which complete and accurate entries will be made of all transactions relating to the proceeds of the Bonds, and all funds and accounts established pursuant to the Indenture. Such books of record and account will be available for inspection by the Authority and the City, during regular business hours and upon reasonable prior notice.

No Additional Obligations. The Authority covenants that no additional bonds, notes or other indebtedness will be issued or incurred which are payable out of the Revenues in whole or in part.

Tax Covenants. The Authority will not take, nor permit nor suffer to be taken by the Trustee or otherwise, any action with respect to the proceeds of any of the Bonds which would cause any of the Bonds to be "arbitrage bonds" or "private activity bonds" within the meaning of the Tax Code. The Authority will cause to be calculated annually all excess investment earnings which are required to be rebated to the United States of America under the Tax Code, and will cause all required amounts to be rebated from payments made by the City for such purpose under the Lease Agreement.

B-15 Lease Agreement. The Trustee will promptly collect all amounts due from the City pursuant to the Lease Agreement. Subject to the provisions of the Indenture governing the enforcement of remedies upon the occurrence of an Event of Default, the Trustee is required to enforce, and take all steps, actions and proceedings which the Trustee determines to be reasonably necessary for the enforcement of all of its rights thereunder as assignee of the Authority and for the enforcement of all of the obligations of the City under the Lease Agreement.

Amendment of Indenture

The Indenture may be modified or amended at any time by a supplemental indenture with the prior written consents of the Owners of a majority in aggregate principal amount of the Bonds then outstanding. No such modification or amendment may (a) extend the maturity of or reduce the interest rate on any Bond or otherwise alter or impair the obligation of the Authority to pay the principal, interest or redemption premiums (if any) at the time and place and at the rate and in the currency provided therein of any Bond without the express written consent of the Owner of such Bond, (b) reduce the percentage of Bonds required for the written consent to any such amendment or modification, or (c) without its written consent thereto, modify any of the rights or obligations of the Trustee.

The Indenture may also be modified or amended at any time by a supplemental indenture, without the consent of any Bond Owners, to the extent permitted by law, but only for any one or more of the following purposes:

• To add to the covenants and agreements of the Authority contained in the Indenture, other covenants and agreements thereafter to be observed, to pledge or assign additional security for the Bonds (or any portion thereof), or to surrender any right or power therein reserved to or conferred upon the Authority.

• To cure any ambiguity, inconsistency or omission in the Indenture, or correct any defective provision in the Indenture, or in any other respect whatsoever as the Authority may deem necessary or desirable, so long as such modification or amendment does not materially adversely affect the interests of the Bond Owners in the opinion of Bond Counsel filed with the Trustee.

• To modify, amend or supplement the Indenture in such manner as to permit the qualification of the Indenture under the Trust Indenture Act of 1939 or any similar federal statute at any time in effect.

• To modify, amend or supplement the Indenture so as to cause interest on the Bonds to remain excludable from gross income under the Tax Code.

• to facilitate the issuance of additional obligations of the City under the Lease Agreement. See "LEASE AGREEMENT - Amendment of Lease Agreement" above.

B-16 Events of Default

Events of Default Defined. The following events constitute events of default under the Indenture:

• Failure to pay any installment of the principal of any Bonds when due, whether at maturity as therein expressed, by proceedings for redemption, by acceleration, or otherwise.

• Failure to pay any installment of interest on the Bonds when due.

• Failure by the Authority to observe and perform any of the other covenants, agreements or conditions on its part contained in this Indenture or in the Bonds, if such failure has continued for a period of 30 days after written notice thereof, specifying such failure and requiring the same to be remedied, has been given to the Authority by the Trustee; provided, however, if in the reasonable opinion of the Authority the failure stated in the notice can be corrected, but not within such 30-day period, such failure shall not constitute an Event of Default if the Authority institutes corrective action within such 30-day period and thereafter diligently and in good faith cures the failure in a reasonable period of time.

• The commencement by the Authority of a voluntary case under Title 11 of the United States Code or any substitute or successor statute.

• The occurrence and continuation of any Event of Default under and as defined in the Lease Agreement. See "LEASE AGREEMENT - Events of Default" above.

Remedies. Upon the occurrence and during the continuance of any Event of Default, the Trustee may, and at the written direction of the Owners of a majority in aggregate principal amount of the Bonds at the time outstanding the Trustee shall:

• upon notice in writing to the Authority and the City, and subject to receipt of satisfactory indemnity, declare the principal of all of the Bonds then outstanding, and the interest accrued thereon, to be due and payable immediately (provided that no such acceleration will have the effect of accelerating the City's obligations under the Lease Agreement, as more fully described above), or

• enforce any rights of the Trustee under or with respect to the Indenture.

The Trustee is irrevocably appointed (and the successive respective Owners of the Bonds, by taking and holding the same, shall be conclusively deemed to have so appointed the Trustee) as trustee and true and lawful attorney-in-fact of the Owners of the Bonds for the purpose of exercising and prosecuting on their behalf such rights and remedies as may be available to such Owners under the provisions of the Bonds, the Indenture and applicable provisions of any law.

B-17 Application of Revenues and Other Funds After Default. If an Event of Default has occurred and is continuing, all Revenues and any other funds then held or thereafter received by the Trustee under any of the provisions of the Indenture will be applied by the Trustee as follows and in the following order:

(1) To the payment of reasonable fees, charges and expenses of the Trustee (including reasonable fees and disbursements of its counsel) incurred in and about the performance of its powers and duties under the Indenture;

(2) To the payment of the principal of and interest then due on the Bonds (upon presentation of the Bonds to be paid, and stamping or otherwise noting thereon of the payment if only partially paid, or surrender thereof if fully paid) in accordance with the provisions of the Indenture, as follows:

First: To the payment to the persons entitled thereto of all installments of interest then due in the order of the maturity of such installments, and, if the amount available is not sufficient to pay in full any installment or installments maturing on the same date, then to the payment thereof ratably, according to the amounts due thereon, to the persons entitled thereto, without any discrimination or preference; and

Second: To the payment to the persons entitled thereto of the unpaid principal of any Bonds which have become due, whether at maturity or by acceleration or redemption, with interest on the overdue principal at the rate borne by the respective Bonds (to the extent permitted by law), and, if the available amount is not sufficient to pay in full all the Bonds, together with such interest, then to the payment thereof ratably, according to the amounts of principal due on such date to the persons entitled thereto, without any discrimination or preference.

Limitation on Bond Owners' Right to Sue. No Owner of any Bond has the right to institute any suit, action or proceeding at law or in equity, for any remedy under the Indenture, unless:

• such Owner has previously given to the Trustee written notice of the occurrence of an Event of Default;

• the Owners of a majority in aggregate principal amount of all the Bonds then outstanding have requested the Trustee in writing to exercise its powers under the Indenture;

• said Owners have tendered to the Trustee indemnity reasonably acceptable to the Trustee against the costs, expenses and liabilities to be incurred in compliance with such request;

B-18 • the Trustee has refused or failed to comply with such request for a period of 60 days after such written request has been received by the Trustee and said tender of indemnity is made to the Trustee; and

• no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Owners of a majority in aggregate principal amount of the Bonds then outstanding.

Discharge of Indenture

The Authority may pay and discharge the indebtedness on any or all of the outstanding Bonds in any one or more of the following ways:

• by paying or causing to be paid the principal of and interest on the Bonds, as and when the same become due and payable;

• by irrevocably depositing with the Trustee, in trust, at or before maturity, cash and/or non-callable Federal Securities which, together with the investment earnings to be received thereon, have been verified by an independent accountant to be sufficient to pay or redeem such Bonds when and as the same become due and payable; or

• by delivering to the Trustee, for cancellation by it, all of such Bonds.

Upon such payment or delivery, and notwithstanding that any Bonds have not been surrendered for payment, the pledge of the Revenues and other funds provided for in the Indenture with respect to such Bonds, and all other obligations of the Authority under the Indenture with respect to such Bonds, will cease and terminate, except only the obligation of the Authority to pay or cause to be paid to the Owners of such Bonds not so surrendered and paid all sums due thereon from amounts set aside for such purpose. Any funds thereafter held by the Trustee, which are not required for said purposes, will be paid over to the Authority.

B-19 (THIS PAGE INTENTIONALLY LEFT BLANK) APPENDIX C

FISCAL YEAR 2015-16 COMPREHENSIVE ANNUAL FINANCIAL REPORT

C-1 (THIS PAGE INTENTIONALLY LEFT BLANK) ..... Freili6nt car ntia This page intentionally left blank COMPREHENSIVE ANNUAL FINANCIAL REPORT

Prepared by the Finance Department This page intentionally left blank Introductory Section Letter of Transmittal ...... 1 Location Map ...... 7 City Council and Staff ...... 8 Organization Chart ...... 9 GFOA - Certification of Achievement ...... 10

Financial Section Independent Auditor's Report ...... 11 Management's Discussion and Analysis ...... 13 Basic Financial Statements Government-Wide Financial Statements • Statement of Net Position ...... 29 • Statement of Activities ...... 30 Governmental Funds Financial Statements • Balance Sheet ...... 34 • Reconciliation of the Governmental Funds Balance Sheet to the Government-Wide Statement of Net Position ...... 37 • Statement of Revenues, Expenditures and Changes in Fund Balances ...... 38 • Reconciliation of the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balances to the Government-Wide Statement of Activities ... 40 Proprietary Funds Financial Statements • Statement of Net Position ...... 42 • Statement of Revenues, Expenses and Changes in Net Position ...... 43 • Statement of Cash Flows ...... 44 Fiduciary Funds Financial Statements • Statement of Assets and Liabilities ...... 46 Index to Notes to Basic Financial Statements ...... 47 Notes to Basic Financial Statements ...... 49

Required Supplementary Information Budgetary Information ...... 95 Modified Approach for the City's Infrastructure ...... 101 Schedules of Changes in the Net Pension Liability and Related Ratios ...... 104 Schedule of Contributions ...... 106 Schedule of Other Post Employment Benefits (OPEB) Funding Progress ...... 108

CAFR for the Fiscal Year Ended June 30, 2016 I i Supplementary Information Non-Major Governmental Funds Descriptions ...... 110 Combining Balance Sheet ...... 114 Combining Statement of Revenues, Expenditures and Changes in Fund Balances ...... 122 Budgetary Comparison Schedule ...... 130 Internal Service Funds Combining Statement of Net Position ...... 140 Combining Statement of Revenues, Expenses and Changes in Net Position ...... 141 Combining Statement of Cash Flows ...... 142 Agency Funds Descriptions ...... 144 Combining Statement of Assets and Liabilities ...... 145 Combining Statement of Changes in Assets and Liabilities ...... 146 Human Services Fund Descriptions ...... 148 Summary of Human Services Fund Balance Sheet ...... 150 Summary of Human Services Fund Revenues, Expenditures and Changes in Fund Balance ...... 154

Statistical Section Descriptions ...... 159 Net Position by Component ...... 160 Changes in Net Position ...... 162 Fund Balances of Governmental Funds ...... 164 Changes in Fund Balances of Governmental Funds ...... 166 Assessed Value and Actual Value of Taxable Property ...... 168 Direct and Overlapping Governments ...... 169 Principal Property Tax Payers ...... 170 Property Tax Levies and Collections ...... 171 Ratios of Outstanding Debt by Type ...... 172 Ratios of General Bonded Debt Outstanding ...... 173 Direct and Overlapping Governmental Activities Debt ...... 174 Legal Debt Margin Information ...... 175 Demographic and Economic Statistics ...... 176 Construction Permits and Estimated Value ...... 177 Principal Employers ...... 178 Full-time Equivalent Employees by Function ...... 179 Operating Indicators by Function ...... 180 Capital Asset Statistics by Function/Program ...... 181

ii I City of Fremont, California Finance Depwtment

3300 Capitol Avenue, ll111l

s1049,1-,1610ph I s10 N,1-4611

December 6, 2016

To the Honorable Mayor, Members of the City Council and Citizens of the City of Fremont, California

Various financing covenants and rules associated with restricted funding sources require the City of Fremont, California (City) to publish a complete set of audited financial statements presented in conformance with generally accepted accounting principles (GAAP). This report is published to fulfill that requirement for the fiscal year ended June 30, 2016.

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

Macias Gini & O'Connell LLP, a firm of licensed certified public accountants, has issued an unmodified ("clean") opinion on the City's financial statements for the fiscal year ended June 30, 2016. The independent auditor's report is located at the front of the financial section of this report.

Management's discussion and analysis (MD&A) immediately follows the independent auditor's report and provides a narrative introduction, overview, and analysis of the basic financial statements. MD&A complements this letter of transmittal and should be read in conjunction with it.

Profile of the Government

The City of Fremont, incorporated in 1956, is located at the southeast end of the San Francisco Bay. With a population of over 229,000, Fremont is the fourth largest city in the Bay Area, the 16th largest in California, and the 96th most populous city in the nation. The City of Fremont is approximately 92 square miles in size. In addition to a large cluster of high tech companies, Fremont has attracted many biotechnology and clean technology companies and serves as a center for advanced manufacturing in the region.

The City of Fremont has operated under the council-manager form of government since its incorporation in 1956. Policy-making and legislative authority are vested in a five-member governing council consisting of the Mayor and four Councilmembers. The City Council is responsible for, among other things, passing ordinances, adopting the budget, approving the Mayor's nominees to commissions, and hiring both the City's manager and its attorney.

CAFR for the Fiscal Year Ended June 30, 2016 I 1 Letter of Transmittal

The City Manager is responsible for carrying out the policies and ordinances of the City Council, for overseeing the day-to-day operations of the City, and for appointing the heads of the various departments. The City Council is elected on a non-partisan basis. Councilmembers serve four-year staggered terms, with two Councilmembers elected every two years. The Mayor is elected to serve a four-year term. The Mayor and Councilmembers are elected at large and all are subject to a two­ term limit.

The City of Fremont provides a broad range of services, including police and fire protection, construction and maintenance of streets, parks, storm drains and other infrastructure, building inspections, licenses and permits, recreational and cultural activities, and human services programs. The City also manages franchises for solid waste, cable television, and energy.

The City of Fremont is a general law city and, as such, does not operate under the provisions of a voter-approved charter. As with other California cities, Fremont has limited ability to set tax rates. The State Constitution establishes a maximum rate for property tax and limits the growth of assessed value. The property tax collected by the County is allocated among the taxing jurisdictions in the County based on criteria established by the State Legislature. The rate and tax base of the City's other major general tax, sales tax, are also controlled by the State Legislature or the Constitution, rather than the City Council.

Increases of existing local taxes and any new taxes require voter approval. Taxes used for general purposes are subject to approval by a simple majority of voters, while taxes levied for specific purposes require a two-thirds majority of voters, as do property tax levies used to pay for debt issued to build capital assets.

Assessments have varying requirements for voter approval, ranging from approval through Council action unless challenged by a majority protest, to two-thirds voter approval, with voting rights apportioned based on the amount of the assessment. In addition, fees for facilities and services are subject to requirements that they be set at levels that do not exceed the reasonable costs of providing those services. As a result, fund balances generated by differences between fee revenue and related expenses are restricted or committed for services and facilities that benefit fee payers.

The City of Fremont budget policies are subject to California State law, GAAP, and actions of the City Council. The City's annual operating budget is adopted by the City Council by July 1 each year. The annual budget sets appropriations by fund, with further allocation by department or program. At the fund level, expenditures may not legally exceed appropriations. The City Manager is authorized to transfer budgeted amounts between departments or programs within any fund. The annual budget resolution authorizes the City Manager to increase appropriations for operating expenditures due to increases in grant or activity-based revenues in an amount not to exceed the increased grant or activity-based revenues. All other revisions or transfers that alter the total appropriations of other funds must be approved by the City Council, which also may adopt supplemental appropriations at any time during the year.

2 I City of Fremont, California Letter of Transmittal

Local Economy

Fremont is the fourth largest city in Silicon Valley, with a vibrant and diversified globally connected economy with important assets such as a centralized Bay Area location, access to the Bay Area Rapid Transit (BART) commuter rail system, and a world class workforce. For these reasons, Fremont is home to dozens of innovative firms, including Tesla Motors, Lam Research, Seagate Technology, Western Digital, ThermoFisher Scientific, Delta Products and more. Considered the advanced manufacturing hub of Silicon Valley, approximately 22% of working adults in Fremont are employed in manufacturing. The growth of Tesla has resulted in an equally impressive growth of new companies in its supply chain within the City and region. In December 2016, the City Council approved Tesla's master plan, which contemplates up to four million additional square feet of development on its factory site, as it ramps up production for its next generation vehicle, Model 3. Two of Fremont's most prominent sectors are clean technology and biomedical. Fremont is home to a growing cluster of nearly 50 clean-tech companies, such as Solar City, Soraa, and GenZe, and it has been recognized as having the largest number of biomedical manufacturing companies in the Bay Area.

Growing industries and employment sectors include:

• Electric vehicle industry • High-tech and information technology • Clean and green technology • Biotechnology and life sciences • Logistics, warehousing, and goods movement • Medical According to a report completed by San Francisco-based Size Up.com, Fremont is ranked No. 1 in the country for technology start-up business per capita, with 21 for every 100,000 residents. Fremont was voted the 2nd Most Inventive City in America for number of patents in 2010 by The Daily Beast/Newsweek, and ranks 4th in Silicon Valley for number of patents obtained in the past decade. Corporate expansion activity in the City has resulted in over $500 million of investment over the last five years. And with nearly 50 million square feet of office, R&D, manufacturing, and warehouse building space, Fremont has 65% of all R&D real estate inventory in the East Bay Area.

Fremont is one of the most ethnically and culturally diverse cities in the Bay Area, with highly educated residents and high-paying jobs in a variety of business sectors. The average household income is $114,684, and 49% of Fremont's residents have bachelor's, graduate, or professional degrees. Fremont was recently named the 5th best run city in the nation by 24/7 Wall Street and the 10th happiest mid-size city in America by Career Bliss.

CAFR for the Fiscal Year Ended June 30, 2016 I 3 Letter of Transmittal

Long-Term Financial Planning and Major Initiatives

The City maintains a multi-year forecasting model for operating revenues and expenditures, and also produces a five-year capital plan that includes debt service. The multi-year forecast is regularly updated to reflect current revenue and expenditure assumptions and is presented to the City Council at mid-year and during the budget process for the next fiscal year. The City's five­ year capital plan is updated every two years.

The City Council has continued to focus attention on the long-term benefits of transportation infrastructure improvements, recruitment of consumer retail uses to balance the City's business-to­ business sales tax base, development of a pedestrian-oriented urban center in the City's Downtown area, and development opportunities for employment based advanced manufacturing businesses and their partners in the City's Warm Springs Innovation District. Significant resources have been invested in the City's estimated share ofregional freeway interchanges. Four interchanges were constructed using local funds to allow the completion of extensive freeway investments funded by Alameda County, the State, and the federal government. This investment completed the upgrade to I-880 through Fremont years earlier than would have otherwise been the case. Construction was also completed on two grade separation projects that will increase safety, reduce congestion, and facilitate the extension of BART south to the City's Warm Springs district and, eventually, to San Jose.

Fremont has long been the end of the BART line in the East Bay, but that will change with the opening of the South Fremont/Warm Springs station in 2016/17, and by 2018/2019, BART will extend 10 miles further south to San Jose. This BART expansion will open up the South Fremont/Warm Springs area from both the north and the rest of Silicon Valley to the south. This area is critically important to the City and the region and represents a unique convergence of forces. Tesla Motors now anchors this district in the former NUMMI plant. There is also an abundance of industrial space and vacant land. Recently, Union Pacific Railroad (UPRR) sold 160 acres to Lennar. Construction of Lennar's mixed use project, including 2,200 residential units and 1. 7 million square feet oflndustrial/commercial, began in fall 2016. In addition, Toll Brothers and Valley Oak have both received recent Council approval for a total of 1,786 additional residential units, including 234 affordable rental units, 330,000 square feet of commercial/class A office space, a hotel, incubator/accelerator space, and live/work units. Construction for these projects is anticipated to begin in 2017.

The new BART station that will open in 2016/17 is within walking distance of Tesla Motors and the Lennar property. The City and the region are heavily invested in ensuring the area is developed strategically and takes advantage of the huge public support and regional access provided by the new BART station. A Feasibility Study for the Warm Springs West Access Bridge, which will connect the existing and proposed workforce to the new BART station, and conceptual bridge design, was approved by City Council in October 2014 and the final design of the bridge and plaza were approved by City Council May 3, 2016. A partnership with BART has also been defined and was solidified in early 2016 through an Agreement Memorandum of Understanding that defines the roles and responsibilities of both the City and BART in relation to the design, construction, on­ going operation and maintenance, and ownership of the bridge. In July 2016, the Alameda County Transportation Commission (ACTC) awarded Measure BB funds in the amount of$25M for construction and construction management of the bridge and plaza project. Construction is slated to

4 I City of Fremont, California Letter of Transmittal

begin in summer 2017 and completion is anticipated in spring 2018. This connection is critical for the success of the Innovation District as it provides an essential pedestrian and bicyclist connection from the larger employment and residential centers to the west of the BART Warm Springs/ South Fremont Station.

In addition, with its ideal Silicon Valley location, Downtown Fremont is poised to become a vibrant urban mixed use district within the City Center that will serve as a destination for the City and region. Pending new developments will help create an exciting new district in Fremont in keeping with the City's new general plan goal of becoming "strategically urban." Downtown will provide Fremont with a focal point and community gathering space - a more sustainable, pedestrian­ friendly public realm activated with street-level commercial, retail, civic uses and public open spaces that stimulate economic activity and entice high-quality, high-intensity development to the district. Development projects will take advantage of the close proximity and connections to the Fremont BART station. The building development patterns will change the district's character from today's low-density, vehicular-oriented suburban development fronting surface parking lots to a mid-density, transit-oriented development directly fronting streets and sidewalks.

Some elements of the overall plan have been completed; for example, Urban Housing celebrated its grand opening in July 2013 ofa 300-unit apartment project, and TMG Partners/Sares Regis/Summer Hill have begun construction on the Downtown's first mixed use project which entails 157 ownership housing units including condos, stacked flats, and row homes. In addition, the project includes 21,000 square feet of critical ground floor retail space that will set the tone for the vibrant pedestrian environment the vision supports. Another highlight is the completed extension of Capitol Avenue between Paseo Padre Parkway and Fremont Boulevard setting the tone for the multi-modal, pedestrian retail spine that will be a catalyst for attracting additional private investment.

The 2016/17 budget as adopted by the City Council provides funding to maintain City facilities and infrastructure, take advantage of economic development opportunities in the Downtown and Warm Springs Innovation District, construct affordable housing, extend library hours, and increase social services grants.

Relevant Financial Policies

The City of Fremont has adopted a comprehensive set of financial policies. These policies address topics like cash management, risk management, reserves and stabilization accounts, and debt capacity, issuance and management. The policies are included with the annual operating budget, and are reviewed each year in conjunction with the adoption of the annual operating budget.

Awards and Acknowledgements

The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Fremont for its Comprehensive Annual Financial Report (CAFR) for the fiscal year ended June 30, 2015. This was the 32nd consecutive year the City has received this prestigious award. To be awarded a Certificate

CAFR for the Fiscal Year Ended June 30, 2016 I 5 Letter of Transmittal

of Achievement, the City published an easily readable and efficiently organized CAFR that satisfied both generally accepted accounting principles and applicable program requirements.

A Certificate of Achievement for Excellence in Financial Reporting is valid for a period of one year only. However, we believe our current CAFR continues to meet the Certificate of Achievement for Excellence in Financial Reporting Program's requirements, and we are submitting it to the GFOA to determine its eligibility for another certificate.

The City also received the GFOA's Distinguished Budget Presentation Award for its annual budget document for FY 2015/16. This was the 19th consecutive year the City received this prestigious award. To qualify for the Distinguished Budget Presentation Award, the City's budget document was judged to be proficient as a policy document, a financial plan, an operations guide, and a communications device.

The preparation of this report would not have been possible without the skill, effort, and dedication of the entire staff of the Finance Department. We wish to thank all City departments for their assistance in providing the data necessary to prepare this report. Credit and thanks are also due to the City Manager, and the Mayor and City Councilmembers for their unfailing support for maintaining the highest standards of professionalism in the management of the City of Fremont's finances.

David Persselin Finance Director/Treasurer

6 I City of Fremont, California Location Map

Located on the southeast side of the San Spanish. In the mid-l 840s, John C. Fremont Francisco Bay, Fremont is a city of over mapped a trail through Mission Pass to 229,000 people with an area of92 square provide access for American settlers into the miles, making it the fourth largest city in the southeastern San Francisco Bay Area. In San Francisco Bay Area and ranks 96th 1853, Washington Township was established, among the most populous cities in the nation taking in the communities of Mission San according to the U.S. Census Bureau. With Jose, Centerville, Niles, Irvington, and Warm its moderate climate and its proximity to Springs. On January 23, 1956, these major universities, shopping areas, communities joined together to form the City recreational and cultural activities, of Fremont. employment centers, major airports, and the Bay Area Rapid Transit system, Fremont captures metropolitan living at its best. w-t• The Fremont area was first settled with the ? s establishment of Mission San Jose by the Pleasanton

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CITY OF FREMONT AND VICINITY

CAFR for the Fiscal Year Ended June 30, 2016 I 7 City Council and Staff

City Council

Bill Harrison, Mayor Lily Mei, Vice Mayor Suzanne Lee Chan, Councilmernber Vinnie Bacon, Councilmember Rick Jones, Councilmernber

City Executive Staff

Fred Diaz, City Manager Harvey Levine, City Attorney Jessica von Borek, Assistant City Manager Karena Shackelford, Deputy City Manager Brian Stott, Deputy City Manager Debra Margolis, Assistant City Attorney Marilyn Crane, Information Technology Services Director Susan Gauthier, City Clerk Kelly Kline, Economic Development Director GeoffLaTendresse, Fire Chief Hans Larsen, Public Works Director Richard Lucero, Police Chief David Persselin, Finance Director Jeff Schwob, Community Development Director Suzanne Shenfil, Human Services Director Suzanne Wolf, Community Services Director

CAFR Team

Julie Battershell, Senior Accountant Anita Chang, Accounting Technician Elisa Chang, Executive Assistant/Graphic Artist Norma Cutter, Treasury Analyst Tricia Fan, Senior Accountant Tish Saini, Senior Accountant Mike Sung, Deputy Director of Finance Ellen Zhou, Accountant

8 I City of Fremont, California Organization Chart

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Fremont Community

.. ------.. City Council ..------·I I ·------·: Commissions ~ ·------·. Boards I I City Manager - City Attorney

A City Manager

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... • Finance - Fire City Clerk I,.. -I I TJevelopment -I I I . Community lluman Resources . Human :,.. , :.., ...... ,.. - " - - . Services -··-- " --·-·- -

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CAFR for the Fiscal Year Ended June 30, 2016 I 9 Certification of Achievement for Excellence in Financial Reporting

The Government Finance Officers Association (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Fremont for its Comprehensive Annual Financial Report (CAFR) for the fiscal year ended June 30, 2015. This was the 32nd consecutive year the City has received this prestigious award. In order to be awarded a Certificate of Achievement, the City published an easily readable and efficiently organized CAFR. This report satisfied both GAAP and legal requirements. A Certificate of Achievement is valid for one year only. We believe our current CAFR continues to meet the Certificate of Achievement Program's requirements and we are submitting it to the GFOA to determine its eligibility for another certificate.

Government Finance Officers Associalion

Certificate of Achievement for Excellence in Financial Reporting

Presented to City of Fremont California

ForiL-; ComnrchcnsiveAnnual Financial Report for lhc Fiscal Year Ended

June 30, 2015

10 I City of Fremont, California Independent Auditor's Report Honorable Mayor and Members of the City Council City of Fremont, California

Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund informatim of the City of Fremont, California (City), as of and for the fiscal year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise the City's basic financial statements as listed in the table of contents.

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

Auditor's Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opm1ons.

Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the City as of June 30, 2016, and the respective changes in financial position, and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Other Matters Prior-Year Comparative Information We have previously audited the City's financial statements as of and for the fiscal year ended June 30, 2015, and we expressed unmodified opinions on the respective financial statements of the governmental activities, each major fund, and the aggregate remaining fund information in our report dated December 14, 2015. In our opinion, the summarized comparative information presented herein as of and for the fiscal year ended June 30, 2015, is consistent, in all material respects, with the audited financial statements from which it has been derived.

www.mgocpa.com CAFR for the Fiscal Year Ended June 30, 2016 I 11 Independent Auditors' Report

Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis, the budgetary comparism schedules, the modified approach for the City's infrastructure information, the schedules of changes in the net pension liability and related ratios, the schedules of contributims, and the schedule of other post-employment benefits funding progress as listed in the table of contents, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City's basic financial statements. The introductory section, combining and individual fund financial statements and schedules, and statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual fund financial statements and schedules are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual fund financial statements and schedules are fairly stated, in all material respects, in relation to the basic financial statements as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on them.

Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 6, 2016 on our consideration of the City's internal control over financial reporting and on our tests of its compliance with certain provisions oflaws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City's internal control over financial reporting and compliance.

Walnut Creek, California December 6, 2016

12 I City of Fremont, California Management's Discussion and Analysis

Introduction

As management of the City of Fremont (City), we offer readers of the City's financial statements this narrative overview and analysis of the financial activities of the City for the fiscal year ended June 30, 2016. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our Letter of Transmittal, which can be found on pages 1-6 of this report. In addition, some prior fiscal year balances have been reclassified to match the format of the current fiscal year presentation.

Financial Highlights

• The assets of the City exceeded its liabilities at the close of the most recent fiscal year by $693.4 million (net position). Excluding the $288.0 million net pension liability, $97.0 million of unrestricted net position is available to meet the City's ongoing obligations to residents and creditors. • The City's net position increased by $58.8 million from the prior year. • As of June 30, 2016, the City's governmental funds reported combined fund balances of $282.4 million, an increase of $47.1 million in comparison with the prior year. Of this amount, 12.4% ($34.9 million) is available for spending at the City's discretion (unassigned fund balance). • As of June 30, 2016, unassigned fund balance in the General Fund was $36.3 million, or approximately 20.3% of total General Fund expenditures and transfers out. Of this amount, $17.3 million was set aside by City Council policy to address severe unforeseen events (contingencies), $3. 7 million was set aside by City Council policy to offset uncertainty in the multi-year budget forecast, $4.3 million was set aside by Council policy to provide a source of working capital for new programs or undertakings that have potential for receiving significant funding from outside sources, organization retooling, process improvement, and strategic entrepreneurial opportunities, and $4.3 million was set aside by City Council policy to mitigate the effects of future economic downturns and unanticipated cost increases beyond the City's control. For more information, please refer to the note titled Minimum Fund Balance Policies (Note l.I.13.) in the Notes to the Basic Financial Statements. • The City's total outstanding long-term debt increased by $2. 7 million during the fiscal year ended June 30, 2016.

CAFR for the Fiscal Year Ended June 30, 2016 I 13 Management's Discussion and Analysis

Overview ofthe Financial Statements

The discussion and analysis provided here are intended to serve as an introduction to the City's basic financial statements, which consist of three components: 1) government-wide financial statements, 2) fund financial statements, and 3) the notes to the financial statements. This report also includes supplementary information intended to furnish additional detail to support the basic financial statements themselves.

Government-wide Financial Statements. The government-wide financial statements are designed to provide readers with a broad overview of the City's finances, in a manner similar to a private­ sector business.

The Statement of Net Position presents information on all of the City's assets, liabilities, and deferred inflows/outflows of resources, with the difference reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the City is improving or deteriorating.

The Statement of Activities presents information showing how the City's net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported for some items that will only result in cash flows in future fiscal periods ( e.g., uncollected taxes, and earned but unused vacation and other compensated leave).

All of the City's activities are considered to be governmental in nature and, as a result, no business­ type activities are reported in these statements. Governmental activities are those that are principally supported by taxes, fees, and other revenues. For the City, governmental activities include general government administration, police services, fire services, human services, capital assets maintenance and operations, recreation and leisure services, and community development and environmental services.

The City is the primary government in this report. There are no discretely presented component units. However, these financial statements include two other entities that, although legally separate, are important because the City is financially accountable for them. These component units are the Fremont Public Financing Authority (Financing Authority) and the Fremont Social Services Joint Powers Authority (Social Services JPA). The financial activities of the Financing Authority and the Social Services JPA are integrally related to those of the City and are "blended" with those of the City.

The government-wide financial statements can be found on pages 29-31 of this report.

Fund Financial Statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds. The fund financial statements either reinforce information in the government-wide financial statements or provide additional information.

14 I City of Fremont, California Management's Discussion and Analysis

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

Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government's near-term financing decisions. Both the governmental funds balance sheet and the governmental funds statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities.

The City maintains 34 individual governmental funds. Information is presented in the governmental funds balance sheet and the governmental funds statement ofrevenues, expenditures, and changes in fund balance for the following individual funds that are considered to be major funds: • General Fund • Capital Improvement • Development Impact Fees • Human Services • Development Cost Center • Intermodal Surface Transportation Efficiency Act • Recreation Services • Low and Moderate Income Housing Asse

Data for the other twenty-six governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these non-major governmental funds is provided in the form of combining statements and schedules in the supplementary information section of this report.

The City adopts an annual appropriated budget for its General Fund, Development Cost Center, Recreation Services, Human Services, and the Low and Moderate Income Housing Asset funds. Budgetary comparison schedules are provided in the required supplementary information section of this report to demonstrate compliance with the adopted budget.

The basic governmental fund financial statements can be found on pages 34-40 of this report.

Proprietary funds. The only proprietary funds the City has are internal service funds, which are an accounting device used to accumulate and allocate costs internally among the City's various functions. The City uses internal service funds to account for the risk management and information technology services provided to other City departments on a cost-reimbursement basis, as well as funds accumulated for Fire Department capital replacement. Because these services benefit governmental rather than business-type functions, they have been included within governmental activities in the government-wide financial statements.

CAFR for the Fiscal Year Ended June 30, 2016 I 15 Management's Discussion and Analysis

The internal service funds are combined into a single, aggregated presentation in the proprietary fund financial statements. Individual fund data for the internal service funds is provided in the form of combining statements and schedules in the supplementary information section of this report.

The basic proprietary funds financial statements can be found on pages 42-44 of this report.

Fiduciary funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reported in the government-wide financial statements because the resources of those funds are not available to support the City's own programs. The City's fiduciary funds are comprised of agency funds, which report resources held by the City in a custodial capacity for individuals, private organizations, and other governments. The accounting used for fiduciary funds is much like that used for proprietary funds.

The fiduciary fund financial statements can be found on page 46 of this report.

Notes to the Financial Statements. The notes provide additional information that is necessary to acquire a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 49-94 of this report.

Other Information. In addition to the basic financial statements and accompanying notes, this report also presents required supplementary information. This information includes budgetary comparison schedules, as well as more detailed information about the City's use of the modified approach for certain of its infrastructure assets. Also included are a schedule of changes in the net pension liability and related ratios, a schedule of pension contributions, and a schedule of other post- employment benefits (OPEB) funding progress. Required supplementary information can be found on pages 95-108 of this report.

The combining statements and schedules referred to earlier in connection with non-major governmental funds and internal service funds are presented immediately following the required supplementary information. Combining and individual fund statements and schedules can be found on pages 114-157 of this report.

16 I City of Fremont, California Management's Discussion and Analysis

Government-Wide Financial Analysis

As noted earlier, changes in net position over time may serve as a useful indicator of the City's financial health. At the close of FY 2015/16, net position stood at $693.4 million - a 9.3% increase from the prior year.

Information about net position is presented in the summary schedule below:

CITY OF FREMONT'S NET POSITION JUNE 30, 2016 AND 2015 (dollars in thousands)

Percentage 2016 2015 Change Current and other assets $ 341,100 $ 289,200 17.9% Capital assets 899,554 897,556 0.2% Assets 1,240,654 1,186,756 4.5% Deferred outflows related to pensions 30,905 26,209 17.9% Deferred Outflows of Resources 30,905 26,209 17.9% Current liabilities 46,363 42,865 8.2% Noncurrent liabilities 509,745 486,165 4.9% Liabilities 556,108 529,030 5.1% Deferred inflows related to pensions 22,076 49,407 (55.3%) Deferred Inflows of Resources 22,076 49,407 (55.3%) Net position: Net investment in capital assets 734,701 727,728 1.0% Restricted 149,630 137,108 9.1% Unrestricted* (190,956) (230,308) (17.1%) Net position $ 693,375 $ 634,528 9.3% * Unrestricted net position for June 30, 2016, includes the City's $288.0 million net pension liability, which is not a claim on current financial assets.

At June 30, 2016, the City reported positive balances in all categories of net position, except for unrestricted net position due to the impact of the inclusion of the net pension liability.

The largest portion of the City's net position, $734. 7 million, reflects its net investment in capital assets ( e.g., land, infrastructure, buildings, machinery and equipment) less any related debt used to acquire those assets. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City's investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources because the capital assets themselves cannot be used to liquidate these liabilities.

An additional portion of the City's net position represents $149.6 million ofrestricted resources that are subject to external restrictions on how they may be used. Excluding the $288.0 million net

CAFR for the Fiscal Year Ended June 30, 2016 I 17 Management's Discussion and Analysis pension liability, $97.0 million of unrestricted net position is available to meet the City's ongoing obligations to residents and creditors.

Information about changes in net position is presented in the summary schedule, below:

CITY OF FREMONT'S CHANGES IN NET POSITION FOR THE YEARS ENDED JUNE 30, 2016 AND 2015 ( dollars in thousands)

Percentage 2016 2015 Change Revenues: Program revenues: Charges for services $ 53,340 $ 44,611 19.6% Operating grants and contributions 14,170 14,034 1.0% Capital grants and contributions 27,857 19,066 46.1% General revenues: Property tax 82,485 79,612 3.6% Sales tax 48,580 40,744 19.2% Business tax 10,126 9,420 7.5% Transient occupancy tax 8,086 7,181 12.6% Property transfer tax 1,801 1,758 2.4% Franchise fees 9,605 9,299 3.3% Investment earnings 4,659 1,764 164.1% Gain on sale of capital assets 22,934 15,985 43.5% Miscellaneous 9,968 9,562 4.2% Total revenues 293,611 253,036 16.0% Pro gr am expenses: General government 13,605 13,900 (2.1%) Police services 64,837 62,266 4.1% Fire services 42,311 38,969 8.6% Human services 10,619 10,418 1.9% Capital assets maintenance and operations 67,776 57,971 16.9% Recreation and leisure services 8,187 8,398 (2.5%) Community development/ environmental services 23,601 20,092 17.5% Intergovermnental 1,990 (100.0%) Interest on debt 3,828 3,897 (1.8%) Total program expenses 234,764 217,901 7.7% Increase ( decrease) in net position 58,847 35,135 67.5% Net position, beginning of year 634,528 599,393 5.9% Net position, end of year $ 693,375 $ 634,528 9.3%

18 I City of Fremont, California Management's Discussion and Analysis

Major changes in government-wide revenues include the following:

• Capital grants and contributions increased by $8.8 million as a result of growth in development activity and permit issuance for several large projects as well as increases in funding for Alameda County Transportation Commission (ACTC) Measure BB and IS TEA capital projects. • Charges for services increased $8. 7 million from the prior year due to charges for inclusionary housing for several large development projects including Patterson Ranch ($6.1 million), Parasol ($1. 1 million), Crown Court ($0.9 million), Darrow Farm ($0. 7 million), and Mission Creek ($0. 7 million). • Sales tax increased $7.8 million, but approximately $3.0 million of that amount is one-time revenue attributable to the end of the annual "triple flip" advances and adjustments from the state. Without that distortion, the percentage growth would have been 11.9%. The sectors accounting for the majority of the increase are business and industry ($2.3 million), autos and transportation ($1.2 million), and the county pool ($1.2 million). • Gain on sale of capital assets increased by $6.9 million to $22.9 million. The most significant gains were for the sale of surplus land at Pahn Avenue ($21.9 million) and property at Shadow brook Terrace ($0. 7 million). • Investment earnings increased $2.9 million due to an increase in the amount of funds invested as well as a change in the composition of the investment portfolio.

Major changes in government-wide expenses include the following:

• Capital assets maintenance and operations increased by $9.8 million reflecting increased activity related to ACTC Measures Band BB and IS TEA capital projects. • Community development and environmental services increased by $3. 5 million primarily due to the removal of non-capital assets related to the City's Municipal Waste Transfer Facility. • Fire services increased by $3.3 million primarily due to capital expenses for emergency medical equipment and higher personnel costs.

CAFR for the Fiscal Year Ended June 30, 2016 I 19 Management's Discussion and Analysis

Financial Analysis of The City's Major Funds

As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance­ related legal requirements. The focus of the City's governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City's financing requirements. In particular, unassigned fund balance may serve as a useful measure of a government's net resources available for spending at the end of the fiscal year.

As of June 30, 2016, the City's governmental funds reported combined ending fund balances of $282.4 million, an increase of $47.1 million from the prior year. Of this amount, 0.9% ($2.4 million) is nonspendable because it relates to prepaid assets, 56.3% ($159.1 million) is legally restricted for specific purposes by enabling legislation or external funding source providers, 5.3% ($15.0 million) is committed for specific purposes by the City Council, and 25.1 % ($71.0 million) is assigned for specific purposes by the City. The remaining 12.4% ($34.9 million) is unassigned fund balance available for spending at the City's discretion, but is also subject to Council­ established policies for future contingencies.

The following are the major funds that either qualified under the reporting criteria or were considered to be important to financial statement users:

General Fund- The General Fund is the City's chief operating fund. As of June 30, 2016, total fund balance was $39.1 million, of which $36.3 million was unassigned. The primary components of this unassigned amount are: $17.3 million (10.0% of budgeted expenditures and transfers out) set aside by City Council policy for use for costs associated with unforeseen events (contingencies); $4.3 million (2.5% of budgeted expenditures and transfers out) set aside by Council policy as a source of working capital for new programs or undertakings that have potential for receiving significant funding from outside sources, organization retooling, process improvement, and strategic entrepreneurial opportunities; $4.3 million (2.5% of budgeted expenditures and transfers out) set aside by Council policy to offset the effects of future economic downturns and unanticipated cost increases beyond the City's control; $3. 7 million set aside by Council policy to offset uncertainty in the multi-year budget forecast; and $6. 7 million of unallocated fund balance.

As a measure of the General Fund's liquidity, it may be useful to compare both unassigned fund balance and total fund balance to total General Fund expenditures and transfers out. Unassigned fund balance represents approximately 20.3% of total General Fund expenditures and transfers out.

The fund balance of the City's General Fund decreased by $2.1 million during the 2015/16 fiscal year, compared to an increase of$8.8 million in the prior year. Revenues and transfers in of$176.9 million were 8.1 % ($13.2 million) higher than in FY 2014/15. Expenditures and transfers out of $179.1 million were 15.6% ($24.1 million) higher than in FY 2014/15.

Development Impact Fees - This fund represents the aggregate total of park land impact, park facility, fire impact, traffic impact, and capital facility fees. These fees are levied on all new development in the City to pay for the construction and improvement of public facilities needed as a result of growth. Fees collected in FY 2015/16 were 71.8% ($5.5 million) higher than the amount collected in FY 2014/15 resulting from an increase in activity due to the economy, and due to permits for several large projects being issued in FY 2015/16. During FY 2015/16, 39.4% of this

20 I City of Fremont, California Management's Discussion and Analysis fund's expenditures ($6.6 million) were for park-related projects and 60.5% ($10.2 million) were for mitigating traffic-related impacts. In addition, $850,000 was transferred to pay debt service related to capital facilities. As of June 30, 2016, the fund balance totaled $69.7 million, down from $74.2 million in the prior year.

Because these funds are collected for construction (for mitigating traffic-related impacts) or improvements of public facilities (Fire and capital facilities), the fund balance is restricted for community development purposes, including park development and acquisition projects. These funds have not yet been spent because of the difficulty in obtaining suitable parcels of land and the operational maintenance impacts of adding new parks. These projects are progressing cautiously because of the need to ensure that sufficient operating revenues exist so that park facilities can be adequately and appropriately maintained.

Development Cost Center - This fund was established to account for engineering, planning, and building and construction inspection activities related to the City's land use planning and construction regulatory responsibilities. Its customers are not only the development community, but also the City itself for its own capital projects. User fees collected in this cost center recover the City's costs of administering development- and construction-related regulatory programs. As of June 30, 2016, the balance totaled $9.1 million, up from $4.6 million in the prior year, due to an increase in development activity. This fund balance is restricted for uses related to ensuring continuity of critical community development services.

Recreation Services - This fund was established to account for the transactions and activities related to delivery of recreation services. Fees collected for recreation services are used for the development of programs and facilities benefiting fee payers. Total revenues in the amount of$8.5 million were 9.1 % higher in FY 2015/16 than in the prior year ($7.8 million). Expenditures increased 5.9% (from $7.9 million to $8.3 million). As of June 30, 2016, the fund balance was $7.5 million, an increase of$0.2 million from the prior year. This committed fund balance will be used to develop or maintain recreation facilities and preserve the continuity of recreation services during economic downturns.

Capital Improvement - This fund is used to account for capital improvements for the City, including public safety improvements, infrastructure, and other public works projects. Amounts in this fund are received as transfers from the General Fund, interest earned on invested cash balances, proceeds from the sale of certain parcels ofland, or as proceeds of debt. As of June 30, 2016, the fund balance was $77.6 million. During FY 2015/16, fund balance increased by $34.1 million primarily due to the sale of surplus City property to fund capital projects supporting the Downtown Plan and Warm Springs/South Fremont Community Plan, additional funds provided from the General Fund to fund various capital projects, and energy efficiency project lease financing proceeds received in FY 2015/16.

Human Services - This fund represents the activities for City's social service infrastructure to promote a healthy and safe environment for families, the elderly and youth. Services and programs include self-sufficiency, counseling, and housing assistance to support a vibrant community. As of June 30, 2016, the fund balance was $7.4 million, an increase of$0.3 million from the prior year.

Intermodal Surface Transportation Efficiency Act (!STEA) - This fund accounts for federal funding for transportation projects. Among ISTEA's many programs, three provide capital improvement CAFR for the Fiscal Year Ended June 30, 2016 I 21 Management's Discussion and Analysis funds for local governments. These programs are known as the Surface Transportation Program, the Congestion Mitigation and Air Quality Improvement Program, and the Transportation Enhancement Activity Program. Funds are applied for on a project-by-project basis. As of June 30, 2016, the ISTEA fund had a negative fund balance of$1.3 million, representing expenditures which have not yet been reimbursed.

Low and Moderate Income Housing Asset - This fund is used to administer the housing assets and functions related to the Low and Moderate Income Housing Program. As of June 30, 2016, fund balance was $4. 7 million, an increase of $1.3 million from the prior year, mainly due to higher principal, interest, and surplus cash payments from developers.

General Fund Budgetary Highlights

Original Budget Compared to Final Budget. During the year, there was no need for any significant amendments to increase either the original estimated revenues or original budgeted appropriations. However, there was a need to reallocate appropriations among departments when it became clearer which departments would actually be charged for certain employee benefits, such as leave cash-outs. Generally, the movement of the appropriations between departments was not significant. The other change between the original budget and the final budget was the reappropriation of amounts to satisfy encumbrances of the prior year, as authorized by the Council­ adopted budget resolution.

Final Budget Compared to Actual Results. The General Fund budget is prepared in accordance with generally accepted accounting principles. A summary of the budgetary comparison schedule for the General Fund, located in the required supplementary information following the notes to the financial statements, follows.

SUMMARY OF GENERAL FUND BUDGETARY COMPARISON SCHEDULE FOR THE YEAR ENDED JUNE 30, 2016 (dollars in thousands)

Favorable (Unfavorable) Original Variance from Budget Final Budget Actual Results Final Budget Beginning fund balance $ 33,118 $ 38,360 $ 41,248 $ 2,888 Resources: Revenues 168,742 168,742 171,334 2,592 Transfers in 5,607 5,607 5,603 (4) Total resources 174,349 174,349 176,937 2,588 Charges to appropriations: Expenditures 144,255 153,243 149,499 3,744 Transfers out 30,202 29,871 29,559 312 Total charges 174,457 183,114 179,058 4,056 Net change in fund balance (108) (8,765) (2,121) 6,644 Ending fund balance $ 33,010 $ 29,595 $ 39,127 $ 9,532

22 I City of Fremont, California Management's Discussion and Analysis

The actual beginning fund balance was $2.9 million higher than the final budget amount due to the inclusion of prepaid assets ($2.2 million) and the year-end adjustment for unrealized fair value gain or loss on investments ($0. 7 million), neither of which are considered available for budgetary purposes. Total revenues and transfers in during FY 2015/16 were $2.6 million greater than the final budget estimate. Actual expenditures and transfers out were $4.1 million less than final budget. The net result of these variances was an actual ending fund balance $9.5 million higher than the final budget estimate.

The most significant differences between estimated revenues and actual revenues were as follows ( dollars in thousands):

Estimated Actual Reveuue Source Revenues Revenues Differeuce Perceut Sales tax $ 47,337 $ 48,580 $ 1,243 2.6% Property tax 80,312 79,388 (924) (1.2%) Other 1,937 2,832 895 46.2% Investment Earnings 615 1,271 656 106.7%

The positive variance in sales tax revenue is attributable to stronger than anticipated auto sales and leases and an increase in proceeds from the county pool from online sales. Property tax revenue was lower mainly due to lower than anticipated secured property tax collections. Other revenues were higher than anticipated mainly due to the sale of a property and the redistribution of former RDA proceeds. Investment earnings were higher than anticipated primarily due to an increase in the amount of funds invested as well as a change in the composition of the investment portfolio.

The majority of the $4.1 million expenditure savings is the result of lower than anticipated salary and benefits expenditures due to vacant positions (partially offset by increased overtime) and reduced expenditures for contract services and utilities.

CAFR for the Fiscal Year Ended June 30, 2016 I 23 Management's Discussion and Analysis

Capital Assets and Debt Administration

Capital Assets. The City's investment in capital assets as of June 30, 2016, amounts to $899.6 million (net of accumulated depreciation). This investment in capital assets includes land, buildings, machinery, equipment, vehicles, park facilities, roads, and highways. The total increase in capital assets for the current fiscal year was approximately 0.2%. Following is a summary of the City's capital assets (net of depreciation) at June 30, 2016 and 2015:

CITY OF FREMONT'S CAPITAL ASSETS JUNE 30, 2016 AND 2015 (dollars in thousands)

Percentage 2016 2015 Change Land $ 211,711 $ 211,998 (0.1%) Land improvements 5,448 5,448 0.0% Infrastructure 505,715 471,309 7.3% Buildings and improvements 148,163 152,953 (3.1%) Equipment 5,787 5,238 10.5% Vehicles 12,855 12,870 (0.1%) Construction in progress 9,874 37,740 (73.8%) Total capital assets $ 899,553 $ 897,556 0.2%

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

• Addition of Central Park Soccer and Turf construction costs of$3.8 million, Downtown capital project costs of $2.3 million, Capitol Avenue Extension project (Phase 2) costs of $2.0 million, and $557,000 for the New Financial System in Construction in Progress • Addition of Capital Avenue Extension costs of$2.6 million and other costs of$857,000 in Infrastructure • Removal from Construction in Progress of $5.6 million of non-capital expenses related to the City's Municipal Waste Transfer Facility • Transfer from Construction in Progress of the completed Warren/Mission Grade Separation, $25 million, irrigation construction $987,000, and others $963,000 to Infrastructure • The purchase of various equipment and vehicles at a cost of$3.7 million • Donated infrastructure improvements associated with various development projects valued at $768,000 • Sale of surplus City properties at $482,000 of book value

Additional information about the City's capital assets can be found in Note l.I.3., and Note 4, following the basic financial statements.

24 I City of Fremont, California Management's Discussion and Analysis

Long-tenn Debt. As of June 30, 2016, the City had $176.2 million in long-term debt outstanding. Of this amount, $41.8 million was for general obligation bonds, $123.8 million was related to certificates of participation, $9.1 million was for lease financing, and $1.5 million was for unamortized bond premium. Following is a summary schedule of outstanding debt:

CITY OF FREMONT'S LONG-TERM DEBT JUNE 30, 2016 ( dollars in thousands)

Balauce Iucurred or Satisfied or Balauce July 1, 2015 Issued Matured Juue 30, 2016 General Obligation Bonds: 2009 Fire Safety Bonds $ 14,475 $ $ 350 $ 14,125 2012 Fire Safety Bonds 7,430 325 7,105 2013 Fire Safety Bonds 21,305 725 20,580 Subtotal 43,210 1,400 41,810 Certificates of Participation (COPs): 1998 Public Financing Authority 8,165 425 7,740 2008 Public Financing Authority 24,650 585 24,065 2008 Public Financing Authority 43,055 1,075 41,980 2010 Public Financing Authority 14,545 465 14,080 2012A Public Financing Authority 10,560 815 9,745 2012B Public Financing Authority 27,690 1,525 26,165 Subtotal 128,665 4,890 123,775 Lease Financing: 2016 Energy Efficiency Financing 9,100 9,100 Unamortized Bond Premium 1,651 124 1,527 Total $ 173,526 $ 9,100 $ 6,414 $ 176,212

Of the outstanding debt, 48.5% is fixed rate debt, with an average interest rate of approximately 2.98%. The remaining 51.5% of the outstanding debt is variable rate debt, with an average interest rate of 0.40% as of June 30, 2016. The average interest rate on all outstanding City debt is 1.65% at June 30, 2016.

The City maintains Standard & Poor's ratings of AA+ (stable outlook) on its general obligation bonds and AA (stable outlook) on its COPs.

State law provides for a legal debt limit of 15% of gross assessed valuation; however, this provision was enacted when assessed valuation was based upon 25% of market value. The City's computation of the debt limit reflects a conversion of assessed valuation data from the current full valuation perspective to the 25% level that was in effect at the time that the legal debt margin was enacted. The current debt limitation for the City is $1.5 billion, which is significantly in excess of the City's outstanding general obligation debt.

In addition to State law, the City Council adopted a debt policy in February 1996 that limits annual debt service payments in the General Fund to 7% of budgeted expenditures and transfers out. As of July 1, 2016, debt service payments were approximately 3.9% of budgeted expenditures and transfers out in compliance with the policy. Additional information about the City's long-term debt can be found in Note 5, following the basic financial statements.

CAFR for the Fiscal Year Ended June 30, 2016 I 25 Management's Discussion and Analysis

Use ofModified Approach to Accounting for Infrastructure

The City has elected to use the modified approach to accounting for infrastructure assets, as defined by GASB Statement No. 34, for its street network. The street network is composed of all City streets, and includes all physical features associated with the operation of motorized vehicles that exist within the limits of the City rights of way.

Pursuant to the modified approach, the City has committed to preserving and maintaining its street network at an appropriate condition level as determined by the City Council. Through June 30, 2016, the City's policy was to maintain an average pavement condition index (PCI) rating of 50 or "fair" for the entire street network. As of June 30, 2016, the City's overall street network was rated at a computed PCI index of 72.

In addition to performing periodic condition assessments, governments that use the modified approach must also estimate at the start of each reporting period the amount of spending needed that period to maintain and preserve infrastructure at the government's selected condition level. For the year ended June 30, 2016, the maintenance estimate was $19.0 million, but the amount actually spent was $4.5 million. Under the City's expanded pavement preservation program, the majority of street areas were treated using a combination of base repairs and surface treatments such as cape seals and slurry seals. This approach is more economical than a pavement rehabilitation program such as overlays, enabling the available funds to cover a larger pavement area.

Requests for Information

This financial report is designed to provide a general overview of the City's finances for all those with an interest in the City's financial activities. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the City's Finance Director at 3300 Capital Avenue, P. 0. Box 5006, Fremont, California 94537-5006.

26 I City of Fremont, California Government-Wide Financial Statements

CAFR for the Fiscal Year Ended June 30, 2016 I 27 Government-Wide Financial Statements

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28 I City of Fremont, California Government-Wide Financial Statements

City of Fremont Statement of Net Position June 30, 2016 (With comparative totals for June 30, 2015)

Governmental Activities ASSETS 2016 2015 Current assets: Cash and investments held by City $ 288,427,354 $ 249,885,853 Restricted cash and invesbnents held by fiscal agent or City 13,917,087 6,301,118 Receivables, net 31,703,306 23,346,857 Condemnation deposits 15,000 15,000 Prepaid assets 2,653,525 2,173,335 Total current assets 336,716,272 281,722,163 Noncurrent assets: Housing loans receivable, net 1,562,709 4,656,966 Land held for resale 2,821,430 2,821,430 Capital assets: Nondepreciable assets 719,038,028 714,680,458 Depreciable assets, net 180,515,528 182,875,592 Total capital assets, net 899,553,556 897,556,050 Total noncurrent assets 903,937,695 905,034,446 Total assets 1,240,653,967 1,186,756,609

DEFERRED OUTFLOWS OF RESOURCES Deferred outflows of resources related to pensions 30,904,836 26,208,859 LIABILITIES Current liabilities: Accounts payable 11,106,328 9,163,635 Salaries and wages payable 10,327,648 9,819,348 Claims payable 6,038,000 5,630,000 Pollution remediation obligation- due within one year 806,000 1,481,481 Interest payable 1,429,620 1,419,224 Unearned revenue 7,737,596 6,733,368 Compensated absences - due within one year 2,279,509 2,204,045 Long-term debt- due within one year 6,638,717 6,413,717 Total current liabilities 46,363,418 42,864,818 Noncurrent liabilities: Claims payable 13,145,000 11,946,000 Pollution:renlediation obligation- due in more than one year 1,769,759 1,481,481 Net other post employment benefits obligation 30,459,000 30,401,000 Net pension liability 287,959,282 268,613,147 Compensated absences - due in more than one year 6,838,525 6,612,135 Long-term debt- due in more than one year 169,573,245 167,111,962 Total noncurrent liabilities 509,744,811 486,165,725 Total liabilities 556,108,229 529,030,543 DEFERRED INROWS OF RESOURCES Deferred inflows of resources related to pensions 22,075,552 49,407,103

NET POSITION Net invesbnent in capital assets 734,700,673 727,727,677 Restricted: Social service programs 12,653,550 13,533,528 Debt service 2,586,451 2,643,062 Public safety 1,955,999 1,012,487 Street improvements 20,966,840 17,209,527 Community development 111,443,494 102,442,173 Other pu:rp os es 23,961 267,364 Total restricted 149,630,295 137,108,141 Unrestricted (190,955,946) (230,307,996) Total net position $ 693,375,022 $ 634,527,822

See accompanying Notes to Basic Financial Statements. CAFR for the Fiscal Year Ended June 30, 2016 I 29 Government-Wide Financial Statements

City of Fremont Statement of Activities For the fiscal year ended June 30, 2016 (With comparative totals for the fiscal year ended June 30, 2015)

Program. Revenues Operating Capital Charges for Grants and Grants and Functions/ Programs Expenses Services Contributions Contributions Total

Primary govermnent: Governmental activities: General government $ 13,604,679 $ 1,666,658 $ $ $ 1,666,658 Police services 64,837,566 4,175,223 1,494,322 5,669,545 Fire services 42,310,730 2,804,753 184,371 2,989,124 Human services 10,619,068 2,093,782 5,876,521 7,970,303 Capital assets maintenance and operations 67,776,490 2,152,983 4,914,934 27,856,531 34,924,448 Recreation and leisure services 8,186,587 8,260,807 8,260,807 Community development and environmental services 23,600,633 32,185,970 1,699,769 33,885,739 Intergovernmental Interest on debt 3,828,360

Total $234,764,113 $ 53,340,176 $ 14,169,917 $ 27,856,531 $ 95,366,624

General revenues: Property tax Sales tax Business tax Transient occupancy tax Property transfer tax Total taxes Franchise fees Invesbnent earnings (loss) Gain on sale of capital assets :tvliscellaneous

Total general revenues

Change in net position

Net position - beginning of year, as reported

Restatement for GASB 68

Net position - beginning of year, as restated

Net position - end of year

See accompanying Notes to Basic Financial Statements.

30 I City of Fremont, California Government-Wide Financial Statements

Net (Expense) Revenue and Changes in Net Position Governmental Activities 2016 2015

$ (11,938,021) $ (12,748,262) (59,168,021) (55,814,510) (39,321,606) (35,947,364) (2,648,765) (4,203,952) (32,852,042) (30,937,214) 74,220 (763,650)

10,285,106 6,110,421 (1,990,040) (3,828,360) (3,896,781)

(139,397,489) (140,191,352)

82,484,888 79,611,885 48,580,024 40,743,875 10,125,832 9,420,130 8,086,529 7,181,438 1,800,905 1,758,406 151,078,178 138,715,734 9,605,547 9,298,688 4,659,270 1,764,197 22,934,023 15,985,118 9,967,671 9,562,197

198,244,689 175,325,934

58,847,200 35,134,582

634,527,822 896,131,565

(296,738,325)

634,527,822 599,393,240

$ 693,375,022 $ 634,527,822

CAFR for the Fiscal Year Ended June 30, 2016 I 31 Government-Wide Financial Statements

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32 I City of Fremont, California Governmental Funds Financial Statements

Governmental Funds Financial Statements

CAFR for the Fiscal Year Ended June 30, 2016 I 33 Governmental Funds Financial Statements

City of Fremont Balance Sheet Governmental Funds June 30, 2016 (With comparative totals for June 30, 2015)

Major Funds

General Development Development Recreation Frmd hnpactFees Cost Center Services ASSETS Cash and invesbnents held by City $24,119,639 $ 72,463,832 $ 15,031,507 $ 9,430,398 Restricted cash and invesbnents held by fiscal agent or City Receivables: Property tax 839,309 Sales tax 14,926,104 Due from other govenunental agencies 1,347,957 Housing loans receivable, net 114,719 Accrued interest 748,671 Transient occupancy tax 787,868 Franchise fees 926,635 Accounts receivable 171,702 829,879 Other 284,502 15,431 Land held for resale Prepaid assets 2,193,530 44,359 52,023 Due from other funds 3,971,023 Total assets $ 50,431,659 $ 72,463,832 $ 15,905,745 $ 9,497,852

UABILIDES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES Liabilities: Accounts payable $ 2,720,434 $ 2,785,012 $ 257,989 $ 215,179 Salaries and wages payable 8,323,216 909,473 379,037 Due to other funds Unearned revenue 146,677 5,687,682 1,415,582 Total liabilities 11,190,327 2,785,012 6,855,144 2,009,798 Deferred inflows of resources-unavailable revenue 114,719 Fund Balances: Nonspendable: Prepaid assets 2,193,530 44,359 52,023 Restricted for: Social service programs Debt service Public safety Street :irrtprovements Community development 69,678,820 9,006,242 Other purposes Committed for: Social service programs Recreation programs 7,436,031 Assigned for: Vehicle replacement Other capital projects Purchase orders and contracts 644,427 Unassigned 36,288,656 Total fund balances 39,126,613 69,678,820 9,050,601 7,488,054 Total liabilities, deferred inflows of resources, and fund balances $ 50,431,659 $ 72,463,832 $ 15,905,745 $ 9,497,852

See accompanying Notes to Basic Financial Statements.

34 I City of Fremont, California Governmental Funds Financial Statements

l\.iajor Funds Total Governmental Funds Intennodal Surface Low and Capital H=n Transportation Moderate Income Non-major Improvement Services Efficiency Act Housing Asset Funds 2016 2015

$ 66,343,453 $ 6,924,516 $ 5,216,402 $ 62,666,600 $ 262,196,355 $ 226,268,026 9,555,134 4,361,953 13,917,087 6,301,118

28,968 868,277 791,681 14,926,104 5,927,542 50,000 2,287,629 3,963,180 3,470,430 11,119,196 11,434,075 1,447,990 1,562,709 4,656,966 748,671 444,534 787,868 822,482 926,635 990,456 172,434 13,589 600,740 1,788,344 2,527,795 154,260 454,193 292,268 2,821,430 2,821,430 2,821,430 48,907 97,410 2,436,229 2,173,335 3,971,023 5,056,283 $ 78,991,358 $ 10,673,724 3,963,180 $ 5,216,402 $ 71,380,369 $ 318,524,121 $ 270,507,991

$ 1,421,753 $ 477,478 1,584,446 $ $ 1,489,305 $ 10,951,596 $ 8,520,382 365,005 13,999 96,741 10,007,471 9,646,378 742,811 2,378,734 849,478 3,971,023 5,056,283 487,655 7,737,596 6,733,368 1,421,753 1,585,294 3,963,180 501,654 2,435,524 32,747,686 29,956,411 1,710,990 1,333,265 220,155 3,379,129 5,222,521

48,907 97,410 2,436,229 2,173,335

6,224,126 4,714,748 3,685 10,942,559 9,038,913 4,390,396 4,390,396 4,460,258 1,428,149 1,955,999 3,384,148 2,892,597 8,126,985 20,822,441 28,949,426 16,882,384 32,699,073 111,384,135 102,427,173 23,961 23,961 267,364

1,153,314 6,451,973 7,605,287 6,637,434 7,436,031 7,269,011

2,355,500 2,355,508 2,708,119 67,965,564 67,965,564 41,638,392 644,427 1,833,795 (1,333,265) (75,756) 34,879,635 37,100,284 77,569,605 7,377,440 (1,333,265) 4,714,748 68,724,690 282,397,306 235,329,059 $ 78,991,358 $ 10,673,724 $ 3,963,180 $ 5,216,402 $ 71,380,369 $ 318,524,121 $ 270,507,991

CAFR for the Fiscal Year Ended June 30, 2016 I 35 Governmental Funds Financial Statements

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36 I City of Fremont, California Governmental Funds Financial Statements City of Fremont Reconciliation of the Governmental Funds Balance Sheet To the Government-Wide Statement of Net Position June 30, 2016 (With comparative totals for June 30, 2015)

2016 2015

Total Fund Balances - Total Governmental Funds $ 282,397,306 $ 235,329,059

Amounts reported for Governmental Activities in the Statement of Net Position are different because:

Capital assets used in governmental activities are not current financial resources and therefore are not reported in the Governmental Funds Balance Sheet, net of Internal Service Funds capital assets of $2,554,798 and $2,639,743 at June 30, 2016 and 2015, respectively. 896,998,758 894,916,307

Interest payable on long-term debt does not require current financial resources. Therefore, interest payable is not reported as a liability in the Governmental Funds Balance Sheet. (1,429,620) (1,419,224)

Condemnation deposits are reported as current assets; however, such deposits are reported as expenditures in Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances. 15,000 15,000

Internal Service Funds are used to charge the costs of insurance, information technology, and fire equipment replacement to individual funds. The assets and liabilities of the Internal Service Funds are included in governmental activities in the Government-Wide Statement of Net Position 3,465,002 1,502,463

Deferred inflows of resources recorded in governmental funds financial statements resulting from activities in which revenues were earned but funds were not available are reclassified as revenues in the Government-Wide Financial Statements. 3,379,129 5,222,521 Accruals for compensated absences are long-term liabilities and are not due and payable in the current period and therefore they are not reported in the Governmental Funds Balance Sheet. (9,118,034) (8,816,180)

Other post employment benefits obligation on Government-Wide Statement of Net Position is not due and payable and therefore is not reported in the Governmental Funds Balance Sheet. (30,459,000) (30,401,000)

Pollution remediation obligations are not due and payable in the current period and therefore are not reported in the Governmental Funds Balance Sheet. (2,575,759) (2,962,962)

Deferred outflows of resources resulting from timing changes of employer pension contributions are not current financial resources and therefore are not reported in the Governmental Funds Balance Sheet. 30,210,386 25,635,550

Deferred inflows of resources resulting from the changes in the net pension liability are not due and payable and therefore are not reported in the Governmental Funds Balance Sheet. (21,482,398) (48,223,767)

Net pension liability on Government-Wide Statement of Net Position is not due and payable and therefore is not reported in the Governmental Funds Balance Sheet. (281,813,786) (262,744,266)

Long-term debt is not due and payable in the current period and therefore is not reported in the Governmental Funds Balance Sheet. (176,211,962) (173,525,679)

Net Position of Governmental Activities $ 693,375,022 $ 634,527,822 See accompanying Notes to Basic Financial Statements.

CAFR for the Fiscal Year Ended June 30, 2016 I 37 Governmental Funds Financial Statements

City of Fremont Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds For the fiscal year ended June 30, 2016 (With comparative totals for the fiscal year ended June 30, 2015)

Major Funds

General Development Development Recreation Fund Impact Fees Cost Center Services REVENUES Property tax $ 79,387,844 $ $ $ Sales tax 48,580,024 Intergovenrmental 564,969 Business tax 10,125,832 Other taxes 9,887,434 Impact fees 11,792,744 Franchise fees 9,605,547 Charges for services 9,078,856 15,914,551 8,248,097 Investment earnings 1,271,369 1,163,425 190,483 137,430 Other 2,102,100 151,387 138,831 Total revenues 170,603,975 13,107,556 16,105,034 8,524,358

EXPENDITURES Current: General govenrment 14,534,805 Police services 67,208,825 Fire services 43,406,101 Hunrnn services Capital assets maintenance and operations 21,445,806 12,036,929 2,824,034 Recreation and leisure services 8,318,171 Comnmnity development and envirollillental services 1,327,238 9,367,299 Intergovenrmental Capital outlay 1,084,778 4,781,179 77,752 Debt service: Principal Interest and fiscal charges 491,554 Total expenditures 149,499,107 16,818,108 12,269,085 8,318,171

REVENUES OVER (UNDER) EXPENDITURES 21,104,868 (3,710,552) 3,835,949 206,187

OTHER FINANCING SOURCES (USES) Debt issuance Proceeds from sale of capital assets 729,628 Transfers in 5,603,226 3,075,982 2,246,187 Transfers out (29,558,804) (850,000) (2,486,340) (2,233,331)

Total other financing sources (uses) (23,225,950) (850,000) 589,642 12,856

Net change in fund balances (2,121,082) (4,560,552) 4,425,591 219,043

FUND BALANCES Beginning of year 41,247,695 74,239,372 4,625,010 7,269,011 End of year $ 39,126,613 $ 69,678,820 $ 9,050,601 $ 7,488,054

See accompanying Notes to Basic Financial Statements.

38 I City of Fremont, California Governmental Funds Financial Statements

Major Funds Total Governmental Funds Intermodal Surface Low and Capital Human Transportation Moderate Income Non-major Improvement Services Efficiency Act Housing Asset Funds 2016 2015

$ $ $ $ $ 3,097,044 $ 82,484,888 $ 79,611,885 48,580,024 40,743,875 7,129,170 5,723,301 16,139,864 29,557,304 26,077,980 10,125,832 9,420,130 9,887,434 8,939,844 11,792,744 6,966,643 9,605,547 9,298,688 65,242 1,674,590 20,202,232 55,183,568 47,547,582 908,630 72,648 77,159 439,946 4,261,090 1,625,206 53,452 927,207 1,650,296 4,839,905 9,863,178 9,419,190 1,027,324 9,803,615 5,723,301 1,727,455 44,718,991 271,341,609 239,651,023

14,534,805 13,687,288 698,779 67,907,604 60,977,009 191,591 43,597,692 37,123,963 11,219,010 169,803 11,388,813 10,523,242 6,129,782 4,929,304 13,321,937 60,687,792 54,164,969 8,318,171 7,847,547 1,246,393 399,454 12,657,275 24,997,659 19,033,162 1,990,040 4,538,739 2,127,262 3,133,049 15,742,759 17,756,829

6,290,000 6,290,000 6,105,000 47,366 3,402,761 3,941,681 4,055,742 10,668,521 12,512,769 7,056,566 399,454 39,865,195 257,406,976 233,264,791

(9,641,197) (2,709,154) (1,333,265) 1,328,001 4,853,796 13,934,633 6,386,232

9,100,000 9,100,000 22,315,000 988,986 24,033,614 19,244,059 12,277,300 4,371,484 9,520,285 37,094,464 37,855,620 (1,322,266) (55,464) (588,259) (37,094,464) (37,855,620)

43,692,300 3,049,218 (55,464) 9,921,012 33,133,614 19,244,059

34,051,103 340,064 (1,333,265) 1,272,537 14,774,808 47,068,247 25,630,291

43,518,502 7,037,376 3,442,211 53,949,882 235,329,059 209,698,768 $ 77,569,605 $ 7,377,440 $ (1,333,265) $ 4,714,748 $ 68,724,690 $ 282,397,306 $ 235,329,059

CAFR for the Fiscal Year Ended June 30, 2016 I 39 Governmental Funds Financial Statements City of Fremont Reconciliation of the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balances to the Government-Wide Statement of Activities For the fiscal year ended June 30, 2016 (With comparative totals for the fiscal year ended June 30, 2015)

2016 2015

Net Change in Fund Balances - Total Governmental Funds $ 47,068,247 $ 25,630,291

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

Governmental funds report capital outlays as expenditures. However, in the Government-Wide Statenient of Activities, the cost of those assets is allocated over their estilnated useful lives as depreciation expense. Tiris is the amount of capital assets additions recorded in the current period along with the condemnation deposit increase/ decrease due to land acquired and legal expenses paid during the year. 15,742,759 17,756,829

Contributions of capital assets from developers not reported as revenue in governmental funds. 767,809 146,478

Pension contribution made subsequent to the measu:renient date is an expenditure in the goverrnnental funds, but reported as a deferred outflow of resources in the government-wide financial statements. 29,165,275 25,635,550 Pension expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in goverrnnental funds. (16,918,590) (20,817,420)

Depreciation expense on capital assets is reported in the Government-Wide Statement of Activities, but it does not require the use of current financial resources. Therefore, depreciation, net of $432,132 and $476,027, for the years ended June 30, 2016 and 2015, respectively, from the Internal Service Funds is not reported as an expenditure in goverrnnental funds. (7,728,229) (7,902,237)

Disposals of capital assets and transfers of capital assets to the Internal Service Funds are reported in the Government-Wide Statement of Activities, but do not require the use of current financial resources. Therefore, these activities are not reported as expenditures in goverrnnental funds. (6,699,888) (3,258,941)

Bond proceeds provide current financial resources to governmental funds, but issuing debt increases long-tenn liabilities in the Government-Wide Statement of Net Position (9,100,000)

Repayment of bond principal is an expenditure in governmental funds, but the repayment reduces long-tenn liabilities in the Government-Wide Statement of Net Position 6,290,000 6,105,000

Revenues earned but not available are deferred in the goverrnnental funds but are recognized as revenues in the goverrnnent-wide financial statements. Also, revenues recognized in the goverrnnental funds during the current year that were earned and recognized in previous years in the goverrnnent-wide financial statements are reported as beginning net position in the statement of activities. (1,843,392) (2,937,138) The net change in interest payable on long-tenn debt is reported in the Government-Wide Statement of Activities, but it does not require the use of current financial resources. (10,396) 35,244 Unamortized long-term premium is deferred and amortized in the Government-Wide Statement of Activities, but it does not require the use of current financial resources. Therefore, the amortization of long-tenn premium is not reported as an expenditure in goverrnnental funds. 123,717 123,717 Internal Service Funds are used to charge the costs of insurance, information technology, and fire equipment replacement to individual funds. The change in net position of the Internal Service Funds is reported with goverrnnental activities. 1,962,539 932,525 The City's net OPEB obligation on the Government-Wide Statement of Net Position is not due and payable in the current period and therefore the changes are not reported in the governmental funds. (58,000) (5,378,000) Pollution remediation obligations are not due and payable in the current period and therefore the changes are not reported in the governmental funds. 387,203 (768,334)

Long-tenn compensated absences are not due and payable in the current period and therefore the changes are not reported in the governmental funds. (301,854) (168,982)

Change in Net Position of Governmental Activities $ 58,847,200 $ 35,134,582 See accompanying Notes to Basic Financial Statements.

40 I City of Fremont, California Proprietary Funds Financial Statements

Proprietary Funds Financial Statements

CAFR for the Fiscal Year Ended June 30, 2016 I 41 Proprietary Funds Financial Statements

City of Fremont Statement of Net Position Proprietary Funds June 30, 2016 (With comparative totals for June 30, 2015)

Internal Service 2016 2015

ASSETS

Current assets: Cash and investments held by City $ 26,230,999 $ 23,617,827 Other receivables 84,018 116,024 Prepaid assets 217,296 Total current assets 26,532,313 23,733,851

Noncurrent assets: Depreciable assets 8,806,385 9,060,585 Less accumulated depreciation (6,251,587) (6,420,842) Total noncurrent assets 2,554,798 2,639,743

Total assets 29,087,111 26,373,594

DEFERRED OUTFLOWS OF RESOURCES Deferred outflows of resources related to pensions 694,450 573,309

LIABILITIES

Current liabilities: Accounts payable 154,732 643,253 Salaries and wages payable 240,177 172,970 Claims payable 6,038,000 5,630,000 Total current liabilities 6,432,909 6,446,223

Noncurrent liabilities: Claims payable 13,145,000 11,946,000 Net pension liability 6,145,496 5,868,881 Total noncurrent liabilities 19,290,496 17,814,881

Total liabilities 25,723,405 24,261,104

DEFERRED INFLOWS OF RESOURCES Deferred inflows of resources related to pensions 593,154 1,183,336

NET POSITION

Net investment in capital assets 2,554,798 2,639,743 Unrestricted 910,204 (1,137,280)

Total net position $ 3,465,002 $ 1,502,463

See accompanying Notes to Basic Financial Statements.

42 I City of Fremont, California Proprietary Funds Financial Statements

City of Fremont Statement of Revenues, Expenses and Changes in Net Position Proprietary Funds For the fiscal year ended June 30, 2016 (With comparative totals for the fiscal year ended June 30, 2015)

Internal Service 2016 2015

OPERATING REVENUES

Charges for setvices $ 15,318,958 $ 13,262,099 Other 13,084 51,221

Total operating revenues 15,332,042 13,313,320

OPERATING EXPENSES

Salaries and wages 4,008,396 3,861,676 Insurance premiums 1,454,813 1,331,409 Provision for claim losses 5,106,255 4,314,130 Claims administration 269,893 265,588 Materials and supphes 2,439,578 2,214,430 Depreciation 432,132 476,027 Other 56,616 56,526

Total operating expenses 13,767,683 12,519,786

OPERATING INCOME 1,564,359 793,534

NONOPERATING REVENUES

Investment income 398,180 138,991

CHANGE IN NET POSITION 1,962,539 932,525

Net position- beginning of year, as previously reported 1,502,463 7,157,650 Restatement for implementation of GASB 68 (6,587,712) Net position- beginning of year, as restated 1,502,463 569,938 Net position - ending $ 3,465,002 $ 1,502,463

See accompanying Notes to Basic Financial Statements.

CAFR for the Fiscal Year Ended June 30, 2016 I 43 Proprietary Funds Financial Statements

City of Fremont Statement of Cash Flows Proprietary Funds For the fiscal year ended June 30, 2016 (With comparative totals for the fiscal year ended June 30, 2015)

Internal Service 2016 2015

CASH FLOWS FROM OPERATING ACTIVITIES

Receipts from users $ 15,133,668 $ 13,249,746 Other revenue 13,084 51,221 Less: Payments to supphers (4,652,805) (3,523,012) Payments for employee seivices (4,375,897) (3,943,582) Payments for claims paid (3,499,255) (4,759,130) Payments to others (56,616) (56,526) Net cash provided by operating activities 2,562,179 1,018,717

CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES

Acquisition of capital assets (347,187) (370,425) Sale of land held for resale 2,821,430 Net cash used in capital and related financing activities (347,187) 2,451,005

CASH FLOWS FROM INVESTING ACTIVITIES Interest received on cash and investments 398,180 138,991

Net change in cash and cash equivalents 2,613,172 3,608,713

CASH AND CASH EQUIVALENTS Beginning of year 23,617,827 20,009,114

End of year $ 26,230,999 $ 23,617,827

RECONCILIATION OF OPERATING INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES Operating income $ 1,564,359 $ 793,534 Adjustments to reconcile operating loss to net cash provided by operating activities: Depreciation 432,132 476,027 Changes in operating assets and habihties: Other receivables 32,006 (12,353) Prepaid assets (217,296) Accounts payable (488,521) 288,415 Salaries and wages payable 67,207 26,898 Claims payable 1,607,000 (445,000) Deferred outflow resources - pension plan (121,141) (573,309) Deferred inflow resources - pension plan (590,182) 1,183,336 Net pension habihty 276,615 (718,831)

Net cash provided by operating activities $ 2,562,179 $ 1,018,717

See accompanying Notes to Basic Financial Statements.

44 I City of Fremont, California Fiduciary Funds Financial Statements

Fiduciary Funds Financial Statements

CAFR for the Fiscal Year Ended June 30, 2016 I 45 Fiduciary Funds Financial Statements

City of Fremont Statement of Assets and Liabilities Fiduciary Funds June 30, 2016 (With comparative totals for June 30, 2015)

Agency Funds 2016 2015

ASSETS Cash and investments held by City $ 13,032,769 $ 12,525,586 Restricted cash and investments held by fiscal agent or City 8,127,041 7,847,201 Land held for resale 678,979 13,592,893 Accounts receivable 13,647 22,688 Other receivables 170,574 63,469

Total assets $ 22,023,010 $ 34,051,837

LIABILITIES Accounts payable $ 37,374 $ 39,844 Due to other governmental agencies 678,979 13,592,893 Cash overdraft 1,480 10,544 Deposits 21,305,177 20,408,556

Total liabilities $ 22,023,010 $ 34,051,837

See accompanying Notes to Basic Financial Statements.

46 I City of Fremont, California Index to Notes to Basic Financial Statements

Note 1 - Summary of Significant Accounting Policies ...... 49 A Description of the Government-Wide Financial Statements ...... 49 B. Financial Reporting Entity ...... 49 C. Basis of Presentation - Government-Wide Financial Statements ...... 50 D. Basis of Presentation - Fund Financial Statements ...... 51 E. Measurement Focus and Basis of Accounting ...... 53 F. Use of Estimates ...... 54 G. Comparative Data ...... 55 H. Effects of New Pronouncements ...... 55 I. Assets, Liabilities, Deferred Outflows/Inflows of Resources, and Net Position/Fund Balance ...... 57 J. Revenues, Expenditures/Expenses ...... 64

Note 2 - Cash and Investments ...... 66 A Authorized Investments ...... 66 B. Risk Disclosures - Deposits ...... 68 C. Risk Disclosures - Investments ...... 68 D. Fair Value Adjustment ...... 70 E. External Investment Pool ...... 70 F. Fair Value Hierarchy ...... 71

Note 3 - Housing Loans Receivable ...... 72

Note 4 - Capital Assets ...... 73

Note 5 - Long-Term Obligations ...... 75 A Debt Issuance ...... 77 B. Special Assessment Debt (No City Commitment) ...... 77 C Community Facilities District Special Tax Bonds (No City Commitment) ...... 77 D. Variable Rate Demand Certificates of Participations (COPs) ...... 78 E. Pledged Revenues for Bonds ...... 79 F. Compensated Absences ...... 80

Note 6 - Pollution Remediation Obligation ...... 80 A Police Firing Range ...... 80 B. Fire Station No. 1 ...... 80 C Fire Station No. 2 ...... 81 D. Former Union Pacific Railroad Corridor ...... 81

CAFR for the Fiscal Year Ended June 30, 2016 I 47 Index to Notes to Basic Financial Statements

E. Centerville Unified Site ...... 81 Note 7 - Risk Management ...... 81 A Risk Management Program ...... 81 B. Participation in Public Entity Risk Pools ...... 82

Note 8 - lnterfund Transactions ...... 84 A lnterfund Receivables and Payables ...... 84 B. lnterfund Transfers ...... 84

Note 9 - Retirement Benefits ...... 85 A General Information about the Pension Plans ...... 85 B. Net Pension Liability ...... 87 C Changes in the Net Pension Liability ...... 89

Note 10 - Other Post-Employment Benefits (OPEB) ...... 91

Note 11 - Commitments and Contingencies ...... 93

48 I City of Fremont, California Notes to Basic Financial Statements

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The basic financial statements of the City of Fremont, California (City) have been prepared in conformity with U.S. generally accepted accounting principles (GAAP) as applied to governmental entities. The Governmental Accounting Standards Board (GASB) is the accepted standard setting body for establishing governmental accounting and financial reporting principles. The more significant of the City's accounting policies are described below.

A. Description of the Government-Wide Financial Statements

The government-wide financial statements (the Statement of Net Position and Statement of Activities) report information on all of the nonfiduciary activities of the primary government and its component units. Data from the governmental funds and internal service funds financial statements are summarized as governmental activities in the government-wide financial statements. All fiduciary activities are reported only in the fund financial statements.

B. Financial Reporting Entity

The City was incorporated in January 1956. The City has a council-manager form of government and provides a wide range of municipal services. These basic financial statements present the City and its component units. Component units are legally separate organizations for which the elected officials of the primary government are financially accountable. In addition, component units can be other organizations for which the primary government's exclusion would cause the reporting entity's financial statements to be misleading or incomplete.

The following is a brief overview of the component units included in the accompanying basic financial statements of the City. Financial information for these component units can be obtained from the City's Finance Department.

Fremont Public Financing Authority (Financing Authority)~ A joint powers authority formed by the City and the former Redevelopment Agency of the City of Fremont (Agency), organized for the purpose of financing certain capital projects for the City or the Agency. Separate financial statements are not issued for the Financing Authority. Although the Agency ceased to exist after January 31, 2012, that occurrence had no effect on the existence of the Financing Authority.

Fremont Social Services Joint Powers Authority (Social Services JPA) ~ A joint powers authority formed by the City and the Agency, organized for the purpose of facilitating the activities of the Family Resource Center. In 1998, the Social Services JPA entered into a 40-year lease with the City for the two buildings that house the Family Resource Center. The Social Services JP A has committed to subleasing this space to CDBG­ eligible tenants at below-market rents over the 40-year lease term. Rents collected from CD BG-eligible tenants are used to make payments on the debt service obligations incurred in connection with the purchase of the buildings. Separate financial statements

CAFR for the Fiscal Year Ended June 30, 2016 I 49 Notes to Basic Financial Statements

are not issued for the Social Services JP A Although the Agency ceased to exist after January 31, 2012, that occurrence had no effect on the existence of the Social Services JPA.

The City Council serves in separate session as the governing body of the Financing Authority and the Social Services JP A and a financial benefit/burden relationship exists between the City and these entities. As a result, the financial activities of the Financing Authority and the Social Services JPA are integrally related to those of the City and are "blended" with those of the City.

C. Basis of Presentation - Government-Wide Financial Statements

While separate government-wide and fund financial statements are presented, they are interrelated. The governmental activities column incorporates data from governmental funds and internal service funds. Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though the latter are excluded from the government-wide financial statements.

The City reports the following governmental activities:

General Government - These services are those that are associated with the general administration of the government. These services are primarily provided by the following departments: City Council, City Manager, City Attorney, City Clerk, Finance, and Human Resources. These departments provide services that support external as well as other internal government functions of the City.

Public Safety - Police Services - The Police Department is responsible for the safeguarding of citizens' lives and property, the preservation of constitutional rights, and neighborhood problem solving. These services also include the animal shelter and jail bookings.

Public Safety - Fire Services - The Fire Department is responsible for providing fire and life safety emergency services, including emergency response, paramedic services, public education, emergency-preparedness training and hazardous materials management services.

Human Services - The Human Services Department offers a range of services to the community including a senior center, paratransit services, counseling, and support for seniors, families and youth.

Capital Assets Maintenance and Operations - These services are provided by the Public Works Department and the Community Services Department and include maintenance of the City's capital assets and infrastructure such as public buildings, parks, streets and vehicles.

Recreation and Leisure Services - Services provided by the Community Services Department include performing and visual arts, youth and adult sports, youth and early

50 I City of Fremont, California Notes to Basic Financial Statements

childhood enrichment programs, park visitor services, and management of the community centers, special facilities, and historic sites.

Community Development and Environmental Services - These services are provided by the Community Development Department and the Environmental Services Division of the Community Services Department and include community planning, engineering, code enforcement, building permit and inspection services, and environmental services that enhance and preserve a high quality living environment within the City.

Certain eliminations have been made as prescribed by GASB Statement No. 34 in regards to interfund activities, payables and receivables; however, program revenues and expenses have been retained.

D. Basis of Presentation - Fund Financial Statements

The accounts of the City are organized on the basis of funds, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, deferred inflows of resources, deferred outflows of resources, fund equity, revenues, and expenditures or expenses, as appropriate. Government resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled.

Governmental fund financial statements include a Balance Sheet and a Statement of Revenues, Expenditures and Changes in Fund Balances for all major governmental funds and aggregated non-major funds. Accompanying statements are presented to reconcile and explain the differences in fund balances and change in fund balances as presented in these statements to the net position and change in net position presented in the government-wide financial statements. The fund types presented in the fund financial statements include the General Fund, special revenue funds, debt service funds, and capital projects funds. The City has presented all major funds that meet the criteria prescribed in GASB Statement No. 34.

The City reports the following major governmental funds:

General Fund - This fund is the City's primary operating fund. It accounts for all financial resources and outlays of the general government. The General Fund receives the City's discretionary funding sources (e.g., property tax, sales tax, charges for services, etc.) and uses its resources for the general operations of the City (e.g., police, fire, general government) not accounted for in other funds.

Development Impact Fees - This is a capital projects fund that accounts for impact fees levied under California Government Code Sections 66000 et seq., "Fees for Development Projects" (commonly referred to as AB1600) and Section 66477 (commonly referred to as the Quimby Act). The City assesses fees for fire, capital facilities, traffic, park dedication in lieu, and park facilities. These fees are used to defray all or a portion of the cost of additional public facilities needed to provide service to new development. CAFR for the Fiscal Year Ended June 30, 2016 I 51 Notes to Basic Financial Statements

Development Cost Center - This is a special revenue fund that accounts for user fees and costs of services related to planning, engineering and inspection of public and private development construction projects.

Recreation Services - This is a special revenue fund that accounts for all of the City's recreation programs and services, including Central Park and activities of the community centers. User fees are generated from the various classes and programs offered to the public.

Capital Improvement - By Council resolution, this capital projects fund can be used only to finance capital improvements for the City, including the acquisition, construction, and initial equipping of parks, recreation areas, public safety facilities, or other public works projects. Amounts in this fund are primarily received as transfers from the General Fund, as interest earned on invested cash balances, as proceeds from the sale of certain parcels of land, or as proceeds of debt.

Human Services - This is a special revenue fund used to account for revenues from federal, state, and local sources that, by law or administrative action, are designated to sustain the City's social service infrastructure to promote a healthy and safe environment for families, the elderly, and youth. Services and programs include self-sufficiency, counseling, and housing assistance.

Intermodal Surface Transportation Efficiency Act (]STEA) - This is a capital projects fund used to account for federal funding for transportation projects. Among ISTEA's many programs, three provide capital improvement funds for local governments. These programs are known as the Surface Transportation Program, the Congestion Mitigation and Air Quality Improvement Program, and the Transportation Enhancement Activity Program. Funds are applied for on a project-by-project basis.

Low and Moderate Income Housing Asset - This is a special revenue fund created to administer the housing assets and functions related to the Low and Moderate Income Housing Program retained by the City following the dissolution of the former Agency. Principal and interest from developers for Low and Moderate housing projects and homeowners for the Single Family Rehabilitation and First Time Home Buyers Down Payment Assistance Program, as well as interest earned on invested cash balances, account for the revenues of this fund.

Proprietary fund financial statements include a Statement of Net Position, a Statement of Revenues, Expenses and Changes in Net Position, and a Statement of Cash Flows for all proprietary funds.

The City reports the following proprietary fund type:

Internal Service - This fund type accounts for the Risk Management and Information Technology services provided to other City departments on a cost-reimbursement basis, as well as funds accumulated for Fire Capital Replacement.

52 I City of Fremont, California Notes to Basic Financial Statements

Internal service fund balances and activities have been incorporated into governmental activities in the government-wide financial statements.

Fiduciary fund financial statements consist of a Statement of Assets and Liabilities and a Statement of Changes in Assets and Liabilities. The City's fiduciary funds consist of three agency funds. The City's agency funds are custodial in nature and do not involve measurement of results of operations.

The City reports the following agency funds:

Local Improvement Districts~ Special assessment bonds were issued by local improvement districts under various public improvement acts of the State of California and are secured by liens against properties deemed to have been benefited by the improvements for which the bonds were issued. The City acts as an agent in collecting the assessments from the property owners, forwarding the collections to bondholders, and initiating foreclosure proceedings when necessary. This fund also accounts for the accumulation of City of Fremont Community Facilities District No. 1 (CFD 1) facilities and services special tax revenue, payment of principal and interest for the outstanding CFD 1 special tax bonds, and payment for maintenance of the public improvements at Pacific Commons financed with the special tax bonds.

Performance Bonds, Deposits and Confiscated Assets~ This fund accounts for bonds and deposits received in conjunction with construction activity within the City, assets confiscated by the police, and other deposits held by the City in a fiduciary capacity.

Southern Alameda County GJS ~ This fund accounts for monies collected from agencies participating in a JP A for the administration of the Geographic Information System (GIS). The City is the administrator of the GIS, which serves the participating agencies. The parties to the JPA are the City of Fremont, City of Newark, Union Sanitary District, and Alameda County Water District.

During the year, the City has activity between funds for various purposes. Any residual balances outstanding at year end are reported as due from/to other funds and advances to/from other funds. While these balances are reported in the fund financial statements, certain eliminations are made in the preparation of the government-wide financial statements. Balances between funds are eliminated. Similarly, activity occurs during the year involving transfers of resources between funds. In the fund financial statements these amounts are reported at gross amounts as transfers in/out. However, certain eliminations are made in the preparation of the government-wide financial statements. Transfers between funds are eliminated.

E. Measurement Focus and Basis ofAccounting

The accounting and financial reporting treatment is determined by the applicable measurement focus and basis of accounting. Measurement focus indicates the type of resources being measured such as current financial resources or economic resources. The basis of accounting indicates the timing of transactions or events for recognition in the financial statements. CAFR for the Fiscal Year Ended June 30, 2016 I 53 Notes to Basic Financial Statements

The government-wide financial statements are presented on an economic resources measurement focus and the accrual basis of accounting. Accordingly, all of the City's assets and liabilities, including capital assets, as well as infrastructure assets and long-term liabilities, are included in the accompanying Statement ofNet Position. The Statement of Activities presents changes in net position. Under the accrual basis of accounting, revenues are recognized in the period in which they are earned and expenses are recognized in the period in which the liability is incurred.

All governmental funds are accounted for on a spending or current financial resources measurement focus and the modified accrual basis of accounting. Accordingly, only current assets and current liabilities are included on the balance sheet. The Statement of Revenues, Expenditures and Changes in Fund Balances presents increases (revenues and other financing sources) and decreases ( expenditures and other financing uses) in net current assets.

Under the modified accrual basis of accounting, revenues are recognized in the accounting period in which they become both measurable and available to finance expenditures of the current period. Revenues not meeting the availability criteria are considered deferred inflows of resources. Property tax revenues are recognized in the current year if they are collected within 60 days of year-end. All other revenues are recorded when received in cash, except that revenues subject to accrual (generally received within 90 days after year­ end) are recognized when due. The primary revenue sources that have been treated as susceptible to accrual by the City are property tax, sales tax, special assessments, intergovernmental revenues, other taxes, interest revenue, rental revenue and certain charges for services. Fines, forfeitures, licenses, and permits are not susceptible to accrual because they are usually not measurable until received in cash. Expenditures are recorded in the accounting period in which the related fund liability is incurred.

Proprietary funds are accounted for using the economic resources measurement focus and the accrual basis of accounting. Accordingly, all assets and liabilities (whether current or noncurrent) are included in the Statement of Net Position. The Statement of Revenues, Expenses and Changes in Net Position presents increases (revenues) and decreases ( expenses) in total net position. The agency funds have no measurement focus but utilize the accrual basis of accounting for reporting assets and liabilities.

F. Use of Estimates

The preparation of the basic financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities. In addition, estimates affect the reported amount of revenues and expenses. Actual results could differ from these estimates and assumptions.

54 I City of Fremont, California Notes to Basic Financial Statements

G. Comparative Data

The basic financial statements include certain prior-year summarized comparative information in total but not at the level of detail required for a presentation in conformity with generally accepted accounting principles. Accordingly, such information should be read in conjunction with the City's fiscal year 2014/15 financial statements, from which the summarized information was derived. Comparative total data for the prior year have been presented to provide an understanding of the overall changes in the financial position and operations of the City. Certain fiscal year 2015/15 amounts presented as summarized comparative financial information in the basic financial statements have been reclassified for comparative purposes to conform to the presentation in the fiscal year 2015/16 basic financial statements.

H. Effects of New Pronouncements

The City implemented the following GASB Statements during the year:

In February 2015, GASB issued Statement No. 72, Fair Value Measurement and Application. This statement addresses accounting and financial reporting issues related to fair value measurements.

Key changes include the following:

• Measurement of investments at fair value. Investments not measured at fair value continue to include money market investments and 2a7-like external investment pools.

• Measurement at acquisition value ( an entry price) for donated capital assets, donated works of art, historical treasures, and similar assets and capital assets received in a service concession arrangement. These assets were previously required to be measured at fair value.

• Disclosures about fair value measurements, the level of fair value hierarchy, and valuation techniques.

• Disclosures regarding investments in certain entities that calculate net asset value per share ( or its equivalent), such as the City's external investment pools.

The statement requires a government to use valuation techniques that are appropriate under the circumstances and for which sufficient data are available to measure fair value. The techniques should be consistent with one or more of the following approaches: the market approach, the cost approach, or the income approach. Valuation techniques maximize the use ofrelevant observable inputs and minimize the use of unobservable inputs. The statement also establishes a hierarchy of inputs to valuation techniques used to measure fair value, and permits quoted prices provided by third parties as long as the City determines that those quoted prices are developed in accordance with the provisions of the statement.

CAFR for the Fiscal Year Ended June 30, 2016 I 55 Notes to Basic Financial Statements

In June 2015, GASB issued Statement No. 76, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments. This statement reduces the hierarchy of generally accepted accounting principles to two categories of authoritative GAAP and addresses the use of authoritative and nonauthoritative literature in the event that the accounting treatment for a transaction or other event is not specific with a source of authoritative GAAP.

In March 2016, the GASB issued Statement No. 82, Pension Issues -An Amendment of GASE Statements No. 67, No. 68 and No. 73. The Statement addresses issues raised with respect to the GASB Statement No. 67, 68 and 73, regarding: (1) the presentation of payroll-related measures in required supplementary information; (2) the selection of assumptions and the treatment of deviations from the guidance in an Actuarial Standard of Practice for financial reporting purposes; and (3) the classification of payments made by employers to satisfy employee (plan member) contribution requirements. The implementation of these statements did not have a significant impact on the City's financial statements for the fiscal year ended June 30, 2016.

The City is currently analyzing its accounting practices to determine the potential impact on the financial statements for the following GASB Statements:

In June 2015, GASB issued Statement No. 74, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans. This statement addresses reporting by OPEB plans that administer benefits on behalf of governments. The requirements of this statement are effective for the City's fiscal year ending June 30, 2017.

In June 2015, GASB issued Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. This statement addresses reporting by governments that provide OPEB to their employees and for governments that finance OPEB for employees of other governments. The requirements of this statement are effective for the City's fiscal year ending June 30, 2018.

In August 2015, GASB issued Statement No. 77, Tax Abatement Disclosures. This statement requires governments that enter into tax abatement agreements to disclose certain information about the agreements. The requirements of this statement are effective for the City's fiscal year ending June 30, 2017.

In December 2015, GASB issued Statement No. 78, Pensions Provided through Certain Multiple-Employer Defined Benefit Pension Plans. The objective of this statement is to address a practice issue regarding the scope and applicability of Statement No. 68 associated with pensions provided through certain cost-sharing multiple-employer defined benefit pension plans and to state or local governmental employers whose employees are provided with such pensions. Such plans are not considered a state or local government pension plan and are used to provide benefits to both employees of state and local governments and employees of employers that are not state or local governments. The requirements of this statement are effective for the City's fiscal year ending June 30, 2017.

56 I City of Fremont, California Notes to Basic Financial Statements

In December 2015, GASB issued Statement No. 79, Certain External Investment Pools and Pool Participants. The statement addresses accounting and financial reporting for certain external investment pools and pool participants. The requirements of this statement are effective for the City's fiscal year ending June 30, 2017.

In January 2016, GASB issued Statement No. 80, Blending Requirements for Certain Component Units-an amendment of GASE Statement No. 14. The objective of this statement is to improve financial reporting by clarifying the financial statement presentation requirements for certain component units. This statement amends the blending requirements established in GASB Statement No. 14, The Financial Reporting Entity, as amended. The requirements of this statement are effective for the City's fiscal year ending June 30, 2017.

In March 2016, GASB issued Statement No. 81, Irrevocable Split-Interest Agreements. The statement provides recognition and measurement guidance for situations in which a government is a beneficiary of these agreements. The requirements of this statement are effective for the City's fiscal year ending June 30, 2018.

I. Assets, Liabilities, Deferred Outflows/Inflows of Resources, and Net Position/Fund Balance

1. Cash and Investments

The City pools cash resources from all funds in order to facilitate and maximize the management of cash. The balance in the pooled cash account is available to meet current operating requirements. Cash in excess of current requirements is invested in various interest-bearing accounts and other fixed income investments with varying terms.

In addition, Note 2 provides information about the City's deposits and investments, interest sensitive investments, the credit quality of the investments held at year-end, and fair value measurement. Investments are presented at fair value except as noted below. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Money market investments (such as short-term, highly liquid debt instruments including bankers' acceptances) and securities (notes, bills, and obligations of the U.S. government and its agencies), and participating interest-earning investment contracts (such as negotiable certificates of deposit and repurchase agreements) that have a remaining maturity at the time of purchase of one year or less, are reported at amortized cost, which approximates fair value. Interest earned on investments is allocated monthly to all funds on the basis of daily cash and investment balances.

The City participates in two investment pools, the first managed by the State of California, the Local Agency Investment Fund (LAIF) and the second managed by PFM Asset Management LLC, the California Asset Management Program (CAMP). LAIF has invested a portion of the pool funds in structured notes and asset-backed securities, which are subject to interest rate risk. The fair value of participants' positions in the

CAFR for the Fiscal Year Ended June 30, 2016 I 57 Notes to Basic Financial Statements

external investment pools is the same as the value of the investment pool's shares and investment income, which includes changes in fair value (i.e., realized and unrealized gains or losses).

Cash and cash equivalents are considered to be cash on hand, amounts in demand deposits and short-term investments with original maturities of three months or less from the date acquired by the City.

2. Restricted Cash and Investments

Certain restricted cash and investments are held by a fiscal agent or the City for the redemption of bonded debt and for acquisition and construction of certain capital projects.

3. Capital Assets

Capital assets are stated at historical cost or estimated historical cost if actual historical cost is not available. Donated assets are stated at their estimated fair market value on the date donated. City policy has set the capitalization threshold for reporting infrastructure capital assets at $25,000 and for all other capital assets at $5,000. Depreciation is recorded on a straight-line basis over estimated useful lives of the assets, as follows:

Infrastructure 15 - 100 years Buildings 50 years Building Improvements 20 years Vehicles 5 - 27 years Machinery and Equipment 5 - 25 years

The City defines infrastructure as the basic physical assets that allow the City to function. These assets include the street network, park and recreation lands and improvements network, storm water collection network, and site amenities associated with buildings, such as parking and landscaped areas, used by the City in the conduct of its business. All of the City's infrastructure networks are depreciated over their estimated useful lives, with the exception of the street network for which the City has elected to use the modified approach as defined by GASB Statement No. 34.

Pursuant to the modified approach to accounting for infrastructure assets, the City has committed to preserving and maintaining its street network at an appropriate condition level as determined by the City Council. Consequently, no depreciation expense is reported for the capital assets comprising the street network, nor are amounts capitalized in connection with improvements that lengthen the lives of those capital assets, unless those improvements also increase their service capacity. The City maintains an inventory of its street network infrastructure assets and performs periodic condition assessments to establish that the predetermined condition level is being maintained. Additionally, the City makes annual estimates of the amount that must be expended to preserve and maintain the street network at the predetermined condition level. 58 I City of Fremont, California Notes to Basic Financial Statements

4. Compensated Absences

In accordance with negotiated labor agreements, employees accumulate earned but unused vacation and other compensated leave, and sick pay benefits. There is no liability for unpaid accumulated sick leave because the City does not pay any amounts when employees separate from service with the City. All vacation and other compensated leave is accrued when incurred in the government-wide and proprietary fund financial statements. A liability for these amounts is reported in governmental funds when due and payable only if it is expected to be settled with current financial resources.

5. Claims Payable

The City records a liability to reflect an actuarial estimate of ultimate uninsured losses for both general liability claims (including property damage claims) and workers' compensation claims. The estimated liability for workers' compensation claims and general liability claims includes incurred but not reported (IBNR) claims and loss adjustment expenses. There is no fixed payment schedule to pay any of these liabilities.

6. Unearned Revenue

Unearned revenues arise when the City receives resources before it has a legal claim to them, as when grant monies are received before all eligibility requirements imposed by the grantor have been met (i.e. before incurring qualifying expenditures or performing related services). In subsequent periods, when the City has met all eligibility requirements, the liability for unearned revenue is removed from the balance sheet and revenue is recognized.

7. Interfund Transactions

During the normal course of operations, the City has numerous transactions among funds. The significant interfund transactions that occurred during the year can be classified into two types:

Transfers - Transactions to allocate resources or the occurrence of specific expenditures to the receiving fund. These transactions are recorded as transfers in and out in the year in which they are approved.

Loans Between Funds - Transactions to loan resources from one fund to another. Short-term loans are recorded as "due from other funds" in the disbursing fund and "due to other funds" in the receiving fund.

8. Long-Term Obligations

In the government-wide financial statements, long-term debt and other long-term obligations are reported as liabilities in the governmental activities. Bond premiums and discounts are amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount.

CAFR for the Fiscal Year Ended June 30, 2016 I 59 Notes to Basic Financial Statements

In the fund financial statements, govermnental-type funds recognize bond premiums and discounts during the period they occur. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuance are reported as other financing sources, while discounts on debt issuance are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures.

9. Pensions

For purposes of measuring the net pension liability and deferred outflows/inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the City of Fremont's California Public Employees' Retirement System (CalPERS) plans (the "Plans") and additions to/deductions from the Plans' fiduciary net position have been determined on the same basis as they are reported by CalPERS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value.

10. Deferred Outflows/Inflows of Resources

In addition to assets, the statement of net position or balance sheet will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. For the year ended June 30, 2016, the City is reporting deferred pension contributions and differences between expected and actual experiences for pension plans as deferred outflows of resources.

In addition to liabilities, the statement of net position or balance sheet will sometimes report a separate section for deferred inflows ofresources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. For the year ended June 30, 2016, the City has two types of items to report in this category: the first, unavailable revenue which arises only under the modified accrual basis of accounting, is reported only in the govermnental funds balance sheet; the second, pension items including the difference between expected and actual earnings on pension investments, changes of pension plan assumptions, and differences between expected and actual experiences are is reported in the government-wide and proprietary funds statement of net position. The unavailable revenues in the governmental funds will be recognized as an inflow of resources during the period that the amounts become available.

60 I City of Fremont, California Notes to Basic Financial Statements

11. Net Position and Fund Balance

In the government-wide financial statements, net position is reported in one of three categories:

Net Investment in Capital Assets - groups all capital assets, including infrastructure, into one component of net position. Accumulated depreciation and the outstanding balances of debt that are attributable to the acquisition, construction, or improvement of these assets reduce the balance of this category.

Restricted Net Position - consists ofrestricted assets reduced by liabilities and deferred inflows ofresources related to those assets. Enabling legislation authorizes the City to assess, levy, charge, or otherwise mandate payment of resources and includes a legally enforceable requirement that those resources be used only for the specific purposes stipulated in the legislation. A legally enforceable enabling legislation restriction is one that a party external to a government-such as citizens, public interest groups, or the judiciary-can compel a government to honor.

Unrestricted Net Position - represents net position of the City that are not restricted for any project or purpose.

As prescribed by GASB Statement No. 54, governmental funds report fund balance in classifications based primarily on the extent to which the City is bound to honor constraints on the specific purposes for which amounts in the funds can be spent. As of June 30, 2016, fund balances for government funds are reported in the following categories:

Non spendable Fund Balance - includes amounts that are ( a) not in spendable form, or (b) legally or contractually required to be maintained intact. The "not in spendable form" criterion includes items that are not expected to be converted to cash, for example, inventories, prepaid amounts, and long-term notes receivable.

Restricted Fund Balance - includes amounts that can be spent only for the specific purposes stipulated by external resource providers, constitutionally or through enabling legislation. Restrictions may effectively be changed or lifted only with the consent ofresource providers.

Committed Fund Balance - includes amounts that can only be used for the specific purposes determined by a formal action of the City's highest level of decision-making authority. The City Council is the highest level of decision­ making authority for the City that can, by adoption of an ordinance or resolution ( either action is equally binding as the other), commit fund balances. Commitments may be changed or lifted only by the City Council taking the same formal action that imposed the constraint originally.

CAFR for the Fiscal Year Ended June 30, 2016 I 61 Notes to Basic Financial Statements

Assigned Fund Balance~ comprises amounts intended to be used by the City for specific purposes through budgetary actions or delegation of authority by the City Council. Intent is expressed by the City Council or an official to whom the City Council has delegated the authority (generally, the City Manager) to assign amounts to be used for specific purposes.

Unassigned Fund Balance~ is the residual classification for the General Fund and includes all amounts not contained in the other classifications. Unassigned amounts are technically available for any purpose. The amount also includes negative fund balances for other governmental funds.

At June 30, 2016, the City's Intermodal Surface Transportation Efficiency Act (ISTEA) major capital projects fund had a deficit fund balance of $1,333,265. The Miscellaneous State Grants Capital nonmajor capital project fund had a deficit fund balance of $42,473. The City's Proposition lB Highway-Railroad Crossing Safety Account (HRCSA) nonmajor capital projects fund had a deficit fund balance of $33,283. These deficits are due to the timing of receipt of revenues to fund capital expenditures. The deficits are expected to be funded by future intergovernmental revenues.

12. Use of Restricted/Unrestricted Net Position and Fund Balances

When an expense is incurred for purposes for which both restricted and unrestricted net position are available, the City's policy is to apply restricted net position first.

With respect to fund balance, the City considers restricted amounts to have been spent first when an expenditure is incurred for purposes for which both restricted and unrestricted fund balance are available. Additionally, the City considers committed amounts to have been spent first, assigned amounts to have been spent second, and unassigned amounts to have been spent last when an expenditure is incurred for purposes for which committed, assigned, and unassigned fund balance is available.

13. Minimum Fund Balance Policies

Budget policies adopted by the City Council and incorporated into the annual operating budget require the City to maintain the following four General Fund reserves: the Contingency Reserve, the Program Investment Reserve, the Economic Volatility Reserve, and the Budget Uncertainty Reserve.

Contingency Reserve ~ helps mitigate the effects of unanticipated situations such as natural disasters and severe, unforeseen events. The Contingency Reserve also serves as back-up liquidity to the Risk Management Fund if the need arises. The Contingency Reserve is funded at a level at least equal to 10% of annual operating expenditures and transfers out. All uses of the Contingency Reserve must be approved by City Council. Any such uses are to be repaid to the Contingency Reserve over a period of no more than three years. This reserve balance is reported as unassigned fund balance in the General Fund because it does not meet the requirements of a "stabilization

62 I City of Fremont, California Notes to Basic Financial Statements

arrangement," as defined in GASB Statement No. 54. At June 30, 2016, the Contingency Reserve was approximately $17.3 million.

Program Investment Reserve~ provides a source of working capital for the following: a) new programs or undertakings that have potential for receiving significant funding from outside sources, and b) organization retooling, process improvement, and strategic entrepreneurial opportunities. The Program Investment Reserve is funded at a level equal to 2. 5% of annual operating expenditures and transfers out. All uses of the Program Investment Reserve must be approved by the City Council. Any such uses are to be repaid to the Program Investment Reserve over a period to be determined by the City Council at the time of usage approval, with a target repayment period of no more than three years. This reserve balance is reported as unassigned fund balance in the General Fund because it does not meet the requirements of a "stabilization arrangement," as defined in GASB Statement No. 54. At June 30, 2016, the Program Investment Reserve was approximately $4.3 million.

Economic Volatility Reserve~ is intended to offset the effects of future economic downturns and unanticipated cost increases beyond the City's control. The Economic Volatility Reserve is funded at a level equal to 2.5% of annual operating expenditures and transfers out. All uses of the Economic Volatility Reserve must be approved by the City Council. Any such uses are to be repaid to the Economic Volatility Reserve over a period to be determined by the City Council at the time of usage approval, with a target repayment period of no more than three years. This reserve balance is reported as unassigned fund balance in the General Fund because it does not meet the requirements of a "stabilization arrangement," as defined in GASB Statement No. 54. At June 30, 2016, the Economic Volatility Reserve was approximately $4.3 million.

Budget Uncertainty Reserve~ is intended to offset quantifiable uncertainty in the multi-year forecast. The long-term funding level for this reserve is determined by measuring the level of financial risk associated with the following three areas of uncertainty:

Revenue risks: Revenues falling short of budget projections, causing budget shortfalls.

State budget risks: Possibility of State implemented budget solutions that legislatively reallocate intergovernmental revenues from local jurisdictions to the State (in the absence of guarantees or constitutional protection of these revenues).

Uncontrollable costs: The City requires a source of supplemental funding for things like further increases in the California Public Employees' Retirement System (CalPERS) retirement rates resulting from CalPERS investment performance falling short of actuarial

CAFR for the Fiscal Year Ended June 30, 2016 I 63 Notes to Basic Financial Statements

assumptions; and other cost increases beyond City control (e.g., various fuel and utility charges).

All uses of this reserve must be approved by the City Council. If the risk factors described above are eliminated as a result of new revenue sources, legislation, or major changes in economic conditions, the basis for the reserve will be reviewed and the funding level may be adjusted accordingly. In the event the reserve has accumulated funding beyond the established level reasonably required to offset the risks above, excess funds will be assigned for capital projects, budgeted for service enhancement, or returned to the General Fund for other purposes. This reserve is reported as unassigned fund balance in the General Fund because it does not meet the requirements of a "stabilization arrangement," as defined in GASB Statement No. 54. At June 30, 2016, the Budget Uncertainty Reserve was approximately $3.7 million.

J. Revenues, Expenditures/Expenses

1. Program Revenues

The types of transactions reported as program revenues for the City are reported in three categories: (1) charges for services, (2) operating grants and contributions, and (3) capital grants and contributions. All taxes, including those dedicated for specific purposes, and other internally dedicated resources are reported as general revenues rather than as program revenues.

2. Allocation of Indirect Expense to Functions in the Government-Wide Statement of Activities

The City charges funds and departments for certain centralized expenses (risk management, information technology, OPEB, and vehicle maintenance and replacement) which include an administrative overhead component. As a result, those indirect expenses are included along with the direct expenses shown for each of the governmental activities in the government-wide statement of activities.

3. Property Tax

Under California law, property taxes are assessed and collected by the counties at a rate of up to 1% of assessed value, plus other increases approved by the voters. Property taxes go into a pool and are then allocated to cities based on complex formulas. Property taxes are collected by the Auditor-Controller of the County of Alameda (County) and are remitted upon collection to the various taxing entities, including the City. Accordingly, the City accrues only those taxes that are received from the County within sixty days after year-end.

For assessment and collection purposes, property is classified as either "secured" or "unsecured" and is listed accordingly on separate parts of the assessment roll. The "secured roll" is that part of the assessment roll containing State-assessed property and real property having a tax lien that is sufficient, in the opinion of the County Assessor, to

64 I City of Fremont, California Notes to Basic Financial Statements

secure payment of the taxes. Unsecured property comprises all taxable property not attached to land, such as personal property or business property. Every tax levied by a county that becomes a lien on secured property has priority over all present and future private liens arising pursuant to State law on the secured property, regardless of the time of the creation of the other liens. A tax levied on unsecured property does not become a lien against the taxed unsecured property, but may become a lien on other property owned by the taxpayer.

Valuation of secured property and establishment of a statutory tax lien occur as of January 1 prior to the tax year (the tax year is the July 1 - June 30 fiscal year of the State) of the related tax levy, and the secured and unsecured tax rolls are certified on or before July 31 of the tax year by the County Assessor.

The County assesses property values, levies bills, and collects taxes as follows:

Secured Unsecured Lien Dates January 1 January 1 Levy Dates January 1 January 1 Due Dates 50% on November 1 July 1 50% on February 1 Delinquent after December 10 (for November) August 31 April 10 (for February)

The City does not have the ability to control the levy rate or the amount of property taxes remitted by the County because these are governed by State law.

4. Operating and Nonoperating Revenues and Expenses in the Proprietary Funds

Operating revenues in the proprietary funds are those revenues that are generated from the primary operations of the fund. All other revenues are reported as nonoperating revenues. Operating expenses are those expenses that are essential to the primary operations of the fund. All other expenses are reported as nonoperating expenses.

5. Excess of Expenditures over Appropriations

For the fiscal year ended June 30, 2016, the following special revenue funds had an excess of expenditures over appropriations, which were expected to be covered with existing fund balance: COPS AB3229, CUPA Administration, and Miscellaneous Federal Grants.

CAFR for the Fiscal Year Ended June 30, 2016 I 65 Notes to Basic Financial Statements

2. CASH AND INVESTMENTS

The City maintains an internal cash and investment pool for all funds. Certain restricted funds that are held and invested by independent outside custodians through contractual agreements are not pooled, and are reported as cash with fiscal agent. Investment income earned on pooled cash and investments is allocated monthly to the various funds based on average daily cash balances. Investment income from cash and investments with fiscal agent is credited directly to the related funds.

A. Authorized Investments

The City's investment policy is adopted annually by the City Council in accordance with California Government Code Section 53601, and has as its objectives the following (in order of priority):

• Safety: Safety of principal is the foremost objective of the investment program. Investments of the City shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio. To attain this objective, diversification is required in the portfolio's composition.

• Liquidity: The portfolio shall remain sufficiently liquid to meet all operating requirements that can be reasonably anticipated. Liquidity refers to the ability to sell an investment at any given moment with a minimal chance oflosing some portion of principal or interest.

• Yield: The portfolio shall be designed to attain a market rate ofreturn throughout budgetary and economic cycles, taking into account the investment risk constraints and the cash flow characteristics of the portfolio.

Under provisions of the City's investment policy, the City may invest in the following types of investments:

• Bonds and notes issued by the City.

• U.S. Treasury bills, notes, bonds, or certificates of indebtedness, or those for which the faith and credit of the United States are pledged for the payment of principal and interest.

• Registered state warrants or treasury notes or bonds issued by the State of California in the third highest rating category or better by a nationally recognized statistical rating organization (NRSRO).

• Registered treasury notes or bonds of any of the other 49 states in addition to California in the third highest rating category or better by a NRSRO.

• Bonds, notes, warrants, or other evidence of debt issued by a local agency within the State of California in the third highest rating category or better by a NRSRO.

• The Local Agency Investment Fund (LAIF) maintained by the State of California. 66 I City of Fremont, California Notes to Basic Financial Statements

• Obligations issued by agencies or instrumentalities of the U.S. Government.

• Bankers' acceptances with a term not to exceed 180 days in the highest short-term rating category by a NRSRO.

• Prime commercial paper with a term not to exceed 270 days and the highest rating issued by Moody's Investors Service or Standard & Poor's Corporation on the date of purchase. Eligible paper shall be issued by corporations that are organized and operating within the United States, having total assets in excess of $500,000,000, rated A-1, and if the issuer has issued long-term debt, it must be rated in the third highest rating category or better by a NRSRO.

• Negotiable certificates of deposit issued by federally chartered or state-chartered banks or associations or by a state-licensed branch of a foreign bank in the third highest rating category or better by at least two NRSROs.

• Repurchase agreements that comply with statutory requirements, are documented by a written agreement, are fully collateralized by delivery to an independent third-party custodian or the counterparty's bank's trust department or safekeeping department, and are for a term of one year or less.

• Medium-term notes issued by corporations organized and operating in the United States and rated in the third highest rating category or better by at least two NRSROs.

• Shares of beneficial interest issued by diversified management companies investing in authorized securities and obligations categorized as money market mutual funds with the highest rating by at least two NRSROs (e.g., money market mutual funds).

• Shares of beneficial interest issued by a joint powers authority organized pursuant to section 6509. 7 of the California Government Code that invests in the securities and obligations authorized in subdivisions (a) and (o), inclusive of Section 53601 of the California Government Code.

• Insured or collateralized time deposits or savings accounts secured in accordance with the provisions of Sections 53651 and 53652 of the California Government Code.

• Any pass-through security, collateralized mortgage obligation, mortgage-backed or other pay-through bond, equipment lease-backed certificate, consumer receivable pass-through certificate, or consumer receivable-backed bond rated in the second highest rating category or better by at least two NRSROs.

• Senior unsecured unsubordinated obligations issued or unconditionally guaranteed by the International Bank for Reconstruction and Development, International Finance Corporation, or Inter-American Development Bank, rated in the second highest rating category or better by an NRSRO.

No more than a five-year maximum maturity for each investment is allowed, unless an extension of maturity is granted by the City Council.

CAFR for the Fiscal Year Ended June 30, 2016 I 67 Notes to Basic Financial Statements

In accordance with Section 53651 of the California Government Code, the City cannot invest in inverse floaters, range notes, or interest-only strips that are derived from a pool of mortgages, or in any security that could result in zero interest accrual if held to maturity. The limitation does not apply to investments in shares of beneficial interest issued under the Investment Company Act of 1940 that are authorized investments under Section 53601 of the California Government Code.

The City's investment policy specifies that the provisions of the related bond indentures or resolutions shall govern investments of bond proceeds.

The following is a summary of pooled cash and investments, including cash and investments with fiscal agent, at June 30, 2016:

Governmental Activities Fiduciary Funds Totals Cash and investments held by the City $ 288,427,354 $ 13,032,769 $ 301,460,123 Restricted cash and investments held by fiscal agent or City 13,917,087 8,127,041 22,044,128 Cash overdraft (1,480) (1,480) Total cash and investments 302,344,441 21,158,330 323,502,771 Less: cash and deposits not meeting the definition of investments (18,956,841) (2,273,163) (21,230,004) Total investments $ 283,387,600 $ 18,885,167 $ 302,272,767

B. Risk Disclosures - Deposits

At June 30, 2016, the carrying and bank amounts of the City's cash and deposits were $21,230,004 and $24,267,142, respectively. Of the bank balance, $1,250,000 was insured by the Federal Deposit Insurance Corporation (FDIC) and $23,017,142 was collateralized. The California Government Code and the City's investment policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits, other than the following provision. The California Government Code requires that a financial institution secure deposits made by state or local governmental units by pledging securities in an undivided collateral pool held by a depository regulated under state law (unless so waived by the governmental unit). The market value of the pledged securities in the collateral pool must equal at least ll0% of the total amount deposited by the public agencies. California law also allows financial institutions to secure City's deposits by pledging first trust deed mortgage notes having a value of 150% of secured public deposits.

C. Risk Disclosure - Investments

In the governmental funds, restricted cash and investments held by the City in the Fire General Obligation Bonds Debt Service Fund are related to general obligation bonds. Restricted cash and investments held by fiscal agent in the Fremont Public Financing Authority Debt Service Fund and in the Capital Improvement Fund are restricted for the payment of principal and interest on certificates of participation and capital project

68 I City of Fremont, California Notes to Basic Financial Statements

expenditures. In the fiduciary funds, restricted cash and investments relate to special assessment and special tax bonds.

Interest Rate Risk. At June 30, 2016, the City did not hold investments that are "highly sensitive to interest rate fluctuations," as defined by GASB Statement No. 40. As a means of limiting exposure to fair value losses arising from rising interest rates, the City's investment policy provides that final maturities of securities cannot exceed five years. Specific maturities of investments depend on liquidity needs. The weighted-average life of the portfolio was 623 days, without regard to call features of many of the bonds held in the portfolio.

Credit Risk. It is the City's policy that commercial paper must have a credit rating of Al by Standard & Poor's or P-1 by Moody's Investors Service at time of purchase. Corporate bonds and medium-term notes must have a rating of A or better by at least two nationally recognized statistical rating organizations (NRSROs) at time of purchase. Mutual funds must have the highest rating issued by at least two NRSROs. The Local Agency Investment Fund (LAIF), administered by the State of California, has a separate investment po !icy, governed by Government Code Sections 16480-16481.2, that provides credit standards for its investments.

As of June 30, 2016, the City's investments consisted of the following:

Lowest Rating Investment Maturities Investment Type Category* Fair Value 1 Year or Less 1-2 Years 2-3 Years 3-4 Years 4-5 Years

Pooled investments held by the City: U.S. Treasunes AA 73,115,523 $19,013,731 $21,856,365 $32,245,427 U.S. Agencies: Federal Fann Credit Bank Bonds (FFCB) AA 1,000,026 1,000,026 Federal Home Loan Bank Bonds (HILB) AA 1,000,010 1,000,010 Federal Home Loan Mortg. Corp. Bonds (FHLMC) AA 3,082,491 3,082,491 Federal Nat10nal Mortg. Assn. Bonds (FNMA) AA 15,401,328 6,022,510 7,322,562 2,056,256 Medmm-tenn corporate notes AA/Aa 11,276,238 10,453,920 822,318 Medmm-tenn corporate notes A 22,054,145 4,180,820 4,373,418 6,478,691 7,021,216 Medmm-tenn corporate notes BBB 2,398,146 1,539,255 858,891 Municipal Bonds AA/Aa 3,612,180 2,898,103 714,077 Municipal Bonds A 660,233 660,233 Asset-Backed Secunl!es AAA/ Aaa 7,614,320 3,348,480 3,336,280 929,560 Collaterahzed Mortgage Obligations AA 2,910,224 1,230,440 532,572 1,147,212 Negotiable Certificates of Deposit A-1/P-1 15,673,222 5,450,204 10,223,018 Negotiable Certificates of Deposit AA/Aa 10,792,569 4,907,864 5,884,705 Supranational notes AAA/ Aaa 2,388,151 2,388,151 LAIF~~ Not Rated 65,040,379 65,040,379 CAJ:v!P*" Not Rated 47,040,624 47,040,624 Total pooled investments held by the City 285,059,809 122,439,071 43,553,785 42,314,737 35,697,122 41,055,094

Investments held by fiscal agent: Money market mutual funds** AAA/ Aaa 16,448,883 16,448,883 Medmm-tenn corporate notes Bee 764,075 764,075 Total investments held by fiscal agent 17,212,958 16,448,883 764,075

Total investments $302,272,767 $ 138,887,954 $ 43,553,785 $ 43,078,812 $35,697,122 $ 41,055,094

~ Rating categones shown are for: Standard and Poor's (AAA, AA, A) and Moody's (Aaa, Aa, A, Baa); ratings are shown without modifications (+,-,1,2, or3). *" Weighted average matunty.

CAFR for the Fiscal Year Ended June 30, 2016 I 69 Notes to Basic Financial Statements

Custodial Credit Risk. For an investment, custodial credit risk is the risk that, in the event of the failure of the counterparty, the City will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. All securities, with the exception of the money market funds, time deposits, and LAIF, are held by a third-party custodian, Bank of New York Mellon (BNYM). BNYM is a registered member of the Federal Reserve Bank. The securities held by BNYM are in street name, and a customer number assigned to the City identifies ownership.

Concentration of Credit Risk. Concentration of credit risk is the risk of loss attributed to the magnitude of an investor's holdings in a single issuer. The City diversifies its portfolio by limiting the percentage of the portfolio that can be invested in any one issuer's name to 5%. Investments in U.S. Treasury securities, Federal Agency securities, mutual funds and investment pools (LAIF, CAMP) are not subject to this limit on credit concentration.

D. Fair Value Adjustment

GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools, and GASB Statement No. 72, Fair Value Measurement and Application, require that the City's investments be carried at fair value instead of cost. Accordingly, the City adjusts the carrying value of its investments to reflect their fair value at each fiscal year-end and the effects of these adjustments are included in income for that fiscal year. The total amount of the unrealized fair value gain as of June 30, 2016 was $1,974,721. At June 30, 2015, the total unrealized fair value gain was $92,236. The change in value between the two periods amounted to an unrealized gain of $1,882,485 for fiscal year 2015/16.

E. External Investment Pools

Local Agency Investment Fund~ The City voluntarily invests in the California Local Agency Investment Fund (LAIF), a State of California external investment pool. LAIF is part of the Pooled Money Investment Account (PMIA). PMIA oversight is provided by the Pooled Money Investment Board (PMIB) and an in-house Investment Committee. PMIB members are the State Treasurer, State Director of Finance, and State Controller. The Local Investment Advisory Board (LIAB) provides oversight for LAIF. The Board consists of five members as designated by statute. The Chairman is the State Treasurer or his designated representative. Two members are qualified by training and experience in the field of investment or finance, and the State Treasurer appoints two members who are treasurers, finance or fiscal officers, or business managers employed by any county, city or local district or municipal corporation of the state.

The City reports its investment in LAIF at the fair value amount provided by LAIF, which is the same as the value of the City's pool share. The City measures the value of its LAIF investment by multiplying its account balance by the ratio of the portfolio fair value to amortized cost (a factor of 1.000621222). The balance available for withdrawal is based on the accounting records maintained by the State, which are recorded on an amortized cost basis. As of June 30, 2016, the City had $65,000,000 invested in LAIF, and the fair value of the City's investment in LAIF was $65,040,379.

70 I City of Fremont, California Notes to Basic Financial Statements

At June 30, 2016, PMIA had a total portfolio of approximately $75.4 billion and of that amount, 97.19% was invested in non-derivative financial products and 2.81 % was invested in structured notes and asset-backed securities. These investments include the following:

• Structured notes are debt securities ( other than asset-backed securities) whose cash flow characteristics ( coupon rate, redemption amount, or stated maturity) depend upon one or more indices and/or have embedded forwards or options.

• Asset-backed securities entitle the purchasers to receive a share of the cash flows from a pool of assets, such as principal and interest repayments from a pool of mortgages (e.g., CMOs), small business loans, or credit card receivables.

California Asset Management Program~ The City voluntarily invests in the California Asset Management Program (CAMP), a California Joint Powers Authority established in 1989 to provide California public agencies with professional investment services. The CAMP Pool is a permitted investment for all local agencies under California Government Code Section 5360l(p). CAMP is directed by a Board of Trustees, which is made up of experienced local government finance directors and treasurers.

CAMP determines fair value on its investment portfolio based on amortized cost. The City measures the value of its CAMP investment at the fair value amount provided by CAMP. As of June 30, 2016, the fair value of the City's investment in CAMP was $47,040,624.

At June 30, 2016, CAMP had a total portfolio of approximately $1.8 billion of which all was invested in non-derivative financial products.

F. Fair Value Hierarchy

The City categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure fair value of the assets. Level 1 inputs are quoted prices in an active market for identical assets; Level 2 inputs are significant other observable inputs; and Level 3 inputs are significant unobservable inputs. The City does not measure any of its investments using level 3 inputs.

CAFR for the Fiscal Year Ended June 30, 2016 I 71 Notes to Basic Financial Statements

The following is a summary of the fair value and net asset value measurements of the City as of June 30, 2016:

Fair Value Measurements Using Balance at Inveshnents 6/30/2016 Level 1 Inputs Level 2 Inputs Investments by fair value level: U.S. Treasuries $ 73,115,523 $ 73,115,523 $ U.S. Agencies 20,483,855 20,483,855 Medium-tenn corporate notes 36,492,604 36,492,604 Municipal Bonds 4,272,413 4,272,413 Asset-Backed Securities 7,614,320 7,614,320 Collateralized Mortgage Obligations 2,910,224 2,910,224 Negotiable Certificates of Deposit 26,465,791 26,465,791 Supranational notes 2,388,151 2,388,151 Total investments by fair value level 173,742,881 $ 73,115,523 $ 100,627,358 Investments measured at the net asset value (NAV): LAIF 65,040,379 CAMP 47,040,624 Money market mutual funds 16,448,883 Total investments measured at the NAV 128,529,886 Total investments measured at fair value $ 302,272,767

U.S. Treasury securities classified in Level 1 of the fair value hierarchy are valued using prices quoted in active markets for those securities. Securities classified in Level 2 of the fair value hierarchy are valued using prices determined by the use of matrix pricing techniques maintained by the pricing vendors for these securities. Matrix pricing is used to value securities based on the securities' relationship to benchmark quoted prices.

3. HOUSING LOANS RECEIVABLE

The City purchased ten rehabilitation loans from the former Successor Agency to the Redevelopment Agency of the City of Fremont (SARA) on June 30, 2013 for the discounted net present value of$364,442. The SARA assigned to the City all the SARA's rights, title, and interest in and to the loan documents, including, without limitation, the rights to receive and enforce payment of the loan repayments. The balance due on these loans at June 30, 2016 is $241,245 in the General Fund. The City has recorded an allowance in anticipation of the amount to be forgiven for these loans in the amount of$126,526, resulting in a receivable balance of $114,719. Because these loans do not meet the City's availability criteria for revenue recognition, the City has deferred the inflow of resources in the governmental funds financial statements.

At June 30, 2016, the City was owed $1,447,990 in its Human Services special revenue fund for various housing assistance loans to homeowners made by the City. The terms of repayment are for 20 years at 5% interest per annum. Because the notes do not meet the City's availability criteria for revenue recognition, the City has deferred the inflow ofresources in the governmental funds financial statements.

72 I City of Fremont, California Notes to Basic Financial Statements

The City has issued various other housing loans that are expected to be forgiven in future years. As a result, the City has recorded an allowance in anticipation of the amount to be forgiven for loans receivable in the same amount as the outstanding principal on those loans, resulting in a zero balance in the basic financial statements. Accrued interest on the loans is recorded as interest receivable with an offsetting allowance for uncollectible amounts in anticipation of the amount to be forgiven together with the loan principal. The cumulative amount of these housing loans receivable as of June 30, 2016 is $87,757,917, and the accumulated interest receivable is $19,819,076.

4. CAPITAL ASSETS

Capital assets activities of the governmental activities of the primary government for the year ended June 30, 2016, consist of the following:

Balance Balance 7/1/2015 Increase Decrease Transfers 6/30/2016 Nondepreciable Assets: Land $211,998,125 $ 194,178 $ (481,519) $ $211,710,784 Land improvements 5,448,471 5,448,471 Infrastructure 459,494,113 3,484,335 29,026,555 492,005,003 Construction in progress 37,739,749 8,720,630 (5,610,681) (30,975,928) 9,873,770 Total nondepreciable assets 714,680,458 12,399,143 (6,092,200) (1,949,373) 719,038,028 Depreciable Assets: Building and improvements 217,886,088 (443,774) 217,442,314 Equipment 19,780,511 1,378,196 (1,149,500) 8,161 20,017,368 Vehicles 30,890,447 2,312,607 (1,344,631) 31,858,423 Infrastructure 326,094,926 767,809 1,941,212 328,803,947 Total depreciable assets 594,651,972 4,458,612 (2,937,905) 1,949,373 598,122,052 Less Accumulated Depreciation For: Building and improvements (64,932,899) (4,363,997) 17,751 (69,279,145) Equipment (14,542,746) (815,798) 1,128,385 (14,230,159) Vehicles (18,020,647) (2,166,596) 1,184,081 (19,003,162) Infrastructure (314,280,088) (813,970) (315,094,058) Total accumulated depreciation (411,776,380) (8,160,361) 2,330,217 (417,606,524) Total depreciable assets, net 182,875,592 (3,701,749) (607,688) 1,949,373 180,515,528 Total capital assets, net $ 897,556,050 $8,697,394 $ (6,699,888) $ $ 899,553,556

CAFR for the Fiscal Year Ended June 30, 2016 I 73 Notes to Basic Financial Statements

Depreciation expense was charged to functions and programs of the primary government, as follows:

Governmental Activities: General government $ 215,685 Police services 1,025,822 Fire services 2,308,033 Human services 37,831 Capital assets maintenance and operations 3,597,716 Recreation services 379,625 Community development and environmental services 163,517 Amount reported in the internal service funds 432,132 Total depreciation expense, governmental activities $8,160,361

During the fiscal year, the City retired assets of $6. 7 million and received total sale proceeds of $23.9 million to fund capital projects. The most significant transaction was the sale of the 9.59 acres on Palm Avenue, ($481,519 book value) for $22.4 million.

In accordance with GASB Statement No. 34, the City has reported all capital assets including infrastructure in the Government-Wide Statement of Net Position. The City elected to use the modified approach, as defined by GASB Statement No. 34, for infrastructure reporting for its roads and street network. As a result, no accumulated depreciation expense has been recorded for this system. A more detailed discussion of the modified approach is presented in the Required Supplementary Information section of this report. All other capital assets, including other infrastructure systems, are reported using the basic approach whereby accumulated depreciation and depreciation expense have been recorded.

74 I City of Fremont, California Notes to Basic Financial Statements

5. LONG-TERM OBLIGATIONS

A summary of changes in governmental activities long-term debt for the year ended June 30, 2016, is as follows:

Amounts Satisfied or Amounts Antounts Due Amounts Due Interest Outstanding lncUITed or Matured and Outstanding Within One in More than Rates June 30, 2015 Issued Net Decreases June 30, 2016 Year One Year

General Obligation Bonds

Fire SafetyBond2009 2.50-5.125% $ 14,475,000 $ $ (350,000) $ 14,125,000 $ 365,000 $ 13,760,000 Maturity- 08/01/2038

Fire SafetyBond2012 2.00-3.25% 7,430,000 (325,000) 7,105,000 330,000 6,775,000 Maturity- 08/01/2032

Fire SafetyBond2013 4.00-4.25% 21,305,000 (725,000) 20,580,000 760,000 19,820,000 Maturity- 08/01/2034

Total general obligation bonds 43,210,000 (1,400,000) 41,810,000 1,455,000 40,355,000

Certificates of Participation

1998 Public Financing Authority Variable 8,165,000 (425,000) 7,740,000 450,000 7,290,000 Maturity- 08/01/2028

2008 Public Financing Authority 4.0-5.30% 24,650,000 (585,000) 24,065,000 610,000 23,455,000 Maturity- 08/01/2038

2008 Public Financing Authority Variable 43,055,000 (1,075,000) 41,980,000 1,125,000 40,855,000 Maturity- 08/01/2038

2010 Public Financing Authority Variable 14,545,000 (465,000) 14,080,000 480,000 13,600,000 Maturity- 08/01/2038

2012 A Public Financing Authority 2.00-4.00% 10,560,000 (815,000) 9,745,000 840,000 8,905,000 Maturity- 08/01/2025

2012B Public Financing Authority Variable 27,690,000 (1,525,000) 26,165,000 1,555,000 24,610,000 Maturity- 08/01/2030

Total certificates of participation 128,665,000 (4,890,000) 123,775,000 5,060,000 118,715,000

Lease Financing

2016 Energy Efficiency Financing 2.01% 9,100,000 9,100,000 9,100,000 Maturity- 02/01/2027

Total long-term debt 171,875,000 9,100,000 (6,290,000) 174,685,000 6,515,000 168,170,000

Unamortized long-term bond premium 1,650,679 (123,717) 1,526,962 123,717 1,403,245

Total long-term debt with unamortized bond premium $173,525,679 $ 9,100,000 $ (6,413,717) $176,211,962 $ 6,638,717 $169,573,24.5

Amounts oflong-term debt payable in the government-wide financial statements are generally payable from amounts available in related debt service funds and from annual property tax and certain other revenues collected for the purpose of retiring the respective debt obligations.

CAFR for the Fiscal Year Ended June 30, 2016 I 75 Notes to Basic Financial Statements

The annual principal and interest requirements oflong-term debt are as follows:

Certificates of Participation and Year Ending General Obligation Bonds Energy Efficiency Financing June 30 Principal Interest Principal Interest* 2017 1,455,000 1,732,094 5,060,000 1,996,290 2018 1,510,000 1,678,125 6,040,308 1,975,291 2019 1,565,000 1,618,100 6,217,081 1,891,298 2020 1,615,000 1,558,000 6,399,193 1,804,701 2021-2025 9,025,000 6,736,163 35,179,989 7,493,452 2026-2030 10,845,000 4,720,594 31,843,429 4,843,917 2031-2035 12,065,000 2,254,669 22,440,000 2,947,440 2036-2039 3,730,000 394,600 19,695,000 803,040 Total $ 41,810,000 $ 20,692,345 $132,875,000 $ 23,755,429 * Variable-rate interest requirerrents for the 1998, 2008, 2010, and 2012B Public Financing Authority Certificates of Participation are estimated using interest rates in effect as of June 30, 2016, of 0.40%.

The following assets have been pledged as collateral towards the related long-term debt issues:

Certificates of Participation/Lease Financing Secured Assets 1998 Public Financing Authority Family Resource Center 2008 Public Financing Authority - fixed rate Maintenance Center 2008 Public Financing Authority - variable rate Fire Stations #8 and #9 Main Library

2010 Public Financing Authority Fire Stations #2 and #6 Fire Tactical Training Center

2012A Public Financing Authority Police Detention and Property Evidence Storage Facility Animal Shelter

2012B Public Financing Authority Police Facility Fire Station #3

2016 Energy Efficiency Financing Streetlights

76 I City of Fremont, California Notes to Basic Financial Statements

A. Debt Issuance

On May 3, 2016, the City Council adopted a resolution approving a lease financing with Pinnacle Public Finance, Inc. to finance a package of energy and water efficiency measures. The financing, in the amount of$9,100,000, closed on May 24, 2016. The leased assets consist of the City's streetlights, and the lease payments are payable from general revenues of the City. The lease financing bears a fixed interest rate of2.0l % and has a final maturity date of February 1, 2027. As of June 30, 2016, the lease financing indebtedness was $9,100,000.

B. Special Assessment Debt (No City Commitment)

Special assessment bonds have been issued under various public improvement acts of the State of California and are secured by liens against properties deemed to have been benefited by the improvements for which the bonds were issued. The City is not liable for repayment and acts only as an agent for the property owners in collecting the assessments, forwarding the collections to bondholders, and initiating foreclosure proceedings when necessary. These bonds are payable solely from assessments, specific reserves, and the proceeds from property foreclosures. As of June 30, 2016, special assessment bonded indebtedness (long-term and current portions) was approximately $1,120,000.

C. Community Facilities District Special Tax Bonds (No City Commitment)

Pacific Commons Community Facilities District No. 1 (the "CFD") was formed by the City Council in 1996 pursuant to the Mello-Roos Community Facilities Act of 1982 for the construction of infrastructure improvements to be acquired and maintained by the City of Fremont within the CFD. The CFD is a business park with commercial and industrial facilities.

On June 12, 2001, the City Council approved the issuance of $30,000,000 of Community Facilities District No. 1, Special Tax, Series 2001 (Pacific Commons) bonds. These bonds were issued on June 27, 2001. The proceeds of the 2001 bonds were utilized to finance the acquisition of specified public capital improvements for the development of the CFD.

On June 26, 2005, the City Council approved the issuance of $38,000,000 of Community Facilities District No. 1, Special Tax, Series B (Pacific Commons) bonds. These bonds were issued on July 21, 2005. The net proceeds of the Series B bonds were used to reimburse the developers for the costs of specified public improvements conveyed to public agencies in conjunction with the development of Pacific Commons.

On August 25, 2015, the City issued $79,700,000 of Community Facilities District No. 1 (Pacific Commons) Special Tax Bonds, Series 2015 (the Series 2015 Bonds). A portion of the Series 2015 Bonds was issued to fully refund the following, maturing on or after September 1, 2015:

CAFR for the Fiscal Year Ended June 30, 2016 I 77 Notes to Basic Financial Statements

Community Facilities District No. 1 (Pacific Commons) Special Tax Bonds Series 2001 - $27,195,000 Series 2005 - $37,960,000

Additionally, a portion of the Series 2015 Bonds was issued to reimburse the developer for the cost of certain public facilities and improvements previously completed and accepted by the City.

The property owners are obligated to pay the interest and principal on the Series 2015 Bonds through an annual levy pursuant to the Rate and Method of Apportionment approved by the City Council and the qualified electors of the CFD. The Series 2015 Bonds are not a general debt liability of the City and are solely payable from the annual facilities special tax levy and the reserve fund. The Series 2015 Bonds bear fixed interest rates ranging from 2.00% to 5.00% and have a final maturity date of September 1, 2045. As of June 30, 2016, the Series 2015 Bond indebtedness was $79,700,000.

D. Variable Rate Demand Certificates of Participations (COPs)

In connection with the issuance of the 1998 Public Financing Authority COPs, the Financing Authority obtained an irrevocable letter of credit as a credit facility with U.S. Bank, NA for the COPs. The letter of credit was extended on August 22, 2016 and is due to expire on June 30, 2017. Ifunreimbursed draws on the credit facility were converted to a term loan in accordance with the reimbursement agreement, the unreimbursed amount would bear interest at rates as defined in the reimbursement agreement ofup to 12% per annum, and would be repaid in six substantially equal semiannual debt service payments commencing six months after the draw. The Financing Authority is required to pay an annual commitment fee of0.475% based on the outstanding principal amount of the bonds plus the interest component as defined in the reimbursement agreement supported by the credit facility. For the year ended June 30, 2016, the Financing Authority paid an annual commitment fee in the amount of$39,077.

In connection with the issuance of the 2008 Public Financing Authority COPs, the Financing Authority obtained an irrevocable letter of credit as a credit facility with U.S. Bank, NA for the COPs. The letter of credit was extended on August 22, 2016 and is due to expire on June 30, 2017. Ifunreimbursed draws on the credit facility were converted to a term loan in accordance with the reimbursement agreement, the unreimbursed amount would bear interest at rates as defined in the reimbursement agreement ofup to 12% per annum, and would be repaid in six substantially equal semiannual debt service payments commencing six months after the draw. The Financing Authority is required to pay an annual commitment fee of0.475% based on the outstanding principal amount of the bonds plus the interest component as defined in the reimbursement agreement supported by the credit facility. For the year ended June 30, 2016, the Financing Authority paid an annual commitment fee in the amount of$210,406.

In connection with the issuance of the 2010 Public Financing Authority COPs, the Financing Authority obtained an irrevocable letter of credit as a credit facility with U.S. Bank, NA for the COPs. The letter of credit was extended on August 22, 2016 and is due to

78 I City of Fremont, California Notes to Basic Financial Statements

expire on June 30, 2017. Ifunreimbursed draws on the credit facility were converted to a term loan in accordance with the reimbursement agreement, the unreimbursed amount would bear interest at rates as defined in the reimbursement agreement ofup to 12% per annum, and would be repaid in six substantially equal semiannual debt service payments commencing six months after the draw. The Financing Authority is required to pay an annual commitment fee of0.475% based on the outstanding principal amount of the bonds plus the interest component as defined in the reimbursement agreement supported by the credit facility. For the year ended June 30, 2016, the Financing Authority paid an annual commitment fee in the amount of $70,118.

In connection with the issuance of the 2012B Public Financing Authority COPs, the Financing Authority obtained an irrevocable letter of credit as a credit facility with Wells Fargo Bank, NA for the COPs. The Letter of Credit is due to expire on May 1, 2017. If unreimbursed draws on the credit facility were converted to a term loan in accordance with the reimbursement agreement, the unreimbursed amount would bear interest at rates as defined in the reimbursement agreement ofup to 10% per annum, and would be repaid in eleven substantially equal semiannual debt service payments commencing six months after the draw. The Financing Authority is required to pay an annual commitment fee of 0.42% based on the outstanding principal amount of the bonds plus the interest component as defined in the reimbursement agreement supported by the credit facility. For the year ended June 30, 2016, the Financing Authority paid an annual commitment fee in the amount of $115,321.

E. Pledged Revenues for Bonds

The City, through the Fremont Public Financing Authority, has issued multiple series of Certificates of Participation and entered into a direct placement energy efficiency lease financing to finance and refinance city facilities and equipment. The certificates of participation and lease financing are payable by a pledge of lease revenues payable by the City, pursuant to the Lease Agreements between the City and the Financing Authority. The City has covenanted that as long as the leased properties are available for its use, the City will take such action as may be necessary to include all lease payments in its annual budgets and to make the necessary annual appropriations. Total debt service requirements remaining on the certificates of participation and lease financing are $156,630,429, payable through August 1, 2038. For the year ended June 30, 2016, the total lease payments made by the City and total debt service payments paid by the Financing Authority totaled $6,387,252.

At the City's municipal general election held on November 5, 2002, voters approved Measure R authorizing the issuance of Fire Safety Project General Obligation Bonds in the not-to-exceed amount of $51,000,000 and an override property tax to pay debt service on the bonds. Measure R specified that the Fire Safety Project General Obligation Bonds proceeds be used to replace three older fire stations with new modern stations, to construct public safety training facilities, and to remodel and to upgrade seven existing fire stations to meet current earthquake standards. Three bond series totaling $51,000,000 have been issued.

CAFR for the Fiscal Year Ended June 30, 2016 I 79 Notes to Basic Financial Statements

The City's General Obligation bonds are payable from pledged ad valorem property taxes until August 1, 2038, the final maturity date of the bonds. The total principal and interest remaining on these bonds is $62,502,345. For the fiscal year ended June 30, 2016, the City collected $3,097,045 in ad valorem property taxes and made total debt service payments in the amount of$3,l 77,738.

F. Compensated Absences

The City records a liability to recognize the financial effect of unused vacation and other compensated leaves. During FY 2015/16, employees earned $7,089,470 of compensated absences and used $6,787,616. As of June 30, 2016, the total liability for vacation and other compensated leaves is $9,118,034. Of that balance, $2,279,509 is expected to be used within one year, with the remaining $6,838,525 to be used in subsequent years. The City typically uses the General Fund to liquidate the majority of its compensated absences.

6. POLLUTION REMEDIATION OBLIGATION

The properties for which the City bears pollution remediation responsibilities are described in the following paragraphs. At June 30, 2016, the City estimated that $806,000 or 31% of the total obligation is due and payable ( due within one year) with the remaining portion due in more than one year.

A. Police Firing Range

In November 2010 the City entered into a ten year Amendment to a Lease Agreement with the Alameda County Water District (ACWD) for the use of a portion of its property as an outdoor police firing range. ACWD plans to use the land for other purposes when the City lease expires at the end of 2020. Under the terms of the Amendment, the City is obligated to remove the lead contamination from the ACWD property at the termination of the lease. The Amendment also provides for a reassessment of the remediation costs every two years, and if the reassessment exceeds the current estimate by 10% the City is to increase the amount of funds held in the Capital Improvement Program (CIP) to cover the costs. The estimated remaining obligation was $521,962 at June 30, 2016.

B. Fire Station No. 1

ACWD is preparing a recommendation to the State Water Resource Quality Control Board (SWRQCB) to close a leaking underground fuel tank originating from City of Fremont's Fire Station No. 1. If closure is approved, the City will destroy the monitoring wells and dismantle the soil vapor extraction system for an estimated cost of $50,000. Approval is expected in 2017.

80 I City of Fremont, California Notes to Basic Financial Statements

C. Fire Station No. 2

ACWD is preparing a recommendation to the SWRQCB for the closure of four existing monitoring wells located at Fire Station No. 2. Funding of $21,000 has been allocated in the CIP for the estimated cost to close the wells. Approval is expected in 2016 and destruction of the wells in 2017.

D. Former Union Pacific Railroad Corridor

Under an Operations and Maintenance Plan (the "Plan"), the City is responsible for annual monitoring of the former Union Pacific Railroad (UPRR) corridor located between Paseo Padre Parkway and Washington Boulevard. Under the Plan, the City monitors to ensure the encapsulated contamination has not been exposed and remediates any damage to the cap before any exposure could occur. Except for the staff time required for the annual monitoring, no significant pollution remediation obligation is expected as of June 30, 2016.

E. Centerville Unified Site

The City is currently in the process of completing environmental remediation work for the approximately 6-acre site known as the "Centerville Unified Site" with the principal address of37070 Fremont Boulevard ("property") that was previously owned by the former Redevelopment Agency ("RDA") of the City. As a result of a former dry cleaning operation and automobile-related uses on the property, the former RDA retained an environmental consultant, TRC Solutions, Inc., to prepare environmental remediation work plans to: 1) remove an old utility corridor, remnant foundation, and surface oil spill; and 2) remediate subsurface chlorinated solvents-perchloroethylene ("PCE") in the form of soil vapors­ discovered at the property and a neighboring property to the northwest, 37000 Fremont Boulevard (presently Carl's Jr.), by active remediation with implementation ofa soil-vapor extraction system. The first phase of the work (removal of the old utility corridor, remnant foundation, and surface oil spill) was completed in October 2014. The second and last phase ofremediation work (removal of subsurface chlorinated solvents) started in May 2016. The estimated remaining obligation is $1,982,797 as of June 30, 2016.

7. RISK MANAGEMENT

The City is exposed to various exposures related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters.

A. Risk Management Program

The City established the Risk Management Internal Service Fund to account for and finance its uninsured risks of loss. Under the City's risk management program, the City retains risk for up to $500,000 for each workers' compensation claim, up to $500,000 and in excess of $40,000,000 for each general liability claim, and up to $25,000 for each property claim.

CAFR for the Fiscal Year Ended June 30, 2016 I 81 Notes to Basic Financial Statements

The liability for general liability claims and workers' compensation claims in excess of $500,000 is discussed below.

The City records estimated liabilities for claims filed or expected to be filed up to the amounts for which it retains risk in the Risk Management Internal Service Fund. Charges to the General Fund and other funds are based on a percentage of payroll costs for general liability and a three-year moving average cost of claims for workers' compensation. They are recorded in the funds as expenditures or expenses and revenues of the Risk Management Internal Service Fund.

The City retained an independent actuary in 2016 to perform an analysis of the City's potential liability for its retained risk portions of the general liability and workers' compensation programs. The amount recorded as a liability consists of the specific reserves (self-insured retention) for individual known claims or lawsuits and estimates for incurred but not reported claims. The present value of estimated outstanding losses is calculated using a 4. 5% discount rate to reflect future investment earnings.

Changes in the balances of claim liabilities (shown as claims payable in the accompanying basic financial statements) during the past two fiscal years ended June 30, 2015 and 2016, are as follows:

2015 2016 Balance, beginning of year $ 18,021,000 $ 17,576,000 Provision for claims losses 4,314,129 5,106,255 Claims payments (4,759,129) (3,499,255) Balance, end of year $ 17,576,000 $ 19,183,000

Due in one year $ 5,630,000 $ 6,038,000 Due in more than one year 11,946,000 13,145,000 Total claim liabilities $ 17,576,000 $ 19,183,000

B. Participation in Public Entity Risk Pools

In February 1986, the City joined with other municipalities and regional municipal joint powers authorities to form the California Joint Powers Risk Management Authority (CJPRMA), a public entity risk pool currently operating as a general liability risk management and insurance program for 21 member entities. The purpose of the CJPRMA is to spread the adverse effects of losses among the member agencies. General liability claims in excess of$500,000 and up to $40,000,000 per occurrence are covered by the CJPRMA. Five years after settlement of all claims for a program year, CJPRMA retroactively adjusts premium deposits for any excess or deficiency in deposits related to paid claims and reserves.

82 I City of Fremont, California Notes to Basic Financial Statements

Summary financial information for CJPRMA for the year ended June 30, 2015 (latest available date), is as follows:

Cash and investments $ 88,457,527 Receivables and other current assets 778,948 Capital assets, net 3,310,749 Total assets ---===-==a-$ 92,547,224 Total liabilities $ 49,508,050 Net position 43,039,174 Total liabilities and net position ---===-===a-$ 92,547,224 0 pera ting revenues $ 11,977,453 Loss provisions and premiums paid (12,567,517) General and administrative expenses (1,497,941) Net operating loss (2,088,005) Net investment and other income 1,839,793 Net income before refunds to members (248,212) Refunds to members (2,187,192) Change in net position ---==-==a==$ (2,435,404) The CJPRMA refunds excess premium deposits to members from time to time, based on the results of actuarial studies of each program year's claims experience. These refunds include cumulative earnings on program year contributions, but may be reduced by amounts required to fund prior or subsequent year unfavorable claims experience.

The CJPRMA governing board consists of a representative from each member entity. All members have a single vote for policy and charter changes. An executive committee of seven is elected to handle administration. Complete financial statements for the CJPRMA can be obtained from CJPRMA, 3201 Doolan Road, Suite 285, Livermore, CA 94551.

In June 2006, the City joined the CSAC Excess Insurance Authority (CSAC). CSAC membership consists of55 California counties and 255 organizations (cities, school districts, special districts and other JP As). Workers' compensation claims in excess of $500,000 are covered by CSAC through reinsurance up to a limit of$250,000,000.

CAFR for the Fiscal Year Ended June 30, 2016 I 83 Notes to Basic Financial Statements

Summary financial information for CSAC for the year ended June 30, 2015 (latest available date), is as follows:

Cash and investments $ 134,915,500 Receivables and other current assets 72,861,844 Noncurrent assets 434,584,578 Total assets $ 642,361,922

Total liabilities $ 529,955,277 Net position 112,406,645 Total liabilities and net position $ 642,361,922

Operating revenues $ 614,659,751 Loss provisions and premiums paid (609,944,932) General and administrative expenses (9,456,561) Net operating loss (4,741,742) Net investment and other income 6,280,773 Change in net position $ 1,539,031

Complete financial statements for CSAC can be obtained from CSAC Excess Insurance Authority,75 Iron Point Circle, Suite 200, Folsom, CA 95630.

8. INTERFUND TRANSACTIONS

A. Inte,fund Receivables and Payables

Interfund receivables and payables represent short-term loans owed by the Human Services Fund, Intermodal Surface Transportation Efficiency Act Fund, and non-major governmental funds to the General Fund for purposes of covering short-term negative cash positions. These interfund transactions are routine year-end adjustments. At June 30, 2016, the General Fund was due $2,378,734 from the Intermodal Surface Transportation Efficiency Act Fund, $742,811 from the Human Services Fund, and $849,478 from the non-major governmental funds.

B. Interfund Transfers

The General Fund transfers resources to other funds to support activities that cannot be supported through fees, grants, or charges for service. These activities include capital projects, debt service, and certain cost center operations. There are also a variety of additional transfers between the General Fund and other funds to cover such items as overhead and vehicle replacement charges.

84 I City of Fremont, California Notes to Basic Financial Statements

Interfund transfers for the year ended June 30, 2016, were as follows:

Transfers Out Low /Moderate Development Development Recreation H=n Income Non-Major General Fund hnpact Fees Cost Center Services Services Housing Asset Funds Total

General Fund $ $ 850,000 $ 2,419,500 $ 1,068,071 $ 878,500 $ 55,464 $ 331,691 $ 5,603,226

Development Cost Center 3,075,982 3,075,982 .E ~ Recreation Services 2,246,187 2,246,187 'ti• Capital hnprovement 11,137,000 1,140,300 12,277,300 ,.."• Human Services 4,128,080 243,404 4,371,484

Non-Major Funds 8,971,555 66,840 24,960 443,766 13,164 9,520,285

Total $ 29,558,804 $ 850,000 $ 2,486,340 $ 2,233,331 $ 1,322,266 $ 55,464 $ 588,259 $ 37,094,464

9. RETIREMENT BENEFITS

A. General Information about the Pension Plans

Plan Descriptions~ All qualified permanent and probationary employees are eligible to participate in the City's separate City of Fremont Safety (police and fire) and City of Fremont Miscellaneous (all other) Plans, agent multiple-employer defined benefit pension plans administered by the California Public Employees' Retirement System (CalPERS), which acts as a common investment and administrative agent for its participating member employers.

Benefits Provided~ All regular City employees classified as full-time, as well as part-time regular employees and temporary City workers who work 1,000 or more hours per year, are required to participate in CalPERS. The City's pension plans provide retirement and disability benefits, annual cost-of-living adjustments (COLA), and death benefits to plan members and beneficiaries through CalPERS. Benefits are based on years of credited service, equal to one year of full time employment, and vest after five years of service. These benefit provisions and all other requirements are established by State statute and City ordinance.

City employees are entitled to an annual retirement benefit, payable monthly for life, the amount of which is based on a formula which varies depending on the employee's retirement plan, date of hire, and participation in a public retirement plan prior to City employment. As of December 31, 2012, the City had established two tiers ofretirement benefits: a "Tier l" benefit applicable to employees hired prior to April 8, 2012; and a "Tier 2" benefit applicable to employees hired on or after April 8, 2012. On January 1, 2013, the Public Employees' Pension Reform Act of2013 (PEPRA) took effect. PEPRA distinguishes between so-called "classic" employees, who were in a public retirement plan (not necessarily PERS) prior to January 1, 2013, and "new" employees, who first became a member of a public retirement plan on or after January 1, 2013. Classic employees hired by CAFR for the Fiscal Year Ended June 30, 2016 I 85 Notes to Basic Financial Statements

the City on or after April 8, 2012, are eligible for the City's Tier 2 benefit, while new employees are eligible for the retirement benefits established by PEPRA.

A summary of the City's benefit formulas is provided below:

Tier 1 Tier 2 PEPRA Safety Misc Safety Misc Safety Misc Retirement Age 50 55 55 60 57 62 Benefit Formula 3.0% 2.5% 3.0% 2.0% 2.7% 2.0% Average Final 12 12 36 36 36 36 Compensation Period months months months months months months Maximum% of Final 90% NoMax 90% No Max 90% NoMax Compensation COLA 2.0% 3.0% 2.0% 2.0% 2.0% 2.0%

Covered Employees~ At June 30, 2015, the most recent information available, the following employees were covered by the benefit terms for each Plan:

Miscellaneous Safety Inactive employees or beneficiaries currently receiving benefits 744 461 Inactive employees entitled to but not yet receiving benefits 502 97 Active employees 538 312 Total 1,784 870

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

The required Miscellaneous Plan employer contribution rate for fiscal year 2014/15 was 24.081 % of covered payroll, resulting in $10,615,278 being recognized by CalPERS as employer contributions. The required Safety Plan employer contribution rate was 40.711 % of covered payroll, resulting in $15,067,536 being recognized by CalPERS as employer contributions.

Pension Plan Financial Reports~ The City's pension plans do not issue stand-alone financial reports; however, CalPERS issues a variety of reports and publications, including its audited financial statements, which are available at the following link: https ://www.calpers.ca.gov.

86 I City of Fremont, California Notes to Basic Financial Statements

B. Net Pension Liability

The City's net pension liability for each plan is measured as the total pension liability, less the pension plan's fiduciary net position. The net pension liability of each of the plans is measured as of June 30, 2015, using an annual actuarial valuation as of June 30, 2014, rolled forward to June 30, 2015, using standard update procedures.

Assumptions and Other Inputs - A summary of significant assumptions and other inputs used to measure the total pension liability is shown below.

Assumptions aud Other Iuputs Used to Measure the Total Peusiou Liability Valuation Date June 30, 2014 Measurement Date June 30, 2015 Actuarial Cost Method Entry Age Normal Actuarial Assumptions: Inflation 2.75% Salary Increases Varies by entry age and service Discount Rate/Investment 7.65% net of pension plan investment expenses, includes inflation Rate of Return Mortality Rate Table Probabilities of mortality are based on the 2014 CalPERS Experience Study for the period from 1997 to 2011. The table includes 20 years of mortality improvements using Society of Actuaries Scale BB Post-Retirement Benefit Contract COLA up to 2. 75% until purchasing power protection Increase allowance floor on purchasing power applies, 2. 75% thereafter Other Assumptions All other actuarial assumptions used in the June 30, 2014 valuation were based on the results of an actuarial experience study for the period from 1997 to 2011, including updates to salary increase, mortality and retirement rates. The experience study report can be obtained at CalPERS' website under forms and publications.

Change ofAssumptions - GASB 68 states that the long-term expected rate of return should be determined net of pension plan investment expense but without reduction for pension plan administrative expense. The discount rate of7.50 percent used for the June 30, 2014 measurement date was net of administrative expense. The discount rate of7.65 percent used for the June 30, 2015 measurement date is without reduction for administrative expense.

Discount Rate - The discount rate used to measure the total pension liability was 7.65 percent. To determine whether the municipal bond rate should be used in the calculation of a discount rate for each plan, CalPERS stress tested plans that would most likely result in a discount rate that would be different from the actuarially assumed discount rate. Based on the testing of the plans, the tests revealed the assets would not run out. Therefore, the current 7.65 percent discount rate is appropriate and the use of the municipal bond rate calculation is not deemed necessary. The long-term expected discount rate of7.65 percent is applied to all plans in the Public Employees Retirement Fund. The stress test results are presented in a detailed report called "GASB Crossover Testing Report" that can be obtained at CalPERS' website under the GASB 68 section. CAFR for the Fiscal Year Ended June 30, 2016 I 87 Notes to Basic Financial Statements

The long-term expected rate ofreturn on pension plan investments was determined using a building-block method in which best-estimate ranges of expected future real rates of return ( expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. In determining the long-term expected rate of return, CalPERS staff took into account both short-term and long-term market return expectations as well as the expected pension fund (Public Employees' Retirement Fund) cash flows. Such cash flows were developed assuming that both members and employers will make their required contributions on time and as scheduled in all future years.

Using historical returns of all the funds' asset classes, expected compound (geometric) returns were calculated over the short-term (first 10 years) and the long-term (11-60 years) using a building-block approach. Using the expected nominal returns for both short-term and long-term, the present value of benefits was calculated for each fund. The expected rate ofreturn was set by calculating the single equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated using both short-term and long-term returns. The expected rate of return was then set equivalent to the single equivalent rate calculated above and rounded down to the nearest one quarter of one percent.

The table below reflects long-term expected real rate ofreturn by asset class. The rate of return was calculated using the capital market assumptions applied to determine the discount rate and asset allocation. The target allocation shown was adopted by the Board effective on July 1, 2014.

Current Target Real Return Real Return Asset Class Allocation Years 1-loC•J Years 11 +Cbl Global Equity 51.0% 5.25% 5.71% Global Fixed Income 19.0% 0.99% 2.43% Inflation Sensitive 6.0% 0.45% 3.36% Private Equity 10.0% 6.83% 6.95% Real Estate 10.0% 4.50% 5.13% Infrastructure and Forestland 2.0% 4.50% 5.09% Liquidity 2.0% (0.55%) (1.05%) Total 100.0% (a) An expected inflation rate of 2.5% used for this period. (b) An expected inflation rate of 3. 0% used for this period.

Fiduciary Net Position - The City's pension plans do not issue stand-alone financial reports, so information about the elements of the pension plans' basic financial statements is not directly available. However, the City's plans constitute a portion of the CalPERS PERF A Pension Trust Fund, for which a Statement of Fiduciary Net Position - Fiduciary Funds is included in the CalPERS Comprehensive Annual Financial Report located at the following link: https://www.calpers.ca.gov/docs/forms-pub Ii cations/ cafr-2015. pdf. The accompanying Notes to the Basic Financial Statements disclose information related to the basis of accounting, including the policies with respect to benefit payments and the valuation of pension plan investments.

88 I City of Fremont, California Notes to Basic Financial Statements

C. Changes in the Net Pension Liability

A schedule of changes in the Net Pension Liability for the period ending June 30, 2015, is presented below for each City pension plan.

Miscellaneous Plan: Increase (Decrease) Total Pension Fiduciary Net Net Pension Liability Position Liability/(Asset) Balance as of Jnne 30, 2014 $428,579,868 $319,896,911 $108,682,957 Changes dnring the year Service cost 7,507,286 7,507,286 Interest on the total pension liability 31,320,840 31,320,840 Changes of assumptions (7,685,566) (7,685,566) Differences between expected and actual experience (5,745,910) (5,745,910) Plan to plan resource movement 11,897 (11,897) Contributions from the employer 10,615,278 (10,615,278) Contributions from employees 3,603,542 (3,603,542) Pension plan net investment income 7,088,364 (7,088,364) Benefit payments, including refunds of employee contributions (18,958,554) (18,958,554) Administrative expense (362,448) 362,448 Net changes 6,438,096 1,998,079 4,440,017 Balance as of June 30, 2015 $435,017,964 $321,894,990 $113,122,974

Safety Plan: Increase (Decrease) Total Pension Fiduciary Net Net Pension Liability Position Liability/(Asset) Balance as of June 30, 2014 $560,211,231 $400,281,041 $159,930,190 Changes during the year Service cost 9,445,690 9,445,690 Interest on the total pension liability 41,504,625 41,504,625 Changes of assumptions (9,630,020) (9,630,020) Differences between expected and actual experience 1,432,189 1,432,189 Contributions from the employer 15,067,536 (15,067,536) Contributions from employees 4,310,000 (4,310,000) Pension plan net investment income 8,918,712 (8,918,712) Benefit payments, including refunds of employee contributions (28,384,236) (28,384,236) Administrative expense (449,882) 449,882 Net changes 14,368,248 (537,870) 14,906,118 Balance as of June 30, 2015 $574,579,479 $399,743,171 $174,836,308

CAFR for the Fiscal Year Ended June 30, 2016 I 89 Notes to Basic Financial Statements

Sensitivity o[the Net Pension Liability to Changes in the Discount Rate~ The following table presents the net pension liability of the City for each plan, calculated using the current discount rate for each plan, as well as what the net pension liability would be if it were calculated using a discount rate that is one percentage-point lower or one percentage-point higher.

Miscellaneous Safety Discount rate 1% lower 6.65% 6.65% Net Pension Liability $171,518,282 $247,349,533 Current discount rate 7.65% 7.65% Net Peusiou Liability $113,122,974 $174,836,308 Discount rate 1% higher 8.65% 8.65% Net Pension Liability $64,879,902 $114,597,260

Pension Expense~ For the year ended June 30, 2016, the City recognized pension expense of $4,602,549 for the Miscellaneous Plan and $12,575,783 for the Safety Plan; a total expense of $17,178,332.

Deferred Outflows ofResources and Deferred Inflows ofResources~ At June 30, 2016, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Deferred Deferred Outflows of Inflows of Resources Resources Pension contributions subsequent to measurement date $ 29,859,725 $ Changes of assumptions (11,968,033) Differences between expected and actual experiences 1,045,111 (3,693,799) Net difference between projected and actual earnings on pension plan investments (6,413,720) Total $ 30,904,836 $ (22,075,552)

$29,859,725 reported as deferred outflows ofresources related to contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2017. Other amounts reported as deferred outflows of resources and deferred inflows ofresources related to pensions will be recognized as pension expense as follows:

Year Euded Juue30 2017 $(11, 703,959) 2018 (10,744,567) 2019 (6,242,317) 2020 7,660,402 Total $(21,030,441)

90 I City of Fremont, California Notes to Basic Financial Statements

JO.OTHER POST-EMPLOYMENT BENEFITS (OPEB)

Plan Description and Eligibility - In addition to providing the retirement benefits described above, the City provides post-employment healthcare benefits, in accordance with bargaining unit agreements, to employees who retire directly from the City under CalPERS at the minimum age of 50 with at least 5 years of CalPERS service or disability. Retirees must make an election within 120 days following the date of separation from City employment to be eligible for the benefits. The number of employees currently eligible to receive the benefit has increased from 712 in the previous year to 741 in the current year. The City reimburses all or part of premium payments for medical insurance. The reimbursement amount is subject to a negotiation process and varies by bargaining unit and retirement date. The benefit is paid monthly to the retiree subject to proof of coverage and attestation of premium payment. The benefit generally ceases upon death of the retiree. The total annual required contribution for June 30, 2016, was $7,324,000, based on the June 30, 2014 actuarial valuation.

Funding Policy - In fiscal year 2015/16, the City began prefunding its OPEB obligations by prepaying the entire annual required contribution (ARC) to a trust administered by CalPERS, (California Employers' Retiree Benefit Trust (CERBT)). Prior to that, the City funded its OPEB obligations on a pay-as-you-go basis. The City has elected to reimburse itself from the CERBT for the cost of benefits incurred during the year.

Annual OPEB Cost and Net OPEB Obligation - The City's annual OPEB cost (expense) is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters ofGASB Statement No. 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover the normal cost each year and amortize any unfunded actuarial liabilities ( or funding excess) over a period not to exceed thirty years. The following table shows the components of the City's annual OPEB cost for the year, the amount actually contributed to the plan, and changes in the City's net OPEB obligation for these benefits:

Annual required contribution $ 7,324,000 Interest on net OPEB obligation 2,204,000 Amortization of net OPEB obligation (2,146,000) Annual OPEB cost (expense) 7,382,000 Contribution to CERBT (7,324,000) Increase in net OPEB obligation 58,000 NET OPEB obligation - beginning of year 30,401,000 NET OPEB obligation - end of year $ 30,459,000

CAFR for the Fiscal Year Ended June 30, 2016 I 91 Notes to Basic Financial Statements

The City's annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for fiscal year 2015/16 and the two preceding years are as follows:

Percentage of Fiscal Year Annual Contributions Annual OPEB NetOPEB Ended OPEB Cost Made Cost Contributed Obligation 2014 $ 7,921,000 $ 2,719,000 34.3% $ 25,023,000 2015 8,321,000 2,943,000 35.4% 30,401,000 2016 7,382,000 7,324,000 99.2% 30,459,000

Funding Status and Funding Progress - The schedule of funding progress below, determined as part of the June 30, 2014 actuarial valuation (the most recent valuation available), shows the actuarial value of assets, actuarial accrued liability, their relationship, and the relationship of the unfunded actuarial accrued liability to payroll.

Entry Age Unfunded UAAL as Actuarial Actuarial Actuarial Actuarial Percentage Valuation Value of Accrued Accrued Funded Covered of Covered Date Assets Liability Liability Ratio Payroll Payroll 6/30/2014 $ $ 70,797,000 $ 70,797,000 0.0% $ 76,166,000 930%

Actuarial valuations of an ongoing plan involve estimates of the value ofreported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future.

The schedule of funding progress, presented as required supplementary information (RSI) following the notes to the financial statements, presents multi-year trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits.

Actuarial Methods and Assumptions - Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities, and the actuarial value of assets, consistent with the long-term perspective of the calculations.

In the June 30, 2014 actuarial valuation that determined both the annual required contribution for fiscal year 2015/16 and the most recent funding status and progress, the entry age normal actuarial cost method was used. The actuarial assumptions include a 7.25% investment rate of return, a 3.0% general rate of inflation, and 3.25% in aggregate payroll increases. Medical trends for Medicare and non-Medicare are assumed to increase from the prior year by 8.3% and 8.0%, respectively, for fiscal year 2014/15 and are graded down to an ultimate rate of5.0% and 5.0%, respectively, by fiscal year 2020/21. The unfunded actuarial accrued liability (UAAL) is

92 I City of Fremont, California Notes to Basic Financial Statements

amortized as a level percentage of projected payroll over a 22-year closed period. There is no assumed post-employment benefit increase.

JI.COMMITMENTS AND CONTINGENCIES

Litigation - The City is a defendant in various lawsuits. Although the outcome of these lawsuits is not presently determinable, in the opinion of the City's legal counsel, the resolution of these matters will not have a material adverse effect on the financial condition of the City.

Grant Adiustments - Amounts received or receivable from grantor agencies are subject to audit and adjustment by the grantor agencies, principally the federal government. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable funds. The amount, if any, of expenditures that may be disallowed by the grantor cannot be determined at this time, although the City expects such amounts, if any, to be immaterial.

Cooperation and Financing Agreements - The City has entered into various cooperation and financing agreements with other public agencies that commit the City to future participation in design and construction of the Mission Interchange and the associated Warren Avenue Grade Separation. During fiscal year 2015/16, the City continued to work under the amended cooperative funding agreement with the Santa Clara Valley Transportation Authority (VT A) for the construction of the Warren Avenue Grade Separation which is funded by state grant funds received from the Highway Railroad Crossing Safety Account (HRCSA) program.

Affordable Housing Funds - At its June 9, 2015 meeting, the City Council authorized the City Manager or his designee to execute loan documents totaling $11,910,000 to Mid-Pen Housing for the development of the Stevenson Family Apartments, which was subsequently reduced by $108,000 to reflect a City contribution to pay land acquisition costs. Funding sources include: $6,673,502 from the Inclusionary Housing In-Lieu fund, $2,509,679 from the Low and Moderate Income Housing Asset fund, and $2,726,819 from the City Funded Affordable Housing Fund. On December 1, 2015, the City and Mid-Pen Housing entered into an Acquisition and Predevelopment Loan Agreement in the amount of $5,007,115, leaving $6,794,885 of the loan commitment outstanding.

Also, at its June 9, 2015 meeting, the City Council committed all remaining available affordable housing funds plus future affordable housing revenue, up to a total of $6,970,000, for the Pare 55 Senior Apartments project, to be appropriated for a loan to Eden Housing. At its February 16, 2016 and June 14, 2016 meetings, the City Council committed an additional $520,000 of HOME funds to the Pare 55 project, for a total commitment of $7,490,000. Funding sources include: $4,300,000 from the Inclusionary Housing In-Lieu fund, $1,000,000 from the Low and Moderate Income Housing Asset fund, $1,670,000 from the City Funded Affordable Housing Fund, and $520,000 from the HOME fund.

Encumbrances - Encumbrances represent commitments related to unperformed contracts for goods or services. Encumbrance accounting, under which purchase orders, contracts, and other commitments for the expenditure of resources are recorded to reserve that portion of the applicable appropriation, is utilized in the governmental fund types. Encumbrances outstanding at year-end are reported as part of fund balance and do not constitute expenditures or liabilities

CAFR for the Fiscal Year Ended June 30, 2016 I 93 Notes to Basic Financial Statements

because the commitments will be honored during the subsequent year. At June 30, 2016, encumbrances of the governmental funds are as follows:

Fund Balances Fund Restricted Committed Assigned Total General Fund $ $ $ 644,427 $ 644,427 Development Impact Fees 6,833,537 6,833,537 Development Cost Center 188,427 188,427 Recreation Services 12,609 12,609 Capital Improvement 6,139,129 6,139,129 Low and Moderate Income Housing Asset 15,672 15,672 Non-major governmental funds 1,354,946 597,625 1,952,571 Total $ 8,392,582 $ 12,609 $ 7,381,181 $ 15,786,372

Former Successor Agency Property Held for Resale - In June 2014, two Successor Agency properties were transferred to the City under the terms of the Long Range Property Management Plan (LRPMP). The Centerville Unified Site was sold on October 30, 2015 at its MAI (Member Appraisal Institute) appraised market value of $6,795,000, less than the previously reported potential estimated value of$12,913,914. $4,782,000 of the net proceeds was remitted to the County for distribution to the taxing agencies. $13,000 of the proceeds was used to pay for closing costs plus reimbursement of "Allowed City Costs" pursuant to the Compensation Agreement by and between the City, Successor Agency and each of the affected taxing entities in Alameda County. $2,000,000 of the proceeds is being held in an escrow as a contingency as the full cost of environmental remediation is not known until a "no further action" letter is granted by the environmental regulatory oversight agency, the Alameda County Water District. The remaining property, the Union Pacific Site in the Niles district, remains with the City and is reported as $678,979 land held for resale in the City's Agency Fund. Upon sale, the proceeds will be remitted to the County for distribution to the taxing agencies.

94 I City of Fremont, California 1. BUDGETARY INFORMATION

A. Budgetary Basis ofAccounting

Budgets are adopted annually on a budgetary basis consistent with GAAP for the general fund, special revenue funds, debt service funds, and internal service funds. Project-length budgets are adopted biennially for all capital projects funds.

The annual budget sets appropriations by fund or with further allocation by department or program. The legal level of budgetary control (i.e., the level at which expenditures may not legally exceed appropriations) is the fund level. The City Manager is authorized to transfer budgeted amounts between departments or programs within any fund. The City Council may adopt supplemental appropriations during the year.

The annual budget resolution authorizes the City Manager to increase appropriations for operating expenditures for the Development Services and Recreation Services cost centers when estimated fee revenue in those funds exceeds the amount identified in the budget because of increased activity. It also authorizes the City Manager to increase appropriations for operating expenditures due to increases in grant or activity-based revenues in an amount not to exceed the increased grant or activity-based revenues. It additionally authorizes the City Manager to appropriate and transfer unencumbered ending fund balance to the Risk Management Fund in the amounts necessary to maintain adequate funding of the workers' compensation and general liability reserves. All other revisions or transfers that alter the total appropriations of other funds must be approved by the City Council.

B. Encumbrances

Encumbrances represent commitments related to unperformed contracts for goods or services. Encumbrance accounting, under which purchase orders, contracts, and other commitments for the expenditure of resources are recorded to reserve that portion of the applicable appropriation, is utilized in the governmental fund types. Encumbrances outstanding at year-end are reported as restricted, committed, assigned or unassigned fund balance and do not constitute expenditures or liabilities because the commitments will be honored during the subsequent year.

Unexpended annual appropriations lapse at the end of the fiscal year; encumbered appropriations are re-budgeted in the next fiscal year. Unexpended capital improvement appropriations are carried forward until the improvements or programs are complete.

CAFR for the Fiscal Year Ended June 30, 2016 I 95 Required Supplementary Information

1. BUDGETARY INFORMATION (continued)

C. Budgetary Comparison Schedules

Following are the budgetary comparison schedules for the General Fund and each major special revenue fund with a legally adopted annual budget (Development Cost Center, Recreation Services, Human Services, and Low and Moderate Income Housing Asset Funds).

General Fund -Budt!eta!J!_ Comearison Schedule (For the Fiscal Year Ended June 30, 2016) Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative)

Fund Balance - Beginning of year* $ 33,118,000 $ 38,360,000 $ 41,247,695 $ 2,887,695 Property tax 80,312,000 80,312,000 79,387,844 (924,156) Sales tax 47,337,000 47,337,000 48,580,024 1,243,024 Intergovernmental 398,000 398,000 564,969 166,969 Business tax 9,888,000 9,888,000 10,125,832 237,832 Other taxes 9,434000 9,434,000 9,887,434 453,434 Franchises 9,420,000 9,420,000 9,605,547 185,547 Charges for services 9,401,000 9,401,000 9,078,856 (322,144) Investment earnings 615,000 615,000 1,271,369 656,369 Other 1,937,000 1,937,000 2,831,728 894,728 Transfers in 5,607,000 5,607,000 5,603,226 (3,774) Total resources 174,349,000 174,349,000 176,936,829 2,587,829 Charges to appropriations (outflows): General government 16,701,216 16,453,333 14,534,805 1,918,528 Police services 62,562,094 67,418,600 67,208,825 209,775 Fire services 42,842,775 44,539,918 43,406,101 1,133,817 Capital assets maintenance and operations 20,324,591 21,814,944 21,445,806 369,138 Community development and environmental services 1,309,620 1,417,190 1,327,238 89,952 Capital outlay 1,084,778 1,084,778 Debt service: Interest and fiscal charges 514,549 514,549 491,554 22,995 Transfers out 30,201,950 29,870,723 29,558,804 311,919 Total charges to appropriations 174,456,795 183,114,035 179,057,911 4,056,124

Net change in fund balance (107,795) (8,765,035) (2,121,082) 6,643,953

Fund Balance - End of year* $ 33,010,205 $ 29,594,965 $ 39,126,613 $ 9,531,648

* Actual fund balance includes the value of prepaid assets and the year-end adjustment for unrealized fair value gain or loss on investments.

96 I City of Fremont, California Required Supplementary Information

1. BUDGETARY INFORMATION (continued)

C. Budgetary Comparison Schedules (continued)

Develoement Cost Center Fund- Budg_eta!J!. Comearison Schedule (For the Fiscal Year Ended June 30, 2016) Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative)

Fund Balance - Beginning of year* $ 3,4CB,000 $ 4,665,064 $ 4,625,010 $ (40,054) Resources (inflows): Charges for services 13,763,758 14,652,233 15,914,551 1,262,318 Investment earnings 35,800 41,725 190,483 148,758 Transfers in 2,374,398 3,075,982 3,075,982 Total resources 16,173,956 17,769,940 19,181,016 1,411,076

Charges to appropriations (outflows): Capital assets maintenance and operations 2,824,CB4 2,824,034 2,824,034 Community development and environmental services 10,963,714 12,861,748 9,367,299 3,494,449 Capital outlay 77,752 77,752 Transfers out 2,486,340 2,486,340 2,486,340 Total charges to appropriations 16,274,088 18,249,874 14,755,425 3,494,449

Resources over (under) charges to appropriations (100,132) (479,934) 4,425,591 4,905,525

Fund Balance - End of year* $ 3,302,868 $ 4,185,130 $ 9,050,601 $ 4,865,471

* Actual fund balance includes the year-end adjustment for unrealized fair value gain or loss on investments.

The significant variance in community development and environmental services charges is attributable to vacancies and contract services costs being lower than anticipated.

CAFR for the Fiscal Year Ended June 30, 2016 I 97 Required Supplementary Information

1. BUDGETARY INFORMATION (continued)

C. Budgetary Comparison Schedules (continued)

Recreation Services Fund- Budg_etarr. Comearison Schedule (For the Fiscal Year Ended June 30, 2016) Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative)

Fund Balance - Beginning of year* $ 6,960,452 $ 7,331,090 $ 7,269,011 $ (62,079) Resources (inflows): Charges for services 7,659,887 7,714,387 8,248,095 533,708 Investment earnings 50,000 50,000 137,431 87,431 Other 131,842 131,842 138,832 6,990 Transfers in 2,235,279 2,246,187 2,246,187 Total resources 10,077,008 10,142,416 10,770,545 628,129

Charges to appropriations ( outflows): Recreation and leisure services 8,596,273 8,628,599 8,318,171 310,428 Transfers out 993,576 2,133,876 2,233,331 (99,455) Total charges to appropriations 9,589,849 10,762,475 10,551,502 210,973

Resources over (under) charges to appropriations 487,159 (620,059) 219,043 839,102

Fund Balance - End of year* $ 7,447,611 $ 6,711,031 $ 7,488,054 $ 777,023

* Actual fund balance includes the year-end adjustment for unrealized fair value gain or loss on investments.

98 I City of Fremont, California Required Supplementary Information

1. BUDGETARY INFORMATION (continued)

C. Budgetary Comparison Schedules (continued)

Human Services Fund -Budg_etarr. Comearison Schedule (For the Fiscal Year Ended June 30, 2016) Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) Fund Balance - Beginning of year* $ 6,488,000 $ 7,064,186 $ 7,CB7,376 $ (26,810) Resources (inflows): Intergovernmental 7,385,CB6 7,407,612 7,129,170 (278,442) Charges for services 1,820,859 1,820,859 1,674,590 (146,269) Investment earnings 91,800 91,800 72,648 (19,152) Other 657,118 657,118 927,207 270,089 Transfers in 4,197,392 4,221,998 4,371,484 149,486 Total resources 14,152,205 14,199,387 14,175,099 (24,288) Charges to appropriations ( outflows): Human services 12,115,809 12,368,566 11,219,010 1,149,556 Community development and environmental services 1,477,165 1,821,242 1,246,393 574,849 Interest and fiscal charges 690,566 48,000 47,366 634 Transfers out 977,586 1,620,152 1,322,266 297,886 Total charges to appropriations 15,261,126 15,857,960 13,835,035 2,022,925 Resources over (under) charges to appropriations (1,108,921) (1,658,573) 340,064 1,998,637 Fund Balance - End of year* $ 5,379,079 $ 5,405,613 $ 7,377,440 $ 1,971,827

* Actual fund balance includes the year-end adjustment for unrealized fair value gain or loss on investments.

The significant variance in human services and community development and environmental services charges are attributable to vacancies and contract services costs being lower than anticipated.

CAFR for the Fiscal Year Ended June 30, 2016 I 99 Required Supplementary Information

1. BUDGETARY INFORMATION (continued)

C. Budgetary Comparison Schedules (continued)

Low and Moderate Income Housing_ Asset Fund (For the Fiscal Year Ended June 30, 2016) Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative)

Fund Balance - Beginning of year* $ 2,891,969 $ 3,47.3,625 $ 3,442,211 $ (31,414) Resources (inflows): Investment earnings 95,000 95,000 77,159 (17,841) Other 1,200,000 1,200,000 1,650,296 450,296 Total resources 1,295,000 1,295,000 1,727,455 432,455

Charges to appropriations ( outflows):

Community development and environmental services 530,880 475,049 399,454 75,595 Transfers out 55,469 55,469 55,464 5 Total charges to appropriations 586,349 530,518 454,918 75,600

Resources over (under) charges to appropriations 708,651 764,482 1,272,537 508,055

Fund Balance - End of year* $ 3,600,620 $ 4,238,107 $ 4,714,748 $ 476,641

* Actual fund balance includes the year-end adjustment for unrealized fair value gain or loss on investments.

100 I City of Fremont, California Required Supplementary Information

2. MODIFIED APPROACH FOR THE CITY'S INFRASTRUCTURE

The City has elected to use the modified approach to accounting for infrastructure assets, as defined by GASB Statement No. 34, for its street network. The street network is composed of all City streets, and includes all physical features associated with the operation of motorized vehicles that exist within the limits of the City rights of way. The City street network is constructed primarily of asphalt pavement. Further, based on land use, access and traffic utilization, the street network is subdivided into the following three classifications: arterial/major, collector, and residential/local.

In conjunction with the Metropolitan Transportation Commission, the City maintains a Pavement Management System (PMS) database that contains all of the pavement information for the street network. The PMS contains a complete inventory of all street segments including the length, width, area, classification, maintenance and rehabilitation history and the records of all inspections of the pavement condition. Also, the PMS contains the inspection based Pavement Condition Index (PCI) for each street segment and has the functionality to compute the overall City area-weighted PCI.

A. Condition Assessment Data

Pursuant to GASB Statement No. 34, a government that wishes to use the modified approach must assess the condition of the network for which that approach is used at least once every three years. Consequently, the City hires external consultants to conduct condition assessments every two to three years for arterial and collector streets, and every five years for residential streets. In 2015, the entire City street network of arterial, collector and residential streets was inspected and assessed.

For the pavement condition assessment, the street segment is inspected and the physical condition is recorded based on a system of sampling and measuring 17 defined pavement distress types. The PCI, a nationally recognized index, is calculated based on the inspection data. The PCI is expressed as a rating from Oto 100, where O is the least acceptable condition and 100 is the rating for a street in excellent condition or a new street. The following condition categories with their corresponding PCI rating ranges are defined:

Condition PCI Rating Excellent 86-100 Good 70-85 Fair 50-69 Poor 25-49 Very Poor <25

CAFR for the Fiscal Year Ended June 30, 2016 I 101 Required Supplementary Information

2. MODIFIED APPROACH FOR THE CITY'S INFRASTRUCTURE (continued)

A. Condition Assessment Data (continued)

The PCI for each street segment is entered into the database at the time of the latest periodic inspection. Between the inspections, the PMS computes "real time" PCI values based on standardized deterioration curves for pavement materials.

Through June 30, 2016, the City's policy was to maintain an average PCI rating of50 for the entire street network. This rating means that more pavement distresses ranging from surface defects such as cracking and raveling to more serious load related distresses, such as "alligator" cracking and rutting will become noticeable to drivers traveling at the posted speeds. As of June 30, 2016, the City's overall street network was rated at a computed PCI index of 72, with the detail condition as follows:

% of Street Pavement Area Condition PCI Rating 6/30/13 6/30/14 6/30/15 6/30/16 Good to Excellent 70-100 53 58 64 66 Fair 50-69 16 18 18 18 Poor to Very Poor 0-49 31 24 18 16

In the table above, it can be seen that in fiscal year 2015/16, approximately 66% of the City's streets were rated above PCI 70, the lower limit for streets in good condition. This is a 2% increase from fiscal year 2014/15 when the percentage of streets rated above 70 was 64%. The reason for the increase is an expanded pavement preservation program that maintains more area of streets in good condition to keep them in the good category. Also, the program included bringing streets that were in a lower condition category back into a higher condition category.

B. Estimated Maintenance and Preservation Costs

In addition to performing periodic condition assessments, governments that use the modified approach must also estimate at the start of each reporting period the amount of spending needed that period to maintain and preserve infrastructure at the government's selected condition level.

102 I City of Fremont, California Required Supplementary Information

2. MODIFIED APPROACH FOR THE CITY'S INFRASTRUCTURE (continued)

B. Estimated Maintenance and Preservation Costs (continued)

The table below compares estimated annual amounts required to maintain the City street network at the prior-year-ending PCI level with the actual expenditures for street maintenance and actual PCI levels computed at the close of the fiscal year:

Computed Overall City Fiscal Maintenance PCI Rating Year Estimate Actual Expenditure (Condition Assessments) 2011/12 $14,800,000 $7,403,000 62 2012/13 $14,800,000 $6,121,000 62 2013/14 $19,140,000 $9,823,000 66 2014/15 $19,140,000 $11,392,340 68 2015/16 $19,000,000 $4,504,282 72

The actual expenditures over the years have remained below the estimated levels, but the overall City PCI has remained relatively stable with some recent improvement. Under the City's expanded pavement preservation program, the majority of street areas were treated using a combination of base repairs and surface treatments such as cape seals and slurry seals. This approach is more economical than a pavement rehabilitation program such as overlays, enabling the available funds to cover a larger pavement area.

CAFR for the Fiscal Year Ended June 30, 2016 I 103 Required Supplementary Information

3. SCHEDULE OF CHANGES IN THE NET PENSION LIABILITY AND RELATED RATIOS

A. Miscellaneous Plan

FY 2015/16 FY 2014/15 Total Pension Liability Service Cost $ 7,507,286 $ 7,924,529 Interest on the Total Pension Liability 31,320,840 30,270,566 Changes of Assumptions (7,685,566) Difference between Expected and Actual Experience (5,745,910) Benefit Payments, including Refunds of (18,958,554) (18,521,044) Employee Contributions Net Change in Total Pension Liability 6,438,096 19,674,051 Total Pension Liability- Beginning 428,579,868 408,905,817 Total Pension Liability- Ending (a) $ 435,017,964 $428,579,868 Valuation Date of Total Pension Liability 6/30/2014 6/30/2013 Plan Fiduciary Net Position Contributions from the Employer $ 10,615,278 $ 10,225,328 Contributions from Employees 3,603,542 3,714,276 Net Investment Income 7,088,364 47,792,502 (net of administrative expenses) Benefit Payments, including Refunds of (18,958,554) (18,521,044) Employee Contributions Plan to Plan Resource Movement 11,897 Administrative Expense (362,448) Net Change in Plan Fiduciary Net Position 1,998,079 43,211,062 Plan Fiduciary Net Position - Beginning 319,896,911 276,685,849 Plan Fiduciary Net Position- Ending (b) $ 321,894,990 $ 319,896,911 Plan Fiduciary Net Position as a Percentage of the 74.00% 74.64% Total Pension Liability Plan Net Pension Liability- Beginning $108,682,957 $132,219,968 Plan Net Pension Liability- Ending (a) - (b) $113,122,974 $108,682,957 Measurement Date of Net Pension Liability 6/30/2015 6/30/2014 Covered Payroll $ 45,076,041 $ 42,454,728 Plan Net Pension Liability as a Percentage of 250.96% 256.00% Covered Payroll The figures above do not include any liability impact that may have resulted from plan changes which occurred after June 30, 2014. The discount rate was changed from 7.5 percent (net of administrative expense) to 7.65 percent. Fiscal year ended June 30, 2015 was the first year of implementation of GASB Statement No. 68, therefore only two years of information are shown.

104 I City of Fremont, California Required Supplementary Information

3. SCHEDULE OF CHANGES IN THE NET PENSION LIABILITY AND RELATED RATIOS (continued)

B. Safety Plan

FY 2015/16 FY 2014/15 Total Pension Liability Service Cost $ 9,445,690 $ 9,428,558 Interest on the Total Pension Liability 41,504,625 39,695,994 Changes of Assumptions (9,630,020) Difference between Expected and Actual Experience 1,432,189 Benefit Payments, including Refunds of (28,384,236) (26,957,919) Employee Contributions Net Change in Total Pension Liability 14,368,248 22,166,633 Total Pension Liability- Beginning 560,211,231 538,044,598 Total Pension Liability- Ending (a) $574,579,479 $ 560,211,231 Valuation Date of Total Pension Liability 6/30/2014 6/30/2013 Plan Fiduciary Net Position Contributions from the Employer $ 15,067,536 $ 13,719,650 Contributions from Employees 4,310,000 3,757,435 Net Investment Income 8,918,712 60,180,612 (net of administrative expenses) Benefit Payments, including Refunds of (28,384,236) (26,957,919) Employee Contributions Adminish'a tive Expense (449,882) Net Change in Plan Fiduciary Net Position (537,870) 50,699,778 Plan Fiduciary Net Position - Beginning 400,281,041 349,581,263 Plan Fiduciary Net Position- Ending (b) $399,743,171 $400,281,041 Plan Fiduciary Net Position as a Percentage of the 69.57% 71.45% Total Pension Liability

Plan Net Pension Liability- Beginning $159,930,190 $188,463,335 Plan Net Pension Liability- Ending (a) - (b) $174,836,308 $159,930,190 Measurement Date of Net Pension Liability 6/30/2015 6/30/2014 Covered Payroll $ 38,266,915 $ 35,546,231 Plan Net Pension Liability as a Percentage of 456.89% 449.92% Covered Payroll The figures above do not include any liability impact that may have resulted from plan changes which occurred after June 30, 2014. The discount rate was changed from 7.5 percent (net of administrative expense) to 7.65 percent. Fiscal year ended June 30, 2015 was the first year of implementation of GASB Statement No. 68, therefore only two years of information are shown.

CAFR for the Fiscal Year Ended June 30, 2016 I 105 Required Supplementary Information

4. SCHEDULE OF CONTRIBUTIONS

A. Miscellaneous Plan

FY 2015/16 FY 2014/15 FY 2013/14 Actuarially Determined Contribution $ 12,301,280 $ 10,615,278 $10,225,328 Contributions in Relation to the (12,301,280) (10,615,278) (10,225,328) Actuarially Determined Contribution Contribution Deficiency (Excess) $ $ $ Covered Payroll $ 46,428,322 $ 45,076,041 $42,454,728 Contributions as a Percentage of Covered Payroll 26.50% 23.55% 24.09%

Fiscal year ended June 30, 2015 was the first year of implementation of GASB Statement No. 68, therefore only three years of information are shown.

Methods and Assumptions Used in Calculating the Actuarially Determined Contribution for FY 2015/16 Valuation Date June 30, 2013 Actuarial Cost Method Entry age normal Amortization Method Level percent of payroll Asset Valuation Method Market value Inflation 2.75% Salary Increases 3.30% to 14.20% depending on age, service, and type of employment Payroll Growth 3.00% Discount Rate/Investment 7.50% net of pension plan investment and administrative expenses; Rate of Return includes inflation Retirement Age Probabilities ofretirement are based on the 2010 Ca!PERS Experience Study for the period from 1997 to 2007 Mortality Rate Table Probabilities of mortality are based on the 2010 Ca!PERS Experience Study for the period from 1997 to 2007. Pre-retirement and Post­ retirement mortality rates include 5 years of projected mortality improvement using Scale AA published by the Society of Actuaries

106 I City of Fremont, California Required Supplementary Information

4. SCHEDULE OF CONTRIBUTIONS (continued)

B. Safety Plan

FY 2015/16 FY 2014/15 FY 2013/14 Actuarially Determined Contribution $ 17,558,445 $ 15,067,536 $13,719,650 Contributions in Relation to the Actuarially (17,558,445) (15,067,536) (13,719,650) Determined Contribution Contribution Deficiency (Excess) $ $ $

Covered Payroll $ 39,414,922 $ 38,266,915 $35,546,231 Contributions as a Percentage of Covered Payroll 44.55% 39.37% 38.60%

Fiscal year ended June 30, 2015 was the first year of implementation of GASB Statement No. 68, therefore only three years of information are shown.

Methods and Assumptions Used in Calculating the Actuarially Determined Contribution for FY 2015/16 Valuation Date June 30, 2013 Actuarial Cost Method Entry age normal Amortization Method Level percent of payroll Asset Valuation Method Market value Inflation 2.75% Salary Increases 3.30% to 14.20% depending on age, service, and type of employment Payroll Growth 3.00% Discount Rate/ Investment 7.50% net of pension plan investment and administrative expenses; Rate of Return includes inflation Retirement Age Probabilities ofretirement are based on the 2010 Ca!PERS Experience Study for the period from 1997 to 2007 Mortality Rate Table Probabilities of mortality are based on the 2010 Ca!PERS Experience Study for the period from 1997 to 2007. Pre-retirement and Post­ retirement mortality rates include 5 years of projected mortality improvement using Scale AA published by the Society of Actuaries

CAFR for the Fiscal Year Ended June 30, 2016 I 107 Required Supplementary Information

5. SCHEDULE OF OTHER POST-EMPLOYMENT BENEFITS (OPEB) FUNDING PROGRESS

Entry Age Unfunded UAAL as Actuarial Actuarial Actuarial Actuarial Percentage Valuation Value of Accrued Accrued Funded Covered of Covered Date Assets Liability Liability Ratio Payroll Payroll 6/30/2010 $ $ 67,049,000 $ 67,049,000 0.0% $ 74,073,000 90.5% 6/30/2012 79,329,000 79,329,000 0.0% 69,885,000 1135% 6/30/2014 70,797,000 70,797,000 0.0% 76,166,000 930%

108 I City of Fremont, California Non-Major Governmental Funds

CAFR for the Fiscal Year Ended June 30, 2016 I 109 Special Revenue Funds

Special Revenue Funds

Special Revenue Funds are used to account for City revenues from sources that, by law or administrative action, are designated to finance particular functions or activities of government. The individual special revenue funds are as follows:

HOME Grant - This fund accounts for monies received under the HOME Investment Partnership Act. HOME funds can be used to acquire, rehabilitate, finance, and construct affordable housing and provide tenant-based rental assistance.

Integrated Waste Management- This fund accounts for monies received by the City to comply with the provisions of AB939 for the purpose of addressing recycling, household hazardous waste and solid waste management issues. These revenues may only be spent for integrated waste management and waste reduction programs.

Urban Runoff-The Clean Water Fee special assessment funds the Urban Runoff Clean Water Program. This program is based on the Stormwater Management Plan of the Alameda Countywide Clean Water Program. The plan is required for and a part of the National Pollutant Discharge Elimination System permit. Included in the plan are tasks for municipalities to carry out, including public information, municipal maintenance activities, new development requirements, illicit discharge elimination, industrial discharge identification and control, monitoring and special studies.

Traffic Safety OTS- This fund accounts for monies received from the State, to be used to reduce alcohol involved fatalities and injuries, and raise general public awareness regarding the problems associated with drinking and driving.

Abandoned Vehicle - This fund accounts for monies received by the City under California Vehicle Code Sections 9250. 7 and 22710 and used for the abatement, removal, and disposal as public nuisances of any abandoned, wrecked, dismantled, or inoperative vehicles from private or public property.

Narcotics Asset Seizure - This fund accounts for assets confiscated by the City and by the Southern Alameda County Major Crimes Task Force (SACMCTF), which consists of police officers from the cities of Fremont, Newark and Union City. These assets may only be used for future narcotics investigations.

COPS AB3229 - This fund accounts for State funds distributed by the County for front-line law enforcement services, including anti-gang and community crime prevention programs.

CUPA Administration - The Certified Unified Program Agencies (CUP A) administration fund accounts for the collection of Fire CUPA fines and penalties. Assets are used for hazardous material management.

Justice Assistance Grant- This fund accounts for federal pass-through money and allows states, tribes and local government to support a broad range of activities to prevent and control crime based on local needs and conditions, such as initiatives technical assistance, training personnel, and equipment supplies.

110 I City of Fremont, California Special Revenue Funds

City Funded Affordable Housing Fund - This fund accounts for the City's funding for the City general fund allocations for affordable housing, monitoring payments, and other miscellaneous revenues.

Inclusionary Housing In Lieu - This fund accounts for payments received from developers. The Inclusionary Housing Program requires a minimum amount of affordable housing to be created in conjunction with market rate residential development.

Metropolitan Medical Response System (MMRS) - This fund accounts for federal grants to fund the purchase of anti-terrorism equipment, medications, and training and exercise for terrorism responses.

Miscellaneous Federal Grants - This fund accounts for federal monies received from various individual federal grants that are subject to the Single Audit.

Miscellaneous State Support - This fund accounts for one-time miscellaneous funds received from State agencies.

State Gas Tax- This fund accounts for monies apportioned to the City from State-collected gasoline taxes. The annual allocation may be spent for street maintenance or construction. Funds are apportioned by the State on the basis of population.

Maintenance District - This fund accounts for lighting and landscape maintenance activities in new subdivisions within the City. These activities are funded by special assessments on property within the benefited area.

CAFR for the Fiscal Year Ended June 30, 2016 I 111 Debt Service Funds, Capital Project Funds

Debt Service Funds

Debt Service Funds are used to record the accumulation ofresources for, and the payment of, principal, interest and fiscal charges on general long-term debt. The individual debt service funds are as follows:

Fire General Obligation Bonds - This fund accounts for the accumulation of property tax revenue and payment of principal and interest for the City's general obligation bonds. In November 2002, Fremont voters approved Measure R, which authorized the City to issue $51 million of general obligation bonds to provide funding to replace three fire stations, build a public safety training center, and make remodeling and seismic improvements to seven existing fire stations. Three bond series totaling $51 million have been issued. The City is obligated to annually levy ad valorem taxes upon all taxable properties within the City for the payment of the principal and interest for these bonds.

Fremont Financing Authority - This fund accounts for the payment of principal and interest on various certificates of participation. The proceeds of the debt were used to finance construction of capital facilities.

Capital Project Funds

Capital Project Funds are used to account for the acquisition or construction of major capital facilities and improvements. The specific capital project funds are listed below:

Transportation Development Act - This fund accounts for funds received under the Transportation Development Act (Article 3) to be used for street construction projects.

Miscellaneous State Grants Capital - This fund accounts for one-time miscellaneous funds received from State agencies.

Interchange Construction - This fund accounts for construction oflnterstate 880 interchange at Fremont Boulevard, Mission Boulevard, Auto Mall Parkway and Dixon Landing Road.

Vehicle Replacement - This fund accounts for vehicle and accessory acquisitions and dispositions. Funds are transferred from the general fund and other funds for these expenditures.

Capital Improvement Outside Sources - This fund accounts for contributions received from other outside sources that are intended to help fund specific capital projects.

Measure B, BB & F Grants, Streets, Bikes and Pedestrian - These funds account for the portion of monies from Measure B, BB and Measure F to be used to fund transportation-related capital projects. Under Measure B, the City receives the proceeds of an additional half-cent sales tax for use on transportation-related expenditures. In November 2014 voters approved Measure BB which augments and extends the existing Alameda County Measure B half-cent transportation sales tax by a half-cent to April I, 2045. In November 2010, voters of Alameda County approved Measure F,

112 I City of Fremont, California Capital Project Funds the Vehicle Registration Fee (VRF) program. The City receives proceeds from a fee on each annual motor vehicle registration or renewal in Alameda County.

Traffic System Management - This fund receives monies from the Bay Area Quality Management District under AB434. The fund's expenditures relate to the implementation of the City's trip reduction ordinance - a State-mandated activity.

Proposition JB Highway-Railroad Crossing Safety Account (HRCSA) - This fund accounts for monies from Proposition lB, approved by California voters in November 2006, for grade separation and railroad crossing safety improvements.

CAFR for the Fiscal Year Ended June 30, 2016 I 113 Non-Major Governmental Funds

City of Fremont Combining Balance Sheet Non-Major Governmental Funds June 30, 2016 (With comparative totals for June 30, 2015)

Special Revenue Funds

Integrated HOME Waste Grant Management

ASSETS Cash and invesbnents held by City $ $ 7,390,427 Restricted cash and invesbnents

held by fiscal agent or City

Receivables: Property tax Due from other govenunental agencies 135,973 492,652 .Accounts receivable 572,047 Othff

Prepaid assets

Total assets $ 135,973 $ 8,455,126

LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES

Liabilities: .Accounts payable $ 2,842 $ 271,020 Salaries and wages payable 62,411 Due to other funds 129,446

Total liabilities 132,288 333,431

Deferred inflows of resources-unavailable revenue

Fund Balances (Deficits): Nonspendable Prepaid assets Restricted for:

Social service programs 3,685

Debt service Public safety

Street :irrtprovements Community development 8,121,695

Other pmposes

Committed for: Social service programs

Assigned for:

Vehicle replacement Unassigned

Total fund balances (deficits) 3,685 8,121,695

Total liabilities, deferred inflows of resources, and fund balances (deficits) $ 135,973 $ 8,455,126

114 I City of Fremont, California Non-Major Governmental Funds

Special Revenue Funds

Narcotics Justice Urban Traffic Abandoned Asset COPS CUPA Assistance Runoff Safety OTS Vehicle Seizure AB3229 Administration Grant

$ 1,098,985 $ $ $ 745,713 $ 432,676 $ 678,031 $ 11,629

8,846 34,500

$ 1,107,831 $ $ 34,500 $ 745,713 $ 432,676 $ 678,031 $ 11,629 ======

$ 84,662 $ $ $ 5,458 $ 509 $ $ 392 27,026 7,304 34,500

111,688 34,500 12,762 509 392

732,951 432,167 678,031 11,237

996,143

996,143 732,951 432,167 678,031 11,237

$ 1,107,831 $ $ 34,500 $ 745,713 $ 432,676 $ 678,031 $ 11,629 ======(Continued)

CAFR for the Fiscal Year Ended June 30, 2016 I 115 Non-Major Governmental Funds

City of Fremont Combining Balance Sheet Non-Major Governmental Funds, Continued June 30, 2016 (With comparative totals for June 30, 2015)

Special Revenue Funds

City Funded Inclusionary Metropolitan Affordable Housing Medical Response Housing Fund In Lieu System

ASSETS Cash and invesbnents held by City $ 6,483,838 $ 14,203,213 $ 101,754 Restricted cash and invesbnents held by fiscal agent or City Receivables: Property tax

Due from other govenunental agencies

Accounts receivable

Other

Prepaid assets

Total assets $ 6,483,838 $ 14,203,213 $ 101,754

LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES

Liabilities: .Accounts payable $ 31,865 $ 3,576 $ 141 Salaries and wages payable Due to other funds

Total liabilities 31,865 3,576 141

Deferred inflows of resources-unavailable revenue

Fund Balances (Deficits):

Nonspendable Prepaid assets

Restricted for:

Social service programs Debt service

Public safety 101,613

Street :irrtproventents Community development 14,199,637

Other pmposes

Committed for: Social service programs 6,451,973

Assigned for: Vehicle replacentent

Unassigned

Total fund balances (deficits) 6,451,973 14,199,637 101,613

Total liabilities, deferred inflows of resources, and fund balances (deficits) $ 6,483,838 $ 14,203,213 $ 101,754

116 I City of Fremont, California Non-Major Governmental Funds

Special Revenue Funds Total J\.1:i.scellaneous J\.1:i.scellaneous Non-major Federal State State Maintenance Special Revenue Grants Support Gas Tax District Funds

$ $ $ 11,454,231 $ 510,423 $ 43,110,920

145,220 49,829 25,200 1,040 893,260 28,693 600,740 42,999 42,999

$ 145,220 $ 92,828 $ 11,508,124 $ 511,463 $ 44,647,919 ====

$ 112,317 $ 7,428 $ 381,777 $ 41,995 $ 943,982 96,741 8,942 85,400 258,288

121,259 92,828 381,777 41,995 1,299,011

3,685

1,955,999 11,126,347 11,126,347 469,468 23,786,943 23,961 23,961

6,451,973

23,961 11,126,347 469,468 43,348,908

$ 145,220 $ 92,828 $ 11,508,124 $ 511,463 $ 44,647,919 ==== (Continued)

CAFR for the Fiscal Year Ended June 30, 2016 I 117 Non-Major Governmental Funds

City of Fremont Combining Balance Sheet Non-Major Governmental Funds, Continued June 30, 2016 (With comparative totals for June 30, 2015)

Debt Service Funds Total Fire General Frentont Non-major Obligation Financing Debt Service Bonds Authority Funds

ASSETS Cash and invesbnents held by City $ $ $ Restricted cash and invesbnents held by fiscal agent or City 2,558,008 1,803,945 4,361,953 Receivables: Property tax 28,968 28,968

Due from other govenunental agencies

.Accounts receivable

Other

Prepaid assets

Total assets $ 2,586,976 $ 1,803,945 $ 4,390,921

LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES

Liabilities: .Accounts payable $ 525 $ $ 525 Salaries and wages payable Due to other funds

Total liabilities 525 525

Deferred inflows of resources-unavailable revenue

Fund Balances (Deficits): N onspenda ble Prepaid assets

Restricted for: Social service programs

Debt service 2,586,451 1,803,945 4,390,396

Public safety Street :irrtprovements

Community development Other pmposes

Committed for:

Social service programs Assigned for:

Vehicle replacement Unassigned

Total fund balances (deficits) 2,586,451 1,803,945 4,390,396

Total liabilities, deferred inflows of resources, and fund balances (deficits) $ 2,586,976 $ 1,803,945 $ 4,390,921

118 I City of Fremont, California Non-Major Governmental Funds

Capital Project Funds

Transportation l'vliscellaneous Capital Measure B, BB & F Development State Grants Interchange Vehicle hnproventent- Grants, Streets, Act Capital Construction Replacement Outside Sources Bike & Pedestrian

$ $ $ 408,024 $ 2,467,765 $ 12,798,604 $ 3,881,295

191,476 308,175 380,768 1,317,369

111,261 97,410 $ 191,476 $ 308,175 $ 408,024 $ 2,565,175 $ 13,290,633 ------$ 5,198,664

$ 15,000 $ 116,652 $ $ 112,257 $ 82,200 $ 62,498

176,476 191,523

191,476 308,175 112,257 82,200 62,498

42,473 144,399

97,410

408,024 4,151,904 5,136,166 8,912,130

2,355,508 (42,473)

(42,473) 408,024 2,452,918 13,064,034 5,136,166

$ 191,476 $ 308,175 $ 408,024 $ 2,565,175 $ 13,290,633 $ 5,198,664 ===== (Continued)

CAFR for the Fiscal Year Ended June 30, 2016 I 119 Non-Major Governmental Funds

City of Fremont Combining Balance Sheet Non-Major Governmental Funds, Continued June 30, 2016 (With comparative totals for June 30, 2015)

Capital Projects Funds

Traffic System Prop 1B Management HRCSA

ASSETS Cash and invesbnents held by City $ $ Restricted cash and invesbnents held by fiscal agent or City

Receivables: Property tax Due from other govenunental agencies 6,399 372,983

.Accounts receivable Othff

Prepaid assets

Total assets $ 6,399 $ 372,983

LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES

Liabilities: .Accounts payable $ $ 156,191 Salaries and wages payable Due to other funds 6,399 216,792

Total liabilities 6,399 372,983

Deferred inflows of resources-unavailable revenue 33,283

Fund Balances (Deficits): Nonspendable Prepaid assets

Restricted for:

Social service programs Debt service

Public safety Street :irrtprovements

Community development

Other pmposes Committed for:

Social service programs Assigned for:

Vehicle replacement

Unassigned (33,283)

Total fund balances (deficits) (33,283)

Total liabilities, deferred inflows of resources, and fund balances (deficits) $ 6,399 $ 372,983

120 I City of Fremont, California Non-Major Governmental Funds

Total Non-major Total Non-major Capital Projects Govenunental Funds Funds 2016 2015

$ 19,555,688 $ 62,666,608 $ 49,373,963

4,361,953 4,421,008

28,968 39,250 2,577,170 3,470,430 3,728,239 600,740 997,142 111,261 154,260 174,776 97,410 97,410

$ 22,341,529 $ 71,380,369 $ 58,734,378

544,798 $ 1,489,305 $ 3,301,815 96,741 77,501 591,190 849,478 937,756

1,135,988 2,435,524 4,317,072

220,155 220,155 467,424

97,410 97,410

3,685 3,685 4,390,396 4,460,258 1,955,999 1,012,487 9,696,094 20,822,441 16,882,384 8,912,130 32,699,073 23,562,791 23,961 267,364

6,451,973 5,193,075

2,355,508 2,355,508 2,708,119 (75,756) (75,756) (140,281)

20,985,386 68,724,690 53,949,882

$ 22,341,529 $ 71,380,369 $ 58,734,378

(Concluded)

CAFR for the Fiscal Year Ended June 30, 2016 I 121 Non-Major Governmental Funds

City of Fremont Combining Statement of Revenues, Expenditures and Changes in Fund Balances Non-Major Governmental Funds For the fiscal year ended June 30, 2016 (With comparative totals for the fiscal year ended June 30, 2015)

Special Revenue Funds

Integrated HOME Waste Urban Grant Management Runoff REVENUES: Property tax $ $ $ Intergovernmental 144,561 121,188 Charges for services 7,308,471 1,451,021 Investment earnings Other

Total revenues 144,561 7,429,659 1,451,021

EXPENDITURES: Current: Police services Fire services Human services Capital assets maintenance and operations 3,058 Community development and environmental services 143,313 5,983,116 1,460,816 Capital outlay 269,180 Debt service: Principal Interest and fiscal charges

Total expenditures 143,313 6,252,296 1,463,874

REVENUES OVER (UNDER) EXPENDITURES 1,248 1,177,363 (12,853)

OTHER FINANCING SOURCES (USES): Proceeds from sale of capital assets Transfers in Transfers out (1,248) (191,688) (79,596) Total other financing sources (uses) (1,248) (191,688) (79,596)

Net change in fund balances 985,675 (92,449)

FUND BALANCES (DEFICITS): Beginning of year 3,685 7,136,020 1,088,592

End of year $ 3,685 $ 8,121,695 $ 996,143

122 I City of Fremont, California Non-Major Governmental Funds

Special Revenue Funds

Narcotics Justice Traffic Abandoned Asset COPS CUPA Assistance Safety OTS Vehicle Seizure AB3229 Administration Grant

$ $ $ $ $ $ 5,918 57,569 325,277 528,638

6,251 2,423 228 704,128 5,918 57,569 331,528 531,061 704,128 228

5,918 57,569 214,454 347,108 24,518

10,584 44,359 26,097

5,918 57,569 225,038 391,467 26,097 24,518

106,490 139,594 678,031 (24,290)

50,000

50,000 156,490 139,594 678,031 (24,290)

576,461 292,573 35,527

$ $ $ 732,951 $ 432,167 $ 678,031 $ 11,237

(Continued)

CAFR for the Fiscal Year Ended June 30, 2016 I 123 Non-Major Governmental Funds

City of Fremont Combining Statement of Revenues, Expenditures and Changes in Fund Balances Non-Major Governmental Funds, Continued For the fiscal year ended June 30, 2016 (With comparative totals for the fiscal year ended June 30, 2015)

Special Revenue Funds

City Funded Inclusionary Metropolitan Affordable Housing Medical Response Housing Fund In Lieu System REVENUES: Property tax $ $ $ Intergovernmental 32,901 Charges for services 10,806,020 Investment earnings 95,924 907 Other Total revenues 95,924 10,806,020 33,808

EXPENDITURES: Current: Police services Fire services 40,121 Human services Capital assets maintenance and operations Community development and environmental services 97,026 4,973,004 Capital outlay Debt service: Principal Interest and fiscal charges Total expenditures 97,026 4,973,004 40,121

REVENUES OVER (UNDER) EXPENDITURES (1,102) 5,833,016 (6,313)

OTHER FINANCING SOURCES (USES):

Proceeds from sale of capital assets Transfers in 1,260,000 Transfers out Total other financing sources (uses) 1,260,000

Net change in fund balances 1,258,898 5,833,016 (6,313)

FUND BALANCES (DEFICITS): Beginning of year 5,193,075 8,366,621 107,926

End of year $ 6,451,973 $ 14,199,637 $ 101,613

124 I City of Fremont, California Non-Major Governmental Funds

Special Revenue Funds Total Miscellaneous Miscellaneous Non-major Federal State State Maintenance Special Revenue Grants Support Gas Tax District Funds

$ $ $ $ $ 263,801 187,621 4,914,934 6,582,408 193,943 19,759,455 106,077 211,810 704,128 263,801 187,621 5,021,011 193,943 27,257,801

49,212 698,779 145,220 6,250 191,591 169,803 169,803 5,316,287 169,194 5,488,539

12,657,275 69,369 419,589

263,801 176,053 5,316,287 169,194 19,625,576

11,568 (295,276) 24,749 7,632,225

1,310,000 (243,403) (11,568) (16,500) (544,003) (243,403) (11,568) (16,500) 765,997 (243,403) (295,276) 8,249 8,398,222

267,364 11,421,623 461,219 34,950,686

$ 23,961 $ $ 11,126,347 $ 469,468 $ 43,348,908

(Continued)

CAFR for the Fiscal Year Ended June 30, 2016 I 125 Non-Major Governmental Funds

City of Fremont Combining Statement of Revenues, Expenditures and Changes in Fund Balances Non-Major Governmental Funds, Continued For the fiscal year ended June 30, 2016 (With comparative totals for the fiscal year ended June 30, 2015)

Debt Service Funds Total Fire General Fremont Non-major Obligation Financing Debt Service Bonds Authority Funds REVENUES: Property tax $ 3,097,044 $ $ 3,097,044 Intergovernmental Charges for services Investment earnings 25,857 1,453 27,310 Other Total revenues 3,122,901 1,453 3,124,354

EXPENDITURES: Current: Police services Fire services Human services Capital assets maintenance and operations Community development and environmental services Capital outlay Debt service: Principal 1,400,000 4,890,000 6,290,000 Interest and fiscal charges 1,779,512 1,623,249 3,402,761 Total expenditures 3,179,512 6,513,249 9,692,761

REVENUES OVER (UNDER) EXPENDITURES (56,611) (6,511,796) (6,568,407)

OTHER FINANCING SOURCES (USES): Proceeds from sale of capital assets Transfers in 6,498,545 6,498,545 Transfers out Total other financing sources (uses) 6,498,545 6,498,545

Net change in fund balances (56,611) (13,251) (69,862)

FUND BALANCES (DEFICITS): Beginning of year 2,643,062 1,817,196 4,460,258

End of year $ 2,586,451 $ 1,803,945 $ 4,390,396

126 I City of Fremont, California Non-Major Governmental Funds

Capital Project Funds

Transportation :tvliscellaneous Capital Measure B, BB & F Development State Grants Interchange Vehicle Improvement - Grants, Streets, Act Capital Construction Replacement Outside Sources Bike & Pedestrian

$ $ $ $ $ $ 191,476 636,089 802,987 6,905,806 442,777 8,956 41,463 112,504 37,903 4,135,777 191,476 636,089 8,956 41,463 5,494,045 6,943,709

176,458 436,647 823,117 291,637 768,500 4,851,770

116,652 163,124 1,761,497 103,075

176,458 553,299 986,241 2,053,134 871,575 4,851,770

15,018 82,790 (977,285) (2,011,671) 4,622,470 2,091,939

88,986 900,000 1,711,740 (44,256) 1,756,470 900,000 15,018 82,790 (977,285) (255,201) 5,522,470 2,091,939

(15,018) (125,263) 1,385,309 2,708,119 7,541,564 3,044,227

$ $ (42,473) $ 408,024 $ 2,452,918 $ 13,064,034 $ 5,136,166

(Continued)

CAFR for the Fiscal Year Ended June 30, 2016 I 127 Non-Major Governmental Funds

City of Fremont Combining Statement of Revenues, Expenditures and Changes in Fund Balances Non-Major Governmental Funds, Continued For the fiscal year ended June 30, 2016 (With comparative totals for the fiscal year ended June 30, 2015)

Capital Project Funds

Traffic System Prop lB Management HRCSA REVENUES: Property tax $ $ Intergovernmental 28,473 992,625 Charges for services Investment earnings Other Total revenues 28,473 992,625

EXPENDITURES: Current: Police services Fire services Human services Capital assets maintenance and operations 28,473 456,796 Community development and environmental services Capital outlay 569,112 Debt service: Principal Interest and fiscal charges Total expenditures 28,473 1,025,908

REVENUES OVER (UNDER) EXPENDITURES (33,283)

OTHER FINANCING SOURCES (USES):

Proceeds from sale of capital assets Transfers in Transfers out Total other financing sources (uses)

Net change in fund balances (33,283)

FUND BALANCES (DEFICITS): Beginning of year

End of year $ $ (33,283)

128 I City of Fremont, California Non-Major Governmental Funds

Total Non-major Total Non-major Capital Projects Governmental Funds Funds 2016 2015

$ $ 3,097,044 $ 4,583,885 9,557,456 16,139,864 14,684,708 442,777 20,202,232 15,609,122 200,826 439,946 201,654 4,135,777 4,839,905 4,172,166 14,336,836 44,718,991 39,251,535

698,779 855,119 191,591 60,459 169,803 386,167 7,833,398 13,321,937 14,576,512

12,657,275 7,340,946 2,713,460 3,133,049 3,976,151

6,290,000 6,105,000 3,402,761 3,462,639 10,546,858 39,865,195 36,762,993

3,789,978 4,853,796 2,488,542

988,986 988,986 78,059 1,711,740 9,520,285 9,136,698 (44,256) (588,259) (6,810,596) 2,656,470 9,921,012 2,404,161 6,446,448 14,774,808 4,892,703

14,538,938 53,949,882 49,057,179

$ 20,985,386 $ 68,724,690 $ 53,949,882

(Concluded)

CAFR for the Fiscal Year Ended June 30, 2016 I 129 Special Revenue and Debt Service Funds

City of Fremont Budgetary Comparison Schedule Special Revenue and Debt Service Funds For the fiscal year ended June 30, 2016

Special Revenue Funds

HOME Grant Integrated Waste Management

Variance with Variance with Final Final Budget Final Final Budget Budgeted Actual Positive Budgeted Actual Positive Amounts Amounts (Negative) Amounts Amounts (Negative) REVENUES: Property tax $ $ $ $ $ $ Intergovernmental 795,992 144,561 (651,431) 90,000 121,188 31,188 Charges for services 6,802,751 7,308,471 505,720 Invesbnent earnings Other

Total revenues 795,992 144,561 (651,431) 6,892,751 7,429,659 536,908

EXPENDITURES:

Current: Police services Fire services Human services Capital assets maintenance and operations Community development and environmental services 794,744 143,313 651,431 6,428,356 5,983,116 445,240 Capital outlay 269,180 (269,180) Debt service: Principal Interest and fiscal charges Total expendihrres 794,744 143,313 651,431 6,428,356 6,252,296 176,060

REVENUES OVER (UNDER) EXPENDITURES 1,248 1,248 464,395 1,177,363 712,968

OTHER FINANCING SOURCES (USES):

Transfers in Transfers out (1,248) (1,248) (191,688) (191,688)

Total other financing somces (uses) (1,248) (1,248) (191,688) (191,688) Net change in fund balances $ $ $ 272,707 985,675 $ 712,968

FUND BALANCES (DEFICITS): Beginning of year 3,685 7,136,020

End of year $ 3,685 $ 8,121,695

130 I City of Fremont, California Special Revenue and Debt Service Funds

Special Revenue Funds

Urban Runoff Traffic Safety OTS Abandoned Vehicle

Variance with Variance with Variance with Final Final Budget Final Final Budget Final Final Budget Budgeted Actual Positive Budgeted Actual Positive Budgeted Actual Positive Amounts Amounts (Negative) Amounts Amounts (Negative) Amounts Amounts (Negative)

$ $ $ $ $ $ $ $ $ 6,500 5,918 (582) 167,000 57,569 (109,431) 1,433,500 1,451,021 17,521

1,433,500 1,451,021 17,521 6,500 5,918 (582) 167,000 57,569 (109,431)

6,500 5,918 582 167,000 57,569 109,431

3,058 3,058

1,564,380 1,460,816 103,564

1,567,438 1,463,874 103,564 6,500 5,918 582 167,000 57,569 109,431

(133,938) (12,853) 121,085

(79,596) (79,596) (79,596) (79,596)

$ (213,534) (92,449) $ 121,085 $ $ $ $ =====

1,088,592

$ 996,143 $ $

(Continued)

CAFR for the Fiscal Year Ended June 30, 2016 I 131 Special Revenue and Debt Service Funds

City of Fremont Budgetary Comparison Schedule Special Revenue and Debt Service Funds For the fiscal year ended June 30, 2016

Special Revenue Fund

Narcotics Asset Seizure COPS AB3229

Variance with Variance with Final Final Budget Final Final Budget Budgeted Actual Positive Budgeted Actual Positive Amounts Amounts (Negative) Amounts Amounts (Negative) REVENUES: Property tax $ $ $ $ $ $ Intergovernmental 344,710 325,277 (19,433) 355,000 528,638 173,638 Charges for services Invesbnent earnings 6,251 6,251 2,423 2,423 Other

Total revenues 344,710 331,528 (13,182) 355,000 531,061 176,061

EXPENDITURES:

Current: Police services 286,340 214,454 71,886 353,698 347,108 6,590 Fire services Human services Capital assets maintenance and operations Community development and environmental services Capital outlay 10,584 (10,584) 44,359 (44,359) Debt service: Principal Interest and fiscal charges Total expendihrres 286,340 225,038 61,302 353,698 391,467 (37,769)

REVENUES OVER (UNDER) EXPENDITURES 58,370 106,490 48,120 1,302 139,594 138,292

OTHER FINANCING SOURCES (USES):

Transfers in 50,000 50,000 Transfers out

Total other financing somces (uses) 50,000 50,000 Net change in fund balances $ 108,370 156,490 $ 48,120 $ 1,302 139,594 $ 138,292

FUND BALANCES (DEFICITS): Beginning of year 576,461 292,573

End of year $ 732,951 $ 432,167

132 I City of Fremont, California Special Revenue and Debt Service Funds

Special Revenue Fund

CUPA Administration Justice Assistance Grant City Funded Affordable Housing

Variance with Variance with Variance with Final Final Budget Final Final Budget Final Final Budget Budgeted Actual Positive Budgeted Actual Positive Budgeted Actual Positive Amounts Amounts (Negative) Amounts Amounts (Negative) Amounts Amounts (Negative)

$ $ $ $ $ $ $ $ $ 30,000 (30,000)

228 228 18,000 95,924 77,924 704,128 704,128 704,128 704,128 30,000 228 (29,772) 18,000 95,924 77,924

30,568 24,518 6,050

160,500 97,026 63,474 26,097 (26,097)

26,097 (26,097) 30,568 24,518 6,050 160,500 97,026 63,474

678,031 678,031 (568) (24,290) (23,722) (142,500) (1,102) 141,398

1,260,000 1,260,000

1,260,000 1,260,000 $ 678,031 $ 678,031 $ (568) (24,290) $ (23,722) $ 1,117,500 1,258,898 $ 141,398

35,527 5,193,075

$ 678,031 $ 11,237 $ 6,451,973

(Continued)

CAFR for the Fiscal Year Ended June 30, 2016 I 133 Special Revenue and Debt Service Funds

City of Fremont Budgetary Comparison Schedule Special Revenue and Debt Service Funds For the fiscal year ended June 30, 2016

Special Revenue Funds

lnclusionary Housing In Lieu Metropolitan Medical Response System

Variance with Variance with Final Final Budget Final Final Budget Budgeted Actual Positive Budgeted Actual Positive Amounts Amounts (Negative) Amounts Amounts (Negative) REVENUES: Property tax $ $ $ $ $ $ Intergovernmental 60,000 32,901 (27,099) Charges for services 1,500,000 10,806,020 9,306,020 Invesbnent earnings 907 907 Other

Total revenues 1,500,000 10,806,020 9,306,020 60,000 33,808 (26,192)

EXPENDITURES:

Current: Police services Fire services 129,526 40,121 89,405 Human services Capital assets maintenance and operations Community development and environmental services 5,088,400 4,973,004 115,396 Capital outlay Debt service: Principal Interest and fiscal charges Total expendihrres 5,088,400 4,973,004 115,396 129,526 40,121 89,405

REVENUES OVER (UNDER) EXPENDITURES (3,588,400) 5,833,016 9,421,416 (69,526) (6,313) 63,213

OTHER FINANCING SOURCES (USES):

Transfers in Transfers out

Total other financing somces (uses) Net change in fund balances $ (3,588,400) 5,833,016 $ 9,421,416 $ (69,526) (6,313) $ 63,213

FUND BALANCES (DEFICITS): Beginning of year 8,366,621 107,926

End of year $ 14,199,637 $ 101,613

134 I City of Fremont, California Special Revenue and Debt Service Funds

Special Revenue Fund

Miscellaneous Federal Grants Ivliscellaneous State Grants State Gas Tax

Variance with Variance with Variance with Final Final Budget Final Final Budget Final Final Budget Budgeted Actual Positive Budgeted Actual Positive Budgeted Actual Positive Amounts Amounts (Negative) Amounts Amounts (Negative) Amounts Amounts (Negative)

$ $ $ $ $ $ $ $ $ 207,448 263,801 56,353 208,371 187,621 (20,750) 4,914,934 4,914,934

106,077 106,077

207,448 263,801 56,353 208,371 187,621 (20,750) 5,021,011 5,021,011

55,000 49,212 5,788 152,448 145,220 7,228 27,000 6,250 20,750 169,803 169,803 5,316,287 5,316,287

69,369 (69,369)

207,448 263,801 (56,353) 196,803 176,053 20,750 5,316,287 5,316,287

11,568 11,568 (295,276) (295,276)

(18,671) (243,403) (224,732) (11,568) (11,568) (18,671) (243,403) (224,732) (11,568) (11,568)

$ (18,671) (243,403) $ (224,732) =$==== $ $ (295,276) (295,276) =$====

267,364 11,421,623

$ 23,961 $ $ 11,126,347

(Continued)

CAFR for the Fiscal Year Ended June 30, 2016 I 135 Special Revenue and Debt Service Funds

City of Fremont Budgetary Comparison Schedule Special Revenue and Debt Service Funds For the fiscal year ended June 30, 2016

Special Revenue Funds Debt Service Funds

Maintenance District Fire General Obligation Bonds

Variance with Variance with Final Final Budget Final Final Budget Budgeted Actual Positive Budgeted Actual Positive Amounts Amounts (Negative) Amounts Amounts (Negative) REVENUES: Property tax $ $ $ $ 3,097,044 $ 3,097,044 $ Intergovernmental Charges for services 193,943 193,943 Invesbnent earnings 25,857 25,857 Other

Total revenues 193,943 193,943 3,097,044 3,122,901 25,857

EXPENDITURES:

Current: Police services Fire services Human services Capital assets maintenance and operations 169,194 169,194 Community development and environmental services Capital outlay Debt service: Principal 1,400,000 1,400,000 Interest and fiscal charges 1,779,512 1,779,512 Total expendihrres 169,194 169,194 3,179,512 3,179,512

REVENUES OVER (UNDER) EXPENDITURES 24,749 24,749 (82,468) (56,611) 25,857

OTHER FINANCING SOURCES (USES):

Transfers in Transfers out (16,500) (16,500)

Total other financing sOLUces (uses) (16,500) (16,500) Net change in fund balances $ 8,249 8,249 $ $ (82,468) (56,611) $ 25,857

FUND BALANCES (DEFICITS): Beginning of year 461,219 2,643,062

End of year $ 469,468 $ 2,586,451

136 I City of Fremont, California Special Revenue and Debt Service Funds

Debt Service Funds

Fremont Financing Authority

Variance with Final Final Budget Budgeted Actual Positive Amounts Amounts (Negative)

$ $ $

1,453 1,453

1,453 1,453

4,890,000 4,890,000 2,654,855 1,623,249 1,031,606 7,544,855 6,513,249 1,031,606

(7,544,855) (6,511,796) 1,033,059

7,544,855 6,498,545 (1,046,310)

7,544,855 6,498,545 (1,046,310) $ (13,251) $ (13,251)

1,817,196

$ 1,803,945

(Concluded)

CAFR for the Fiscal Year Ended June 30, 2016 I 137 Special Revenue and Debt Service Funds

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138 I City of Fremont, California Internal Service Funds

Internal Service Funds

CAFR for the Fiscal Year Ended June 30, 2016 I 139 Internal Service Funds

City of Fremont Combining Statement of Net Position Internal Service Funds June 30, 2016 (With comparative totals for June 30, 2015)

Fire Totals Risk Information Capital Equipment Managentent Technology Replacement 2016 2015

ASSETS

Current assets: Cash and invesbnents held by City $ 20,428,719 $ 4,718,599 $ 1,083,681 $ 26,230,999 $ 23,617,827 Other receivables 84,018 84,018 116,024 Prepaid assets 24,669 192,627 217,296 Total current assets 20,428,719 4,827,286 1,276,308 26,532,313 23,733,851

Noncurrent assets: Depreciable assets 19,000 8,787,385 8,806,385 9,060,585 Less accrunulated depreciation (6,251,587) (6,251,587) (6,420,842) Total noncurrent assets 19,000 2,535,798 2,554,798 2,639,743

Total assets 20,447,719 7,363,084 1,276,308 29,087,111 26,373,594

DEFERRED OUTFLOWS OF RESOURCES Deferred outflows of resources related to pensions 89,057 605,393 694,450 573,309

LIABILITIES

Current liabilities: Accounts payable 7,351 147,381 154,732 643,253 Salaries and wages payable 91,716 148,461 240,177 172,970 Claims payable 6,038,000 6,038,000 5,630,000 Total current liabilities 6,137,067 295,842 6,432,909 6,446,223

Noncurrent liabilities: Claims payable 13,145,000 13,145,000 11,946,000 Net pension liability 854,299 5,291,197 6,145,496 5,868,881 Total noncurrent liabilities 13,999,299 5,291,197 19,290,496 17,814,881

Total liabilities 20,136,366 5,587,039 25,723,405 24,261,104

DEFERRED INFLOWS OF RESOURCES Deferred inflows of resources related to pensions 90,858 502,296 593,154 1,183,336

NET POSITION

Net invesbnentin capital assets 19,000 2,535,798 2,554,798 2,639,743 Unrestricted 290,552 (656,656) 1,276,308 910,204 (1,137,280)

Total net position $ 309,552 $ 1,879,142 $ 1,276,308 $ 3,465,002 $ 1,502,463

140 I City of Fremont, California Internal Service Funds

City of Fremont Combining Statement of Revenues, Expenses and Changes in Net Position Internal Service Funds For the fiscal year ended June 30, 2016 (With comparative totals for the fiscal year ended June 30, 2015)

Fire Totals Risk Infonnation Capital Equipment Management Technology Replacement 2016 2015

OPERATING REVENUES

Charges for services $ 7,000,814 $ 6,918,144 $ 1,400,000 $ 15,318,958 $ 13,262,099 Other (488) 13,572 13,084 51,221

Total operating revenues 7,000,326 6,931,716 1,400,000 15,332,042 13,313,320

OPERATING EXPENSES

Salaries and wages 486,308 3,522,088 4,008,396 3,861,676 Insurance premiums 1,454,813 1,454,813 1,331,409 Provision for clairrt losses 5,106,255 5,106,255 4,314,130 Claims administration 269,893 269,893 265,588 Materials and supplies 11,307 2,285,511 142,760 2,439,578 2,214,430 Depreciation 432,132 432,132 476,027 Other 56,616 56,616 56,526

Total operating expenses 7,328,576 6,296,347 142,760 13,767,683 12,519,786

OPERATING INCOME (328,250) 635,369 1,257,240 1,564,359 793,534

NONOPERATING REVENUES

Invesbnent income 307,819 71,293 19,068 398,180 138,991

CHANGE IN NET POSIDON (20,431) 706,662 1,276,308 1,962,539 932,525

Net position - beginning of year, as previously reported 329,983 1,172,480 1,502,463 7,157,650 Restatement for implementation ofGASB 68 (6,587,712) Net position beginning of year, as restated 329,983 1,172,480 1,502,463 569,938

Net position - ending $ 309,552 $ 1,879,142 $ 1,276,308 $ 3,465,002 $ 1,502,463

CAFR for the Fiscal Year Ended June 30, 2016 I 141 Internal Service Funds

City of Fremont Combining Statement of Cash Flows Internal Service Funds For the fiscal year ended June 30, 2016 (With comparative totals for the fiscal year ended June 30, 2015)

Fire Totals Risk Informa ti.on Capital Equipment Management Technology Replacement 2016 2015 CASH FLOWS FROM OPERATING ACTIVITIES

Receipts from users 7,004,692 6,921,603 1,207,373 15,133,668 13,249,746 Other revenue (488) 13,572 13,084 51,221 Less: Payments to suppliers (1,871,811) (2,638,234) (142,760) (4,652,805) (3,523,012) Payments for employee services (501,058) (3,874,839) (4,375,897) (3,943,582) Payments for claims paid (3,499,255) (3,499,255) (4,759,130) Payments to others (56,616) (56,616) (56,526) Net cash provided by operating activities 1,132,080 365,486 1,064,613 2,562,179 1,018,717

CASH FLOWS FROM CAPITAL FINANCING ACTIVITIES

Acquisition of capital assets (347,187) (347,187) (370,425) Sale of land held for resale 2,821,430 Net cash used in capital and related financing activities (347,187) (347,187) 2,451,005

CASH FLOWS FROM INVESTING ACTIVITIES Interest received on cash and investments 307,819 71,293 19,068 398,180 138,991

Net change in cash and cash equivalents 1,439,899 89,592 1,083,681 2,613,172 3,608,713

CASH AND CASH EQUIVALENTS

Beginning of year 18,988,820 4,629,007 23,617,827 20,009,114 End of year 20,428,719 4,718,599 1,083,681 26,230,999 23,617,827

RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED BY OPERATING ACTIVITIES

Operating income (loss) (328,250) 635,369 1,257,240 1,564,359 793,534 Adjustments to reconcile operating income (loss) to net cash provided by operating activities: Deprecia ti.on 432,132 432,132 476,027 Changes in operating assets and liabilities: Otlterreceivables 3,878 28,128 32,006 (12,353) Prepaid assets (24,669) (192,627) (217,296) Accounts payable (135,798) (352,723) (488,521) 288,415 Salaries and wages payable 40,997 26,210 67,207 26,898 Claims payable 1,607,000 1,607,000 (445,000) Deferred outflow resources - pension plan (8,369) (112,772) (121,141) (573,309) Deferred inflow resources - pension plan (75,686) (514,496) (590,182) 1,183,336 Net pension liability 28,308 248,307 276,615 (718,831)

Net cash provided by operating activities 1,132,080 365,486 1,064,613 2,562,179 1,018,717

142 I City of Fremont, California Agency Funds

Agency Funds

CAFR for the Fiscal Year Ended June 30, 2016 I 143 Agency Funds

Fiduciary Fund Financial Statements

Fiduciary Funds are used to account for assets held by the City on behalf of others as their agent. Specific fiduciary funds are as follows:

Agency Funds

Local Improvement Districts - Special assessment bonds were issued by local improvement districts under various public improvement acts of the State of California and are secured by liens against properties deemed to have been benefited by the improvements for which the bonds were issued. The City acts as an agent in collecting the assessments from the property owners, forwarding the collections to bondholders, and initiating foreclosure proceedings when necessary. This fund also accounts for the accumulation of City of Fremont Community Facilities District No. 1 (CFD 1) facilities and services special tax revenue, payment of principal and interest for the outstanding CFD 1 special tax bonds, and payment for maintenance of the public improvements at Pacific Commons financed with the special tax bonds.

Performance Bonds, Deposits and Confiscated Assets - This fund accounts for bonds and deposits received in conjunction with construction activity within the City, assets confiscated by the police and other deposits, held by the City in a fiduciary capacity.

Southern Alameda County GIS - This fund accounts for monies collected from participating agencies for the administration of the program. The City of Fremont is the administrator of the Geographic Information System which serves the participating agencies. The program operates under a JP A that was approved by the City of Fremont, City of Newark, Union Sanitary District and Alameda County Water District.

144 I City of Fremont, California Agency Funds

City of Fremont Combining Statement of Assets and Liabilities Agency Funds June 30, 2016 (With comparative totals for June 30, 2015)

Performance Bonds, Southern Local Deposits and Alameda Improvement Confiscated County Total Districts Assets GIS 2016 2015

All Agency Funds

Assets: Cash and investments held by City $ 10,489,995 $ 2,542,774 $ $13,032,769 $12,525,586 Restricted cash and investments held by fiscal agent 5,853,878 2,273,163 8,127,041 7,847,201 Land held for resale 678,979 678,979 13,592,893 Accounts receivable 13,647 13,647 22,688 Other receivables 170,574 170,574 63,469

Total assets $ 16,514,447 $ 5,494,916 $ 13,647 $ 22,023,010 $ 34,051,837

Liabilities: Accounts payable $ 37,374 37,374 39,844 Due to other governments 678,979 678,979 13,592,893 Cash overdraft 1,480 1,480 10,544 Deposits 16,514,447 4,778,563 12,167 21,305,177 20,408,556

Total liabilities $ 16,514,447 $ 5,494,916 $ 13,647 $ 22,023,010 $ 34,051,837

CAFR for the Fiscal Year Ended June 30, 2016 I 145 Agency Funds

City of Fremont Combining Statement of Changes in Assets and Liabilities Agency Funds For the fiscal year ended June 30, 2016

Balance Balance June 30, 2015 Additions Deductions June 30, 2016 local Improvement Districts

Assets: Cash and invesbnents held by City $ 10,053,725 $ 9,146,336 $ (8,710,066) $ 10,489,995 Restricted cash and invesbnents held by fiscal agent 7,608,918 72,518,487 (74,273,527) 5,853,878 Other receivables 63,469 664,288 (557,183) 170,574 Total assets $ 17,726,112 $ 82,329,111 $ (83,540,776) $ 16,514,447

liabilities: Deposits $ 17,726,112 $ 100,951,872 $ (102,163,537) $ 16,514,447

Performance Bonds, Deposits and Confiscated Assets

Assets: Cash and invesbnents held by City $ 2,471,861 $ 6,556,525 $ (6,485,612) $ 2,542,774 Restricted cash and invesbnents held by fiscal agent 238,283 2,034,880 2,273,163 Land held for resale 13,592,893 (12,913,914) 678,979 Total assets $ 16,303,037 $ 8,591,405 $ (19,399,526) $ 5,494,916 liabilities: Accounts payable $ 39,844 $ 5,706,739 $ (5,709,209) $ 37,374 Due to other governentents 13,592,893 (12,913,914) 678,979 Deposits 2,670,300 4,055,984 (1,947,721) 4,778,563 Total liabilities $ 16,303,037 $ 9,762,723 $ (20,570,844) $ 5,494,916

Southern Alameda Coun!y GIS Assets: Cash and invesbnents held by City $ $ 54,287 $ (54,287) $ Accounts receivable 22,688 43,743 (52,784) 13,647 Total assets $ 22,688 $ 98,030 $ (107,071) $ 13,647 liabilities: Cash overdraft $ 10,544 $ 1,480 $ (10,544) $ 1,480 Deposits 12,144 23 12,167 Total liabilities $ 22,688 $ 1,503 $ (10,544) $ 13,647

Total Agency Funds

Assets: Cash and invesbnents held by City $ 12,525,586 $ 15,757,148 $ (15,249,965) $ 13,032,769 Restricted cash and invesbnents held by fiscal agent 7,847,201 74,553,367 (74,273,527) 8,127,041 land held for resale 13,592,893 (12,913,914) 678,979 Accounts receivable 22,688 43,743 (52,784) 13,647 Other receivables 63,469 664,288 (557,183) 170,574

Total assets $ 34,051,837 $ 91,018,546 $ (103,047,373) $ 22,023,010

liabilities: Accounts payable $ 39,844 $ 5,706,739 $ (5,709,209) $ 37,374 Due to other goveTI\lllents 13,592,893 (12,913,914) 678,979 Cash overdrafts 10,544 1,480 (10,544) 1,480 Deposits 20,408,556 105,007,879 (104,111,258) 21,305,177

Total liabilities $ 34,051,837 $ 110,716,098 $ (122,744,925) $ 22,023,010

146 I City of Fremont, California Human Services Fund

Human Services Fund

CAFR for the Fiscal Year Ended June 30, 2016 I 147 Human Services Fund

The Human Services Fund is a special revenue fund used to account for revenues from federal, state, and local sources that, by law or administrative action, are designated to sustain the City's social service infrastructure to promote a healthy and safe environment for families, the elderly, and youth. Services and programs include self-sufficiency, counseling, and housing assistance. The individual sub-funds included in the Human Services Fund are as follows:

Community Development Block Grant- This fund accounts for grants from the U.S. Department of Housing and Urban Development for the primary purpose of developing viable urban communities.

SHP Grant - This fund accounts for funds from the Department of Housing and Urban Development to implement the Homeless Outreach for People Empowerment project.

Older Americans Grant - This fund accounts for federal and local grant monies received under the Older Americans Act. Case management services are provided to enable functionally impaired older persons to age in place.

Tri-City Elders & Eden Housing - This fund accounts for the Tri-City Elders Coalition which works to identify and effectively meet the needs of seniors to enable them to remain independent in their own homes and communities, as well as the Eden Housing fund, which supports a program coordinator providing services at three senior housing complexes in Fremont.

Senior Center - This fund accounts for revenues and expenditures for programs conducted by the Senior Citizens Center.

Multipurpose Senior Services Program - This fund accounts for Federal monies received via the State Department of Aging to provide services aimed at allowing frail elders to remain in their homes.

Area Agency on Aging - This fund accounts for Federal and local monies received via the Alameda County Area Agency on Aging (AAA) to provide services aimed at allowing frail elders to remain in their homes.

Alameda Behavioral Health Care - This fund accounts for the monies received from the Alameda County Behavioral Health Care Services Department to support a multi-disciplinary team approach to family support at the Family Resource Center, as well as a Senior Mobile Mental Health team.

Family Resource Center - This fund accounts for monies received from leases and service contracts at the Family Resource Center. This revenue is used for maintenance, operating and program costs of the center.

Family Resource Center Corporation - This fund accounts for the operations of a 50l(c)(3) non­ profit supporting organization for the Fremont Family Resource Center, organized to accept grants and donations from organizations and foundations.

Youth Service Center - This fund accounts for Youth Service Center grants received from the State Council for Criminal Justice via the Alameda County Probation Department.

148 I City of Fremont, California Human Services Fund

Every Child Counts Grant - This fund accounts for monies allocated through Alameda County from State Proposition 10 (tobacco taxes) to support early childhood programs in Youth and Family Services.

Measure B & BB Para-Transit - Under Measure B and Measure BB, the City receives the proceeds of an additional half-cent sales tax for use on transportation-related expenditures. This fund accounts for the portion of these monies used to partially fund the City's paratransit program.

Medi-Cal Administrative Activities - This fund accounts for Federal Medi-Cal reimbursement earned by the Human Services Department for participation in the Medi-Cal Administrative activities program, via the Alameda County Health Care Services Agency.

Targeted Case Management - This fund accounts for Federal Medi-Cal reimbursement earned by the Human Services Department for participation the Targeted Case Management program via the Alameda County Health Care Services Agency.

Community Donations - This fund accounts for donations that support Human Services Department programs, awarded to the department by private contributors.

Human Services Operating- This fund accounts for the Transfer In of General Fund support for the administrative staff and operating expenditures necessary to administer the above funds; as well as service fees from Fremont Unified School District.

CAFR for the Fiscal Year Ended June 30, 2016 I 149 Human Services Fund

City of Fremont Supplemental Information Summary of Human Services Fund Balance Sheet June 30, 2016 (With comparative totals for June 30, 2015)

Community Development SHP Older Americans Block Grant Grant Grant

ASSETS Cash and investments held by City $ $ $ Receivables: Due from other goveilllllental agencies 418,922 86,398 10,526 Housing loans receivable, net 1,447,990 Accounts receivable

Total assets $ 1,866,912 $ 86,398 $ 10,526

LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES

Liabilities: Accounts payable $ 154,281 $ 41,863 $ 273 Salaries and wages payable 11,696 Due to other funds 252,945 44,535 10,253

Total liabilities 418,922 86,398 10,526

Deferred inflows of resources-unavailable revenue 1,447,990

Fund Balances: Restricted for social service prograins Committed for social service programs

Total fund balances

Total liabilities, deferred inflows of resources, and fund balances $ 1,866,912 $ 86,398 $ 10,526

150 I City of Fremont, California Human Services Fund

Tri-City Multipurpose Alameda Family Family Elders & Senior Senior Services Area Agency Behavioral Resource Resource Center Eden Housing Center Prograin on Aging Health Care Center Corporation

$ 28,998 $ 382,871 $ $ $ $ 2,899,513 $ 166,035

35,748 155,126 20,651 199,376 257,803 6,566

13,589

$ 64,746 $ 382,871 $ 155,126 $ 20,651 $ 199,376 $ 3,157,316 $ 186,190

$ 1,715 $ 10,255 $ 5,352 $ 921 $ 577 $ 21,752 $ 871 25,589 64,761 149,774 19,730 198,799

1,715 35,844 155,126 20,651 199,376 86,513 871

63,031 3,070,803 185,319 347,027

63,031 347,027 3,070,803 185,319

$ 64,746 $ 382,871 $ 155,126 $ 20,651 $ 199,376 $ 3,157,316 $ 186,190 ===== (Continued)

CAFR for the Fiscal Year Ended June 30, 2016 I 151 Human Services Fund

City of Fremont Supplemental Information Summary of Human Services Fund Balance Sheet, continued June 30, 2016 (With comparative totals for June 30, 2015)

Youth Every Service Child Counts Measure B & BB Center Grant Para-Transit

ASSETS Cash and investments held by City $ $ 333,699 $ 638,716 Receivables: Due from other goveilllllental agencies 66,775 264,592 473,698 Housing loans receivable, net Accounts receivable

Total assets $ 66,775 $ 598,291 $ 1,112,414

LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES

Liabilities: Accounts payable $ $ 273 $ 173,947 Salaries and wages payable 1,147 1,051 Due to other funds 66,775

Total liabilities 66,775 1,420 174,998

Deferred inflows of resources-unavailable revenue

Fund Balances: Restricted for social service prograins 596,871 937,416 Committed for social service programs

Total fund balances 596,871 937,416

Total liabilities, deferred inflows of resources, and fund balances $ 66,775 $ 598,291 $ 1,112,414

152 I City of Fremont, California Human Services Fund

Medi-Cal Targeted Total Summary of Administrative Case Community Human Services Human Services Fund Activities Management Donations Operating 2016 2015

$ 296,608 $ 845,296 $ 236,544 $ 1,096,236 $ 6,924,516 $ 5,882,252

291,448 2,287,629 3,771,354 1,447,990 1,396,484 13,589 13,316

$ 296,608 $ 845,296 $ 236,544 $ 1,387,684 $ 10,673,724 $ 11,063,406

$ $ 5,908 $ 1,854 $ 57,636 $ 477,478 $ 532,172 260,761 365,005 297,712 742,811 1,701,531

5,908 1,854 318,397 1,585,294 2,531,415

263,000 1,710,990 1,494,615

296,608 839,388 234,690 6,224,126 5,593,017 806,287 1,153,314 1,444,359

296,608 839,388 234,690 806,287 7,377,440 7,037,376

$ 296,608 $ 845,296 $ 236,544 $ 1,387,684 $ 10,673,724 $ 11,063,406

(Concluded)

CAFR for the Fiscal Year Ended June 30, 2016 I 153 Human Services Fund

City of Fremont Supplemental Information Summary of Human Services Fund Revenues, Expenditures, and Changes in Fund Balance For the fiscal year ended June 30, 2016 (With comparative totals for the fiscal year ended June 30, 2015)

Community Tri-City Development SHP Older Americans Elders & Block Grant Grant Grant Eden Housing REVENUES: Intergovernmental $ 1,139,970 $ 256,820 $ 62,982 $ 6,217 Charges for services 19,588 Investment emnings 855 Other 113,608 172,171 Total revenues 1,253,578 256,820 62,982 198,831

EXPENDITURES: Current: Human services 242,511 62,982 224,893 Community development and environmental services 990,893 255,500 Debt service: Interest and fiscal charges Total expenditures 1,233,404 255,500 62,982 224,893

REVENUES OVER (UNDER) EXPENDITURES 20,174 1,320 (26,062)

OTHER FINANCING SOURCES (USES): Transfers in Transfers out (20,174) (1,320) (7,752) Total other financing sources (uses) (20,174) (1,320) (7,752)

Net change in fund balances (33,814)

FUND BALANCES: Beginning of year 96,845

End of year $ $ $ $ 63,031

154 I City of Fremont, California Human Services Fund

Multipurpose Alameda Family Family Senior Senior Services Area Agency Behavioral Resource Resource Center Center Program on Aging Health Care Center Corporation

$ $ 223,869 $ 156,454 $ 717,683 $ 182,096 $ 189,752 113,457 1,060,422 46,196 1,785 131,613 272,342 138,504 321,365 223,869 156,454 831,140 1,561,056 140,289

810,962 223,869 156,454 802,269 901,526 171,856

47,366 810,962 223,869 156,454 802,269 948,892 171,856

(489,597) 28,871 612,164 (31,567)

455,906 109,565 (10,356) (52,042) (852,049) (15,650) 445,550 (52,042) (742,484) (15,650)

(44,047) (23,171) (130,320) (47,217)

391,074 23,171 3,201,123 232,536 $ 347,027 $ $ $ $ 3,070,803 $ 185,319

(Continued)

CAFR for the Fiscal Year Ended June 30, 2016 I 155 Human Services Fund

City of Fremont Supplemental Information, continued Summary of Human Services Fund Revenues, Expenditures, and Changes in Fund Balance For the fiscal year ended June 30, 2016 (With comparative totals for the fiscal year ended June 30, 2015)

Youth Every Medi-Cal Service Child Counts Measure B & BB Administrative Center Grant Para-Transit Activities REVENUES: Intergovernmental $ 410,264 $ 1,176,559 $ 1,944,483 $ 378,610 Charges for services 70,555 Investment emnings 5,757 1,501 Other Total revenues 410,264 1,176,559 2,020,795 380,111

EXPENDITURES: Current: Human services 410,264 1,033,773 1,445,519 305,463 Community development and environmental services Debt service: Interest and fiscal charges Total expenditures 410,264 1,033,773 1,445,519 305,463

REVENUES OVER (UNDER) EXPENDITURES 142,786 575,276 74,648

OTHER FINANCING SOURCES (USES): Transfers in 243,404 Transfers out (72,071) (80,037) (21,444) Total other financing sources (uses) (72,071) (80,037) 221,960

Net change in fund balances 70,715 495,239 296,608

FUND BALANCES: Beginning of year 526,156 442,177

End of year $ $ 596,871 $ 937,416 $ 296,608

156 I City of Fremont, California Human Services Fund

Targeted Fund Revenues, Expenditures, Case Community Human Services Intrafund and Changes in Fund Balances Management Donations Operating ehmination 2016 2015

$ 435,933 $ 20,450 $ 16,780 $ $ 7,129,170 $ 5,455,666 220,816 1,674,590 1,644,125 16,554 72,648 33,017 95,425 3,544 927,207 1,061,896 435,933 115,875 257,694 9,803,615 8,194,704

449,737 83,077 3,893,855 11,219,010 10,137,075

1,246,393 1,019,664

47,366 50,568 449,737 83,077 3,893,855 12,512,769 11,207,307

(13,804) 32,798 (3,636,161) (2,709,154) (3,012,603)

15,647 3,656,527 (109,565) 4,371,484 3,983,324 (31,571) (267,365) 109,565 (1,322,266) (1,262,942) (31,571) 15,647 3,389,162 3,049,218 2,720,382

(45,375) 48,445 (246,999) 340,064 (292,221)

884,763 186,245 1,053,286 7,037,376 7,329,597 $ 839,388 $ 234,690 $ 806,287 $ $ 7,377,440 $ 7,037,376

(Concluded)

CAFR for the Fiscal Year Ended June 30, 2016 I 157 Human Services Fund

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158 I City of Fremont, California This part of the City of Fremont's comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the City's overall financial health.

Contents

Financial Trends 160 These schedules contain trend information to help the reader understand how the City's financial performance and fiscal well-being have changed over time.

Revenue Capacity 168 These schedules contain information to help the reader assess the factors affecting the City's ability to generate property tax.

Debt Capacity 172 These schedules present information to help the reader assess the affordability of the City's current levels of outstanding debt and the City's ability to issue additional debt in the future.

Demographic and Economic Information 176 These schedules offer demographic and economic indicators to help the reader understand the environment within which the City's financial activities take place and to help make comparisons over time and with other governments.

Operating Information 180 These schedules contain information about the City's operations and resources to help the reader understand how the City's financial information relates to the services the City provides and the activities it performs.

Sources: unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the relevant year.

CAFR for the Fiscal Year Ended June 30, 2016 I 159 Statistical Section

City of Fremont Net Position by Component Last Ten Fiscal Years accrual basis of accounting (Unaudited)

1 2006/07 2007/08 2008/09 2009/10' ' 2010/ll Govetnmental activities Net investment in capital assets $ 507,801,920 $ 597,016,241 $ 617,287,566 $ 682,627,226 $ 685,667,798 Restricted 253,733,287 262,457,732 258,314,734 194,716,786 204,033,227 Unrestricted 51,665,700 43,467,426 39,138,468 42,803,743 38,008,379 Total primary government net position $ 813,200,907 $ 902,941,399 $ 914,740,768 $ 920,147,755 $ 927,709,404

Notes: (1) All components of net position restated for prior period ajdustment in FY 2010/ 11 to reflect allowance for uncollectible affordable housing loan interest accruals. (2) Unrestricted net position restated for implementation of GASE Statment No. 65 in FY 2013/14 to eliminate items previously reported as assets. (3) The City implemented GASE Statement No. 68 in FY 2014/15 and unrestricted net position includes the impact of pension balances.

160 I City of Fremont, California Statistical Section

Schedule I

3 3 2011/12 2012/13"' 2013/14 2014115( ) 2015/16' '

$ 691,660,486 $ 705,897,097 $ 711,439,311 $ 727,727,677 $ 734,700,673 117,039,150 127,702,933 128,637,828 137,108,141 149,630,295 59,650,042 52,010,409 56,054,426 (230,307,996) (190,955,946) $ 868,349,678 $ 885,610,439 $ 896,131,565 $ 634,527,822 $ 693,375,022

CAFR for the Fiscal Year Ended June 30, 2016 I 161 Statistical Section

City of Fremont Changes in Net Position Last Ten Fiscal Years accrual basis of accounting (Unaudited)

Expenses Govenunental activities: 2006/07 2007/08 2008/09 2009/lO(l) 2010/11 General government $ 13,008,021 $ 13,070,910 $ 13,767,479 $ 11,430,814 $ 11,971,463 Polices ervices 50,900,709 54,340,131 55,686,039 55,616,399 54,925,765 Fire services 28,586,741 31,949,301 34,614,856 33,959,301 34,482,857 Hrunan services 7,023,486 8,570,232 8,543,626 8,939,110 8,908,446 Capital assets maintenance and operations 51,922,938 45,347,610 38,893,562 46,719,842 42,075,801 Recreation and leisure services 5,746,712 6,248,438 6,929,936 6,868,067 6,731,068 Community development and envirorunental services 35,676,597 39,566,083 42,224,384 52,910,594 45,447,180 Intergovernmental 12,740,670 Interest on debt 9,046,177 9,884,311 9,616,078 4,284,166 6,373,866 Total primary government ex pens es 201,911,381 208,977,016 223,016,630 220,728,293 210,916,446 Program Revenues Governmental activities Charges for services: General government 365,018 1,489,409 1,686,609 916,917 1,000,218 Police services 5,151,589 4,863,088 5,202,320 4,386,919 4,200,213 Fire services 2,633,354 2,707,187 2,810,650 2,909,491 2,819,447 Human services 1,938,551 1,775,799 2,069,671 1,864,397 1,563,341 Capital assets maintenance and operations 1,727,489 1,731,401 1,759,999 2,051,575 2,901,266 Recreation and leisure services 3,844,673 4,028,541 4,604,871 5,480,873 5,540,566 Community development and envirorunental services 18,364,336 16,404,617 14,598,875 15,953,963 12,755,944 Operating grants and contributions 28,035,029 25,380,774 22,954,564 22,854,182 20,877,645 Capital grants and contributions 11,077,269 42,217,560 14,611,426 15,359,351 7,492,536 Total primary government program revenues 73,137,308 100,598,376 70,298,985 71,777,668 59,151,176 Net (Expense)/Revenue Total primary government net expense (128,774,073) (108,378,640) (152,717,645) (148,950,625) (151,765,270) General Revenues and Other Changes in Net Position Governmental activities: Taxes Property tax 90,038,824 98,144,859 103,503,472 102,848,091 100,080,165 Sales tax 34,190,785 35,583,842 31,631,408 26,769,511 30,089,204 Business taxes 6,738,310 7,508,481 7,009,869 7,106,402 6,820,327 Transient occupancy tax 2,885,388 3,181,302 2,864,442 2,866,987 3,475,913 Property transfer tax 1,504,708 1,092,279 840,065 975,982 1,031,249 Franchise fees 7,902,406 7,953,642 8,328,847 7,928,716 8,215,061 lnvesbnent earnings(loss) 13,758,948 17,425,422 8,981,569 6,358,774 4,296,980 Gain on sale of capital assets J\iliscellaneous 7,058,915 4,340,803 4,257,342 9,027,871 5,318,020 Total primary government general revenues and other changes in net position 164,078,284 175,230,630 167,417,014 163,882,334 159,326,919 Pollution remediation obligation (2,900,000) 475,000 Extraordinary loss Total primary government change in net position $ 35,304,211 $ 66,851,990 $ 11,799,369 $ 15,406,709 $ 7,561,649

Notes: (1) lnvesbnentearnings restated for prior period ajdusbnentin FY 2010/11 to reflect allowance foruncollectible affordable housing loan interest accruals. (2) Interest on debt expense restated for implementation of GASE StabnentNo. 65 in FY 2013/14 to eliminate items previously reported as assets. (3) In FY 2015/16, vehicle in-lieu revenue is included in miscellaneous revenue and impact fee revenue is included in capital grants and contributions. All prior years were restated to reflect this change.

162 I City of Fremont, California Statistical Section

Schedule 2

3 2011/12 2012/13(2) 2013/14 2014/15 2015/16( ) $ 10,747,362 $ 12,306,781 $ 12,963,908 $ 13,900,314 $ 13,604,679 54,904,248 56,697,425 60,187,955 62,265,880 64,837,566 35,276,141 35,696,189 37,797,969 38,969,266 42,310,730 9,187,754 9,461,291 9,973,326 10,418,215 10,619,068 56,293,833 48,651,872 55,110,254 57,971,103 67,776,490 7,240,833 7,797,737 8,428,819 8,397,409 8,186,587

18,982,320 16,868,885 21,263,989 20,092,103 23,600,633 1,990,040 6,101,394 5,107,813 4,839,848 3,896,781 3,828,360 198,733,885 192,587,993 210,566,068 217,901,111 234,764,113

835,913 822,395 837,196 1,152,052 1,666,658 4,063,168 4,291,487 4,505,971 4,528,822 4,175,223 2,825,041 2,801,995 2,793,384 2,845,539 2,804,753 1,518,996 2,384,329 2,890,542 1,899,386 2,093,782 4,632,786 2,931,189 2,290,082 9,292,132 2,152,983 5,981,911 6,253,791 6,929,386 7,633,759 8,260,807

14,213,061 15,623,890 18,096,122 24,225,397 32,185,970 28,521,019 20,783,010 16,288,849 14,033,697 14,169,917 11,564,087 15,478,715 21,109,773 12,098,975 27,856,531 74,155,982 71,370,801 75,741,305 77,709,759 95,366,624

(124,577,903) (121,217,192) (134,824,763) (140,191,352) (139,397,489)

81,383,794 77,314,901 72,130,472 79,611,885 82,484,888 33,065,829 34,404,123 38,862,070 40,743,875 48,580,024 7,495,975 7,368,022 7,828,030 9,420,130 10,125,832 4,132,665 4,871,866 6,155,212 7,181,438 8,086,529 861,352 1,202,361 1,494,656 1,758,406 1,800,905 8,255,221 8,470,739 8,924,582 9,298,688 9,605,547 2,289,171 (453,486) 1,957,784 1,764,197 4,659,270 15,985,118 22,934,023 5,239,731 7,813,719 7,993,083 9,562,197 9,967,671

142,723,738 140,992,245 145,345,889 175,325,934 198,244,689

(77,505,561) $ (59,359,726) $ 19,775,053 $ 10,521,126 $ 35,134,582 $ 58,847,200

CAFR for the Fiscal Year Ended June 30, 2016 I 163 Statistical Section

City of Fremont Fund Balances of Governmental Funds Last Ten Fiscal Years modified accrual basis of accounting (Unaudited)

2006/07 2007/08 2008/09 2009/1011 ~1 2010/11121 General Fund Nonspendable: Long term loans receivable $ $ $ $ $ Prepaid assets 10,335 10,827 Assigned for: Encumbrances Unassigned 28,890,327 28,050,777 Reserved 450,170 202,890 386,227 Unreserved 41,683,524 35,524,862 30,713,126 Total general fund $ 42,133,694 $ 35,727,752 $ 31,099,353 $ 28,900,662 $ 28,061,604

All Other Governmental Funds Nonspendable: Prepaid assets $ - $ - $ - $ 3,764,808 $ (10,827) Restricted For: Social service programs 6,430,993 9,820,703 Debt service 7,100,039 3,055,835 Public safety 7,043,810 3,275,314 Street improvements 25,516,365 28,169,721 Community development 141,502,159 79,059,198 Other purposes 774,382 498,172 Committed for: Social service programs 184,559 7,002,800 Recreation programs 3,986,842 6,291,555 Assigned for: Vehicle replacement 4,578,109 4,240,492 Other capital projects 18,244,729 36,690,483 Unassigned Reserved 126,727,937 71,138,649 48,982,849 Unreserved, designated for: Special revenue funds 52,682,836 55,781,769 47,612,657 Capital projects fund 119,785,296 153,637,169 175,423,906 Unreserved, undesignated for: Special revenue funds (709,919) (528,661) (490,498) Total all other governmental funds $ 260,671,861 $ 268,284,736 $ 268,382,353 $ 219,126,795 $ 178,093,446

Notes: (1) Fund balance categories restated for implementation of GASB Statment No. 54 in FY 2010 /11. (2) Fund balance reclassified and restated to conform to the presentation in FY 2011 /12 and subsequent years.

164 I City of Fremont, California Statistical Section

Schedule3

2011/12 2012/13 2013/14 2014/15 2015/16

$ $ $ 314,556 $ $ 2,173,335 2,193,530

1,010,793 1,833,795 644,427 31,002,006 31,310,309 29,819,191 37,240,565 36,288,656

$ 31,002,006 $ 31,310,309 $ 31,144,540 $ 41,247,695 $ 39,126,613

$ $ $ $ $ 242,699

6,299,201 11,707,520 9,820,703 9,038,913 10,942,559 4,273,390 4,251,981 3,055,835 4,460,258 4,390,396 8,475,758 4,958,094 3,275,314 2,892,597 3,384,148 29,640,961 27,807,373 28,169,721 16,882,384 28,949,426 69,628,179 72,719,309 79,059,198 102,427,173 111,384,135 566,102 544,412 498,172 267,364 23,961

3,976,129 1,897,039 7,002,800 6,637,434 7,605,287 4,983,869 5,563,377 6,291,555 7,269,011 7,436,031

3,842,513 3,702,187 3,407,645 2,708,119 2,355,508 30,058,124 35,550,435 36,690,483 41,638,392 67,965,564 (134,557) (42,547) (140,281) (1,409,021)

$ 161,744,226 $ 168,567,170 $ 177,228,879 $ 194,081,364 $ 243,270,693

CAFR for the Fiscal Year Ended June 30, 2016 I 165 Statistical Section

City of Fremont Changes in Fund Balances of Governmental Funds Last Ten Fiscal Years modified accrual basis of accounting (Unaudited)

Revenues 2006/07 2007/08 2008/09 2009/10 2010/11 Taxes: Property tax $ 89,560,729 $ 98,144,859 $ 103,503,472 $ 102,848,091 $ 100,080,165 Sales tax 34,190,785 35,583,842 31,631,408 26,769,511 30,089,204 Business taxes 6,738,310 7,508,481 7,009,869 7,106,402 6,820,327 Transient occupancy tax 2,885,388 3,181,302 2,864,442 2,866,987 3,475,913 Property transfer tax 1,504,708 1,092,279 840,065 975,982 1,031,249 Total taxes 134,879,920 145,510,763 145,849,256 141,201,278 141,496,858 Development impact fees 10,845,865 11,012,026 4,104,115 6,976,919 6,790,105 Franchise fees 7,902,406 7,953,642 8,328,847 7,928,716 8,215,061 Charges for services 31,755,677 31,599,774 30,910,844 31,553,854 30,763,760 Investment earnings 13,405,022 16,955,191 8,760,151 7,325,832 4,062,605 Intergovenunental 29,733,542 53,302,214 33,371,140 31,344,757 22,333,769 Other revenues 5,769,464 3,980,839 3,460,782 8,326,595 4,259,458 Total revenues 234,291,896 270,314,449 234,785,135 234,023,646 217,921,616 Expenditures General government 12,094,439 12,628,762 11,711,458 11,126,970 11,626,724 Pohce services 50,065,794 52,837,739 54,573,391 53,798,999 53,438,082 Fire services 27,630,794 30,364,662 32,710,995 31,471,578 32,088,475 Human services 6,995,637 8,565,647 8,582,926 8,929,839 8,937,090 Capital assets tnaintenance and operations 48,265,999 42,341,852 39,069,515 40,386,402 37,741,086 Recreation and leisure services 5,588,467 6,188,443 6,876,778 6,720,593 6,509,957 Community development and environmental services 26,563,329 29,316,813 42,360,414 28,393,990 30,765,728 Intergovenunental 8,550,372 10,170,059 12,753,545 26,182,316 16,404,213 Capital outlay 13,142,337 57,959,324 39,318,636 41,936,766 24,358,920 Debt service: Principal 9,975,000 10,300,000 20,390,000 8,130,000 4,680,000 Interest and fiscal charges 8,810,719 8,186,907 10,235,890 7,021,913 6,730,327 Payment to refunding escrow Total expenditures 217,682,887 268,860,208 278,583,548 264,099,366 233,280,602 Excess of revenues over (under) expenditures 16,609,009 1,454,241 (43,798,413) (30,075,720) (15,358,986) Other Financing Sources (Uses) Debt issuance 92,360,000 15,000,000 Premium on debt issue 353,665 Proceeds from HELP Loan 1,500,000 Proceeds from sale of capital assets 19,244,059 Transfers in 74,488,066 124,375,710 71,731,048 51,893,739 48,045,240 Transfers out (74,951,757) (123,829,663) (71,155,437) (51,187,268) (47,269,403) Payinentto escrow agent (57,815,000) (22,085,000) Total other financing sources (uses) (463,691) 546,047 36,974,276 (21,378,529) 35,019,896 Extraordinary gain (loss) Net change in fund balances $ 16,145,318 $ 2,000,288 $ (6,824,137) $ (51,454,249) $ 19,660,910 Debt service as a percentage ofnoncapital expenditures 9.2% 8.8% 12.8% 6.8% 5.5% Notes: (1) FY 2015 /16 vehicle in-lieu revenue is included in intergovenunental revenue with all prior years restated to reflect this change.

166 I City of Fremont, California Statistical Section

Schedule4

2011/12 2012/13 2013/14 2014/15 2015/16(l)

$ 81,383,794 $ 77,314,901 $ 72,130,472 $ 79,611,885 $ 82,484,888 33,065,829 34,404,123 38,862,070 40,743,875 48,580,024 7,495,975 7,368,022 7,828,030 9,420,130 10,125,832 4,132,665 4,871,866 6,155,212 7,181,438 8,086,529 861,352 1,202,361 1,494,656 1,758,406 1,800,905 126,939,615 125,161,273 126,470,440 138,715,734 151,078,178 6,193,879 7,371,151 8,262,911 6,966,643 11,792,744 8,255,221 8,470,739 8,924,582 9,298,688 9,605,547 33,500,728 34,880,896 37,815,036 47,547,582 55,183,568 2,056,182 (411,290) 1,795,130 1,625,206 4,261,090 33,418,008 28,525,586 27,054,592 26,077,980 29,557,304 4,790,435 7,670,743 7,940,974 9,419,190 9,863,178 215,154,068 211,669,098 218,263,665 239,651,023 271,341,609

10,326,841 11,705,622 12,325,158 13,687,288 14,534,805 53,386,351 52,983,058 56,526,938 60,977,009 67,907,604 32,968,266 32,028,985 34,122,657 37,123,963 43,597,692 9,132,699 9,289,812 9,835,921 10,523,242 11,388,813 52,839,416 44,241,372 49,542,065 54,164,969 60,687,792 6,904,449 6,984,149 7,546,990 7,847,547 8,318,171

19,250,687 19,145,502 18,912,045 19,033,162 24,997,659 1,990,040 11,413,444 19,490,281 9,929,862 17,756,829 15,742,759

4,890,000 5,430,000 5,435,000 6,105,000 6,290,000 6,672,770 4,957,514 5,054,471 4,055,742 3,941,681 2,844,665 210,629,588 206,256,295 209,231,107 233,264,791 257,406,976 4,524,480 5,412,803 9,032,558 6,386,232 13,934,633

53,280,000 22,005,000 9,100,000 1,272,726 726,480

60,449 218,444 1,202,251 19,244,059 24,033,614 37,006,086 36,398,411 35,667,820 37,855,620 37,094,464 (37,006,086) (34,898,411) (36,667,820) (37,855,620) (37,094,464) (53,245,335) (22,145,000) 1,367,840 1,718,444 788,731 19,244,059 33,133,614 (64,462,513) $ (58,570,193) $ 7,131,247 $ 9,821,289 $ 25,630,291 $ 47,068,247 7.2% 5.6% 5.3% 4.7% 4.2%

CAFR for the Fiscal Year Ended June 30, 2016 I 167 Statistical Section

City of Fremont Assessed Value and Actual Value of Taxable Property Schedules Last Ten Fiscal Years in thousands of dollars (Unaudited)

City(tJ Redevelopment Age ncy(t,2) Taxable Taxable City Fiscal Less Public Assessed Less Public Assessed Direct Year Secured Unsecured Exemptions Utilities Value Secured Unsecured Exemptions Utilities Value Rate(J)

2007 28,907,217 2,036,828 (715,350) 12,654 30,241,349 2,921,642 533,612 (57,752) 849 3,398,351 2008 30,946,443 2,063,841 (732,041) 3,271 32,281,514 3,256,501 563,757 (71,929) 265 3,748,594 2009 32,521,734 2,185,774 (753,714) 3,090 33,956,884 3,534,749 554,175 (93,021) 265 3,996,168 2010 32,197,081 2,445,549 (809,531) 3,090 33,836,189 3,535,085 614,481 (99,204) 265 4,050,627 2011 32,096,417 2,550,780 (841,788) 3,093 33,808,502 3,345,741 585,154 (104,760) 265 3,826,400 2012 31,689,717 2,435,867 (835,287) 3,093 33,293,390 3,355,013 570,433 (105,348) 265 3,820,363 0.1573% 2013 32,152,556 2,461,490 (833,858) 67,380 33,847,568 3,387,706 597,016 (119,523) 265 3,865,464 0.1569% 2014 33,986,979 2,299,499 (826,210) 59,209 35,519,477 3,491,344 652,849 (101,029) 265 4,043,429 0.1527% 2015 36,409,171 2,284,533 (888,111) 52,259 37,857,852 3,750,327 707,415 (123,217) 322 4,334,847 0.1598% 2016 39,250,284 2,348,141 (849,704) 52,259 40,800,980 0.1505%

Notes: (1) In 1978 the voters of the State of California passed Proposition 13 which limited property taxes to a total maximum rate of 1 % of the assessed value of the property being taxed. Each year, the assessed value of property may be increased by an "inflat10n factor" limited to a maximum increase of 2 %. With few except10ns, property is only reassessed at the time that it is sold to a new owner. At that point, the new assessed value is reassessed at the purchase pnce of the property sold. The assessed valuation data shown above represents the only data currently available with respect to the actual market value of taxable property and is subject to the limitations descnbed above. (2) The inform a hon for FY 2012/ 13 and subsequent years is for the Successor Agency to the Redevelopment Agency of the City of Fremont. Effecl! ve at end of FY 2014/ 15, City Council adopted a resol u t10n to term mate the Successor Agency to the Redevelopment Agency of the City of Fremont. (3) The City d1rect rate shown is the City's share of the 1 % countywide rate in City of Fremont Tax Rate Area 12-001 and the City's general obligation bond rate. Comparable data is not available for fiscal years pnor to 2011/12.

Sources: Alameda County Assessor; Alameda County Auditor-Controller

168 I City of Fremont, California Statistical Section

City of Fremont Direct and Overlapping Governments Schedule 6 Last Ten Fiscal Years (Unaudited)

Fiscal City Direct Rate Overlapping Rates Total Direct Year General and Ended Obligation School Special Overlapping June 30, Debt Service County District Districts Rate

2007 0.0044% 1.0000% 0.0520% 0.0246% 1.0810% 2008 0.0042% 1.0000% 0.0610% 0.0402% 1.1054 % 2009 0.0079% 1.0000% 0.0594% 0.0453% 1.1126% 2010 0.0107% 1.0000% 0.0622% 0.0293% 1.1022 % 2011 0.0095% 1.0000% 0.0540% 0.0374% 1.1009% 2012 0.1475% 0.0098% 0.8525 % 0.0844% 0.0375% 1.1317% 2013 0.1475% 0.0094% 0.8525 % 0.0803% 0.0344% 1.1241 % 2014 0.1475% 0.0052 % 0.8525 % 0.0706% 0.0510% 1.1268% 2015 0.1475% 0.0123% 0.8525 % 0.1270% 0.0394% 1.1787% 2016 0.1434% 0.0071 % 0.8566 % 0.1188% 0.0481 % 1.1740%

Notes: (1) In 1978 the voters of the State of California passed Proposition 13 which limited property taxes to a total maximum rate of 1 % of the assessed value of the property being taxed. This 1 % of assessed value is shared by all taxing agencies within which whose jurisdiction the subject property resides. The City direct rate shown is the City's share of the 1 % countywide rate in City of Fremont Tax Rate Area 12-001. Comparable data is not available for fiscal years prior to 2011 /12.

Source: Alameda County Auditor-Controller

CAFR for the Fiscal Year Ended June 30, 2016 I 169 Statistical Section

City of Fremont Principal Property Tax Payers Schedule7 Current Year and Nine Years Ago in thousands of dollars (Unaudited)

2016 2007 %of %of Total City Total City Total Taxable Total Taxable Assessed Assessed Assessed Assessed Tax Payer Value Rank Value Value Rank Value

Tesla Motors Inc $ 755,816 1 2.00% $ John T. Anillaga & Richard T. Peery 199,663 2 0.53% 161,226 5 0.53% S130 LLC 196,250 3 0.52% Transcontinental N orthem California Inc. 189,056 4 0.50% BRE Properties, Inc. 157,638 5 0.42% Essex Bria:nvood LP 141,102 6 0.37% Fremont Pat Ranch LLC 137,442 7 0.36% Fremont Retail Partners LP 135,548 8 0.36% Thenno Fisher Scientific Inc 120,370 9 0.32% Seagate Technology LLC 94,957 10 0.25% New United Motors Manufacturing, Inc. 985,625 1 3.26% Catellus Development Corporation 328,432 2 1.09% SCI LP I 201,358 3 0.67% Ardenwood Corporate Park Associates 164,296 4 0.54% CalWest Industrial Properties LLC 160,137 6 0.53% Jer Bayside LLD 112,126 7 0.37% Selco Service Corporation 70,001 8 0.23% RREEF America Reit II Corporation 58,803 9 0.19% Riggs & Company 51,640 10 0.17% Total $ 2,127,842 5.63% $ 2,293,644 7.58%

Source: Alameda County Assessor

170 I City of Fremont, California Statistical Section

City of Fremont Property Tax Levies and Collections Schedules Last Ten Fiscal Years (Unaudited)

Fiscal Collected within the Year Taxes Levied Fiscal Year of the Levy Delinquent Ended for the Amount Percentage Tax 2 3 June 30, Fiscal Y ear(I) Collected( ) of Levy Collections( )

2007 $ 39,664,243 $ 38,624,386 97.38% $ 820,415 2008 41,526,256 40,733,978 98.09% 1,290,043 2009 43,388,269 42,805,006 98.66% 2,341,001 2010 43,147,792 42,782,214 99.15% 2,454,033 2011 43,850,035 43,356,624 98.87% 1,633,325 2012 46,408,439 45,729,845 98.54% 1,575,887 2013 49,964,034 49,306,560 98.68% 1,529,406 2014 52,673,395 51,433,790 97.65% 558,860 2015 56,311,310 55,104,240 97.86% 961,460 2016 59,079,814 58,251,685 98.60% 2,447,025

Notes: (1) Taxes levied are based on revenue estimate provided annually by the Alameda County Auditor-Controller Agency. (2) Beginning January 2012, amounts collected include the City's share of Successor Agency un-obligated property tax revenue. (3) The City does not have access to data showing delinquent tax collections by fiscal year of delinquency. Amounts shown are total collections of delinquent property taxes during the year.

Source: Alameda County Auditor-Controller

CAFR for the Fiscal Year Ended June 30, 2016 I 171 Statistical Section

City of Fremont Ratios of Outstanding Debt by Type Schedule9 Last Ten Fiscal Years dollars in thousands, except per capita (Unaudited)

Governmental Activities(].)

Certificates of Percentage of Fiscal Year General Redevelop- Participation/ Total Taxable Percentage of Ended Obligation ment Lease Outstanding Assessed Personal Debt Per 3 4 June 30, Bonds Bonds Financing Debt Value('2l Income( l Capita( l

2007 $ 34,834 $ 47,839 $ 130,671 $ 213,344 0.71% 2.76% $ 1,029 2008 34,608 41,946 126,459 203,013 0.63% 2.60% 970 2009 49,627 26,213 140,510 216,350 0.64% 2.74% 1,023 2010 48,639 137,014 185,653 0.55% 2.41% 867 2011 47,607 148,393 196,000 0.58% 2.44% 910 2012 47,503 142,739 190,242 0.57% 2.30% 875 2013 46,220 138,503 184,723 0.55% 1.93% 839 2014 45,497 134,257 179,754 0.51% 1.98% 802 2015 44,095 129,431 173,526 0.46% 1.75% 762 2016 42,647 133,565 176,212 0.43% 1.76% 768

Notes: (1) Details regarding the City's outstanding debt can be found in the Notes to the Basic Financial Statements. (2) Property value data is disclosed in Shedule 5. (3) Personal income data is disclosed in Schedule 13. (4) Population data is disclosed in Schedule 13.

172 I City of Fremont, California Statistical Section

City of Fremont Ratios of General Bonded Debt Outstanding Schedule IO Last Ten Fiscal Years dollars in thousands, except per capita (Unaudited)

General Bonded Debt Outstanding(') Less Amounts Percentage of Fiscal Year General Redevelop- Available in Taxable Ended Obligation ment Debt Service Assessed Debt Per June 30, Bonds Bonds Fund~) Total Value(') Capita!•)

2007 $ 34,834 $ 47,839 $ 1,554 $ 81,119 0.27% $ 391 2008 34,608 41,946 789 75,765 0.23% 362 2009 49,627 26,213 1,763 74,077 0.22% 350 2010 48,639 2,391 46,248 0.14% 216 2011 47,607 2,382 45,225 0.13% 210 2012 47,503 2,407 45,096 0.14% 207 2013 46,220 2,420 43,800 0.13% 199 2014 45,497 1,235 44,262 0.12% 197 2015 44,095 2,643 41,452 0.11% 182 2016 42,647 2,586 40,061 0.10% 175

Notes: (1) Details regarding the City's outstanding debt can be found in the Notes to the Basic Financial Statements. (2) This is the amount restricted for debt service principal payments. (3) Property value data is disclosed in Shedule 5. (4) Population data is disclosed in Schedule 13.

CAFR for the Fiscal Year Ended June 30, 2016 I 173 Statistical Section

City of Fremont Direct and Overlapping Governmental Activities Debt Schedule 11 As of June 30, 2016 (Unaudited)

Amount Estimated Applicable to Debt Percentage Primary Overlapping Government Unit(].) Outstanding Applicable Government

Bay Area Rapid Transit District $527,065,000 6.817% $ 35,930,021 Chabot-Las Positas Community College District 420,427,539 0.007% 29,430 Ohlone Community College District 405,166,857 83.829% 339,647,325 Fremont Unified School District 411,820,000 100.000% 411,820,000 City of Fremont Community Facihties District No. 1 79,700,000 100.000% 79,700,000 City of Fremont 1915 Act Bonds 1,120,000 100.000% 1,120,000 Washington Township Healthcare District 333,540,000 70.217% 234,201,782 East Bay Regional Park District 149,945,000 10.445% 15,661,755 Alameda County General Fund Obligations 852,027,000 17.285% 147,272,867 Alameda County Pension Obligations 47,111,094 17.285% 8,143,153 Alameda-Contra Costa Transit District Certificates of Participation 21,285,000 20.473% 4,357,678 Fremont Unified School District Certificates of Participation 54,570,000 100.000% 54,570,000 Subtotal, overlapping debt 1,332,454,011

City of Fremont, direct debt 176,211,962 Total direct and overlapping debt $1,508,665,973

Notes: (1) Overlapping governments are those that coincide, at least in part, with geographic boundaries of the City. This schedule estimates the portion of the outstanding debt of those overlapping governments that is borne by the property taxpayers of the City of Fremont This process recognizes that, when considering the government's ability to issue and repay long-term debt, the entire debt burden borne by the property taxpayers should be taken into account However, this does not imply that every taxpayer is a resident, and therefore responsible for repaying the debt, of each overlapping government

Source: California Municipal Statistics, Inc.

174 I City of Fremont, California Statistical Section

City of Fremont Legal Debt Margin Information Schedule12 June 30, 2016 Last Ten Fiscal Years dollars in millions (Unaudited)

Fiscal Year Ended June 30, 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Debt limit $1,134 $1,211 $1,273 $1,269 $1,268 $1,249 $1,269 $ 1,332 $ 1,420 $ 1,530

Debt apphcable to limit(1l 35 35 50 49 48 48 46 45 44 43

Legal debt margin $1,099 $1,176 $1,223 $1,220 $1,220 $1,201 $1,223 $ 1,287 $ 1,376 $ 1,487

Percentage available 96.9% 97.1% 96.1% 96.1% 96.2% 96.2% 96.4% 96.6% 96.9% 97.2%

Calculation of Legal Debt Margin Assessed value of taxable property $40,801 25 % of Assessed Valuation 10,200 Debt limit (15% of assessed value) 1,530 General obhgation bonds outstanding 43 Legal debt margin $ 1,487

Notes: (1) The Government Code of the State of California provides for a legal debtlirnitof 15% of gross assessed valuation; however, this provision was enacted when assessed valuation was based upon 25% of market value. The computation above reflects a conversion of assessed valuation data from the current full valuation perspective to the 25% level that was in effect at the timethatthelegal debt margin was enacted by the State of California for local governments located within the state.

Source: City ofFremontFinance Department,: Alameda County Assessor

CAFR for the Fiscal Year Ended June 30, 2016 I 175 Statistical Section

City of Fremont Demographic and Economic Statistics Schedule13 Last Ten Calendar Years (Unaudited)

Per Capita Personal Unemployment 3 3 4 Year Population(l) Income(2, ) Income( ) Rate( )

2007 207,358 $ 37,259 $ 7,725,951,722 3.3% 2008 209,257 37,302 7,805,704,614 4.4% 2009 211,506 37,367 7,903,344,702 7.6% 2010 214,089 36,025 7,712,556,225 8.7% 2011 215,391 37,261 8,025,684,051 8.0% 2012 217,420 38,095 8,282,614,900 6.9% 2013 220,133 43,504 9,576,666,032 5.7% 2014 224,116 40,562 9,090,593,192 4.5% 2015 227,582 43,563 9,914,154,666 3.7% 2016 229,324 43,563 9,990,041,412 3.4%

Notes: (1) State of California, Department of Finance, E-1 Population Estimates for Cities, Counties and the State with Annual Percent Change -- January 1, 2015 and 2016. Sacramento, California, May 2015. These population estimates incorporate 2010 census counts. (2) U.S. Census Bureau, American Community Survey Single Year Estimates 2007-2015. Values have not been adjusted for inflation. (3) Per capita income is not available for 2016, so the 2015 value was used for projecting personal income. (4) State of California, Employment Development Department Labor Market Information Division. Data for 2007- 2009 may not be comparable. The 2016 value is the average for the year through October.

176 I City of Fremont, California Statistical Section

City of Fremont Construction Permits and Estimated Value Schedule14 Last Ten Fiscal Years (Unaudited)

Fiscal year Cornmercia1/Industrial Residential Total Ended Number of Estimated Number of Estimated Number of Estimated June 30, Permits Value Permits Value Permits Value

2007 927 $ 155,059,489 4,346 $130,771,602 5,273 $ 285,831,091 2008 892 244,837,898 3,464 146,059,745 4,356 390,897,643 2009 829 94,886,907 2,970 122,842,111 3,799 217,729,018 2010 894 322,308,508 3,195 116,043,844 4,089 438,352,352 2011 892 110,096,205 2,927 119,479,395 3,819 229,575,600 2012 884 133,682,758 2,861 124,453,892 3,745 258,136,650 2013 884 195,336,130 2,671 126,717,982 3,555 322,054,112 2014 865 335,068,875 3,104 112,278,572 3,969 447,347,447 2015 908 307,125,365 3,188 165,878,100 4,096 473,003,465 2016 893 278,289,511 4,149 270,495,931 5,042 548,785,442

Source: City of Fremont Community Development Department

CAFR for the Fiscal Year Ended June 30, 2016 I 177 Statistical Section

City of Fremont Principal Employers Schedule IS Current Year and Nine Years Ago (1) (Unaudited)

2016 2007 Percentage of Percentage of Total City Total City Employer Employment Employees(2l Rank Employment Employees Rank

Tesla Motors 3.12% 1000-6000 1 Fremont Unified School District 2.47% 2,764 2 1.59% 1,672 3 Washington Hospital 2.68% 1000-5000 3 2.28% 2,400 2 Western Digital 2.68% 1000-5000 4 1.04% 1,100 7 Lam Research Corporation 2.68% 1000-5000 5 1.20% 1,261 5 Seagate Magnetics 2.68% 1000-5000 6 Kaiser Pennanente 0.67% 500-999 7 City of Fremont 0.79% 891 8 Thermo Fisher Scientific 0.67% 500-999 9 Synnex Information Tech. Inc. 0.67% 500-999 10 New United Motor Manufacturing 5.41% 5,700 1 Smart Modular Technologies 1.25% 1,317 4 Boston Scientific/Target Therapeutics, Inc. 1.14% 1,200 6 AXT Incorporated 0.92% 972 8 AsystTechnologies 0.90% 947 9 Oplink Communications 0.85% 900 10 Office Depot 0.85% 900 10

Notes: (1) 2007 is the first year for which comparable data is available. (2) Number of Employees listed as a range as provided by source.

Source: City of Fremont Economic Development Department

178 I City of Fremont, California Statistical Section

City of Fremont Full-time Equivalent Employees by Function Schedule16 Last Ten Calendar Years (Unaudited)

Function/Program 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Public Safety Fire 153.00 161.00 161.00 152.00 152.50 152.50 153.00 154.00 157.00 158.00 Police 294.00 302.00 302.00 287.00 287.00 287.00 282.00 287.50 296.50 303.50 Total 447.00 463.00 463.00 439.00 439.50 439.50 435.00 441.50 453.50 461.50

Other Community Services Community Development 106.42 108.3 113.5 99.27 98.34 60.75 61.00 57.30 60.30 68.05 Economic Development 4.64 4.69 4.68 4.57 3.65 3.65 4.00 4.00 4.00 4.00 Human Services 43.97 52.32 52.80 51.80 54.50 54.50 56.50 58.15 59.93 60.55 Public Works 112.9 116.15 116.03 103.11 103.23 109.24 110.24 111.61 117.61 121.53 Community Sel'\rices 67.35 67.35 69.35 61.85 61.85 93.43 94.41 88.51 90.01 90.76 Housing and Redevelopment 13.99 12.91 13.72 11.93 12.10 12.10 0.00 0.00 0.00 0.00 Total 349.27 361.72 370.08 332.53 333.67 333.67 326.15 319.57 331.85 344.89

Administrative Systems City Manager's Office 7.70 7.70 7.45 5.25 6.15 6.25 6.80 8.80 9.30 9.80 City Attorney 10.75 10.75 10.50 9.42 9.42 9.42 9.67 9.92 9.92 9.92 City Clerk 6.30 5.30 5.30 4.25 4.20 4.20 4.20 4.20 4.20 3.95 Finance 25.75 24.75 24.75 21.65 21.65 21.55 21.75 22.75 22.75 24.00 Information Systems 20.40 21.90 21.90 19.90 19.90 19.90 22.00 22.00 22.00 23.00 Human Resources 17.00 17.00 17.00 14.00 14.00 14.00 14.00 14.00 13.50 14.25 Total 87.90 87.40 86.90 74.47 75.32 75.32 78.42 81.67 81.67 84.92

Citywide Total 884.17 912.12 919.98 846.00 848.49 848.49 839.57 842.74 867.02 891.31

CAFR for the Fiscal Year Ended June 30, 2016 I 179 Statistical Section

City of Fremont Operating Indicators by Function Schedule17 Last Ten Calendar Years (Unaudited)

Function/Program 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016"'

Pohce Physical arrests 6,535 6,345 5,903 5,731 4,934 4,266 3,705 3,986 3,768 3,667 Vehicle moving and parking violations 14,545 17,563 15,849 15,839 13,152 9,829 10,535 11,709 10,435 14,577

Fire Emergency responses(2l 13,535 13,190 13,067 12,958 13,003 13,320 13,445 13,952 14,686 15,567 Fires extinguished 489 462 371 360 331 313 370 364 388 410

Parks and recreation Number of recreation classes registrants 24,072 23,885 23,329 25,410 24,905 26,329 31,521 31,900 33,187 34,000

Notes: (1) Projected through year end based on data received through September 2016. (2) Includes responses within the City of Fremont only; does not include mutual aid responses to Union City, Newark, ek.

180 I City of Fremont, California Statistical Section

City of Fremont Capital Asset Statistics by Function/Program Schedule IS Last Ten Calendar Years (Unaudited)

Function/Program 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Pohce Stations 1 1 1 1 1 1 1 1 1 1 Pohce fleet cars & motorcycles N/A 199 186 168 179 179 179 180 181 187

Fire Stations 10 10 11 11 11 11 11 11 11 11 Engines 16 16 16 16 16 16 16 16 16 16 Trucks 3 3 3 3 3 3 3 3 3 3 Patrols (Wildland units, etc.) 6 6 6 6 6 6 6 6 6 6 Speciahzed Apparatus 3 3 3 3 3 (Hazmat Response, Rescue & WMD /MCI)

Parks and recreation Acreage 1,053 1,053 1,053 1,053 1,191 1,191 1,205 1,213 1,213 1,213 Playgrounds 52 52 52 52 52 52 52 52 52 52 Baseball/ softball diamonds 24 24 24 24 24 24 24 24 24 24 Soccer/football fields 17 17 17 17 17 17 17 17 17 17 Community centers 5 5 5 5 5 5 5 5 5 5 Water park 1 1 1 1 1 1 1 1

CAFR for the Fiscal Year Ended June 30, 2016 I 181 Statistical Section

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182 I City of Fremont, California APPENDIX D

PROPOSED FORM OF OPINION OF BOND COUNSEL

D-1 (THIS PAGE INTENTIONALLY LEFT BLANK) August 22, 2017

Fremont Public Financing Authority 3300 Capital Avenue, Building B Fremont, CA 94538

OPINION: $19,725,000 Fremont Public Financing Authority Lease Revenue Bonds, Series 2017B (2017 Fixed Rate Refinancing Project)

Members of the Board of Directors of the Authority:

We have acted as bond counsel to the Fremont Public Financing Authority (the "Authority") in connection with the issuance by the Authority of the captioned bonds dated the date hereof (the "Bonds"). In such capacity, we have examined such law and such certified proceedings, certifications and other documents as we have deemed necessary to render this opinion.

The Bonds are issued pursuant to Article 4 of Chapter 5, Division 7, Title 1 of the Government Code of the State of California (the "Bond Law"), the Indenture of Trust, dated as of August 1, 2017 (the "Indenture"), by and between the Authority and The Bank of New York Mellon Trust Company, N.A., as trustee (the "Trustee"), and a resolution (the "Resolution") of the Board of Directors of the Authority adopted July 11, 2017. Under the Indenture, the Authority has pledged certain revenues (the "Revenues") for the payment of principal, premium (if any), and interest on the Bonds when due, including lease payments made by the City of Fremont (the "City") under a Lease Agreement dated as of August 1, 2017 (the "Lease Agreement") between the Authority and the City.

Regarding questions of fact material to our opinion, we have relied on representations of the Authority contained in the Indenture and the City contained in the Lease Agreement, and in the certified proceedings and other certifications of public officials furnished to us, without undertaking to verify the same by independent investigation.

Based on the foregoing, we are of the opinion that, under existing law:

1. The Authority is a duly created and validly existing joint exercise of powers authority with the power to adopt the Resolution, enter into the Indenture and perform the agreements on its part contained therein, and issue the Bonds.

2. The City is a duly created and validly existing general law city with the power to enter into the Lease Agreement and perform the agreements on its part contained therein.

3. The Indenture has been duly authorized, executed and delivered by the Authority, and constitutes a valid and binding obligation of the Authority, enforceable against the Authority. Fremont Public Financing Authority August 22, 2017 Page 2

4. The Lease Agreement has been duly authorized, executed and delivered by the Authority and the City, and constitutes a valid and binding obligation of the Authority and the City, enforceable against the Authority and the City.

5. The Indenture creates a valid lien on the Revenues and other funds pledged by the Indenture for the security of the Bonds, on a parity with other bonds (if any) issued or to be issued under the Indenture.

6. The Bonds have been duly authorized and executed by the Authority, and are valid and binding limited obligations of the Authority, payable solely from the Revenues and other funds provided therefor in the Indenture.

7. Interest on the Bonds is excludable from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; it should be noted, however, that for the purpose of computing the alternative minimum tax imposed on corporations (as defined for federal income tax purposes), such interest is taken into account in determining certain income and earnings. The opinions set forth in the preceding sentence are subject to the condition that the Authority and the City comply with all requirements of the Internal Revenue Code of 1986 that must be satisfied subsequent to the delivery of the Bonds in order that such interest be, or continue to be, excluded from gross income for federal income tax purposes. The Authority and the City have covenanted to comply with each such requirement. Failure to comply with certain of such requirements may cause the inclusion of interest on the Bonds in gross income for federal income tax purposes to be retroactive to the date of issuance of the Bonds. We express no opinion regarding other federal tax consequences arising with respect to the Bonds.

8. Interest on the Bonds is exempt from personal income taxation imposed by the State of California.

The rights of the owners of the Bonds and the enforceability of the Bonds and the Indenture are limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights generally, and by equitable principles, whether considered at law or in equity.

This opinion is given as of the date hereof, and we assume no obligation to revise or supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention, or any changes in law that may hereafter occur. Our engagement with respect to this matter has terminated as of the date hereof.

Respectfully submitted,

A Professional Law Corporation APPENDIX E

FORM OF CONTINUING DISCLOSURE CERTIFICATE

$19,725,000 FREMONT PUBLIC FINANCING AUTHORITY Lease Revenue Bonds, Series 20178 (2017 Fixed Rate Refinancing Project)

This Continuing Disclosure Certificate (this "Disclosure Certificate") is executed and delivered by the City of Fremont (the "City"), on behalf of the Fremont Public Financing Authority (the "Authority") and itself, in connection with the issuance by the Authority of the bonds captioned above (the "Bonds"). The Bonds are being issued under an Indenture of Trust dated as of August 1, 2017 (the "Indenture"), by and between the Authority and The Bank of New York Mellon Trust Company, N.A., as trustee (the "Trustee"). The City hereby covenants and agrees as follows:

Section 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the City on behalf of itself and the Authority for the benefit of the holders and beneficial owners of the Bonds and in order to assist the Participating Underwriter in complying with S.E.C. Rule 15c2-12(b)(5).

Section 2. Definitions. In addition to the definitions set forth above and in the Indenture, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized terms shall have the following meanings:

"Annual Reporf' means any Annual Report provided by the City pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate.

"Annual Report Date" means nine months after the end of the City's fiscal year (currently April 1, based on the City's fiscal year-end of June 30).

"Dissemination Agenf' means the City, or any successor Dissemination Agent designated in writing by the City and which has filed with the City a written acceptance of such designation.

"Listed Events" means any of the events listed in Section 5(a) of this Disclosure Certificate.

"MSRB" means the Municipal Securities Rulemaking Board, which has been designated by the Securities and Exchange Commission as the sole repository of disclosure information for purposes of the Rule, or any other repository of disclosure information that may be designated by the Securities and Exchange Commission as such for purposes of the Rule in the future.

"Official Statemenf' means the final official statement dated August 8, 2017, executed by the City and the Authority in connection with the issuance of the Bonds.

"Participating Underwriter' means Morgan Stanley & Co, LLC, the original purchaser of the Bonds required to comply with the Rule in connection with offering of the Bonds.

"Rule" means Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time.

E-1 Section 3. Provision of Annual Reports.

(a) The City shall, or shall cause the Dissemination Agent to, not later than the Annual Report Date, commencing April 1, 2018, with the report for the 2016-17 Fiscal Year, provide to the MSRB, in an electronic format as prescribed by the MSRB, an Annual Report that is consistent with the requirements of Section 4 of this Disclosure Certificate. Not later than 15 Business Days prior to the Annual Report Date, the City shall provide the Annual Report to the Dissemination Agent (if other than the City). If by 15 Business Days prior to the Annual Report Date the Dissemination Agent (if other than the City) has not received a copy of the Annual Report, the Dissemination Agent shall contact the City to determine if the City is in compliance with the previous sentence. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 4 of this Disclosure Certificate; provided that the audited financial statements of the City may be submitted separately from the balance of the Annual Report, and later than the Annual Report Date, if not available by that date. If the City's Fiscal Year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5(c). The City shall provide a written general fund with each Annual Report furnished to the Dissemination Agent to the effect that such Annual Report constitutes the Annual Report required to be furnished by the City hereunder.

(b) If the City does not provide (or cause the Dissemination Agent to provide) an Annual Report by the Annual Report Date, the City shall, in a timely manner as required by the Rule, provide (or cause the Dissemination Agent to provide) to the MSRB, in an electronic format as prescribed by the MSRB, a notice in substantially the form attached as Exhibit A.

(c) With respect to each Annual Report, the Dissemination Agent shall:

(i) determine each year prior to the Annual Report Date the then-applicable rules and electronic format prescribed by the MSRB for the filing of annual continuing disclosure reports; and

(ii) if the Dissemination Agent is other than the City, file a report with the City certifying that the Annual Report has been provided pursuant to this Disclosure Certificate, and stating the date it was provided.

Section 4. Content of Annual Reports. The City's Annual Report shall contain or incorporate by reference the following:

(a) Financial Statements. Audited financial statements of the City for the preceding fiscal year, prepared in accordance generally accepted accounting principles. If the City's audited financial statements are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the final Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available.

(b) Other Annual Information. To the extent not included in the audited final statements of the City, the Annual Report shall also include financial and operating data with respect to the City for preceding fiscal year, substantially similar to that provided in the corresponding tables and charts in the Official Statement, as follows:

E-2 (i) general fund revenue sources by type (over $1,000,000);

(ii) assessed valuations and tax collection records;

(iii) summary of investments, to the extent not summarized in the Audited Financial Statements, including types and amounts of investments;

(iv) combined annual contribution (City's share and employees' share) to the Public Employees Retirement System;

(v) adopted general fund budget; and

(vi) to the extent not summarize in the Audited Financial Statements, a schedule of general fund long term debt, indicating type of issue, final maturity, interest rate range, original issue amount, outstanding principal amount, dollar amount maturing in the fiscal year to which the report relates and principal amount outstanding as of the end of the fiscal year to which the report relates.

(c) Cross References. Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the City or related public entities, which are available to the public through the MSRB. The City shall clearly identify each such other document so included by reference. If the document included by reference is a final official statement, it must be available from the MSRB.

Section 5. Reporting of Significant Events.

(a) The City shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds:

(1) Principal and interest payment delinquencies.

(2) Non-payment related defaults, if material.

(3) Unscheduled draws on debt service reserves reflecting financial difficulties.

(4) Unscheduled draws on credit enhancements reflecting financial difficulties.

(5) Substitution of credit or liquidity providers, or their failure to perform.

(6) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the security, or other material events affecting the tax status of the security.

(7) Modifications to rights of security holders, if material.

(8) Bond calls, if material, and tender offers.

E-3 (9) Defeasances.

(10) Release, substitution, or sale of property securing repayment of the securities, if material.

(11) Rating changes.

(12) Bankruptcy, insolvency, receivership or similar event of the City or other obligated person.

(13) The consummation of a merger, consolidation, or acquisition involving the City or an obligated person, or the sale of all or substantially all of the assets of the City or an obligated person (other than in the ordinary course of business), the entry into a definitive agreement to undertake such an action, or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material.

(14) Appointment of a successor or additional trustee or the change of name of a trustee, if material.

(b) Whenever the City obtains knowledge of the occurrence of a Listed Event, the City shall, or shall cause the Dissemination Agent (if not the City) to, file a notice of such occurrence with the MSRB, in an electronic format as prescribed by the MSRB, in a timely manner not in excess of 1O business days after the occurrence of the Listed Event. Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(8) and (9) above need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to holders of affected Bonds under the Indenture.

(c) The City acknowledges that the events described in subparagraphs (a)(2), (a)(?), (a)(8) (if the event is a bond call), (a)(10), (a)(13), and (a)(14) of this Section 5 contain the qualifier "if material" and that subparagraph (a)(6) also contains the qualifier "material" with respect to certain notices, determinations or other events affecting the tax status of the Bonds. The City shall cause a notice to be filed as set forth in paragraph (b) above with respect to any such event only to the extent that it determines the event's occurrence is material for purposes of U.S. federal securities law. Whenever the City obtains knowledge of the occurrence of any of these Listed Events, the City will as soon as possible determine if such event would be material under applicable federal securities law. If such event is determined to be material, the City will cause a notice to be filed as set forth in paragraph (b) above.

(d) For purposes of this Disclosure Certificate, any event described in paragraph (a)(12) above is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent, or similar officer for the City in a proceeding under the United States Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the City, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement, or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the City.

E-4 Section 6. Identifying Information for Filings with the MSRB. All documents provided to the MSRB under the Disclosure Certificate shall be accompanied by identifying information as prescribed by the MSRB.

Section 7. Termination of Reporting Obligation. The City's obligations under this Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the City shall give notice of such termination in the same manner as for a Listed Event under Section 5(c).

Section 8. Dissemination Agent. The City may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any such Agent, with or without appointing a successor Dissemination Agent. The initial Dissemination Agent will be the City. Any Dissemination Agent may resign by providing 30 days' written notice to the City.

Section 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the City may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that the following conditions are satisfied:

(a) if the amendment or waiver relates to the provisions of Sections 3(a), 4 or 5(a), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of an obligated person with respect to the Bonds, or type of business conducted;

(b) the undertakings herein, as proposed to be amended or waived, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the primary offering of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and

(c) the proposed amendment or waiver either (i) is approved by holders of the Bonds in the manner provided in the Indenture for amendments to the Indenture with the consent of holders, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the holders or beneficial owners of the Bonds.

If the annual financial information or operating data to be provided in the Annual Report is amended pursuant to the provisions hereof, the first annual financial information filed pursuant hereto containing the amended operating data or financial information shall explain, in narrative form, the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided.

If an amendment is made to the undertaking specifying the accounting principles to be followed in preparing financial statements, the annual financial information for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The comparison shall include a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information, in order to provide information to investors to enable them to evaluate the ability of the City to meet its obligations. To the extent reasonably feasible, the comparison shall be quantitative.

E-5 A notice of any amendment made pursuant to this Section 9 shall be filed in the same manner as for a Listed Event under Section 5(c).

Section 10. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the City from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the City chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the City shall have no obligation under this Disclosure Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event.

Section 11. Default. In the event of a failure of the City to comply with any provision of this Disclosure Certificate, the Participating Underwriter or any holder or beneficial owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the City to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Indenture, and the sole remedy under this Disclosure Certificate in the event of any failure of the City to comply with this Disclosure Certificate shall be an action to compel performance.

Section 12. Duties, Immunities and Liabilities of Dissemination Agent.

(a) The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and the City agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent's negligence or willful misconduct. The Dissemination Agent shall have no duty or obligation to review any information provided to it hereunder and shall not be deemed to be acting in any fiduciary capacity for the City, the Bond owners or any other party. The obligations of the City under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds.

(b) The Dissemination Agent shall be paid compensation by the City for its services provided hereunder in accordance with its schedule of fees as amended from time to time, and shall be reimbursed for all expenses, legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder.

Section 13. Notices. Any notice or communications to be among any of the parties to this Disclosure Certificate may be given as follows:

To the Issuer: Fremont Public Financing Authority c/o City of Fremont 33000 Capital Avenue, Building B Fremont, CA 94538 Phone: (510) 494-461 0 Fax: (510) 494-4611

E-6 Any person may, by written notice to the other persons listed above, designate a different address or telephone number(s) to which subsequent notices or communications should be sent.

Section 14. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the City, the Dissemination Agent, the Participating Underwriter and holders and beneficial owners from time to time of the Bonds, and shall create no rights in any other person or entity.

Section 15. Counterparts. This Disclosure Certificate may be executed in several counterparts, each of which shall be regarded as an original, and all of which shall constitute one and the same instrument.

Date: August 22, 2017

CITY OF FREMONT

By:------Finance Director

E-7 EXHIBIT A

NOTICE OF FAILURE TO FILE ANNUAL REPORT

Name of Issuer: Fremont Public Financing Authority (the "Authority")

Name of Bond Issue: Fremont Public Financing Authority Lease Revenue Bonds, Series 2017B (2017 Fixed Rate Refinancing Project)

Date of Issuance: August 22, 2017

NOTICE IS HEREBY GIVEN that the City of Fremont, on behalf of itself and the Authority, has not provided an Annual Report with respect to the above-named Bonds as required by the Indenture of Trust dated as of August 1, 2017, between the Authority and The Bank of New York Mellon Trust Company, N.A. The City anticipates that the Annual Report will be filed by

Dated: ______

CITY OF FREMONT

By:------­ Its: ------

E-8 APPENDIX F

DTC AND THE BOOK-ENTRY ONLY SYSTEM

The following description of the Depository Trust Company ("OTC'), the procedures and record keeping with respect to beneficial ownership interests in the 20178 Bonds, payment of principal, interest and other payments on the 20178 Bonds to OTC Participants or Beneficial Owners, confirmation and transfer of beneficial ownership interest in the 20178 Bonds and other related transactions by and between OTC, the OTC Participants and the Beneficial Owners is based solely on information provided by OTC. Accordingly, no representations can be made concerning these matters and neither the OTC Participants nor the Beneficial Owners should rely on the foregoing information with respect to such matters, but should instead confirm the same with OTC or the OTC Participants, as the case may be.

Neither the City (the "Issuer') nor the Trustee (the "Agent') take any responsibility for the information contained in this Appendix. No assurances can be given that OTC, OTC Participants or Indirect Participants will distribute to the Beneficial Owners (a) payments of interest, principal or premium, if any, with respect to the 20178 Bonds, (b) certificates representing ownership interest in or other confirmation or ownership interest in the 20178 Bonds, or (c) redemption or other notices sent to OTC or Cede & Co., its nominee, as the registered owner of the 20178 Bonds, or that they will so do on a timely basis, or that OTC, OTC Participants or OTC Indirect Participants will act in the manner described in this Appendix. The current "Rules" applicable to OTC are on file with the Securities and Exchange Commission and the current "Procedures" of OTC to be followed in dealing with D TC Participants are on file with D TC.

1. The Depository Trust Company ("OTC"), New York, NY, will act as securities depository for the securities (the "Securities"). The Securities will be issued as fully-registered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of OTC. One fully-registered Security certificate will be issued for each issue of the Securities, each in the aggregate principal amount of such issue, and will be deposited with OTC. If, however, the aggregate principal amount of any issue exceeds $500 million, one certificate will be issued with respect to each $500 million of principal amount, and an additional certificate will be issued with respect to any remaining principal amount of such issue.

2. OTC, the world's largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17 A of the Securities Exchange Act of 1934. OTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC's participants ("Direct Participants") deposit with OTC. OTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. OTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC is the holding company for OTC, National Securities Clearing Corporation and Fixed Income Clearing

F-1 Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the OTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). OTC has a Standard & Poor's rating of AA+. The OTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about OTC can be found at www.dtcc.com and www.dtc.org. The information contained on this Internet site is not incorporated herein by reference.

3. Purchases of Securities under the OTC system must be made by or through Direct Participants, which will receive a credit for the Securities on DTC's records. The ownership interest of each actual purchaser of each Security ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from OTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Securities are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Securities, except in the event that use of the book-entry system for the Securities is discontinued.

4. To facilitate subsequent transfers, all Securities deposited by Direct Participants with OTC are registered in the name of DTC's partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of OTC. The deposit of Securities with OTC and their registration in the name of Cede & Co. or such other OTC nominee do not effect any change in beneficial ownership. OTC has no knowledge of the actual Beneficial Owners of the Securities; DTC's records reflect only the identity of the Direct Participants to whose accounts such Securities are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.

5. Conveyance of notices and other communications by OTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Securities may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Securities, such as redemptions, tenders, defaults, and proposed amendments to the Security documents. For example, Beneficial Owners of Securities may wish to ascertain that the nominee holding the Securities for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them.

6. Redemption notices shall be sent to OTC. If less than all of the Securities within an issue are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.

7. Neither OTC nor Cede & Co. (nor any other OTC nominee) will consent or vote with respect to Securities unless authorized by a Direct Participant in accordance with DTC's MMI Procedures. Under its usual procedures, OTC mails an Omnibus Proxy to Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting

F-2 rights to those Direct Participants to whose accounts Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy).

8. Redemption proceeds, distributions, and dividend payments on the Securities will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of OTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail information from Issuer or Agent, on payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of OTC, Agent, or Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of OTC) is the responsibility of Issuer or Agent, disbursement of such payments to Direct Participants will be the responsibility of OTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

9. A Beneficial Owner shall give notice to elect to have its Securities purchased or tendered, through its Participant, to the Agent, and shall effect delivery of such Securities by causing the Direct Participant to transfer the Participant's interest in the Securities, on DTC's records, to the Agent. The requirement for physical delivery of Securities in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Securities are transferred by Direct Participants on DTC's records and followed by a book­ entry credit of tendered Securities to the Agent's OTC account.

10. OTC may discontinue providing its services as depository with respect to the Securities at any time by giving reasonable notice to Issuer or Agent. Under such circumstances, in the event that a successor depository is not obtained, Security certificates are required to be printed and delivered.

11. Issuer may decide to discontinue use of the system of book-entry-only transfers through OTC (or a successor securities depository). In that event, Security certificates will be printed and delivered to OTC.

12. The information in this section concerning OTC and DTC's book-entry system has been obtained from sources that Issuer believes to be reliable, but Issuer takes no responsibility for the accuracy thereof.

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